# EDGAR Filing Document

**Accession Number:** 0001641398
**File Stem:** 0001213900-23-025481
**Filing Date:** 2023-3
**Character Count:** 479195
**Document Hash:** 818674fddcba3908a21148b2a7a2ef5c
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001213900-23-025481.hdr.sgml**: 20230331

**ACCESSION NUMBER**: 0001213900-23-025481

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 107

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230331

**DATE AS OF CHANGE**: 20230331

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** GD Culture Group Ltd
- **CENTRAL INDEX KEY:** 0001641398
- **STANDARD INDUSTRIAL CLASSIFICATION:** WHOLESALE-METALS, MINERALS (NO PETROLEUM) [5050]
- **IRS NUMBER:** 473709051
- **STATE OF INCORPORATION:** NV
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-37513
- **FILM NUMBER:** 23787875

**BUSINESS ADDRESS:**
- **STREET 1:** FLAT 1512, 15F, LUCKY CENTRE
- **STREET 2:** NO.165-171 WAN CHAI ROA
- **CITY:** WAN CHAI
- **STATE:** K3
- **ZIP:** 000000
- **BUSINESS PHONE:** 852-95791074

**MAIL ADDRESS:**
- **STREET 1:** FLAT 1512, 15F, LUCKY CENTRE
- **STREET 2:** NO.165-171 WAN CHAI ROA
- **CITY:** WAN CHAI
- **STATE:** K3
- **ZIP:** 000000

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Code Chain New Continent Ltd
- **DATE OF NAME CHANGE:** 20200518

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** TMSR HOLDING Co Ltd
- **DATE OF NAME CHANGE:** 20180207

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** JM Global Holding Co
- **DATE OF NAME CHANGE:** 20150505

?xml version="1.0" encoding="ASCII"?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**Form 10-K**

☒ **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the fiscal year ended December 31, 2022**

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

**For the transition period from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to** &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

**Commission file number: 001-37513**

**GD CULTURE GROUP LIMITED** 

**(Exact name of registrant as specified in its charter)**

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| | |
|:---|:---|
| **Nevada** | **47-3709051** |
| (State or other jurisdiction of<br> incorporation or organization) | (I.R.S. Employer<br> Identification Number) |

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| | |
|:---|:---|
| **c/o GD Culture Group Limited**<br> **Flat 1512, 15F, Lucky Centre,**<br> **No.165-171 Wan Chai Road**<br> **Wan Chai, Hong Kong**  | **610047** |
| (Address of principal executive offices) | (Zip Code) |

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Issuer's telephone number: **+852-95791074**

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

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| | |
|:---|:---|
| **Title of Each Class:** | **Name of Each Exchange on Which Registered:** |
| Common Stock, par value $0.0001 per share | The Nasdaq Stock Market LLC |

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

<u>None</u>

**Title of Class**

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ 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. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

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

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

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

As of June 30, 2022, the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the common stock outstanding held by non-affiliates of the registrant, computed by reference to the closing sales price for the common stock of $18.00, as reported on the Nasdaq Capital Market, was approximately $22.8 million.

As of March 31, 2023, there were 1,711,544 shares of common stock, par value $0.0001 per share, of the registrant issued and outstanding.

**<u>**TABLE OF CONTENTS**</u>**

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| | | |
|:---|:---|:---|
|  |  | **PAGE** |
| [**PART I**](#a_001) | | |
| **Item 1.** | [**Business**](#a_002) | 1 |
| **Item 1A.** | [**Risk Factors**](#a_003) | 17 |
| **Item 1B.** | [**Unresolved Staff Comments**](#a_004) | 38 |
| **Item 2.** | [**Properties**](#a_005) | 38 |
| **Item 3.** | [**Legal Proceedings**](#a_006) | 38 |
| **Item 4.** | [**Mine Safety Disclosures**](#a_007) | 38 |
| [**PART II**](#a_008) |  |  |
| **Item 5.** | [**Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities**](#a_009) | 39 |
| **Item 6.** | [**\[Reserved\]**](#a_010) | 42 |
| **Item 7.** | [**Management's Discussion and Analysis of Financial Condition and Results of Operations**](#a_011) | 42 |
| **Item 7A.** | [**Quantitative and Qualitative Disclosures About Market Risk**](#a_012) | 51 |
| **Item 8.** | [**Financial Statements and Supplementary Data**](#a_013) | 51 |
| **Item 9.** | [**Changes in and Disagreements with Accountants on Accounting and Financial Disclosure**](#a_014) | 51 |
| **Item 9A.** | [**Controls and Procedures**](#a_015) | 51 |
| **Item 9B.** | [**Other Information**](#a_016) | 52 |
| **Item 9C.** | [**Disclosure Regarding Foreign Jurisdictions that Prevent Inspections**](#a_017) | 52 |
| [**PART III**](#a_018) |  |  |
| **Item 10.** | [**Directors, Executive Officers and Corporate Governance**](#a_019) | 53 |
| **Item 11.** | [**Executive Compensation**](#a_020) | 58 |
| **Item 12.** | [**Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters**](#a_022) | 60 |
| **Item 13.** | [**Certain Relationships and Related Transactions, and Director Independence**](#a_023) | 61 |
| **Item 14.** | [**Principal Accounting Fees and Services**](#a_024) | 62 |
| [**PART IV**](#a_025) |  |  |
| **Item 15.** | [**Exhibits and Financial Statement Schedules**](#a_026) | 63 |

---

i

**Conventions that Apply to this Annual Report**

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

● "Citi Profit" are to Citi Profit Investment Holding Limited, a British Virgin Islands company, which is wholly owned by GDC;

● "GDC" and the "Company" are to GD Culture Group Limited (formerly known as JM Global Holding Company, TMSR Holding Company Limited and Code Chain New Continent Limited), a Nevada Corporation;

● "TMSR HK" are to TMSR Holdings Limited, a Hong Kong SAR company, which is wholly owned by Citi Profit;

● "Highlight HK" are to Highlights Culture Holding Co., Limited, a Hong Kong SAR company, which is wholly owned by Citi Profit;

● "Highlight Media" are to Shanghai Highlight Media Co., Ltd., a PRC company, which is a variable interest entity for accounting purposes;

● "Highlight WFOE" are to Shanghai Highlight Entertainment Co., Ltd., a PRC company, which is wholly owned by Highlight HK;

● "Makesi WFOE" are to Makesi IoT Technology (Shanghai) Co., Ltd., a PRC company, which is wholly owned by TMSR Holdings;

● "PRC" or "China" are to the People's Republic of China, excluding, for the purpose of this report, Taiwan, Hong Kong and Macau;

● "RMB" or "Renminbi" are to the legal currency of China; and

● "VIE" are to variable interest entity;

● "we", "our", "us" are to the Company and its subsidiaries and VIEs.

● "Yuan Ma" are to Shanghai Yuanma Food and Beverage Management Co., Ltd., a PRC company, which is a variable interest entity for accounting purposes;

● "$", "US$" or "U.S. Dollars" are to the legal currency of the United States.

Unless otherwise indicated, all references to common stock, warrants to purchase common stock, share data, per share data, and related information have been retroactively adjusted, where applicable, in this annual report to reflect a 1-to-30 reverse stock split of our common stock which became effective on November 9, 2022 as if they had occurred at the beginning of the earlier period presented.

ii

**CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS**

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

● our goals and strategies;

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

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

● our estimates regarding the market opportunity for our services;

● the impact of government laws and regulations;

● our ability to recruit and retain qualified personnel;

● our failure to comply with regulatory guidelines;

● uncertainty in industry demand;

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

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

● depth of the trading market in our securities.

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties, including those described in Item 1A "Risk Factors."

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

iii

**PART I**

**Item 1. Business**

**Overview**

GD Culture Group Limited ("GDC" or the "Company", formerly known as JM Global Holding Company, TMSR Holding Company Limited and Code Chain New Continent Limited) is a holding company with no material operations of its own. We currently conduct business through Shanghai Highlight Media Co., Ltd. ("Highlight Media"). Highlight WFOE is the primary beneficiary of Highlight Media for accounting purposes, because, pursuant to certain VIE agreements between Highlight WFOE, Highlight Media and shareholders of Highlight Media, Highlight Media shall pay Highlight WFOE service fees in the amount of 100% of Highlight Media's net income, while Highlight WFOE is obligated to absorb all of losses of Highlight Media. As a result, we consolidate the financial results of Highlight Media in our consolidated financial statements under U.S. GAAP. Such VIE structure involves unique risks to investors. The VIE agreements have not been tested in a court of law and the Chinese regulatory authorities could disallow this VIE structure, which would likely result in a material change in our operations and the value of our securities, including that it could cause the value of such securities to significantly decline or become worthless. For more details on the VIE structure, please see "Item 1. Business – Corporate Structure - Contractual Arrangements between Highlight Media and Highlight WFOE" and "Item 1A. Risk Factors – Risks Related to Our Corporate Structure".

Highlight Media, founded in 2016, is an integrated marketing service agency, focusing on serving businesses in China in connection with brand management, image building, public relations, social media management and event planning. Highlight Media is committed to becoming a modern technology media organization that provide clients with customized services. Its growth strategy is substantially dependent upon our ability to market our intended products and services successfully to prospective clients in China. This requires that we heavily rely upon our sales and marketing team and marketing partners. Failure to reach potential clients will significantly affect our results of operation and could have a material adverse effect on our business, financial conditions and the results of our operations.

Prior to September 28, 2022, we were also engaged in research, development and application of Internet of Things (IoT) and electronic tokens Wuge digital door signs through Wuge Network Games Co., Ltd. ("Wuge"), a then VIE of the Company. On September 28, 2022, the Company entered into a termination agreement with Wuge and the shareholders of Wuge, i.e., Wei Xu, former Chief Executive Officer, President and Chairman of the Board of the Company, and Bibo Lin, former Vice President and Director of the Company, and two entities controlled by Wei Xu, to terminate certain technical consultation and services agreement., equity pledge agreement, equity option agreement, voting rights proxy and financial support agreement, by and among Makesi WFOE, Wuge and the shareholders of Wuge. As a result, Wuge ceased to be a VIE of Makesi WFOE and operations of Wuge have been designated as discontinued operations. In exchange for such termination, on March 9, 2023, the Company cancelled 133,333 shares of common stock, after giving effect to the 1-to-30 reverse stock split which became effective on November 9, 2022 (see "– Corporate History and Structure – Reverse Stock Split" for more details) that were issued to the shareholders of Wuge in January 2020.

Our principal executive offices are located at Flat 1512, 15F, Lucky Centre, No.165-171 Wan Chai Road, Wan Chai, Hong Kong and our telephone number is: +852-95791074. Our website is www.ccnctech.com.

 ****

 ****

**Corporate History and Structure**

The following is an organizational chart setting forth our corporate structure as of the date of this Annual Report.

![](image_001.jpg)

GDC, formerly known as Code Chain New Continent Limited, TMSR Holding Company Limited and JM Global Holding Company, was a blank check company incorporated in Delaware on April 10, 2015. The Company was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, exchangeable share transaction or other similar business transaction, one or more operating businesses or assets. On June 20, 2018, the Company consummated the reincorporation. As a result, the Company changed its state of incorporation from Delaware to Nevada and implemented a 2-for-1 forward stock split of the Company's common stock. The Company is currently a holding company with no material operations of its own.

Citi Profit is a company formed under the laws of the British Virgin Islands in August 2019 and is wholly owned by GDC. It is a holding company with no material operations of its own.

Highlight HK is a company formed under the laws of Hong Kong SAR in November 2022 and is a wholly owned by Citi Profit. It is a holding company with no material operations of its own.

Highlight WFOE is a company formed under the laws of the PRC in January 2023 and is a wholly owned by Highlight HK. It is a holding company with no material operations of its own.

Highlight Media is a company formed under the laws of the PRC in November 2016. Highlight WFOE, Highlight Media and the shareholders of Highlight Media entered into a series of agreements that established a VIE structure in September 2022. See " – Contractual Arrangements between Highlight Media and Highlight WFOE". Highlight WFOE is the primary beneficiary of Highlight Media for accounting purposes, because, pursuant to the VIE agreements, Highlight Media shall pay Highlight WFOE service fees in the amount of 100% of Highlight Media's net income, while Highlight WFOE is obligated to absorb all of losses of Highlight Media. As a result, we consolidate the financial results of Highlight Media in our consolidated financial statements under U.S. GAAP.

TMSR HK is a company formed under the laws of Hong Kong SAR in April 2019 and is a wholly owned by Citi Profit. It is a holding company with no material operations of its own.

Makesi WFOE is a company formed under the laws of the PRC in December 2020 and is a wholly owned by TMSR HK. It is a holding company with no material operations of its own.

Yuan Ma is a company formed under the laws of the PRC in May 2015. Makesi WFOE, Yuan Ma and the shareholders of Yuan Ma entered into a series of agreements that established a VIE structure in June 2022. See " – Contractual Arrangements between Yuan Ma and Makesi WFOE". Makesi WFOE is the primary beneficiary of Yuan Ma for accounting purposes, because, pursuant to the VIE agreements, Yuan Ma shall pay Makesi WFOE service fees in the amount of 100% of Yuan Ma's net income, while Makesi WFOE is obligated to absorb all of losses of Yuan Ma. As a result, we consolidate the financial results of Yuan Ma in our consolidated financial statements under U.S. GAAP. Yuan Ma currently does not have any material operations.

***Reverse Stock Split***

On November 4, 2022, the Company filed a Certificate of Amendment to the Articles of Incorporation (the "Certificate of Amendment") with the Nevada Secretary of State to effect a reverse stock split of the outstanding shares of common stock, par value $0.0001 per shares, of the Company at a ratio of one-for-thirty (30), which became effective at 12:01 a.m. on November 9, 2022. Upon effectiveness of the reverse stock split, every thirty (30) outstanding shares of common stock were combined into and automatically become one share of common stock. The Company's warrants (OTC Pink: CCNCW) was adjusted so that each warrant is to purchase one-half of one shares of Common Stock at a price of $86.40 per half share ($172.50 per whole share). The warrants expired on February 5, 2023.

Unless otherwise indicated, all references to common stock, warrants to purchase common stock, share data, per share data, and related information have been retroactively adjusted, where applicable, in this annual report to reflect the reverse stock split of our common stock as if they had occurred at the beginning of the earlier period presented.

***Name Change***

Effective as of January 10, 2023, the Company changed its corporate name from "Code Chain New Continent Limited" to "GD Culture Group Limited" pursuant to a Certificate of Amendment to the Company's Articles of Incorporation. In connection with the name change, effective as of the opening of trading on January 10, 2023, the Company's common stock is trading on the Nasdaq Capital Market under the ticker symbol "GDC".

***Contractual Arrangements between Yuan Ma And Makesi WFOE***

 ****

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

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

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

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

***Contractual Arrangements between Highlight Media And Highlight WFOE***

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

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

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

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

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

**Impact of the COVID-19 Pandemic**

The COVID-19 pandemic did not have a material impact on our business or results of operation during the fiscal years ended December 31, 2022 and 2021. However, the extent to which the COVID-19 pandemic may negatively impact the general economy and our business is highly uncertain and cannot be accurately predicted. These uncertainties may impede our ability to conduct our operations and could materially and adversely affect our business, financial condition and results of operations, and as a result could adversely affect our stock price and create more volatility.

**Recent Regulatory Developments**

On January 4, 2022, the Cyberspace Administration of China, or CAC, issued the revised Measures on Cyberspace Security Review (the "Revised Measures"), which came into effect on February 15, 2022. Under the Revised Measures, any "network platform operator" controlling personal information of no less than one million users which seeks to list in a foreign stock exchange should also be subject to cyber security review.

We believe neither Highlight Media is not a "network platform operator" who control over one million personal information as mentioned above, given that: (i) Highlight Media does not possess a large amount of personal information in our business operations and (ii) data processed in Highlight Media's business does not have a bearing on national security and thus may not be classified as core or important data by the authorities. As such, we believe Highlight Media is not currently subject to the cyber security review by the CAC. However, the definition of "network platform operator" is unclear and it is also unclear on how it will be interpreted and implemented by the relevant PRC governmental authorities. See "Risk factors — Risk Factors Related to Doing Business in China — Highlight Media may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. Highlight Media may be required to suspend its business, be liable for improper use or appropriation of personal information provided by our customers or face other penalties."

On July 6, 2021, the relevant PRC governmental authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. As these opinions are recently issued, official guidance and related implementation rules have not been issued yet and the interpretation of these opinions remains unclear at this stage. As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions regarding listing abroad or offshore offering from the China Securities Regulatory Commission ("CSRC") or any other PRC governmental authorities. See "Risk Factors — Risk Factors Related to Doing Business in China — The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S exchanges, however, if Highlight Media or GDC were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange and the value of our common stock may significantly decline or become worthless, which would materially affect the interest of the investors."

On December 24, 2021, CSRC issued Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) (the "Administration Provisions"), and the Administrative Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (the "Measures"), which are open for public comments by January 23, 2022. The Administration Provisions and Measures for overseas listings lay out specific requirements for filing documents and include unified regulation management, strengthening regulatory coordination, and cross-border regulatory cooperation. Domestic companies seeking to list abroad must carry out relevant security screening procedures if their businesses involve supervisions such as foreign investment security and cyber security reviews. Companies endangering national security are among those off-limits for overseas listings. According to Relevant Officials of the CSRC Answered Reporter Questions ("CSRC Answers"), after the Administration Provisions and Measures are implemented upon completion of public consultation and due legislative procedures, the CSRC will formulate and issue guidance for filing procedures to further specify the details of filing administration and ensure that market entities could refer to clear guidelines for filing, which means it will still take time to put the Administration Provisions and Measures into effect. As the Administration Provisions and Measures have not yet come into effect, we are currently unaffected by them. However, according to CSRC Answers, only new initial public offerings and refinancing by existing overseas listed Chinese companies will be required to go through the filing process; other existing overseas listed companies will be allowed a sufficient transition period to complete their filing procedure. However, it is uncertain when the Administration Provision and the Measures will take effect or if they will take effect as currently drafted.

On February 17, 2023, the CSRC released the Trial Administrative Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies (the "Trial Measures") and five supporting guidelines, which came into effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedures and report relevant information to the CSRC. If a domestic company fails to complete the filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties by the CSRC, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. As a listed company, we believe that we, all of our PRC subsidiaries and the consolidated VIEs are not required to fulfill filing procedures with the CSRC to continue to offer our securities, or continue listing on the Nasdaq Capital Market, or operate business of the consolidated VIEs as of the date of this annual report. However, there are substantial uncertainties regarding the interpretation and application of the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors ("M&A Rules"), other PRC Laws and future PRC laws and regulations, and there can be no assurance that any governmental agency will not take a view that is contrary to or otherwise different from our belief stated herein. See "Risk Factors - Risk Factors Relating to Doing Business in China - The CSRC has released the Trial Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies (the "Trial Measures"). While such rules have not yet gone into effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our securities to investors and could cause the value of our securities to significantly decline or become worthless."

We believe that we are currently not required to obtain any permission or approval from the CSRC and the CAC in the PRC to issue securities to foreign investors. However, there is no guarantee that this will continue to be the case in the future in relation to any future offerings of our company or the continued listing of our company's securities on the Nasdaq Capital Market, or even in the event such permission or approval is required and obtained, it will not be subsequently revoked or rescinded. If we do not receive or maintain the approvals, or we inadvertently conclude that such approvals are not required, or applicable laws, regulations, or interpretations change such that we are required to obtain approval in the future, we may be subject to an investigation by competent regulators, fines or penalties, or an order prohibiting us from conducting an offering, and these risks could result in a material adverse change in our operations and the value of our securities, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.

**Implication of the Holding Foreign Company Accountable Act**

The Holding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020. The HFCAA states that if the SEC determines that an issuer's audit reports issued by a registered public accounting firm have not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such issuer's securities from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements of the HFCAA. We will be required to comply with these rules if the SEC identifies us as having a "non-inspection" year under a process to be subsequently established by the SEC. If we fail to meet the new rules before the deadline specified thereunder, we could face possible prohibition from trading on the OTCQB, deregistration from the SEC and/or other risks, which may materially and adversely affect, or effectively terminate, our securities trading in the United States. On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the HFCAA. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, legislation entitled "Consolidated Appropriations Act, 2023" (the "Consolidated Appropriations Act") was signed into law by President Biden, which contained, among other things, an identical provision to the Accelerating Holding Foreign Companies Accountable Act and amended the HFCAA by requiring the SEC to prohibit an issuer's securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading. On August 26, 2022, the CSRC, the Ministry of Finance of the PRC (the "MOF"), and the PCAOB signed a Statement of Protocol (the "Protocol"), governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the U.S. Securities and Exchange Commission (the "SEC"), the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC. On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB's access in the future, the PCAOB Board will consider the need to issue a new determination.

Our auditor prior to October 2022, WWC, P.C. had been inspected by the PCAOB on a regular basis in the audit period. Our current auditor, Enrome LLP, has been inspected by the PCAOB on a regular basis as well. If it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, investors may be deprived of the benefits of such inspection. Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken in China that prevents the PCAOB from regularly evaluating our auditors' audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate. Moreover, if trading in our securities is prohibited under the HFCAA in the future because the PCAOB determines that it cannot inspect or fully investigate our auditor at such future time, an exchange may determine to delist our securities. See "Risk Factors—Risks Related to Doing Business in China — The recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies"

**Consolidation** 

We conduct all of our business in China through Highlight Media. Highlight WFOE is the primary beneficiary of Highlight Media for accounting purposes, because, pursuant to the VIE agreements, Highlight Media shall pay Highlight WFOE service fees in the amount of 100% of Highlight Media's net income, while Highlight WFOE is obligated to absorb all of losses of Highlight Media. As a result, we consolidate the financial results of Highlight Media in our consolidated financial statements under U.S. GAAP.

The following tables present selected condensed consolidated financial data of the company and its subsidiaries and the VIE for the fiscal years ended December 31, 2022 and 2021, and balance sheet data as of December 31, 2022 and 2021, which have been derived from our audited consolidated financial statements for those years.

**SELECTED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **For the year Ended Dec 31, 2022** | **For the year Ended Dec 31, 2022** | **For the year Ended Dec 31, 2022** | **For the year Ended Dec 31, 2022** | **For the year Ended Dec 31, 2022** | **For the year Ended Dec 31, 2022** |
|  | **CCNC** | **Subsidiaries** | **VIEs** | **Discontinued<br> Operations** | **Eliminations** | **Consolidated<br> Total** |
| Revenue | $— | $| $153304 | $— | $- | $153304 |
| Net income (loss) | $(1701594) | $| $117406 | $(30397303) | $1159536 | $(30821955) |
| Comprehensive income (loss) | $(1701594) | $| $15951 | $(30397303) | $1214594 | $(30868352) |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the year Ended Dec 31, 2021** | **For the year Ended Dec 31, 2021** | **For the year Ended Dec 31, 2021** | **For the year Ended Dec 31, 2021** | **For the year Ended Dec 31, 2021** |
|  | **CCNC** | **Subsidiaries** | **VIEs** | **Eliminations** | **Consolidated <br> <u>Total</u>** |
| Revenue | $- | $| $- | $- | $- |
| Net income (loss) | $(24721486) | $| $- | $5176134 | $(26970892) |
| Comprehensive income (loss) | $(24721486) | $| $&nbsp;&nbsp;&nbsp;&nbsp; | $4466354 | $(27680672) |

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**SELECTED CONDENSED CONSOLIDATED BALANCE SHEETS**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** |
|  | **GDC** | **Subsidiaries** | **VIE** | **Eliminations** | **Consolidated<br> Total** |
| Cash | $173228 | $&nbsp;&nbsp;&nbsp;&nbsp; - | $215880 | $- | $389108 |
| Total current assets | $173228 | $- | $488693 | $948000 | $1609921 |
| Investments in subsidiaries and VIE | $29910000 | $- | $— | $(29910000) | $— |
| Total assets | $30083228 | $- | $489195 | $(26771515) | $3800908 |
| Total liabilities | $- | $- | $333784 | $- | $333784 |
| Total shareholders' equity | $30083228 | $- | $155411 | $(26771515) | $3467124 |
| Total liabilities and shareholders' equity | $30083228 | $- | $489195 | $(26771515) | $3800908 |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **As of December 31, 2021** | **As of December 31, 2021** | **As of December 31, 2021** | **As of December 31, 2021** | **As of December 31, 2021** |
|  | **GDC** | **Subsidiaries** | **VIE** | **Eliminations** | **Consolidated Total** |
| Cash | $202781 | $&nbsp;&nbsp;&nbsp;&nbsp; - | $14385549 | $- | $14588330 |
| Total current assets | $1457545 | $- | $17258309 | $(2784501) | $15931353 |
| Investments in subsidiaries and VIE | $27660000 | $- | $— | $(27660000) | $— |
| Total assets | $51739299 | $- | $19367508 | $(20571550) | $50535257 |
| Total liabilities | $5471427 | $- | $15833781 | $(2849942) | $18455266 |
| Total shareholders' equity | $46267872 | $- | $3533727 | $(17721608) | $32079991 |
| Total liabilities and shareholders' equity | $51739299 | $- | $19367508 | $(20571550) | $50535257 |

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**SELECTED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the Year Ended December 31, 2022** | **For the Year Ended December 31, 2022** | **For the Year Ended December 31, 2022** | **For the Year Ended December 31, 2022** | **For the Year Ended December 31, 2022** |
|  | **GDC** | **Subsidiaries** | **VIE** | **Eliminations** | **Consolidated<br> Total** |
| Net cash provided by (used in) operating activities | $(101723) | $&nbsp;&nbsp;&nbsp;&nbsp; - | $250296 | $(1034784) | $(886211) |
| Net used in investing activities | $— | $- | $- | $(12493352) | $(12493352) |
| Net cash provided by financing activities | $- | $- | $- | $- | $- |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **For the Year Ended December 31, 2021** | **For the Year Ended December 31, 2021** | **For the Year Ended December 31, 2021** | **For the Year Ended December 31, 2021** | **For the Year Ended December 31, 2021** |
|  | **GDC** | **Subsidiaries** | **VIE** | **Eliminations** | **Consolidated<br> Total** |
| Net cash provided by (used in) operating activities | $(13402262) | $&nbsp;&nbsp;&nbsp;&nbsp; - | $14262544 | $(6371334) | $(5511052) |
| Net used in investing activities | $- | $- | $(308778) | $(961706) | $(1270484) |
| Net cash provided by financing activities | $22539996 | $- | $255766 | $- | $22795762 |

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**Asset Transfer between our Company, our Subsidiaries and the VIE**

As of the date of this annual report, our Company, our subsidiaries, and Highlight Media have not distributed any earnings or settled any amounts owed under the VIE agreements. Our Company, our subsidiaries, and Highlight Media do not have any plan to distribute earnings or settle amounts owed under the VIE agreements in the foreseeable future.

During the fiscal years ended December 31, 2022 and 2021, there was no cash transfers and transfers of other assets between our Company, our subsidiaries, and Highlight Media.

**Our Products and Services – Enterprise brand management services**

Since 2018, Highlight Media has cooperated with authors and publishing houses in China in corporate history and entrepreneur biographies planning and publishing in the lens of the finance industry. Highlight Media published "New Industrial Era - Chinese Industrialist Zhang Yuqiang and His New Stone Story", "Endless Realm – the Growth if China Ping'An", "Unfinished Beauty – Fifteen Years of H World Group", "All Things Are Born – TCL's Forty Years", "From Connection to Activation - Digitalization and China's New Industrial Cycle" and other best-selling books in corporate history, finance and economics and has sold more than 200,000 copies. Highlight Media also plans and organizes online and offline activities with the publishing houses such as new book launches and book sharing sessions for customers, to promote new books and build influence and reputation for the corporate clients.

**Our Customers**

Highlight Media has cooperated with authors and publishing houses in China in corporate history and entrepreneur biographies planning and publishing in the lens of the finance industry. Highlight Media's major customers are Tencent Technology (Shenzhen) Co., LTD, TCL Industrial Holding Co. LTD, Citic Publishing Group Co. LTD and Beijing Baiqian Technology Co., LTD.

**Our Suppliers**

Highlight Media's main suppliers are Shanghai Yudi Feisheng Culture Media Co., LTD and Beijing Baiqian Technology Co., LTD.

**Recent Business Development**

<u>February 2021 Offering</u>

*Registered Direct Offering and Private Placement*

On February 18, 2021, we entered into a securities purchase agreement (the "Securities Purchase Agreement") with certain purchasers, pursuant to which, on February 22, 2021, we sold (i) 138,889 shares of common stock, (ii) registered warrants (the "Registered Warrants") to purchase an aggregate of up to 54,646 shares of common stock and (iii) unregistered warrants (the "Unregistered Warrants") to purchase up to 84,244 shares (the "Warrant Shares") of common stock in a registered direct offering (the "Registered Direct Offering") and a concurrent private placement (the "Private Placement," and together with the Registered Direct Offering, the "Offering"). The terms of the Offering were previously reported in a Form 8-K filed with the SEC on February 18, 2021 and the closing of the Offering was reported in a Form 8-K filed with the Commission on February 22, 2021.

The gross proceeds of the Offering of $24,999,996, before deducting placement agent fees and other expenses, are being used for working capital and general business purposes.

The Registered Warrants have a term of five years and are exercisable immediately at an exercise price of $201,60 per share, subject to adjustments thereunder, including a reduction in the exercise price, in the event of a subsequent offering at a price less than the then current exercise price, to the same price as the price in such offering (a "Price Protection Adjustment").

The Unregistered Warrants have a term of five and one-half years and are first exercisable on the date that is the earlier of (i) six months after the date of issuance or (ii) the date on which the Company obtains stockholder approval approving the sale of the securities sold under the Securities Purchase Agreement, to purchase an aggregate of up to 84,244 shares of common stock. The Unregistered Warrants have an exercise price of $201.60 per share, subject to adjustments thereunder, including (x) a Price Protection Adjustment and (y) in the event the exercise price is more than $183.00, a reduction of the exercise price to $183.00, upon obtaining such stockholder approval.

The Offering was conducted pursuant to a placement agency agreement, dated February 18, 2021 (the "Placement Agency Agreement"), between the Company and Univest Securities, LLC (the "Placement Agent"), on a "reasonable best efforts" basis. The Company paid the Placement Agent a cash fee of $2,310,000, including $2,000,000 in commission which was equal to eight percent (8.0%) of the aggregate gross proceeds raised in this Offering, $250,000 in non-accountable expense which was equal to one percent (1%) of the aggregate gross proceeds raised in the Offering, and $60,000 in accountable expenses. Additionally, the Company issued to the Placement Agent warrants to purchase up to 6,945 shares of common stock, with a term of five years first exercisable six months after the date of issuance and at an exercise price of $180.00 per share.

*Stockholder Approval*

Pursuant to the Securities Purchase Agreement, we are required to hold a meeting of our stockholders not later than April 29, 2021 to seek such approval as may be required from our stockholders (the "Stockholder Approval"), in accordance with applicable law, the applicable rules and regulations of the Nasdaq Stock Market, our certificate of incorporation and bylaws and the Nevada Revised Statutes with respect to the issuance of the securities in the Offering, including the Warrants sold in the Private Placement, so that the issuance by us of shares of common stock in excess of the 231,802 shares (19.99% of the shares of common stock outstanding as of February 17, 2021, the date prior to entering into the Securities Purchase Agreement) in the aggregate (the "Issuable Maximum"), will be in compliance with Nasdaq Listing Rules 5635(a) and 5635(d) as described herein, and investors in the Offering will be able to exercise the Warrants prior to six months after the closing of the Offering.

On April 29, 2021, we held a special meeting of stockholders and approved the issuance of shares of common stock in excess of the 231,802 shares. The exercise price of the Unregistered Warrants was reduced to $183.00.

<u>Asset Purchase Agreement dated February 23, 2021, as amended on April 16, 2021 and May 28, 2021 and the Cancellation of such Asset Purchase Agreement in September 2022</u>

On February 23, 2021, the Company entered into an asset purchase agreement with Sichuan RiZhanYun Jisuan Co., Ltd., (the "Seller"), which was amended and restated on April 16, 2021 and further amended on May 28, 2021 (the "Agreement"). Pursuant to the Agreement, the Company purchased, and the Seller sold, a total of 10,000 Bitcoin mining machines (the "Assets") for a total purchase price of RMB 40,000,000 or US$6,160,000 based on the exchange rate as of April 8, 2021 (the "Purchase Price"), payable in the form of 52,927 shares of common stock of the Company. In addition, pursuant to the Agreement, the Seller agreed to cause revenue and any other source of income from the operation of the Assets to be paid to the Company, payable in cryptocurrency to be deposited into a cryptocurrency wallet held by the Company on a daily basis. The Company agreed to issue to the Seller or its designees certain bonuses, payable in the common stock of the Company upon meeting certain milestones. On June 1, 2021, the Company issued to the Seller's designee 83,776 shares of common stock (the "Shares"), consisted of (i) the Purchase Price in the form of 52,927 shares of common stock and (ii) 30,850 bonus shares for meeting and exceeding certain milestones. Because the Assets were never delivered to the Company and the Company has not received and is not able to accept cryptocurrency from the operation of the Assets, the Company and the Seller agreed to rescind the Agreement and cancel the Shares on September 26, 2022.

<u>Joint Venture Agreement dated June 1, 2021</u>

On June 1, 2021, the Company entered into a joint venture agreement with Zhongyou Technology (Shenzhen) Co., Ltd. to jointly establish Zero Carbon Energy (Shenzhen) Co., Ltd., a digital energy carbon neutral innovation platform which uses digital technology to open up the upstream and downstream of the energy industry chain to achieve carbon neutrality and boost the transformation and upgrading of the industry and carbon emission reduction. The registered capital of the joint venture shall be one million U.S. dollars, to be contributed by the Company. The Company will hold 51% interest of the joint venture. As of March 31, 2023, the Company has not made any contribution nor has the joint venture been established.

<u>Asset Purchase Agreement dated July 28, 2021 and Termination Agreement dated February 23, 2022</u>

On July 28, 2021, the Company entered into an asset purchase agreement with certain seller pursuant to which the Company purchased from the seller digital currency mining machines for a total purchase price of RMB 106,388,672.43, or US$16,442,109.95 (based on the exchange rate between RMB and USD of 1: 6.4705 as of July 8, 2021). In exchange, the Company issued 254,917 shares of common stock of the Company, valued at $64.50 per share, on August 26, 2021. On February 23, 2022, the Company entered into a termination agreement with the seller to terminate the asset purchase agreement dated July 28, 2021 and forfeit the transaction. The 254,917 shares of common stock of the Company were cancelled on March 14, 2022.

<u>Asset Purchase Agreement dated September 27, 2021 and Termination Agreement dated March 7, 2022</u>

On September 27, 2021, the Company entered into an asset purchase agreement with Shenzhen Jindeniu Electronics Limited, pursuant to which the Company agreed to purchase certain storage servers for cloud computing, for a total purchase price of US$15,922,303. On March 7, 2022, the Company entered into a termination agreement with Shenzhen Jindeniu Electronics Limited to terminate the asset purchase agreement dated September 27, 2021. Considerations to the transaction, including advanced payments by the Company, have been returned to respective parties and the transaction is deemed void.

<u>Disposition of Tongrong WFOE</u>

On March 30, 2021, the Company entered into a share purchase agreement with a buyer unaffiliated with the Company (the "Buyer"), and Qihai Wang, former director of the Company (the "Payee"). Pursuant to the agreement, the Company agreed to sell and the Buyer agreed to purchase all the issued and outstanding ordinary shares (the "Tongrong Shares") of Tongrong WFOE. The Payee agreed to be responsible for the payment of the purchase price on behalf of Buyer. The purchase price for the Tongrong Shares shall be $2,464,411, payable in the form of cancelling 14,213 shares of common stock of the Company owned by the Payee. The 14,213 shares are valued at $783.40 per share, based on the average closing price of the Company's common stock during the 30 trading days immediately prior to the date of the agreement from February 12, 2021 to March 26, 2021. On March 31, 2021, the Company closed the sale of the Tongrong Shares and caused the GDC Shares to be cancelled. Tongrong WFOE had a series of VIE agreements with Rong Hai and the shareholders of Rong Hai. The disposition of Tongrong WFOE included disposition of Rong Hai.

<u>Acquisition of Shanghai Yuanma Food and Beverage Management Co., Ltd.</u>

On April 14, 2022, the Company entered into a Share Purchase Agreement with Yuan Ma and all the shareholders of Yuan Ma ("Yuanma Shareholders"). Yuanma Shareholders are Wei Xu, a former Chief Executive Officer, President and Chairman of the Board of the Company, and Jiangsu Lingkong Network Joint Stock Co., Ltd., which is controlled by Wei Xu.

Pursuant to the Share Purchase Agreement, the Company agreed to issue an aggregate of 256,000 shares of common stock of the Company (the "Shares"), valued at $30.00 per share, to the Yuanma Shareholders, in exchange for Yuanma Shareholders' agreement to enter into and to cause Yuan Ma to enter into certain agreements ("Yuan Ma VIE Agreements") with WFOE, the Company's indirectly owned subsidiary, to establish a VIE structure. The issuance of 256,000 shares of common stock to Wei Xu was approved at a special meeting of the stockholders of the Company held on June 13, 2022. On June 21, 2022, Makesi WFOE entered into the Yuan Ma VIE Agreements with Yuan Ma and Yuanma Shareholders, and the 256,000 shares of common stock were issued to Wei Xu.

<u>Acquisition of Shanghai Highlight Media Co., Ltd.</u>

On September 16, 2022, the Company entered into a Share Purchase Agreement with Highlight Media, and all the shareholders of Highlight Media ("Highlight Media Shareholders"). The Highlight Media Shareholders are Hongxiang Yu, the Chief Executive Officer, President and Chairman of the Board of the Company, and Shaung Zhang, the Vice President and a director of the Company.

Pursuant to the Share Purchase Agreement, the Company agreed to issue an aggregate of 300,000 shares of common stock of the Company (the "Shares"), valued at $7.50 per share, to the Highlight Media Shareholders, in exchange for Highlight Media's and Highlight Media Shareholders' agreement to enter into certain agreements (the "Highlight Media VIE Agreements") with Makesi WFOE, the Company's indirectly owned subsidiary, to establish a VIE structure. On September 16, 2022, Makesi WFOE entered into the Highlight Media VIE Agreements with Highlight Media and Highlight Media Shareholders. On September 29, 2022, the 300,000 shares of common stock were issued to the Highlight Media Shareholders.

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

<u>Disposition of Wuge</u>

On September 28, 2022, the Company entered into a termination agreement with Wuge and the shareholders of Wuge, i.e., Wei Xu, former Chief Executive Officer, President and Chairman of the Board of the Company, and Bibo Lin, former Vice President and Director of the Company, and two entities controlled by Wei Xu, to terminate certain technical consultation and services agreement., equity pledge agreement, equity option agreement, voting rights proxy and financial support agreement, by and among Makesi WFOE, Wuge, and the shareholders of Wuge. As a result, Wuge ceased to be a VIE of Makesi WFOE and operations of Wuge have been designated as discontinued operations. In exchange for such termination, on March 9, 2023, the Company cancelled 133,333 shares of common stock that were issued to the shareholders of Wuge in January 2020.

<u>Nasdaq Compliance</u>

On May 5, 2022, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market regarding the Company's failure to comply with Nasdaq Continued Listing Rule 5550(a)(2), which requires listed securities to maintain a minimum bid price of $1.00 per share. A failure to comply with Rule 5550(a)(2) exists when listed securities fail to maintain a closing bid price of at least $1.00 per share for 30 consecutive business days. Based on the closing bid price for the last 30 consecutive business days (including, in particular, the period March 23, 2022 through May 4, 2022), the Company failed to meet the aforesaid requirement.

On November 2, 2022, the Company received a written notice from Nasdaq (stating that, although the Company had not regained compliance with the minimum bid price requirement by November 1, 2022, in accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company is eligible for an additional 180 calendar day period, or until May 1, 2023, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the closing bid price of the Company's common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-day period.

On November 28, 2022, the Company received a letter from Nasdaq stating that because the Company's common stock had a closing bid price at or above $1.00 per share for 10 consecutive business days, the Company had regained compliance with the minimum bid price requirement of $1.00 per share for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2), and that the matter is now closed.

**Environmental Matters**

As of December 31, 2022, Highlight Media was not subject to any fines or legal action involving non-compliance with any relevant environmental regulation, nor are we aware of any threatened or pending action, including by any environmental regulatory authority.

**Governmental Regulations**

***Business license***

Any company that conducts business in the PRC must have a business license that covers a particular type of work. Highlight Media's business license covers its present business of Book Publishing Planning, Financial Self-Media and Public Relations. Prior to expanding Highlight Media's business beyond that of its business license, Highlight Media is required to apply and receive approval from the PRC government.

***Employment laws***

We and Highlight Media are subject to laws and regulations governing our relationship with our employees, including: wage and hour requirements, working and safety conditions, citizenship requirements, work permits and travel restrictions. These include local labor laws and regulations, which may require substantial resources for compliance. China's National Labor Law, which became effective on January 1, 1995, and amended on August 27, 2009, and China's National Labor Contract Law, which became effective on January 1, 2008, and amended on December 28, 2012, permit workers in both state and private enterprises in China to bargain collectively. The National Labor Law and the National Labor Contract Law provide for collective contracts to be developed through collaboration between the labor union (or worker representatives in the absence of a union) and management that specify such matters as working conditions, wage scales, and hours of work. The laws also permit workers and employers in all types of enterprises to sign individual contracts, which are to be drawn up in accordance with the collective contract.

***Intellectual property protection in China***

***Patent.*** The PRC has domestic laws for the protection of copyrights, patents, trademarks and trade secrets. The PRC is also signatory to some of the world's major intellectual property conventions, including:

● Convention establishing the World Intellectual Property Organization (WIPO Convention) (June 4, 1980);

● Paris Convention for the Protection of Industrial Property (March 19, 1985);

● Patent Cooperation Treaty (January 1, 1994); and

● The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) (November 11, 2001).

Patents in the PRC are governed by the China Patent Law and its Implementing Regulations, each of which went into effect in 1985. Amended versions of the China Patent Law and its Implementing Regulations came into effect in 1993, 2001 and 2009, respectively.

The PRC is signatory to the Paris Convention for the Protection of Industrial Property, in accordance with which any person who has duly filed an application for a patent in one signatory country shall enjoy, for the purposes of filing in the other countries, a right of priority during the period fixed in the convention (12 months for inventions and utility models, and 6 months for industrial designs).

The Patent Law covers three kinds of patents — patents for inventions, utility models and designs. The Chinese patent system adopts the principle of first to file, which means that a patent may be granted only to the person who first files an application. Consistent with international practice, the PRC allows the patenting of inventions or utility models that possess the characteristics of novelty, inventiveness and practical applicability only. For a design to be patentable it cannot be identical with, or similar to, any design which, before the date of filing, has been publicly disclosed in publications in the country or abroad or has been publicly used in the country, and should not be in conflict with any prior right of another.

***Copyright***. Copyright in the PRC, including copyrighted software, is principally protected under the Copyright Law of the PRC and related rules and regulations. Under the Copyright Law, the term of protection for copyrighted software is 50 years.

***Trademark***. Registered trademarks are protected under the Trademark Law of the PRC and related rules and regulations. Trademarks are registered with the Trademark Office of the SAIC. Where registration is sought for a trademark that is identical or similar to another trademark which has already been registered or given preliminary examination and approval for use in the same or similar category of commodities or services, the application for registration of such trademark may be rejected. Trademark registrations are effective for a renewable ten-year period, unless otherwise revoked. The duration of a trademark is 10 years from the date of registration.

***Domain names***. Domain name registrations are handled through domain name service agencies established under the relevant regulations, and applicants become domain name holders upon successful registration.

**Regulations on Tax**

***PRC Corporate Income Tax***

The PRC corporate income tax, or CIT, is calculated based on the taxable income determined under the applicable CIT Law and its implementation rules, which became effective on January 1, 2008 and amended on February 24, 2017. The CIT Law imposes a uniform corporate income tax rate of 25% on all resident enterprises in China, including foreign-invested enterprises.

Uncertainties exist with respect to how the CIT Law applies to the tax residence status of The Company and our offshore subsidiaries. Under the CIT 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 corporate income tax purposes. Although the implementation rules of the CIT Law define "de facto management body" as a managing body that exercises substantive and overall management and control over the production and business, personnel, accounting books and assets of an enterprise, the only official guidance for this definition currently available is set forth in Circular 82 issued by the State Administration of Taxation, 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 the Company 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 Circular 82, in the absence of guidance specifically applicable to us, we have applied the guidance set forth in Circular 82 to evaluate the tax residence status of The Company and our subsidiaries organized outside the PRC.

According to Circular 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 corporate income tax on its worldwide income only if all of the following criteria are met:

● the primary location of the day-to-day operational management is in the PRC;

● decisions relating to the enterprise's financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC;

● the enterprise's primary assets, accounting books and records, company seals, and board and shareholders meeting minutes are located or maintained in the PRC; and

● 50% or more of voting board members or senior executives habitually reside in the PRC.

We do not believe that we meet any of the conditions outlined in the immediately preceding paragraph.

We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. However, the tax resident 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 all of our management members are based in China, it remains unclear how the tax residency rule will apply to our case. If the PRC tax authorities determine that we or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income tax purposes, then we or such subsidiary could be subject to PRC tax at a rate of 25% on its world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, if the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, gains realized on the sale or other disposition of our common stock may 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), if such gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our 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 we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in our common stock.

***Value-Added Tax and Business Tax***

In November 2011, the Ministry of Finance and the State Administration of Taxation promulgated the Pilot Plan for Imposition of Value-Added Tax to Replace Business Tax. In May and December 2013 and April 2014, the Ministry of Finance and the State Administration of Taxation promulgated Circular 37, Circular 106 and Circular 43 to further expand the scope of services which are to be subject to Value-Added Tax, or VAT, instead of business tax. Pursuant to these tax rules, from August 1, 2013, VAT will be imposed to replace the business tax in certain service industries, including technology services and advertising services, on a nationwide basis. The VAT rate shall be 17% for sale or importation of goods by a taxpayer. But, unlike business tax, a taxpayer is allowed to offset the qualified input VAT paid on taxable purchases against the output VAT chargeable on the revenue from services provided.

**Regulations Relating to Foreign Exchange and Dividend Distribution**

***Foreign Exchange Regulation***

The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations. Under the PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, may be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans or foreign currency is to be remitted into China under the capital account, such as a capital increase or foreign currency loans to our PRC subsidiaries.

In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches.

We typically do not need to use our offshore foreign currency to fund our PRC operations. In the event we need to do so, we will apply to obtain the relevant approvals of SAFE and other PRC government authorities as necessary.

***SAFE Circular 37***

SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014, which replaced the former circular commonly known as "SAFE Circular 75" promulgated by SAFE on October 21, 2005. SAFE Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents' legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in SAFE Circular 37 as a "special purpose vehicle." SAFE Circular 37 further requires amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.

We have notified substantial beneficial owners of common stock who we know are PRC residents of their filing obligation. However, we may not be aware of the identities of all our beneficial owners who are PRC residents. In addition, we do not have control over our beneficial owners and cannot assure you that all of our PRC resident beneficial owners will comply with SAFE Circular 37. The failure of our beneficial owners who are PRC residents to register or amend their SAFE registrations in a timely manner pursuant to SAFE Circular 37 or the failure of future beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in SAFE Circular 37 may subject such beneficial owners or our PRC subsidiaries to fines and legal sanctions. Failure to register or amend the registration may also limit our ability to contribute additional capital to our PRC subsidiaries or receive dividends or other distributions from our PRC subsidiaries or other proceeds from disposal of our PRC subsidiaries, or we may be penalized by SAFE.

***Share Option Rules***

Under the Administration Measures on Individual Foreign Exchange Control issued by the PBOC on December 25, 2006, all foreign exchange matters involved in employee share ownership plans and share option plans in which PRC citizens participate require approval from SAFE or its authorized branch. Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly-listed companies may submit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies. In addition, under the Notices on Issues concerning the Foreign Exchange Administration for Domestic Individuals Participating in Share Incentive Plans of Overseas Publicly-Listed Companies, or the Share Option Rules, issued by SAFE on February 15, 2012, PRC residents who are granted shares or share options by companies listed on overseas stock exchanges under share incentive plans are required to (i) register with SAFE or its local branches, (ii) retain a qualified PRC agent, which may be a PRC subsidiary of the overseas listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the share incentive plans on behalf of the participants, and (iii) retain an overseas institution to handle matters in connection with their exercise of share options, purchase and sale of shares or interests and funds transfers.

***Regulation of Dividend Distribution***

The principal laws, rules and regulations governing dividend distribution by foreign-invested enterprises in the PRC are the Company Law of the PRC, as amended, the Wholly Foreign-owned Enterprise Law and its implementation regulations and the Chinese-foreign Equity Joint Venture Law and its implementation regulations. Under these laws, rules and regulations, foreign-invested enterprises may pay dividends only out of their accumulated profit, if any, as determined in accordance with PRC accounting standards and regulations. Both PRC domestic companies and wholly-foreign owned PRC enterprises are required to set aside as general reserves at least 10% of their after-tax profit, until the cumulative amount of such reserves reaches 50% of their registered capital. A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

**Regulations on Mergers & Acquisitions and Overseas Listings**

On August 8, 2006, six PRC regulatory agencies, including the CSRC, MOFCOM, the State-owned Assets Supervision and Administration Commission, the SAT, the State Administration of Industry and Commerce and SAFE, adopted the M&A Rules, which became effective on September 8, 2006, and were amended on June 22, 2009. Foreign investors shall comply with the M&A Rules when they purchase equity interests of a domestic company or subscribe the increased capital of a domestic company, and thus changing the nature of the domestic company into a foreign-invested enterprise, when the foreign investors establish a foreign-invested enterprise in the PRC, purchase the assets of a domestic company and operate the assets, or when the foreign investors purchase the assets of a domestic company, establish a foreign-invested enterprise by injecting such assets, and operate the assets. As for merger and acquisition of a domestic company with a related party relationship by a domestic company, enterprise or natural person in the name of an overseas company legitimately incorporated or controlled by the domestic company, enterprise of natural person, such merger and acquisition shall be subject to examination and approval of MOFCOM. The parties involved shall not use domestic investment by foreign investment enterprises or other methods to circumvent the requirement of examination and approval.

Pursuant to the Manual of Guidance on Administration for Foreign Investment Access, which was issued and became effective on December 18, 2008 by MOFCOM, notwithstanding the fact that (i) the domestic shareholder is connected with the foreign investor or not, or (ii) the foreign investor is the existing shareholder or the new investor, the M&A Rules shall not apply to the transfer of an equity interest in an incorporated foreign-invested enterprise from the domestic shareholder to the foreign investor.

On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions. The Opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies. The Opinions proposed to take effective measures, such as promoting the construction of relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection.

On February 17, 2023, with the approval of the State Council, the CSRC released the Trial Measures and five supporting guidelines, which came into effect on March 31, 2023. According to the Trial Measures, (1) domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedures and report relevant information to the CSRC; if a domestic company fails to complete the filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties by the CSRC, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines; (2) if the issuer meets both of the following conditions, the overseas offerings and listings shall be determined as an indirect overseas offerings and listings by a domestic company: (i) 50% or more of the issuer's operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted for by domestic enterprises; and; (ii) its major operational activities are carried out in China or its main places of business are located in China, or the senior managers in charge of its business operation and management are mostly Chinese citizens or domiciled in China; and (3) where a domestic company seeks to indirectly offer and list securities in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures with the CSRC, and where an issuer makes an application for initial public offerings or listings in an overseas market, the issuer shall submit filings with the CSRC within three business days after such application is submitted; if the issuer submits the application documents for offerings or listings in secret or non-public ways overseas, it may submit an explanation at the time of filing, and the application shall be postponed until the application documents are reported to the CSRC within three business days after the application documents are disclosed overseas.

On February 24, 2023, the CSRC, together with the MOF, National Administration of State Secrets Protection and National Archives Administration of China, revised the Provisions issued by the CSRC and National Administration of State Secrets Protection and National Archives Administration of China in 2009. The revised Provisions were issued under the title the "Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies," and came into effect on March 31, 2023 together with the Trial Measures. One of the major revisions to the revised Provisions is expanding their application to cover indirect overseas offering and listing, as is consistent with the Trial Measures. The revised Provisions require that, among other things, (a) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals or entities, including securities companies, securities service providers, and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) a domestic company that plans to, either directly or indirectly through its overseas listed entity, publicly disclose or provide to relevant individuals and entities, including securities companies, securities service providers, and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. Any failure or perceived failure by our Company, our subsidiaries, or the VIEs to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in the relevant entities being held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.

**Legal Proceedings**

From time to time, we may be involved in various claims and legal proceedings arising in the ordinary course of business. None of our Company, our subsidiaries or variable interest entity is currently a party to any such claims or proceedings which, if decided adversely to the Company, would either, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations or cash flows.

**Employees**

As of March 31, 2023, Highlight Media had 20 full-time employees.

Highlight Media have not experienced any significant labor disputes and consider its relationship with the employees to be good. The employees are not covered by any collective bargaining agreement.

As Highlight Media continues to expand our business, we believe it is critical to hire and retain top talent, especially in the areas of marketing and technology engineering. We believe Highlight Media has the ability to attract and retain high quality engineering talent in China based on our competitive salaries, annual performance-based bonus system, and equity incentive program for senior employees and executives.

**Item 1A. Risk Factors**

*An investment in our shares of common stock involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this annual report, before you decide to buy any shares. Any of the following risks could cause our business, results of operations and financial condition to suffer materially, causing the market price of our shares of common stock to decline, in which event you may lose part or all of your investment in our shares of common stock. Additional risks and uncertainties not currently known to us or that we currently do not deem material may also become important factors that may materially and adversely affect our business.*

**Risks Related to Our Corporate Structure**

***If the PRC government deems that the VIE agreements in relation to Highlight Media, our consolidated variable interest entity or VIE, do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations and our common stock may decline in value dramatically or even become worthless.***

We are a holding company incorporated in Nevada. As a holding company with no material operations of our own, we conduct substantially all of our operations through Highlight Media, the consolidated variable interest entity (or VIE) established in PRC. Highlight WFOE is the primary beneficiary of Highlight Media for accounting purposes, because, pursuant to the VIE agreements, Highlight Media shall pay Highlight WFOE service fees in the amount of 100% of Highlight Media's net income, while Highlight WFOE is obligated to absorb all of losses of Highlight Media. As a result, we consolidate the financial results of Highlight Media in our consolidated financial statements under U.S. GAAP. Such VIE structure involves unique risks to investors. For more details on the VIE structure, please see "Item 1. Business – Corporate Structure - Contractual Arrangements between Highlight Media And Highlight WFOE".

We rely on and expect to continue to rely on the VIE agreements to operate our business. These contractual arrangements are not as effective in providing us with control over Highlight Media as ownership of controlling equity interests would be in enabling us to derive economic benefits from the operations of Highlight Media. Under the current contractual arrangements, as a legal matter, if Highlight Media or any of its shareholders executing the VIE agreements fails to perform its, his or her respective obligations under these contractual arrangements, we may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective. For example, if Highlight Media's shareholders were to refuse to transfer their equity interests in such variable interest entity to us or our designated persons when we exercise the purchase option pursuant to these contractual arrangements, we may have to take a legal action to compel them to fulfill their contractual obligations. Highlight Media and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of Highlight Media, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of Highlight Media, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by Highlight Media and its shareholders of their obligations under the contracts. The shareholders of Highlight Media may not act in the best interests of our Company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate the business through the contractual arrangements with Highlight Media.

All of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. The VIE agreements have not been tested in a court of law. If (i) the applicable PRC authorities invalidate the VIE agreements for violation of PRC laws, rules and regulations, (ii) Highlight Media or its shareholders terminate the contractual arrangements, (iii) Highlight Media or its shareholders fail to perform its/his/her obligations under these contractual arrangements, or (iv) if these regulations change or are interpreted differently in the future, we may have to modify such structure to comply with regulatory requirements. There can be no assurance that we can achieve this without material disruption to our business. Furthermore, if Highlight WFOE is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including, without limitation:

● revoking the business license and/or operating licenses of Highlight WFOE or Highlight Media;

● discontinuing or placing restrictions or onerous conditions on our operations through any transactions among Highlight WFOE and Highlight Media;

● imposing fines, confiscating the income from Highlight WFOE or Highlight Media, or imposing other requirements with which Highlight WFOE or Highlight Media may not be able to comply;

● placing restrictions on our right to collect revenues;

● shutting down our servers or blocking our app/websites;

● requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with Highlight Media and deregistering the equity pledges of Highlight Media, which in turn would affect our ability to consolidate or derive economic interests from Highlight Media; or

● restricting or prohibiting our use of the proceeds of future financings to finance our business and operations in China.

● taking other regulatory or enforcement actions against us that could be harmful to our business.

The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business, thus causing the value of our common stock to significantly decline or be worthless, which would materially affect the interest of the investors. In addition, it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of Highlight Media in our consolidated financial statements, if the PRC government authorities were to find our corporate structure and contractual arrangements to be in violation of PRC laws and regulations. If the imposition of any of these government actions causes us to lose our right to direct the activities of Highlight Media or our right to receive substantially all the economic benefits and residual returns from Highlight Media and we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial results of Highlight Media in our consolidated financial statements. Either of these results, or any other significant penalties that might be imposed on us in this event, would have a material adverse effect on our financial condition and results of operations.

In addition, if Highlight Media or all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If Highlight Media undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business and our ability to generate revenues.

***We are a holding company, and will rely on dividends paid by our subsidiaries for our cash needs. Any limitation on the ability of Highlight WFOE to make dividend payments to us, or any tax implications of making dividend payments to us, could limit our ability to pay our parent company expenses or pay dividends to holders of our common stock.***

 ****

We are a holding company with no material operation of our own. We may rely on dividends to be paid by our subsidiaries to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us.

Under PRC laws and regulations, our PRC subsidiary, Highlight WFOE, which is a wholly foreign-owned enterprise in China, may pay dividends only out of its accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital.

Highlight Media, the VIE with which Highlight WFOE has contractual arrangement with, generates primarily all of its revenue in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our PRC subsidiary to use its Renminbi revenues to pay dividends to us. The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by State Administration of Foreign Exchange (the "SAFE") for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our PRC subsidiary to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated. Any limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

***Shareholders of Highlight Media may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.***

The equity interests of Highlight Media are held by a total of two shareholders, Hongxiang Yu, Chief Executive Officer, President and Chairman of the Board of GDC, Shuang Zhang, Vice President and Director of GDC, Their interests may differ from the interests of our Company as a whole. They may breach, or cause Highlight Media to breach, or refuse to renew the existing VIE agreements Highlight WFOE has with Highlight Media, which would have a material adverse effect on our ability to receive economic benefits from them. For example, the shareholders may be able to cause our agreements with Highlight Media to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our Company or such conflicts will be resolved in our favor.

Currently, we do not have arrangements to address potential conflicts of interest the shareholders of Highlight Media may encounter, on one hand, and as a beneficial owner of our Company, on the other hand. We, however, could, at all times, exercise our option under the Exclusive Option Agreement to cause them to transfer all of their equity ownership in Highlight Media to a PRC entity or individual designated by us as permitted by the then applicable PRC laws. In addition, if such conflicts of interest arise, we could also, in the capacity of attorney-in-fact of the then existing shareholders of Highlight Media as provided under the power of attorney, directly appoint new directors of Highlight Media. We rely on the shareholders of Highlight Media to comply with PRC laws and regulations, which protect contracts and provide that directors and executive officers owe a duty of loyalty to our Company and require them to avoid conflicts of interest and not to take advantage of their positions for personal gains, and the laws of Nevada, which provide that the directors have a duty of care and a duty of loyalty to act honestly in good faith with a view to our best interests. However, the legal frameworks of China and Nevada do not provide guidance on resolving conflicts in the event of a conflict with another corporate governance regime. If we cannot resolve any conflicts of interest or disputes between us and the shareholders of Highlight Media, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings. As a result, our common stock may decline in value dramatically or even become worthless should we become unable to assert our contractual rights over the assets of Highlight Media that conducts all or substantially our operations.

***Contractual arrangements in relation to Highlight Media may be subject to scrutiny by the PRC tax authorities and they may determine that we or Highlight Media owe/owes additional taxes, which could negatively affect our results of operations and the value of your investment.***

Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. The PRC enterprise income tax law requires every enterprise in China to submit its annual enterprise income tax return together with a report on transactions with its related parties to the relevant tax authorities. The tax authorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistent with arm's length principles. We may face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements between our WFOE, our variable interest entity Highlight Media and the shareholders of Highlight Media were not entered into on an arm's length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust Highlight Media's income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by Highlight Media for PRC tax purposes, which could, in turn, increase their tax liabilities without reducing Highlight WFOE's tax expenses. In addition, if Highlight WFOE requests the shareholders of Highlight Media to transfer their equity interests in Highlight Media at nominal or no value pursuant to these contractual arrangements, such transfer could be viewed as a gift and subject Highlight WFOE to PRC income tax. Furthermore, the PRC tax authorities may impose late payment fees and other penalties on Highlight Media for the adjusted but unpaid taxes according to the applicable regulations. Our results of operations could be materially and adversely affected if Highlight Media's tax liabilities increase or if they are required to pay late payment fees and other penalties.

***If we exercise the option to acquire equity ownership of Highlight Media, the ownership transfer may subject us to certain limitation and substantial costs.***

Pursuant to the VIE agreements, Highlight WFOE has the exclusive right to purchase all or any part of the equity interests in Highlight Media from the shareholders of Highlight Media for a nominal price, unless the relevant government authorities or then applicable PRC laws request that a minimum price amount be used as the purchase price, in such case the purchase price shall be the lowest amount under such request. The shareholders of Highlight Media will be subject to PRC individual income tax on the difference between the equity transfer price and the then current registered capital of Highlight Media. Additionally, if such a transfer takes place, the competent tax authority may require Highlight WFOE to pay enterprise income tax for ownership transfer income with reference to the market value, in which case the amount of tax could be substantial.

**Risks Related to Doing Business in China**

***PRC regulation of loans to, and direct investments in, PRC entities by offshore holding companies may delay or prevent us from using proceeds from future financing activities to make loans or additional capital contributions to our PRC operating subsidiaries.***

In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents' Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaces the previous SAFE Circular 75. SAFE Circular 37 requires PRC residents, including PRC individuals and PRC corporate entities, to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we may make in the future.

Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore special purpose vehicles, or SPVs, are required to register such investments with SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder of an SPV, is required to update its registration with the local branch of SAFE with respect to that SPV, to reflect any material change. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the local branch of SAFE to reflect any material change. If any PRC resident shareholder of such SPV fails to make the required registration or to update the registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from making additional capital contributions into its subsidiaries in China. In February, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound direct investments, including those required under SAFE Circular 37, must be filed with qualified banks instead of SAFE. Qualified banks should examine the applications and accept registrations under the supervision of SAFE. We have used our best efforts to notify PRC residents or entities who directly or indirectly hold shares in our holding company and who are known to us as being PRC residents to complete the foreign exchange registrations. However, we may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with SAFE registration requirements. We cannot assure you that all other shareholders or beneficial owners of ours who are PRC residents or entities have complied with, and will in the future make, obtain or update any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiaries, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, and limit our PRC subsidiaries' ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.

Furthermore, as these foreign exchange and outbound investment related regulations are relatively new and their interpretation and implementation has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border investments and transactions, will be interpreted, amended and implemented by the relevant government authorities. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. We cannot assure you that we have complied or will be able to comply with all applicable foreign exchange and outbound investment related regulations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

As an offshore holding company with PRC subsidiaries, we may finance our subsidiaries by means of loans or capital contributions and finance Highlight Media by means of loans. Any capital contributions or loans that we, as an offshore entity, make to our Company's PRC subsidiary and Highlight Media are subject to the above PRC regulations. We may not be able to obtain necessary government registrations or approvals on a timely basis, if at all. If we fail to obtain such approvals or make such registration, our ability to make equity contributions or provide loans to our Company's PRC subsidiary and Highlight Media or to fund their operations may be negatively affected, which may adversely affect their liquidity and ability to fund their working capital and expansion projects and meet their obligations and commitments. As a result, our liquidity and our ability to fund and expand our business may be negatively affected.

***Changes in China's economic, political or social conditions or government policies could have a material adverse effect on our business and results of operations.***

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All of Highlight Media's operations and assets are located in China. Accordingly, Highlight Media's business, prospects, financial condition and results of operations may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.

The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China's economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies

While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity in China, and since 2012, China's economic growth has slowed down. Any prolonged slowdown in the Chinese economy may reduce the demand for our products and services and materially and adversely affect our business and results of operations.

***Under the Enterprise Income Tax Law, we may be classified as a "Resident Enterprise" of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC stockholders.***

China passed the Enterprise Income Tax Law, or the EIT Law, and its implementing rules, both of which became effective on January 1, 2008. Under the EIT Law, an enterprise established outside of China with "de facto management bodies" within China is considered a "resident enterprise," meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto management as "substantial and overall management and control over the production and operations, personnel, accounting, and properties" of the enterprise.

On April 22, 2009, the State Administration of Taxation of China issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application of the EIT Law and its implementation to offshore entities controlled by a Chinese enterprise or group. Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a "non-domestically incorporated resident enterprise" if (i) its senior management in charge of daily operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) its substantial assets and properties, accounting books, corporate stamps, board and stockholder minutes are kept in China; and (iv) all of its directors with voting rights or senior management reside in China. A resident enterprise would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10% when paying dividends to its non-PRC stockholders. Because substantially all of our operations and senior management are located within the PRC and are expected to remain so for the foreseeable future, we may be considered a PRC resident enterprise for enterprise income tax purposes and therefore subject to the PRC enterprise income tax at the rate of 25% on its worldwide income. However, it remains unclear as to whether the Notice is applicable to an offshore enterprise controlled by a Chinese natural person. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

If the PRC tax authorities determine that we are a "resident enterprise" for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Currently, we do not have any non-China source income, as we conduct our sales in China. However, under the EIT Law and its implementing rules, dividends paid to us from our PRC subsidiaries would be deemed as "qualified investment income between resident enterprises" and therefore qualify as "tax-exempt income" pursuant to clause 26 of the EIT Law. Second, it is possible that future guidance issued with respect to the new "resident enterprise" classification could result in a situation in which the dividends we pay with respect to our common stock, or the gain our non-PRC shareholders may realize from the transfer of our common stock, may be treated as PRC-sourced income and may therefore be subject to a 10% PRC withholding tax. The EIT Law and its implementing regulations are, however, relatively new and ambiguities exist with respect to the interpretation and identification of PRC-sourced income, and the application and assessment of withholding taxes. If we are required under the EIT Law and its implementing regulations to withhold PRC income tax on dividends payable to our non-PRC shareholders, or if non-PRC stockholders are required to pay PRC income tax on gains on the transfer of their common stock, our business could be negatively impacted and the value of your investment may be materially reduced. Further, if we were treated as a "resident enterprise" by PRC tax authorities, we would be subject to taxation in both China and such countries in which we have taxable income, and our PRC tax may not be creditable against such other taxes.

***We must comply with the Foreign Corrupt Practices Act and Chinese anti-corruption laws*.**

We are required to comply with the United States Foreign Corrupt Practices Act, or FCPA, which prohibits US companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. The PRC also strictly prohibits bribery of government officials. Certain of our suppliers are owned by the PRC government and our dealings with them are likely to be considered to be with government officials for these purposes. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in China. It is our policy to prohibit our employees, and to discourage our agents, representatives and consultants, from engaging in such practices. If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Our employees, agents, representatives and consultants may not always be subject to our control. If any of them violates FCPA or other anti-corruption law, we might be held responsible. We could suffer severe penalties in that event. In addition, the US government may seek to hold us liable for successor liability FCPA violations committed by companies in which we invest or which we acquire.

***Uncertainties in the interpretation and enforcement of PRC laws and regulations and changes in policies, rules, and regulations in China, which may be quick with little advance notice, could limit the legal protection available to you and us.***

The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The legislation over the past three decades has significantly increased the protection afforded to various forms of foreign or private-sector investment in China. Highlight Media is subject to various PRC laws and regulations generally applicable to companies in China. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, however, the interpretations of many laws, regulations, and rules are not always uniform and enforcement of these laws, regulations, and rules involve uncertainties.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, however, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy in the PRC legal system than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies, internal rules, and regulations that may have retroactive effect and may change quickly with little advance notice. As a result, Highlight Media may not be aware of its violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainties over the scope and effect of the contractual, property (including intellectual property), and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect Highlight Media's business and impede Highlight Media's ability to continue its operations.

***Our business may be materially and adversely affected if Highlight Media declares bankruptcy or become subject to a dissolution or liquidation proceeding.***

The Enterprise Bankruptcy Law of the PRC, or the Bankruptcy Law, came into effect on June 1, 2007. The Bankruptcy Law provides that an enterprise will be liquidated if the enterprise fails to settle its debts as and when they fall due and if the enterprise's assets are, or are demonstrably, insufficient to clear such debts.

Highlight Media holds certain assets that are important to our business operations. If Highlight Media undergoes a voluntary or involuntary liquidation proceeding, unrelated third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect Highlight Media's business, financial condition and results of operations.

According to SAFE's Notice of the State Administration of Foreign Exchange on Further Improving and Adjusting Foreign Exchange Administration Policies for Direct Investment, effective on 17 December 2012, and the Provisions for Administration of Foreign Exchange Relating to Inbound Direct Investment by Foreign Investors, effective May 13, 2013, if any of our PRC subsidiaries undergoes a voluntary or involuntary liquidation proceeding, prior approval from SAFE for remittance of foreign exchange to our shareholders abroad is no longer required, but we still need to conduct a registration process with the SAFE local branch. It is not clear whether "registration" is a mere formality or involves the kind of substantive review process undertaken by SAFE and its relevant branches in the past.

***Substantial uncertainties exist with respect to the interpretation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.***

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The Ministry of Commerce published a discussion draft of the proposed Foreign Investment Law in January 2015, or the 2015 FIL Draft, which expands the definition of foreign investment and introduces the principle of "actual control" in determining whether a company is considered a foreign-invested enterprise, or an FIE. Under the 2015 FIL Draft, VIEs that are controlled via contractual arrangement would also be deemed as foreign invested enterprises, 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 compared to the 2015 FIL Draft, there is still uncertainty regarding whether Highlight Media would be identified as a FIE in the future.

Even if Highlight Media were to be identified as a FIE in the future, we believe that our current business would not be adversely affected. However, if we were to engage in any business conduct involving third parties identified as prohibited or restricted on the Negative List, Highlight Media as well as its subsidiary may be subject to laws and regulations on foreign investment. In addition, our shareholders would also be prohibited or restricted to invest in certain sectors on the Negative List. However, even if Highlight Media were to be identified as a FIE, the validity of our contractual arrangements with Highlight Media and its shareholders as well as our corporate structure would not be adversely affected. We would still be able to receive benefits from Highlight Media in accordance with the contractual agreements. In addition, as the Chinese government has been updating the Negative List in recent years and reducing the sectors prohibited or restricted for foreign investment, it is probable in the future that, even if Highlight Media is identified as a FIE, it is still allowed to acquire or hold equity of enterprises in sectors currently prohibited or restricted for foreign investment.

Furthermore, the PRC Foreign Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment may maintain their structure and corporate governance within five years after the implementing of the PRC Foreign Investment Law.

In addition, the PRC Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others, that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions, profits, capital gains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully acquired, and income from liquidation, among others, within China; local governments shall abide by their commitments to the foreign investors; governments at all levels and their departments shall enact local normative documents concerning foreign investment in compliance with laws and regulations and shall not impair legitimate rights and interests, impose additional obligations onto FIEs, set market access restrictions and exit conditions, or intervene with the normal production and operation activities of FIEs; except for special circumstances, in which case statutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited.

Notwithstanding the above, the PRC Foreign Investment Law stipulates that foreign investment includes "foreign investors invest through any other methods under laws, administrative regulations or provisions prescribed by the State Council". Therefore, there are possibilities that future laws, administrative regulations or provisions prescribed by the State Council may regard contractual arrangements as a form of foreign investment, and then whether our contractual arrangement will be recognized as foreign investment, whether our contractual arrangement will be deemed to be in violation of the foreign investment access requirements and how the above-mentioned contractual arrangement will be handled are uncertain.

***Given the Chinese government's significant oversight and discretion over the conduct of the business of Highlight Media, the Chinese government may intervene or influence its operations at any time, which could result in a material change in the operations of Highlight Media and/or the value of our common stock.***

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The Chinese government has significant oversight and discretion over the conduct of Highlight Media and may intervene or influence their operations at any time as the government deems appropriate to further regulatory, political, and societal goals, which could result in a material change in the operations of Highlight Media and/or the value of our common stock.

The Chinese government has recently published new policies that significantly affected certain industries such as the education and Internet industries, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could adversely affect the business, financial condition, and results of operations of Highlight Media. Furthermore, if China adopts more stringent standards with respect to certain areas such as environmental protection or corporate social responsibilities, Highlight Media may incur increased compliance costs or become subject to additional restrictions in their operations. Certain areas of the law in China, including intellectual property rights and confidentiality protections, may also not be as effective as in the United States or other countries. In addition, we cannot predict the effects of future developments in the PRC legal system on the business operations of Highlight Media, including the promulgation of new laws, or changes to existing laws or the interpretation or enforcement thereof. These uncertainties could limit the legal protections available to us and our investors, including you.

***The Chinese government exerts substantial influence over the manner in which we must conduct our business activities*. *We are currently not required to obtain approval from Chinese authorities to list on U.S exchanges, however, if Highlight Media or the holding company were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on U.S. exchange and the value of our common stock may significantly decline or become worthless, which would materially affect the interest of the investors.***

The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Under the current government leadership, the government of the PRC has been pursuing reform policies which have adversely affected China-based operating companies whose securities are listed in the United States, with significant policies changes being made from time to time without notice. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing our business, or the enforcement and performance of our contractual arrangements with borrowers in the event of the imposition of statutory liens, bankruptcy or criminal proceedings. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.

Given recent statements by the Chinese government indicating an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, any such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless.

Recently, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Severely Cracking Down on Illegal Securities Activities According to Law, or the Opinions, which was made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems, will be taken to deal with the risks and incidents of China-concept overseas listed companies. As of the date of this annual report, we have not received any inquiry, notice, warning, or sanctions from PRC government authorities in connection with the Opinions.

On June 10, 2021, the Standing Committee of the National People's Congress of China, or the SCNPC, promulgated the PRC Data Security Law, which took effect in September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data an information.

On August 17, 2021, the State Council promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure, or the Regulations, which took effect on September 1, 2021. The Regulations supplement and specify the provisions on the security of critical information infrastructure as stated in the Cybersecurity Review Measures. The Regulations provide, among others, that protection department of certain industry or sector shall notify the operator of the critical information infrastructure in time after the identification of certain critical information infrastructure.

On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the PRC, or the Personal Information Protection Law, which took effect on November 1, 2021. As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the Personal Information Protection Law provides, among others, that (i) an individual's consent shall be obtained to use sensitive personal information, such as biometric characteristics and individual location tracking, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual's rights, and (iii) where personal information operators reject an individual's request to exercise his or her rights, the individual may file a lawsuit with a People's Court.

On December 24, 2021, the CSRC, together with other relevant government authorities in China issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), and the Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) ("Draft Overseas Listing Regulations"). The Draft Overseas Listing Regulations requires that a PRC domestic enterprise seeking to issue and list its shares overseas ("Overseas Issuance and Listing") shall complete the filing procedures of and submit the relevant information to CSRC. The Overseas Issuance and Listing includes direct and indirect issuance and listing. Where an enterprise whose principal business activities are conducted in PRC seeks to issue and list its shares in the name of an overseas enterprise ("Overseas Issuer") on the basis of the equity, assets, income or other similar rights and interests of the relevant PRC domestic enterprise, such activities shall be deemed an indirect overseas issuance and listing ("Indirect Overseas Issuance and Listing") under the Draft Overseas Listing Regulations. Therefore, the proposed offering would be deemed an Indirect Overseas Issuance and Listing under the Draft Overseas Listing Regulations. As such, the Company would be required to complete the filing procedures of and submit the relevant information to CSRC after the Draft Overseas Listing Regulations become effective.

As such, the Company's businesses may be subject to various government and regulatory interference in the provinces in which they operate. The Company could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. The Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply. The Chinese government may intervene or influence our operations at any time with little advance notice, which could result in a material change in our operations and in the value of our common stock. Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless.

Furthermore, it is uncertain when and whether the Company will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. Although the Company is currently not required to obtain permission from any of the PRC federal or local government to obtain such permission and has not received any denial to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its business or industry. As a result, our common stock may decline in value dramatically or even become worthless should we become subject to new requirement to obtain permission from the PRC government to list on U.S. exchange in the future.

***Fluctuations in exchange rates could adversely affect our business and the value of our securities.***

Changes in the value of the RMB against the U.S. dollar are affected by, among other things, changes in China's political and economic conditions. Any significant revaluation of the RMB may have a material adverse effect on our revenues and financial condition, and the value of, and any dividends payable on our shares in U.S. dollar terms. For example, to the extent that we need to convert U.S. dollars we receive from our public offering into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverse effect on RMB amount we would receive from the conversion. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of paying dividends on our common stock or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition, fluctuations of the RMB against other currencies may increase or decrease the cost of imports and exports, and thus affect the price-competitiveness of our products against products of foreign manufacturers or products relying on foreign inputs.

Since July 2005, the RMB is no longer pegged to the U.S. dollar. Although the People's Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.

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***Increases in labor costs in the PRC may adversely affect our business and results of operations.***

The currently effective *PRC Labor Contract Law*, or the Labor Contract Law was first adopted on June 29, 2007 and later amended on December 28, 2012. The PRC Labor Contract Law has reinforced the protection of employees who, under the Labor Contract Law, have the right, among others, to have written employment contracts, to enter into employment contracts with no fixed term under certain circumstances, to receive overtime wages and to terminate or alter terms in labor contracts. Furthermore, the Labor Contract Law sets forth additional restrictions and increases the costs involved with dismissing employees. To the extent that we need to significantly reduce our workforce, the Labor Contract Law could adversely affect our ability to do so in a timely and cost-effective manner, and our results of operations could be adversely affected. In addition, for employees whose employment contracts include noncompetition terms, the Labor Contract Law requires us to pay monthly compensation after such employment is terminated, which will increase our operating expenses.

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 vehicle buyers by increasing the prices of our products and services, our financial condition and results of operations would be materially and adversely affected.

***PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary's ability to increase its registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.***

In July 2014, the State Administration of Foreign Exchange 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". 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 Special Purpose Vehicles ("SPVs"). 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.

We may not be informed of the identities of all the PRC residents or entities holding direct or indirect interest in our company, nor can we compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents or entities have complied with, and will in the future make or obtain any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiaries, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit Highlight WFOE's ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.

***Highlight Media may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. Highlight Media may be required to suspend its business, be liable for improper use or appropriation of personal information provided by our customers and face other penalties.***

Highlight Media may become subject to a variety of laws and regulations in the PRC regarding privacy, data security, cybersecurity, and data protection. These laws and regulations are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws. In particular, there are numerous laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal information and other user data. Such laws and regulations often vary in scope, may be subject to differing interpretations, and may be inconsistent among different jurisdictions.

We expect to obtain information about various aspects of our operations as well as regarding our employees and third parties. We also maintain information about various aspects of our operations as well as regarding our employees. The integrity and protection of our customer, employee and company data is critical to our business. Our customers and employees expect that we will adequately protect their personal information. We are required by applicable laws to keep strictly confidential the personal information that we collect, and to take adequate security measures to safeguard such information.

The PRC Criminal Law, as amended by its Amendment 7 (effective on February 28, 2009) and Amendment 9 (effective on November 1, 2015), prohibits institutions, companies and their employees from selling or otherwise illegally disclosing a citizen's personal information obtained during the course of performing duties or providing services or obtaining such information through theft or other illegal ways. On November 7, 2016, the Standing Committee of the PRC National People's Congress issued the Cyber Security Law of the PRC, or Cyber Security Law, which became effective on June 1, 2017.

Pursuant to the Cyber Security Law, network operators must not, without users' consent, collect their personal information, and may only collect users' personal information necessary to provide their services. Providers are also obliged to provide security maintenance for their products and services and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws and regulations.

The Civil Code of the PRC (issued by the PRC National People's Congress on May 28, 2020 and effective from January 1, 2021) provides main legal basis for privacy and personal information infringement claims under the Chinese civil laws. PRC regulators, including the Cyberspace Administration of China, MIIT, and the Ministry of Public Security have been increasingly focused on regulation in the areas of data security and data protection.

The PRC regulatory requirements regarding cybersecurity are constantly evolving. For instance, various regulatory bodies in China, including the Cyberspace Administration of China, the Ministry of Public Security and the SAMR, have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations. In April 2020, the Chinese government promulgated Cybersecurity Review Measures, which came into effect on June 1, 2020. According to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security.

In November 2016, the Standing Committee of China's National People's Congress passed China's first Cybersecurity Law ("CSL"), which became effective in June 2017. The CSL is the first PRC law that systematically lays out the regulatory requirements on cybersecurity and data protection, subjecting many previously under-regulated or unregulated activities in cyberspace to government scrutiny. The legal consequences of violation of the CSL include penalties of warning, confiscation of illegal income, suspension of related business, winding up for rectification, shutting down the websites, and revocation of business license or relevant permits. In April 2020, the Cyberspace Administration of China and certain other PRC regulatory authorities promulgated the Cybersecurity Review Measures, which became effective in June 2020. Pursuant to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security. On July 10, 2021, the Cyberspace Administration of China issued a revised draft of the Measures for Cybersecurity Review for public comments ("Draft Measures"), which required that, in addition to "operator of critical information infrastructure," any "data processor" carrying out data processing activities that affect or may affect national security should also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad. The Cyberspace Administration of China has said that under the proposed rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations because of the risk that such data and personal information could be "affected, controlled, and maliciously exploited by foreign governments," The cybersecurity review will also investigate the potential national security risks from overseas IPOs. We do not know what regulations will be adopted or how such regulations will affect us and our listing on Nasdaq. In the event that the Cyberspace Administration of China determines that we are subject to these regulations, we may be required to delist from Nasdaq and we may be subject to fines and penalties. On June 10, 2021, the Standing Committee of the NPC promulgated the PRC Data Security Law, which took effect on September 1, 2021. The Data Security Law also sets forth the data security protection obligations for entities and individuals handling personal data, including that no entity or individual may acquire such data by stealing or other illegal means, and the collection and use of such data should not exceed the necessary limits The costs of compliance with, and other burdens imposed by, CSL and any other cybersecurity and related laws may limit the use and adoption of our products and services and could have an adverse impact on our business. On January 4, 2022, thirteen PRC regulatory agencies, namely, the CAC, the NDRC, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of State Security, the Ministry of Finance, MOFCOM, SAMR, CSRC, the People's Bank of China, the National Radio and Television Administration, National Administration of State Secrets Protection and the National Cryptography Administration, jointly adopted and published the Measures for Cybersecurity Review (2021), which became effective on February 15, 2022. The Measures for Cybersecurity Review (2021) required that, among others, in addition to "operator of critical information infrastructure" any "operator of network platform" holding personal information of more than one million users which seeks to list in a foreign stock exchange should also be subject to cybersecurity review.

On July 10, 2021, the Cyberspace Administration of China issued a revised draft of the Measures for Cybersecurity Review for public comments (the "Review Measures"), and on December 28, 2021, the Cyberspace Administration of China jointly with the relevant authorities published Measures for Cybersecurity Review (2021) which took effect on February 15, 2022 and replace the Review Measures, which required that, operators of critical information infrastructure purchasing network products and services, and data processors (together with the operators of critical information infrastructure, the "Operators") carrying out data processing activities that affect or may affect national security, shall conduct a cybersecurity review, any operator who controls more than one million users' personal information must go through a cybersecurity review by the cybersecurity review office if it seeks to be listed in a foreign country.

Under the Data Security Law enacted on September 1, 2021 and the Measures for Cybersecurity Review (2021) implemented on February 15, 2022, given that (i) Highlight Media is not an Operator, (Ii) Highlight Media does not possess more than one million users' personal information, and (iIi) data processed in Highlight Media's business does not have a bearing on national security and thus may not be classified as core or important data by the authorities. However, if the CSRC, CAC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain their approvals for this offering and any follow-on offering, we may be unable to obtain such approvals and we may face sanctions by the CSRC, CAC or other PRC regulatory agencies for failure to seek their approval which could significantly limit or completely hinder our ability to offer or continue to offer securities to our investors and the securities currently being offered may substantially decline in value and be worthless.

We cannot assure you that PRC regulatory agencies, including the CAC, would take the same view as we do, and there is no assurance that we can fully or timely comply with such laws. In the event that we are subject to any mandatory cybersecurity review and other specific actions required by the CAC, we face uncertainty as to whether any clearance or other required actions can be timely completed, or at all. Given such uncertainty, we may be further required to suspend our relevant business, shut down our website, or face other penalties, which could materially and adversely affect our business, financial condition, and results of operations.

***The CSRC has released the Trial Measures for Administration of Overseas Securities Offerings and Listings by Domestic Companies (the "Trial Measures"). While such rules have not yet gone into effect, the Chinese government may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to continue to offer our securities to investors and could cause the value of our securities to significantly decline or become worthless.***

On February 17, 2023, with the approval of the State Council, the CSRC released the Trial Measures and five supporting guidelines, which came into effect on March 31, 2023. According to the Trial Measures, (1) domestic companies that seek to offer or list securities overseas, both directly and indirectly, should fulfill the filing procedures and report relevant information to the CSRC; if a domestic company fails to complete the filing procedures or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties by the CSRC, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines; (2) if the issuer meets both of the following conditions, the overseas offerings and listings shall be determined as an indirect overseas offerings and listings by a domestic company: (i) 50% or more of the issuer's operating revenue, total profit, total assets or net assets as documented in its audited consolidated financial statements for the most recent accounting year is accounted for by domestic enterprises; and; (ii) its major operational activities are carried out in China or its main places of business are located in China, or the senior managers in charge of its business operation and management are mostly Chinese citizens or domiciled in China; and (3) where a domestic company seeks to indirectly offer and list securities in an overseas market, the issuer shall designate a major domestic operating entity responsible for all filing procedures with the CSRC, and where an issuer makes an application for initial public offerings or listings in an overseas market, the issuer shall submit filings with the CSRC within three business days after such application is submitted; if the issuer submits the application documents for offerings or listings in secret or non-public ways overseas, it may submit an explanation at the time of filing, and the application shall be postponed until the application documents are reported to the CSRC within three business days after the application documents are disclosed overseas.

The Trial Measures, may subject us to additional compliance requirements in the future, and we cannot assure you that we will be able to get the clearance of filing procedures under the Trial Measures on a timely basis, or at all. Any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to continue to offer our securities, cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our consolidated financial condition and results of operations and cause our securities to significantly decline in value or become worthless. We believe that we, our PRC subsidiaries and the consolidated VIEs are not required to fulfill filing procedures with the CSRC to continue to offer our securities, or continue listing on the Nasdaq Capital Market, or operate the business of the consolidated VIEs. In addition, to date, none of us, our PRC subsidiaries or the consolidated VIEs have received any filing or compliance requirements from CSRC for the listing of the Company at Nasdaq Capital Market and all of its overseas offerings. However, there are substantial uncertainties regarding the interpretation and application of the M&A Rules, other PRC Laws and future PRC laws and regulations, and there can be no assurance that any PRC governmental agency will not take a view that is contrary to or otherwise different from our belief stated herein

***If we become directly subject to the recent 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, this offering and our reputation and could result in a loss of your investment in our common stock, especially if such matter cannot be addressed and resolved favorably.***

Recently, 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 around financial and accounting irregularities, 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 has 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 our Company, our business and this offering. 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 the Company. This situation may be a major distraction to our management. If such allegations are not proven to be groundless, our Company and business operations will be severely hampered and your investment in our common stock could be rendered worthless.

***You may face difficulties in protecting your interests and exercising your rights as a stockholder since we conduct substantially all of our operations in China, and almost all of our officers and directors reside outside the U.S.***

Although we are incorporated in Nevada, we conduct substantially all of our operations in China. All of our current officers and almost all of our directors reside outside the U.S. and substantially all of the assets of those persons are located outside of the U.S. It may be difficult for you to conduct due diligence on the Company or such directors in your election of the directors and attend shareholders meeting if the meeting is held in China. We plan to have one shareholder meeting each year at a location to be determined, potentially in China. As a result of all of the above, our public shareholders may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than would shareholders of a corporation doing business entirely or predominantly within the U.S.

***The recent joint statement by the SEC and PCAOB, proposed rule changes submitted by Nasdaq, and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. Although the audit report included in annual report was issued by U.S. auditors who are currently inspected by the PCAOB, if it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, investors would be deprived of the benefits of such inspection and our common stock may be delisted or prohibited from trading.***

On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.

On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in "Restrictive Market", (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company's auditors.

On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company's auditors for three consecutive years, the issuer's securities are prohibited to trade on a national securities exchange or in the over the counter trading market in the U.S. On December 2, 2020, the U.S. House of Representatives approved the Holding Foreign Companies Accountable Act. On December 18, 2020, the Holding Foreign Companies Accountable Act was signed into law.

On March 24, 2021, the SEC announced that it had adopted interim final amendments to implement congressionally mandated submission and disclosure requirements of the Act. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. The SEC will implement a process for identifying such a registrant and any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction, and will also require disclosure in the registrant's annual report regarding the audit arrangements of, and governmental influence on, such a registrant.

On June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, and on December 29, 2022, legislation entitled "Consolidated Appropriations Act, 2023" (the "Consolidated Appropriations Act") was signed into law by President Biden, which contained, among other things, an identical provision to the Accelerating Holding Foreign Companies Accountable Act and amended the HFCA Act by requiring the SEC to prohibit an issuer's securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three, thus reducing the time period for triggering the prohibition on trading.

On December 2, 2021, the SEC issued amendments to finalize rules implementing the submission and disclosure requirements in the Holding Foreign Companies Accountable Act. The rules apply to registrants that the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that PCAOB is unable to inspect or investigate completely because of a position taken by an authority in foreign jurisdictions.

On December 16, 2021, PCAOB announced the PCAOB Holding Foreign Companies Accountable Act determinations (the "PCAOB determinations") relating to the PCAOB's inability to inspect or investigate completely registered public accounting firms headquartered in mainland China of the PRC or Hong Kong, a Special Administrative Region and dependency of the PRC, because of a position taken by one or more authorities in the PRC or Hong Kong.

On August 26, 2022, the CSRC, the Ministry of Finance of the PRC (the "MOF"), and the PCAOB signed a Statement of Protocol (the "Protocol"), governing inspections and investigations of audit firms based in mainland China and Hong Kong, taking the first step toward opening access for the PCAOB to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong. Pursuant to the fact sheet with respect to the Protocol disclosed by the U.S. Securities and Exchange Commission (the "SEC"), the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC.

On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB's access in the future, the PCAOB Board will consider the need to issue a new determination. Our auditor prior to October 2022, WWC, P.C. had been inspected by the PCAOB on a regular basis in the audit period. Our current auditor, Enrome LLP, has been inspected by the PCAOB on a regular basis as well. If it is later determined that the PCAOB is unable to inspect or investigate our auditor completely, investors may be deprived of the benefits of such inspection. Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken in China that prevents the PCAOB from regularly evaluating our auditors' audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate. Moreover, if trading in our securities is prohibited under the HFCAA in the future because the PCAOB determines that it cannot inspect or fully investigate our auditor at such future time, an exchange may determine to delist our securities

However, these recent developments would add uncertainties to our offering, and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor's audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. In the event it is later determined that the PCAOB is unable to inspect or investigate completely the Company's auditor because of a position taken by an authority in a foreign jurisdiction, then such lack of inspection could cause trading in the Company's securities to be prohibited under the Holding Foreign Companies Accountable Act, and ultimately result in a determination by a securities exchange to delist the Company's securities.

***The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.***

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The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that the MOC be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the Anti-Monopoly Law promulgated by the SCNPC effective in 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds (i.e., during the previous fiscal year, (i) the total global turnover of all operators participating in the transaction exceeds RMB10 billion and at least two of these operators each had a turnover of more than RMB400 million within China, or (ii) the total turnover within China of all the operators participating in the concentration exceeded RMB 2 billion, and at least two of these operators each had a turnover of more than RMB 400 million within China) must be cleared by MOFCOM before they can be completed.

Moreover, the Anti-Monopoly Law requires that the MOC shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, the security review rules issued by the MOC that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise "national defense and security" concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise "national security" concerns are subject to strict review by the MOC, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the MOC or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

***If Highlight Media fails to maintain the requisite licenses and approvals required under PRC law, our business, financial condition and results of operations may be materially and adversely affected.***

Foreign investment is highly regulated by the PRC government and local authorities. Highlight Media is required to obtain and maintain certain licenses or approvals from different regulatory authorities in order to operate their respective current businesses. These licenses and approvals are essential to the operation of their businesses, for example, the value-added telecommunication business carried out by Highlight Media. If Highlight Media fails to obtain or maintain any of the required licenses or approvals for its business, we may be subject to various penalties, such as fines and the discontinuation or restriction of its operations. Any such disruption in the business operations of Highlight Media could materially and adversely affect our business, financial condition and results of operations.

***You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions against us or our management, in China, based upon United States laws, including the U.S. federal securities laws, or other foreign laws.***

We are a company incorporated in Nevada. Substantially all of our operations are conducted in China, and substantially all of our assets are located in China. All of our current directors and officers reside in China, and substantially all of the assets of those persons are located outside of the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce judgments against us which are obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States providing for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors or officers if they decide that the judgment violates the basic principles of PRC laws, national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.

In the event shareholders originate an action against a company without domicile in China for disputes related to contracts or other property interests, the PRC courts may accept a cause of action if (a) the disputed contract is concluded or performed in the PRC or the disputed subject matter is located in the PRC, (b) the company (as defendant) has properties that can be seized within the PRC, (c) the company has a representative organization within the PRC, or (d) the parties chose to submit to the jurisdiction of the PRC courts in the contract on the condition that such submission does not violate the requirements of jurisdiction under the PRC Civil Procedures Law. The action may be initiated by the shareholder by filing a complaint with the PRC courts. The PRC courts would determine whether to accept the complaint in accordance with the PRC Civil Procedures Law. The shareholder may participate in the action by itself or entrust any other person or PRC legal counsel to participate on behalf of such shareholder. Foreign citizens and companies will have the same rights as PRC citizens and companies in such an action unless such foreign country restricts the rights of PRC citizens and companies.

**Risks Related to Our Business and Operations**

***Failure to manage Highlight Media effectively since its acquisition could materially impact our business.***

The recent acquisition of Highlight Media have placed, and future growth will place, a significant strain on the Company's management, administrative, operational and financial infrastructure. The Company's success will depend in part on its ability to manage Highlight Media effectively. To manage the recent and expected growth of its operations and personnel, the Company will need to continue to improve its operational, financial and management controls and its reporting systems and procedures. Failure to effectively manage Highlight Media could result in difficulty or delays in deploying the Company's services to customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features or other operational difficulties. Any of these difficulties could adversely impact the Company's business performance and results of operations.

***The limited operating history and evolving business model of Highlight Media make it difficult to evaluate its business and future prospects and the risks and challenges it may encounter.***

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Highlight Media commenced operations in 2016. The evaluations of the business and prediction about future performance may not be as accurate as they would be if Highlight Media had a longer operating history. In the event that actual results differ from the expectation, the investors' perceptions of Highlight Media's business and future prospects could change materially, which may adversely affect the price of our common stock.

***If Highlight Media's fails to maintain strong relationships with the clients, authors and other creative talent, as well as to develop relationships with new creative talent, its business could be adversely affected.***

Highlight Media's business is highly dependent on maintaining strong relationships with the clients, authors and other creative talent who produce the products and services that are sold to its customers. Any overall weakening of these relationships, or the failure to develop successful new relationships, could have an adverse impact on Highlight Media's business and financial performance.

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***Increases in certain operating costs and expenses, which are beyond our control and can significantly affect our profitability, could adversely affect our operating performance.***

Highlight Media's major expense categories include employee compensation. Compensation costs are influenced by general economic factors, including those affecting costs of health insurance, postretirement benefits and any trends specific to the employee skill sets that Highlight Media requires.

***Highlight Media maintains an experienced and dedicated employee base that executes its strategies. Failure to attract, retain and develop this employee base could result in difficulty with executing our strategy.***

***Highlight Media may face disruption to third-party technology systems and resulting interruptions in the availability of its services.***

The satisfactory performance, reliability and availability of our services are critical to our success. We rely on third-party technology infrastructure, websites and social media platforms. However, the technology systems or infrastructure may not function properly at all times. Such third-party technology infrastructure may experience telecommunications failures, computer viruses, failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures, user errors, or other attempts to harm Highlight Media's ability to provide services. Further, hackers, acting individually or in coordinated groups, may also launch distributed denial of service attacks or other coordinated attacks that may cause service outages or other interruptions in Highlight Media's business.

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***Highlight Media may be subject to intellectual property infringement claims.***

We cannot be certain that Highlight Media's operations or any aspects of its business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. Highlight Media may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by Highlight Media's services or other aspects of its business without its awareness. If any third-party infringement claims are brought against Highlight Media, it may be forced to divert management's time and other resources from its business and operations to defend against these claims, regardless of their merits.

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***Highlight Media may fail to make necessary or desirable strategic alliance, acquisition or investment, and we may not be able to achieve the benefits we expect from the alliances, acquisition or investments we make.***

Highlight Media may pursue selected strategic alliances and potential strategic acquisitions that are supplemental to our business and operations, including opportunities that can help us further expand our product and service offerings and improve our technology system. However, strategic alliances with third parties could subject Highlight Media to a number of risks, including risks associated with sharing proprietary information, non-performance or default by counterparties, and increased expenses in establishing these new alliances, any of which may materially and adversely affect our business. In addition, Highlight Media may have limited ability to control or monitor the actions of its strategic partners. To the extent a strategic partner suffers any negative publicity as a result of its business operations, Highlight Media's reputation may be negatively affected by virtue of its association with such party.

The costs of identifying and consummating strategic acquisitions may be significant and subsequent integrations of newly acquired companies, businesses, assets and technologies would require significant managerial and financial resources and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our growth and business operations. In addition, investments and acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities and exposure to potential unknown liabilities of the acquired business. The acquired businesses or assets may not generate the financial results Highlight Media expects and may incur losses. The cost and duration of integrating newly acquired businesses could also materially exceed our expectations. If Highlight Media's portfolio do not perform as we expect, its results of operation and profitability may be adversely affected.

***Our financial results would suffer if Highlight Media fails to successfully differentiate its offerings and meet market needs.***

Highlight Media is subject to the risks that it will not successfully develop and execute promotional strategies in response to future customer trends or technological changes or that it will not otherwise meet market needs in these businesses in a timely or cost-effective fashion. If the Company cannot attract new customers and meet the changing preferences and demands of these customers, its revenues and cash flows could be negatively impacted.

***Cyber risk and the failure to maintain the integrity of Highlight Media's operational or security systems or infrastructure, or those of third parties with which Highlight Media does business, could have a material adverse effect on Highlight Media's business, consolidated financial condition, and results of operations.***

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The cybersecurity risks Highlight Media faces range from cyberattacks common to most industries, such as the development and deployment of malicious software to gain access to its networks and attempt to steal confidential information, launch distributed denial of service attacks, or attempt other coordinated disruptions, to more advanced threats that target Highlight Media.

Like many multinational corporations, Highlight Media, and some third parties upon which Highlight Media relies, has experienced cyberattacks on its computer systems and networks in the past and may experience them in the future, likely with more frequency and sophistication and involving a broader range of devices and modes of attack, all of which will increase the difficulty of detecting and successfully defending against them. To date, none have resulted in any material adverse impact to its business, operations, products, services, or customers. Highlight Media has invested in Cybersecurity tools and resources to keep its systems safe. However, the security measures implemented by Highlight Media or by its outside service providers may not be effective, and our systems (and those of the outside service providers) may be vulnerable to theft, loss, damage and interruption from a number of potential sources and events, including unauthorized access or security breaches, cyber-attacks, computer viruses, power loss, or other disruptive events.

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***Changes in global economic conditions could impact our ability to borrow funds and meet our future financing needs.***

Changes in global financial markets have not had, nor do we anticipate they will have, a significant impact on our liquidity. Due to our significant operating cash flow, financial assets, access to capital markets, and available lines of credit and revolving credit agreements, we continue to believe that we have the ability to meet our financing needs for the foreseeable future. As market conditions change, we will continue to monitor our liquidity position. However, there can be no assurance that our liquidity or our consolidated financial position and results of operations will not be adversely affected by possible future changes in global financial markets and global economic conditions. Unprecedented market conditions including illiquid credit markets, volatile equity markets, dramatic fluctuations in foreign currency rates, and economic recession, could affect future results.

**Risks Related to Our Securities**

***The price of our common stock could be subject to rapid and substantial volatility. Such volatility, including any stock run-ups, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our common stock. Volatility in our common stock price may subject us to securities litigation.***

The market for our common stock may have, when compared to seasoned issuers, significant price volatility and we expect that the price of our shares of common stock may continue to be more volatile than that of a seasoned issuer for the indefinite future. As a relatively small-capitalization company with a relatively small public float, we may experience greater share price volatility, extreme price run-ups, lower trading volume, and less liquidity than large-capitalization companies. In particular, our common stock may be subject to rapid and substantial price volatility, low volumes of trades, and large spreads in bid and ask prices. Such volatility, including any stock run-ups, may be unrelated to our actual or expected operating performance and financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our common stock.

In addition, if the trading volumes of our common stock are low, persons buying or selling in relatively small quantities may easily influence the price of our common stock. This low volume of trades could also cause the price of our common stock to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Holders of our common stock may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our common stock. As a result of this volatility, investors may experience losses on their investment in our common stock. A decline in the market price of our common stock also could adversely affect our ability to issue additional common stock or other securities and our ability to obtain additional financing in the future. No assurance can be given that an active market in our common stock will develop or be sustained. If an active market does not develop, holders of our common stock may be unable to readily sell the shares they hold or may not be able to sell their shares at all.

In a addition, in the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities to the Company and could divert our management's attention and resources.

***We will need additional capital in the future. If additional capital is not available, we may not be able to continue to operate our business pursuant to our business plan or we may have to discontinue our operations entirely.***

 ****

Regardless of the success of this offering, we will require additional capital in the future. We have incurred losses in each year since our inception. If we continue to use cash at our historical rates of use we will need significant additional financing, which we may seek through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest will be diluted, and the terms of any such offerings may include liquidation or other preferences that may adversely affect the then existing shareholders rights. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt or making capital expenditures. If we raise additional funds through collaboration, strategic alliance or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms that are not favorable to us.

***Raising additional capital by issuing shares may cause dilution to existing shareholders.***

We are currently authorized to issue 200,000,000 shares of common stock. As of March 31, 2023, we had 1,711,544 shares of common stock issued and outstanding.

We may seek additional capital through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest will be diluted, and the terms of any such offerings may include liquidation or other preferences that may adversely affect the then existing shareholders rights. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt or making capital expenditures. If we raise additional funds through collaboration, strategic alliance or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms that are not favorable to us.

***Future sales of our common stock could reduce the market price of the common stock.***

Substantial sales of our common stock may cause the market price of our common stock to decline. Sales by us or our security holders of substantial amounts of our common stock, or the perception that these sales may occur in the future, could cause a reduction in the market price of our common stock.

The issuance of any additional shares of our common stock or any securities that are exercisable for or convertible into our common stock, may have an adverse effect on the market price of the common stock and will have a dilutive effect on our existing shareholders and holders of common stock.

 ***We do not know whether a market for the common stock will be sustained or what the trading price of the common stock will be and as a result it may be difficult for you to sell your shares.***

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Although our common stock trade on Nasdaq, an active trading market for the common stock may not be sustained. It may be difficult for you to sell your shares without depressing the market price for the common stock. As a result of these and other factors, you may not be able to sell your shares. Further, an inactive market may also impair our ability to raise capital by selling common stock, or may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares as consideration.

 ****

***We have no plans to pay dividends on our shares, and you may not receive funds without selling the shares.***

We have not declared or paid any cash dividends on our common stock, nor do we expect to pay any cash dividends on our common stock for the foreseeable future. We currently intend to retain any additional future earnings to finance our operations and growth and, therefore, we have no plans to pay cash dividends on our common stock at this time. Any future determination to pay cash dividends on our common stock will be at the discretion of our board of directors and will be dependent on our earnings, financial condition, operating results, capital requirements, any contractual restrictions, and other factors that our board of directors deems relevant. Accordingly, you may have to sell some or all of the shares in order to generate cash from your investment. You may not receive a gain on your investment when you sell the shares and may lose the entire amount of your investment.

***A possible "short squeeze" due to a sudden increase in demand of our common stock that largely exceeds supply may lead to additional price volatility.***

Historically there has not been a large short position in our common stock. However, in the future investors may purchase shares of our common stock to hedge existing exposure or to speculate on the price of our common stock. Speculation on the price of our common stock may involve long and short exposures. To the extent an aggregate short exposure in our common stock becomes significant, investors with short exposure may have to pay a premium to purchase shares for delivery to share lenders at times if and when the price of our common stock increases significantly, particularly over a short period of time. Those purchases may in turn, dramatically increase the price of our common stock. This is often referred to as a "short squeeze." A short squeeze could lead to volatile price movements in our common stock that are not directly correlated to our business prospects, financial performance or other traditional measures of value for the Company or its common stock.

***We have granted participation rights which could affect our ability to raise funds.***

Pursuant to the securities purchase agreement with the investors from the February 2021 Offering, we granted such investors participation rights with respect to issuance of common stock or common stock equivalents within 12 months after the date of the securities purchase agreement. This participation right could delay, limit or hinder our ability to enter into equity financings and to raise funds from third parties.

***As a "smaller reporting company" under applicable law, we will be subject to lessened disclosure requirements. Such reduced disclosure may make our common stock less attractive to investors.***

For as long as we remain an "smaller reporting company" as defined in Rule 405 of the Securities Act of 1933, as amended (the "Securities Act") and Item 10 of the Regulation S-K, we will elect to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "smaller reporting companies", including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and the ability to include 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 disclosure. Because of these lessened regulatory requirements, our stockholders would be left without information or rights available to stockholders of more mature companies. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

**Item 1B. Unresolved Staff Comments**

None.

**Item 2. Properties**

Highlight Media's office is located at Flat 1512, 15F, Lucky Centre, No.165-171 Wan Chai Road, Wan Chai, Hong Kong, China. The rent for this office is approximately RMB 200,000 per year.

We consider our current office space adequate for our current operations.

**Item 3. Legal Proceedings**

To the knowledge of our management, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.

**Item 4. Mine Safety Disclosures**

Not applicable.

**PART II**

**Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities** 

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**(a) Market Information**

Our common stock is traded on the Nasdaq Capital Market and OTC Market under the symbols "GDC".

**(b) Holders**

On March 31, 2023, there are approximately 325 holders of record of our common stock.

**(c) Dividends**

We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends in the foreseeable future. In addition, our board of directors is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future.

**(d) Securities Authorized for Issuance Under Equity Compensation Plans.**

We established our 2019 Equity Incentive Plan (the "Plan"). The Plan was approved by our board of directors on December 12, 2019 and was approved by our stockholders at our annual meeting in 2019. The purpose of the Plan is to grant stock and options to purchase our common stock to our employees, directors and key consultants. The maximum number of shares of common stock that may be issued pursuant to awards granted under the Plan, is 3,000,000 shares.

The following summary briefly describes the principal features of the Plan and is qualified in its entirety by reference to the full text of the Plan.

*Administration.* Our Compensation Committee of the Board of Directors will administer the Plan. The Committee will have the authority to determine the terms and conditions of any agreements evidencing any Awards granted under the Plan and to adopt, alter and repeal rules, guidelines and practices relating to the Plan. Our Compensation Committee will have full discretion to administer and interpret the Plan and to adopt such rules, regulations and procedures as it deems necessary or advisable.

*Eligibility.* Current or prospective employees, directors, officers, advisors or consultants of the Company or its affiliates are eligible to participate in the Plan. Our Compensation Committee has the sole and complete authority to determine who will be granted an award under the Plan, however, it may delegate such authority to one or more officers of the Company under the circumstances set forth in the Plan.

*Number of Shares Authorized.* The Plan provides for an aggregate of Three Million (3,000,000) common stock to be available for awards. If an award is forfeited or if any option terminates, expires or lapses without being exercised, the common stock subject to such award will again be made available for future grant. Shares of common stock that are used to pay the exercise price of an option or that are withheld to satisfy the Participant's tax withholding obligation will not be available for re-grant under the Plan.

Each common share subject to an option or a stock appreciation right will reduce the number of common stock available for issuance by one share, and each common share underlying an award of restricted stock, restricted stock units, stock bonus awards and performance compensation awards will reduce the number of common stock available for issuance by one share.

If there is any change in our corporate capitalization, the Compensation Committee in its sole discretion may make substitutions or adjustments to the number of shares reserved for issuance under our Plan, the number of shares covered by awards then outstanding under our Plan, the limitations on awards under our Plan, the exercise price of outstanding options and such other equitable substitution or adjustments as it may determine appropriate.

The Plan has a term of ten years and no further awards may be granted under the Plan after that date.

*Awards Available for Grant.* Our Compensation Committee may grant awards of con-qualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing.

*Options.* Our Compensation Committee will be authorized to grant options to purchase common stock that are either "qualified," meaning they are intended to satisfy the requirements of Internal Revenue Code of 1986 (the "Code") Section 422 for incentive stock options, or "non-qualified," meaning they are not intended to satisfy the requirements of Section 422 of the Code. Options granted under the Plan will be subject to the terms and conditions established by our Compensation Committee. Under the terms of the Plan, the exercise price of the options will be set forth in the applicable Award agreement. Options granted under the Plan will be subject to such terms, including the exercise price and the conditions and timing of exercise, as may be determined by our Compensation Committee and specified in the applicable award agreement. The maximum term of an option granted under the Plan will be ten years from the date of grant (or five years in the case of a qualified option granted to a 10% stockholder).

 

*Stock Appreciation Rights.* Our Compensation Committee will be authorized to award stock appreciation rights (or SARs) under the Plan. SARs will be subject to the terms and conditions established by our Compensation Committee. An SAR is a contractual right that allows a participant to receive, either in the form of cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. An Option granted under the Plan may include SARs and SARs may also be awarded to a participant independent of the grant of an option. SARs granted in connection with an option shall be subject to terms similar to the option corresponding to such SARs. SARs shall be subject to terms established by our Compensation Committee and reflected in the award agreement.

*Restricted Stock.* Our Compensation Committee will be authorized to award restricted stock under the Plan. Our Compensation Committee will determine the terms of such restricted stock awards. Restricted stock is common stock that generally is non-transferable and subject to other restrictions determined by our Compensation Committee for a specified period. Unless our Compensation Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the restricted period, then any unvested restricted stock is forfeited.

*Restricted Stock Unit Awards.* Our Compensation Committee will be authorized to award restricted stock unit awards. Our Compensation Committee will determine the terms of such restricted stock units. Unless our Compensation Committee determines otherwise or specifies otherwise in an award agreement, if the participant terminates employment or services during the period of time over which all or a portion of the units are to be earned, then any unvested units will be forfeited.

*Stock Bonus Awards.* Our Compensation Committee will be authorized to grant awards of unrestricted common stock or other awards denominated in common stock, either alone or in tandem with other awards, under such terms and conditions as our Compensation Committee may determine.

*Performance Compensation Awards.* Our Compensation Committee will be authorized to grant any award under the Plan in the form of a performance compensation award by conditioning the vesting of the award on the attainment of specific levels of performance of the Company and/or one or more affiliates, divisions or operational units, or any combination thereof, as determined by the Compensation Committee.

*Transferability.* Each award may be exercised during the participant's lifetime only by the participant or, if permissible under applicable law, by the participant's guardian or legal representative and may not be otherwise transferred or encumbered by a participant other than by will or by the laws of descent and distribution. Our Compensation Committee, however, may permit awards (other than incentive stock options) to be transferred to family members, a trust for the benefit of such family members, a partnership or limited liability company whose partners or stockholders are the participant and his or her family members or anyone else approved by it.

*Amendment.* The Plan has a term of ten years. Our Board may amend, suspend or terminate the Plan at any time; however, stockholder approval to amend the Plan may be necessary if the law or the rules of the national exchange so requires. No amendment, suspension or termination will impair the rights of any participant or recipient of any Award without the consent of the participant or recipient.

*Change in Control.* Except to the extent otherwise provided in an award agreement or as determined by the Compensation Committee in its sole discretion, in the event of a change in control, all outstanding options and equity awards (other than performance compensation awards) issued under the Plan will become fully vested and performance compensation awards will vest, as determined by our Compensation Committee, based on the level of attainment of the specified performance goals.

**(e) Recent Sales of Unregistered Securities** 

The Company issued (i) 138,889 shares of common stock, (ii) registered warrants to purchase an aggregate of up to 54,646 shares of common stock and (iii) unregistered warrants to purchase up to 84,244 of common stock in a registered direct offering on February 22, 2021. See "Part I – Item 1. Business – Recent Business Development – February 2021 Offering."

The Company issued 83,776 shares of common stock on June 1, 2021. On September 26, 2022, the Company and the shareholder agreed to cancel such 83,776 shares of common stock. See "Part I – Item 1. Business – Recent Business Development – Asset Purchase Agreement dated February 23, 2021, as amended on April 16, 2021 and May 28, 2021 and the Cancellation of such Asset Purchase Agreement in September 2022"

The Company issued 254,917 shares of common stock on August 26, 2021. On March 14, 2022, the 254,917 shares of common stock were cancelled See "Part I – Item 1. Business – Recent Business Development – Asset Purchase Agreement dated July 28, 2021 and Termination Agreement dated February 23, 2022"

The Company cancelled 14,213 shares of common stock on March 31, 2021. See "Part I – Item 1. Business – Recent Business Development – Disposition of Tongrong WFOE"

The Company issued 256,000 shares of common stock on June 21, 2022. See "Part I – Item 1. Business – Recent Business Development – Acquisition of Shanghai Yuanma Food and Beverage Management Co., Ltd.

The Company issued 300,000 shares of common stock on September 29, 2022. See "Part I – Item 1. Business – Recent Business Development – Acquisition of Shanghai Highlight Media Co., Ltd.

The Company cancelled 133,333 shares of common stock on March 9, 2023. See "Part I – Item 1. Business – Recent Business Development – Disposition of Wuge"

**(f) Purchases of Equity Securities by the Issuer and Affiliated Purchasers**

None.

**Item 6. [Reserved]**

**Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations** 

*The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with our financial statements, and the notes to those financial statements that are included elsewhere in this Report. All monetary figures are presented in U.S. dollars, unless otherwise indicated.*

*Our Management's Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange rate; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.*

*Although the forward-looking statements in this Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.*

**Overview**

GD Culture Group Limited ("GDC", formerly known as JM Global Holding Company, TMSR Holding Company Limited and Code Chain New Continent Limited) is a holding company incorporated in the State of Nevada with no material operations of its own. We currently conduct business through Shanghai Highlight Media Co., Ltd. ("Highlight Media"). Highlight WFOE is the primary beneficiary of Highlight Media for accounting purposes, because, pursuant to the VIE agreements, Highlight Media shall pay Highlight WFOE service fees in the amount of 100% of Highlight Media's net income, while Highlight WFOE is obligated to absorb all of losses of Highlight Media. As a result, we consolidate the financial results of Highlight Media in our consolidated financial statements under U.S. GAAP. Such VIE structure involves unique risks to investors. The VIE agreements have not been tested in a court of law and the Chinese regulatory authorities could disallow this VIE structure, which would likely result in a material change in our operations and the value of our securities, including that it could cause the value of such securities to significantly decline or become worthless. For more details on the VIE structure, please see "Item 1. Business – Corporate Structure - Contractual Arrangements between Highlight Media And Highlight WFOE" and "Item 1A. Risk Factors – Risks Related to Our Corporate Structure".

Prior to September 28, 2022, we were also engaged in research, development and application of Internet of Things (IoT) and electronic tokens Wuge digital door signs through Wuge Network Games Co., Ltd. ("Wuge"), a then VIE of the Company. On September 28, 2022, the Company entered into a share purchase agreement with a buyer unaffiliated with the Company (the "Buyer"), and Wei Xu, former Chief Executive Officer, President and Chairman of the Board of the Company (the "Payee"). Pursuant to the agreement, the Company agreed to sell and the Buyer agreed to purchase all the issued and outstanding ordinary shares of Wuge, a PRC company and an indirect subsidiary of the Company. The Payee agreed to be responsible for the payment of the purchase price on behalf of the Buyer. On September 30, 2022, the Company closed the sale of the Wuge and caused the GDC Shares to be cancelled. As a result, as of September 30, 2022, operations of Wuge have been designated as discontinued operations.

**Key Factors that Affect Operating Results**

Highlight Media, founded in 2016, is an integrated marketing service agency, focusing on enterprise brand management, crisis public relations, intelligent public opinion monitoring, media PR, financial and economic we-media operation, digital face application, large-scale exhibition services and other businesses. It is committed to becoming a modern science and technology media organization that fully empowers the development of customer enterprises in the era of artificial intelligence and big data. Its growth strategy is substantially dependent upon our ability to market our intended products and services successfully to prospective clients in China. This requires that we heavily rely upon our sales and marketing team and marketing partners. Failure to reach potential clients will significantly affect our results of operation and could have a material adverse effect on our business, financial conditions and the results of our operations.

The threats to network and data security are increasingly diverse and sophisticated. Despite the efforts and processes to prevent breaches, the social media platforms, systems and services of third parties that Highlight Media uses in its operations are vulnerable to cyber security risks, including cyber-attacks such as viruses and worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, employee theft or misuse, and similar disruptions from unauthorized tampering with the servers and computer systems or those of third parties that Highlight Media use in its operations, which could lead to interruptions, delays, loss of critical data, and loss of consumer confidence.

In addition, Highlight Media may be the target of email scams that attempt to acquire sensitive information or company assets. Despite the efforts to create security barriers to such threats, Highlight Media may not be able to entirely mitigate these risks. Any cyber-attack that attempts to obtain our data and assets, disrupt Highlight Media's service, or otherwise access the social media platforms, systems and services of third parties that Highlight Media uses, if successful, could adversely affect the business, operating results, and financial condition, be expensive to remedy, and damage the reputation of Highlight Media.

The media industries involving IoT devices, software and services are characterized by the existence of a large number of patents, copyrights, trademarks and trade secrets and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. Much of this litigation involves patent holding companies or other adverse patent owners who have no relevant product revenues of their own, and against whom our own patent portfolio may provide little or no deterrence.

The nature of Highlight Media's business and its publications involves copy rights. We cannot assure you that we, our subsidiaries or the variable interest entities will prevail in any future copyright infringement litigations. Defending such claims, regardless of their merit, could be time-consuming and distracting to management, result in costly litigation or settlement, cause delays, or require us, our subsidiaries or the variable interest to enter into royalty or licensing agreements. In addition, we, our subsidiaries or the variable interest entities could be obligated to indemnify our customers against third parties' claims of intellectual property infringement based on publications. If our products or solutions violate any third-party intellectual property rights, we could be required to withdraw them from the market, re-edit and re-publish them or seek to obtain licenses from third parties, which might not be available on reasonable terms or at all. Any efforts re-edit and re-publish our publications, obtain licenses from third parties on favorable terms might not be successful and, in any case, might substantially increase our costs and harm our business, financial condition and operating results. Withdrawal of any of our publications from the market could harm our business, financial condition and operating results.

**Impact of the COVID-19 Pandemic**

The COVID-19 pandemic did not have a material impact on our business or results of operation during the fiscal years ended December 31, 2022 and 2021. However, the extent to which the COVID-19 pandemic may negatively impact the general economy and our business is highly uncertain and cannot be accurately predicted. These uncertainties may impede our ability to conduct our operations and could materially and adversely affect our business, financial condition and results of operations, and as a result could adversely affect our stock price and create more volatility.

**Results of Operations**

**Year Ended December 31, 2022 as Compared to the Year Ended December 31, 2021**

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **2022** | **2021** |<br>**Change** | **Percentage**<br>**Change** |
| Revenues –Enterprise brand management service | $153304 | - | $153304 | N/A |
| Total revenues | 153304 | - | 153304 | N/A |
| Cost of Revenues –Enterprise brand management service | 97770 | - | 97770 | N/A |
| Total cost of revenues | 97770 | - | 97770 | N/A |
| Gross profit | 55534 |  | 55534 | N/A |
| Operating expenses | 478977 | 19546151 | (19067174) | (97.6)% |
| **Loss from operations** | (423443) | (19546151) | 19122708 | (97.8)% |
| Other income, net | (63) | 799 | (862) | (107.9)% |
| Provision for income taxes | 1146 |  | 1146 | N/A |
| **Loss from continuing operations** | (424652) | (19545352) | 19120700 | (97.8)% |
| **Discontinued operations:** |  |  |  |  |
| Loss（Income）from discontinued operations | (26336694) | 3745098 | (30081792) | (803.2)% |
| Loss on disposal, net of taxes | (4060609) | (11170638) | 7110029 | (63.6)% |
| Net loss | (30821955) | (26970892) | (3851063) | 14.3% |

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***Revenues***

The Company's revenue consists of enterprise brand management service. Total revenues increased by approximately $153,304, to approximately $153,304 for the year ended December 31, 2022, compared to approximately $0 million for the year ended December 31, 2021. The increase was mainly due to acquisition of Shanghai Highlight.

***Cost of Revenues***

The Company's cost of revenues consists of cost of Enterprise brand management service Total cost of revenues increased by approximately $97,770, to approximately $97,770 for the year ended December 31, 2022, compared to approximately $0 for the same period in 2021. Our total cost of revenues increase was attributable to acquisition of Shanghai Highlight.

***Gross Profit***

The Company's gross profit increased by approximately $55,534, to approximately $55,534 during the year ended December 31, 2022, from approximately $0 for the year ended December 31, 2021. The increase was due to acquisition of Shanghai Highlight.

***Operating Expenses***

The Company's operating expenses include selling, general and administrative ("SG&A") expenses, and recovery of doubtful accounts.

SG& A expenses decreased by approximately $19.1 million, by approximately 97.6%, from approximately $0.5 million for the year ended December 31, 2022 to approximately 19.5 million for the year ended December 31, 2021. The increase was mainly due to the reduction of employee benefits.

***Loss from Operations***

As a result of the foregoing, loss from operations for the year ended December 31, 2022 was approximately $0.4 million, an decrease of approximately $19.1 million, or approximately 97.8%, from approximately $19.5 million for the year ended December 31, 2021. The decrease was mainly due to the reduction of employee benefits.

***Net Loss***

The Company's net loss increased by approximately $3.8 million, or 14.3%, to approximately $30.8 million net loss for the year ended December 31, 2022, from approximately $27.0 million net income for the same period in 2021. The increase was mainly due to impairment of prepayments and disposition of Wuge.

***Critical Accounting Policies and Estimates***

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our consolidated financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management's difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management's current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our consolidated financial statements.

<u>Cash and cash equivalents</u>

The Company considers certain short-term, highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. Cash and cash equivalents primarily represent bank deposits and fixed deposits with maturities of less than three months.

<u>Investments</u>

The Company purchases certain liquid short term investments such as money market funds and or other short term debt securities marketed by large financial institutions. These investments are not insured against loss of principal. These investments are accounted for as financial instruments that are marked to fair market value at the end of each reporting period. As result of their short maturities, and limited risk profile, at times, their amortized carrying cost may be the best approximation their fair value.

<u>Accounts receivable, net</u>

Accounts receivable include trade accounts due from customers. An allowance for doubtful accounts may be established and recorded based on management's assessment of potential losses based on the credit history and relationships with the customers. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

<u>Inventories</u>

Inventories are comprised of raw materials, work in progress and finished goods and are stated at the lower of cost or net realizable value using the weighted average method in Rong Hai. Management reviews inventories for obsolescence and cost in excess of net realizable value at least annually and records a reserve against the inventory when the carrying value exceeds net realizable value.

<u>Prepayments</u>

Prepayments are funds deposited or advanced to outside vendors for future inventory purchases. As a standard practice in China, many of the Company's vendors require a certain amount to be deposited with them as a guarantee that the Company will complete its purchases on a timely basis. This amount is refundable and bears no interest. The Company has legally binding contracts with its vendors, which require any outstanding prepayments to be returned to the Company when the contract ends.

<u>Fair value measurement</u> 

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by us. The Company considers the carrying amount of cash, notes receivable, accounts receivable, other receivables, prepayments, accounts payable, other payables and accrued liabilities, customer deposits, short term loans and taxes payable to approximate their fair values because of their short term nature.

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.

<u>Revenue recognition</u>

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

The core principle underlying the revenue recognition ASU is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. The Company's revenue streams are primarily recognized at a point in time except for the warranty revenues where the warranty periods are recognized over the warranty period, usually is a period of twelve months.

The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition except its warranty revenues.

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

Revenues from digital doors signs are recognized at a point in time when legal title and control over the sign is transferred to the customer. Management has determined that for the sales of digital door signs there is a single performance obligation that is met when the aforementioned control is transferred. Typically, customers make payment for the product in advance; the Company will record the payment as contract liabilities under the liability account customer deposits until the Company delivers the product by transferring control. Such revenues are recognized at a point in time after all Payments received prior to the relevant criteria for revenue recognition are met, are recorded as customer deposits.

<u>Gross versus Net Revenue Reporting</u>

Starting from July 2016, in the normal course of the Company's trading of industrial waste materials business, the Company directly purchases the processed industrial waste materials from the Company's suppliers under the Company's specifications and drop ships the materials directly to the Company's customers. The Company would inspect the materials at its customers' site, during which inspection it temporarily assumes legal title to the materials, and after which inspection legal title is transferred to its customers. In these situations, the Company generally collects the sales proceed directly from the Company's customers and pay for the inventory purchases to the Company's suppliers separately. The determination of whether revenues should be reported on a gross or net basis is based on the Company's assessment of whether it is the principal or an agent in the transaction. In determining whether the Company is the principal or an agent, the Company follows the new accounting guidance for principal-agent considerations. Since the Company is the primary obligor and is responsible for (i) fulfilling the processed industrial waste materials delivery, (ii) controlling the inventory by temporarily assume legal title to the materials after inspecting the products from our vendors before passing the materials to our customers, and (iii) bearing the back-end risk of inventory loss with respect to any product return from the Company's customers, the Company has concluded that it is the principal in these arrangements, and therefore report revenues and cost of revenues on a gross basis.

**Recently Issue Accounting Pronouncements**

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We do not believe the adoption of this ASU would have a material effect on our consolidated financial statements.

We do not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on our consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

**Liquidity and Capital Resources**

The Company has funded working capital and other capital requirements primarily by equity contributions, loans from shareholders, cash flow from operations, short term bank loans, loans from third parties. Cash is required to repay debts and pay salaries, office expenses, income taxes and other operating expenses. As of December 31, 2022, our net working capital was approximately $1.3 million, over 59% of the Company's current liabilities was from other payables – related parties due to major shareholders. Removing these liabilities, the Company had net working capital of minus $3.8 million and is expected to continue to generate cash flow by operations from the acquisitions of new companies and loans from related-parties in the twelve months period.

We believe that current levels of cash and cash flows from operations will be sufficient to meet its anticipated cash needs for at least the next twelve months from the date the consolidated financial statements to be issued. However, it may need additional cash resources in the future if it experiences changed business conditions or other developments, and may also need additional cash resources in the future if it wishes to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If it is determined that the cash requirements exceed the Company's amounts of cash and cash equivalents on hand, the Company may seek to issue debt or equity securities or obtain additional credit facility

The following summarizes the key components of the Company's cash flows for the year ended December 31, 2022 and 2021.

---

| | | |
|:---|:---|:---|
|  | **For the year ended<br> December 31,** | **For the year ended<br> December 31,** |
|  | **2022** | **2021** |
| Net cash used in operating activities | $(886211) | $(5511052) |
| Net cash used in investing activities | (12493352) | (1270484) |
| Net cash provided by financing activities |  | 22795762 |
| Effect of exchange rate change on cash | (819659) | (2424613) |
| Net change in cash | $(14199222) | $13589613 |

---

As of December 31, 2022 and 2021, the Company had cash in the amount of $389,108 and $14,588,330, respectively. As of December 31, 2022 and 2021, $215,880 and $14,385,549 and were deposited with various financial institutions located in the PRC, respectively. As of December 31, 2022 and 2021, $173,228 and $202,781 were deposited with one financial institution located in the United States, respectively.

*Operating activities*

Net cash used in operating activities was approximately $0.9 million for the year ended December 31, 2022, as compared to approximately $5.5 million net cash used in operating activities for the year ended December 31, 2021. Net cash provided by operating activities was mainly due to the increase of approximately $20.1 million impairment of prepayments, increase of approximately $4.0 million loss on disposal, the decrease of approximately $2.1 million of customer deposits, the increase of approximately $6.6 million of Goodwill impairments, and the increase of approximately $0.8 million of taxes payable.

*Investing activities*

Net cash used in investing activities was approximately $12.5 million for the year ended December 31, 2022, as compared to approximately $1.3 million net cash used in investing activities for the year ended December 31, 2021. Net cash used in investing activities for the year ended December 31, 2022 was due to approximately $6,566 spending on purchase of equipment, the increase of approximately $215,880 acquisition of Highlight Media and the decrease of approximately $12.7 million disposal of discontinued operations.

*Financing activities*

Net cash provided by financing activities was nil for the year ended December 31, 2022, as compared to approximately $22.8 million net cash provided by financing activities for year ended December 31, 2021.

**Risks**

***Credit Risk***

Credit risk is one of the most significant risks for the Company's business.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. Cash held at major financial institutions located in the PRC are not insured by the government. While we believe that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.

Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. Credit risk is controlled by the application of credit approvals, limits and monitoring procedures. The Company manages credit risk through in-house research and analysis of the Chinese economy and the underlying obligors and transaction structures. To minimize credit risk, the Company normally require prepayment from the customers prior to begin production or delivery products. The Company identifies credit risk collectively based on industry, geography and customer type. This information is monitored regularly by management.

In measuring the credit risk of our sales to our customers, the Company mainly reflects the "probability of default" by the customer on its contractual obligations and considers the current financial position of the customer and the exposures to the customer and its likely future development.

***Liquidity Risk***

The Company is also exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and liquidity to meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, the Company will turn to other financial institutions and the owners to obtain short-term funding to meet the liquidity shortage.

***Inflation Risk***

The Company is also exposed to inflation risk Inflationary factors, such as increases in raw material and overhead costs, could impair our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenue if the selling prices of our products do not increase with such increased costs.

***Foreign Currency Risk***

A majority of the Company's operating activities and a significant portion of the Company's assets and liabilities are denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the Peoples' Bank of China ("PBOC") or other authorized financial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application form together with suppliers' invoices and signed contracts. The value of RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.

**Item 7A. Quantitative and Qualitative Disclosures about Market Risk**

Disclosure in response to this Item is not required for a smaller reporting company.

**Item 8. Financial Statements and Supplementary Data** 

Reference is made to Pages F-1 through F-35 comprising a portion of this Annual Report on Form 10-K.

**Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.**

On October 11, 2022, the "Company notified its independent registered public accounting firm, WWC, P.C. its decision to dismiss WWC, P.C. as the Company's auditor. The reports of WWC, P.C. on the financial statements of the Company for the fiscal year ended December 31, 2021 and the related statements of operations and comprehensive income (loss), changes in stockholders' equity (deficit), and cash flows for the fiscal year ended December 31, 2021 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. The decision to change the independent registered public accounting firm was recommended and approved by the Audit Committee and the Board of Directors of the Company. During the Company's most recent fiscal year ended December 31, 2021 and through October 11, 2022, the date of dismissal, (a) there were no disagreements with WWC, P.C. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of WWC, P.C., would have caused it to make reference thereto in its reports on the financial statements for such years and (b) there were no "reportable events" as described in Item 304(a)(1)(v) of Regulation S-K.

On October 11, 2022, the Audit Committee and the Board of Directors of the Company appointed Enrome LLP as its new independent registered public accounting firm to audit the Company's financial statements. During the two most recent fiscal years ended December 31, 2021 and 2020 and any subsequent interim periods through the date hereof prior to the engagement of Enrome LLP, neither the Company, nor someone on its behalf, has consulted Enrome LLP regarding:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) either: the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company's consolidated financial statements, and either a written report was provided to the Company or oral advice was provided that the new independent registered public accounting firm concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) any matter that was either the subject of a disagreement as defined in paragraph 304(a)(1)(iv) of Regulation S-K or a reportable event as described in paragraph 304(a)(1)(v) of Regulation S-K.

**Item 9A. Controls and Procedures.**

**Evaluation of Disclosure Controls and Procedures**

Under the supervision and with the participation of our management, including our Chief Executive Officers, President and Chief Financial Officer (the "Certifying Officers"), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report.

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

**Management's Report on Internal Controls Over Financial Reporting**

As required by the SEC rules and regulations for the implementation of Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

A "material weakness" is defined under the SEC rules as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis by our internal controls. As a result of its review, management concluded that we had material weaknesses in our internal control over financial reporting process consisting of the following:

● Inadequate U.S. GAAP expertise. The current accounting staff is inexperienced in applying U.S. GAAP standard as they are primarily engaged in ensuring compliance with PRC accounting and reporting requirement for our consolidated operating entities, and thus require substantial training. The current staff's accounting skills and understanding as to how to fulfill the requirements of U.S. GAAP-based reporting, including subsidiary financial statements consolidation, are inadequate.

● No formal plan to provide applicable training for our financial and accounting staff to enhance our understanding of U.S. GAAP and internal control over financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2022. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that our internal control over financial reporting was not effective at December 31, 2022 due to the material weaknesses identified by our management as described above.

<u>Management Plan to Remediate Material Weaknesses</u>

● We plan to engage outside consultant to supplement efforts to improve our internal control over financial reporting;

● We plan to acquire applicable training for our financial and accounting staff to enhance our understanding of U.S. GAAP and internal control over financial reporting

***Changes in Internal Control over Financial Reporting***

 ****

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

**Item 9B. Other Information**

None.

**Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections**

Not applicable.

**PART III**

**Item 10. Directors, Executive Officers and Corporate Governance**

The following table sets forth the name, age and position of each of our executive officers and directors as of the date of this report:

---

| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position** |
| Hongxiang Yu | 44 | Chief Executive Officer, President, and Chairman of the Board |
| Yi Li | 45 | Chief Financial Officer and Secretary |
| Lu Cai | 33 | Chief Operating Officer |
| Shuang Zhang | 53 | Vice President and Director |
| Mingyue Cai <sup>(1)(2)(3)</sup> | 44 | Director, Chairman of the Compensation Committee |
| Shuaiheng Zhang <sup>(1)(2)(3)</sup> | 59 | Director, Chairman of the Audit Committee |
| Yi Zhong <sup>(1)(2)(3)</sup> | 31 | Director, Chairman of the Nominating and Corporate Governance Committee |

---

(1) Member of our Audit Committee

(2) Member of our Compensation Committee

(3) Member of our Nominating and Corporate Governance Committee

**Business Experience and Directorships**

The following describes the backgrounds of the director nominees. Our board of directors has determined that (a) other than Messrs. Hongxiang Yu and Shuang Zhang, all of our directors are independent directors as defined under the Nasdaq Stock Market's listing standards governing members of boards of directors, and (b) the members of our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee are independent under applicable SEC rules.

**Mr. Hongxiang Yu**

Mr. Hongxiang Yu was appointed as the Chief Executive Officer, President, Chairman of the Board and a director of the Company, effective October 4, 2022. Mr. Hongxiang Yu, co-founded Shanghai Highlight Media Co., Ltd. ("Highlight Media"), a consolidated variable interest entity of the Company, in 2016 and has been its Chairman of the Board since then. Mr. Yu is also the Chairman of the Board of Highlight Media Asset Management Co., Ltd., responsible for asset management and private equity investment. Mr. Yu is also the Vice Chairman of the Board of Tianjing Dragon Film Co., Ltd., engaged in the investment in the film industry in China. From 2006 to 2015, Mr. Yu served as the general manager of Hongrun Foundation Engineering Co., Ltd. and the head of the internal audit department of Hongrun Construction Group Co., Ltd. Mr. Yu received his bachelor's degree in international trade from University of Portsmouth in the United Kingdom in 2004 master's degree in international human resource management from University of Portsmouth in the United Kingdom in 2006.

**Ms. Yi Li**

Ms. Yi Li was appointed as the Chief Financial Officer and Secretary of the Company on April 25, 2019. From 2005 to 2007, Ms. Li served as Financial Accounting of Shanghai Supersharp International Co., Ltd. From 2007 to 2009, Ms. Li served as Finance Officer of the HongKong OneByOne Trading & Accessories Co., Ltd. Ms. Li worked as the Financial Manager at Shanghai Yitex Garment Co., Ltd. from 2010 to 2015. Ms. Li served as the Chief Financial Officer of Shanghai Difeng Group since 2015 till now. Ms. Li received her Bachelor degree of International Business and MBA from Auckland Institute of Studies.

**Ms. Lu Cai**

Ms. Lu Cai was appointed as the Chief Operating Officer of the Company, effective February 9, 2023. Ms. Lu Cai, has over 10 years of extensive experience in financial management and consulting. Since July 2020, Ms. Lu Cai has been the Chief Executive Officer of Beijing Boda Shengshi Financial Consulting Co., Ltd, a firm that offers initial public offering and pre-marketing consulting services in China. From July 2017 to May 2020, Ms. Lu Cai was a Vice President of SINO-TONE Beijing Consulting Co., Ltd, a consulting firm based in Beijing, China. Ms. Lu Cai graduated from Beijing Foreign Studies University.

**Ms. Shuang Zhang**

Ms. Shuang Zhang was appointed as the Vice President and a director of the Company, effective October 4, 2022. Ms. Shuang Zhang, co-founded Highlight Media in 2016 and has been its Chief Executive Officer since 2017. During her tenure as the Chief Executive Officer, Ms. Zhang managed the planning, creation and publication of books about the company history of industry leaders in China, published in top financial publications in China. From 2015 to 2016, Ms. Zhang was the director of public relations at Ctrip, an online travel company in China. From 2004 to 2015, Ms. Zhang was the editor-in-chief of China Business News, responsible for editing, performance, and quality control. Ms. Zhang received her bachelor's degree in Journalism from Heilongjiang University in China in 1991 and her Master of Business Administration degree from the Antai College of Management and Economics of Shanghai Jiaotong University.

**Mr. Mingyue Cai**

Mr. Cai was appointed as a director of the Company on February 25, 2020. Mr. Cai has been the Vice President at Yitu Safety Technology (Shenzhen) Co., Ltd., a PRC company engages in artificial intelligence development and application. From November 2009 to August 2017, he was an administrative director at Rugao Port Group Co., Ltd., a PRC company that focuses on port logistics, industrial park construction and timber, coal and ore trade. From June 2004 to October 2009, Mr. Cai worked as a manager at Shanghai Rishan Environmental Protection Technology Co., Ltd., a PRC company that distribute and retail environmentally friendly cleaning products. Mr. Cai has a bachelor's degree in administrative management.

**Mr. Shuaiheng Zhang**

Mr. Shuaiheng Zhang was appointed as a director and a member of the Nominating and Corporate Governance Committee, the Compensation Committee, and the Audit Committee of the Company, effective February 9, 2023. Mr. Shuaiheng Zhang, has more than 40 years of working experience in management. Since September 2019, Mr. Shuaiheng Zhang has been the general manager at Sunwoda Huizhou New Energy Co., Ltd., a high-tech enterprise with research and development, design, production and sale of lithium-ion battery cell and module and a wholly owned subsidiary of Sunwoda Electronic Co., Ltd., a company listed on the Growth Enterprise Market of Shenzhen Stock Exchange since 2011. From October 1994 to July 2013, Mr. Shuaiheng Zhang was the general manager and vice chairman of the board at Shenzhen SEG Co., Ltd., a company listed on the main board of Shenzhen Stock Exchange that are engaged in development of electronic information industry and electronic product trading market. From July 2013 to December 2015, Mr. Shuaiheng Zhang was the vice general manager at Shenzhen SI Semiconductors Co., Ltd., a power semiconductor device manufacturer. From December 2015 to September 2019, Mr. Shuaiheng Zhang was the general manager and chairman of the board of Shenzhen SEG Longyan Energy Technology CO., Ltd., a subsidiary of Shenzhen SEG Co., Ltd. Mr. Shuaiheng Zhang received his bachelor degree In mechanical engineering from Xidian University and his master degree in computer science from Tsinghua University.

**Mr. Yi Zhong**

Mr. Yi Zhong was appointed as a director and a member of the Nominating and Corporate Governance Committee, the Compensation Committee, and the Audit Committee of the Company, effective February 17, 2023. Mr. Yi Zhong, is experienced in fund in management. Since 2014, Mr. Yi Zhong has been a fund manager at Huajian Securities in Shenzhen China, where he managed long-short equity portfolio, analyzed market trends, economic data and company financials to make investment decisions. From 2013 to 2017, Mr. Yi Zhong was a fund manager assistant at Hongouruibo Investment Fund in Shenzhen China, where Mr. Yi Zhong participated in the management of a global equity portfolio, developed and implemented investment strategies that effectively balance risk and reward. Mr. Yi Zhong received his bachelor's degree in business administration from University of Toronto.

**No Classification of Directors**

In accordance with our existing charter, our board of directors is divided into two classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a two-year term.

As discussed above, in connection with the Business Combination, our board of directors has been reconstituted and comprised of six members. Our board of directors believes it is in the best interests of the Company for the board of directors to have no separate classification, such that each director serves a one-year term until the next annual meeting of stockholders or until such director's successor is elected or qualified. If Proposal 4 is approved at the special meeting, all six directors that our board of directors has nominated to serve on the board will serve until the first annual meeting of stockholders following the Business Combination.

 

*Director Independence*

Nasdaq listing standards require that a majority of our board of directors be independent as long as we are not a controlled company. We anticipate that a majority of our board of directors will be independent as of the closing of the Business Combination. An "independent director" is defined under the Nasdaq rules generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company's board of directors, would interfere with the director's exercise of independent judgment in carrying out the responsibilities of a director. We anticipate that our board of directors will determine that Mr. Mingyue Cai, Mr. Shuaiheng Zhang and Mr. Yi Zhong are "independent directors" as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.

 

*Leadership Structure and Risk Oversight*

The board of directors does not have a lead independent director. Currently Mr. Hongxiang Yu serves as our Chief Executive Officer, President and Chairman of the Board.

**Committees of the Board of Directors**

The standing committees of our board of directors currently consists of an Audit Committee and a Compensation Committee, and after the Business Combination will also consist of a Nominating and Corporate Governance Committee. Each of the committees will report to the board of directors as they deem appropriate and as the board may request.

 

 

*Audit Committee*

Our Audit Committee currently consists of Mr. Shuaiheng Zhang, Mr. Yi Zhong and Mr. Mingyue Cai, with Mr. Shuaiheng Zhang serving as the chairman of the Audit Committee. We believe that each of these individuals qualify as independent directors according to the rules and regulations of the SEC with respect to audit committee membership. We also believe that Mr. Shuaiheng Zhang qualifies as our "audit committee financial expert," as such term is defined in Item 401(h) of Regulation S-K. Our board of directors has adopted a written charter for the Audit Committee, which is attached as an exhibit to this Report.

The audit committee's duties, which are specified in our Audit Committee Charter, include, but are not limited to:

● reviewing and discussing with management and the independent auditor our annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our Form 10-K;

● discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;

● discussing with management major risk assessment and risk management policies;

● monitoring the independence of the independent auditor;

● verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;

● reviewing and approving all related-party transactions;

● inquiring and discussing with management our compliance with applicable laws and regulations;

● pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed;

● appointing or replacing the independent auditor;

● determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work;

● establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and

 

 

*Compensation Committee*

Our Compensation Committee currently consists of Mr. Mingyue Cai, Mr. Shuaiheng Zhang, and Mr. Yi Zhong, with Mr. Mingyue Cai serving as the chairman of the Compensation Committee. We anticipate that each of the members of our Compensation Committee will be independent under the applicable Nasdaq listing standards. Our board of directors has adopted a written charter for the Compensation Committee, which is attached as an exhibit to this Report.

The compensation committee's duties, which are specified in our Compensation Committee Charter, include, but not limited to:

● reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer's compensation, evaluating our Chief Executive Officer's performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer's based on such evaluation;

● reviewing and approving the compensation of all of our other executive officers;

● reviewing our executive compensation policies and plans;

● implementing and administering our incentive compensation equity-based remuneration plans;

● assisting management in complying with our proxy statement and annual report disclosure requirements;

● approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;

● producing a report on executive compensation to be included in our annual proxy statement; and

● reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

 

*Corporate Governance and Nominating Committee*

Our Corporate Governance and Nominating Committee will be responsible for, among other matters: (1) identifying individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors; (2) overseeing the organization of our board of directors to discharge the board's duties and responsibilities properly and efficiently; (3) identifying best practices and recommending corporate governance principles; and (4) developing and recommending to our board of directors a set of corporate governance guidelines and principles applicable to us.

&nbsp;&nbsp;&nbsp;&nbsp;

Our Corporate Governance and Nominating Committee currently consists of Mr. Shuaiheng Zhang, Mr. Yi Zhong and Mr. Mingyue Cai, with Mr. Yi Zhong serving as the chairman of the Corporate Governance and Nominating Committee. We anticipate that each of the members of our Corporate Governance and Nominating Committee will be independent under the applicable Nasdaq listing standards. Our board of directors has adopted a written charter for the Corporate Governance and Nominating Committee, which is available on our corporate website at www.ccnctech.com.

 

**Compensation Committee Interlocks and Insider Participation**

None of our executive officers currently serves, and in the past year has not served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors.

**Delinquent Section 16(a) Reports**

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors and persons who beneficially own more than ten percent of our common stock to file reports of ownership and changes in ownership with the SEC. These reporting persons are also required to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of such Forms, during the year ended December 31, 2022, Mr. Hongxiang Yu and Mr. Shuang Zhang did not file the required Section 16 reports on time. In particular, Mr. Hongxiang Yu failed to timely file a Form 3 in connection with his acquisition of 210,000 shares of common stock of the Company on September 29, 2022. Mr. Shuang Zhang failed to timely file a Form 3 in connection with his acquisition of 90,000 shares of common stock of the Company on September 29, 2022

**Code of Ethics**

We have adopted a Code of Ethics that applies to all of our employees, including our chief executive officer, chief financial officer and principal accounting officer. Our Code of Ethics is attached as an exhibit to this Report. If we amend or grant a waiver of one or more of the provisions of our Code of Ethics, we intend to satisfy the requirements under Item 5.05 of Form 8-K regarding the disclosure of amendments to or waivers from provisions of our Code of Ethics that apply to our principal executive officer, principal financial officer and principal accounting officer by posting the required information on our website at the above address.

 

 

**Item 11. Executive Compensation**

The following table provides disclosure concerning all compensation paid for services to GDC in all capacities for our fiscal years ended December 31, 2022 and 2021 provided by (i) each person serving as our principal executive officer ("PEO"), (ii) each person serving as our principal financial officer ("PFO") and (iii) our two most highly compensated executive officers other than our PEO and PFO whose total compensation exceeded $100,000 (collectively with the PEO, referred to as the "named executive officers" in this Executive Compensation section).

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Summary Compensation Table** | &nbsp;&nbsp;&nbsp;**Summary Compensation Table** | &nbsp;&nbsp;&nbsp;**Summary Compensation Table** | &nbsp;&nbsp;&nbsp;**Summary Compensation Table** | &nbsp;&nbsp;&nbsp;**Summary Compensation Table** | &nbsp;&nbsp;&nbsp;**Summary Compensation Table** | &nbsp;&nbsp;&nbsp;**Summary Compensation Table** | &nbsp;&nbsp;&nbsp;**Summary Compensation Table** |
| **Name and Principal Position** | **Fiscal<br> Year** | **Salary<br> ($)** | **Bonus<br> ($)** | **Stock<br> Awards<br> ($)** | **Option<br> Awards<br> ($)** | **Other<br> Compensation<br> ($)** | **Total<br> ($)** |
| Hongxiang Yu <sup>(1)</sup> | 2022 | 7500 |  |  |  |  | 7500 |
| &nbsp;&nbsp;&nbsp;(CEO, President and Chairman of the Board) | 2021 |  |  |  |  |  |  |
| Shuang Zhang <sup>(2)</sup> | 2022 | 7500 |  |  |  |  | 7500 |
| &nbsp;&nbsp;&nbsp;(Vice President and Director) | 2021 |  |  |  |  |  |  |
| Wei Xu <sup>(3)</sup> | 2022 | 7500 |  |  |  |  | 7500 |
| &nbsp;&nbsp;&nbsp;(Former CEO, President and Chairman of the Board) | 2021 | 10000 |  |  |  |  | 10000 |
| Yimin Jin <sup>(4)</sup> | 2022 |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;(Former CEO) | 2021 | 66667 |  |  |  |  | 66667 |
| Weidong (David) Feng <sup>(5)</sup> | 2022 |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;(Former CEO) | 2021 | 33333 |  |  |  |  | 33333 |
| Tingjun Yang <sup>(6)</sup> | 2022 |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;(Former CEO) | 2021 | 18750 |  |  |  |  | 18750 |
| Yi Li <sup>(7)</sup> | 2022 | 30000 |  |  |  |  | 30000 |
| &nbsp;&nbsp;&nbsp;(CFO) | 2021 | 30000 |  |  |  |  | 30000 |
| Jianan Liang <sup>(8)</sup> | 2022 | 7500 |  |  |  |  | 7500 |
| &nbsp;&nbsp;&nbsp;(Former COO) | 2021 | 23750 |  |  |  |  | 23750 |
| Tianxiang Zhu <sup>(9)</sup> | 2022 | 15000 |  |  |  |  | 15000 |
| &nbsp;&nbsp;&nbsp;(Former COO) | 2021 |  |  |  |  |  |  |
| Bibo Lin <sup>(10)</sup> | 2022 | 7500 |  |  |  |  | &nbsp;&nbsp;&nbsp;&nbsp;7500 |
| &nbsp;&nbsp;&nbsp;(Former Vice President and Former director) | 2021 | 10000 |  |  |  |  | 10000 |

---

(1) Mr. Hongxiang Yu was appointed as the Chief Executive Officer, President, Chairman of the Board and a director of the Company, effective
October 4, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;(2) Mr. Shuang Zhang was appointed as the Vice President and a director of the Company, effective October 4, 2022.

(3) Mr. Wei Xu was appointed as a director of the Company on January 3,
2020, as the Co-Chairman of the Board on February 25, 2020, as the President on October 29, 2020, and the CEO on January 21, 2022. On
October 4, 2022, Mr. Xu tendered his resignation as the Chief Executive Officer, President, Chairman of the Company.

(4) M r . Yimin Jin was appointed as the Co-CEO of the Company on April 15, 2019. Mr. Jin was also a director of the Company. On April 7, 2021, Mr. Jin tendered his resignation as a director and Co-Chairman of the Board of Director of the Company. On September 7, 2021, Mr. Jin tendered his resignation as Co-Chief Executive Officer of the Company.

(5) Mr. Weidong (David) Feng was appointed as the
 Co-CEO of the Company on February 1, 2021. On October 1, 2021, Mr. Feng tendered his resignation as Co-Chief Executive Officer of the
 Company.

(6) Mr. Tingjun Yang was appointed as the CEO of the Company on September 7, 2021. On January 21, 2022, Mr. Yang tendered his resignation as Chief Executive Officer of the Company.

(7) Ms. Yi Li was appointed as the CFO of the Company on April 25, 2019.

(8) Mr. Jianan Liang was appointed as the COO of the Company on March 17, 2021. On April 5, 2022, Mr. Liang tendered his resignation as the COO of the Company.

(9) Mr. Tianxiang Zhu was appointed as the COO and a director of the Company
on April 5, 2022. On November 10, 2022, Mr. Tianxiang Zhu tendered his resignation as the Chief Operating Officer and a director of the
Company.

(10) Mr. Bibo Lin was appointed as the Vice President of the Company on February 25, 2020 and as the director on March 30, 2021. On October 4, 2022, Mr. Lin tendered his resignation as the Vice President and a director of the Company.

**Grants of Plan Based Awards in the Fiscal Year Ended December 31, 2022**

During the fiscal year ended December 31, 2022, no shares of common stock were granted to our officers and directors under the plan.

**Outstanding Equity Awards at Fiscal Year-End**

None.

**Employment Contracts, Termination of Employment, Change-in-Control Arrangements**

We have entered into employment agreements with each of our executive officers, respectively, (each an "Employment Agreement," collectively, the "Employment Agreements"). Under these agreements, each of our executive officers is employed for a specified time period. We may terminate employment for cause, at any time, without advance notice or remuneration, for certain acts of the executive officer, such as conviction or plea of guilty to a crime, or misconduct or a failure to perform agreed duties. The executive officer may resign at any time with a three-month advance written notice.

The officers also agreed to enter into additional confidential information and invention assignment agreements and are subject to certain non-compete and non-solicitation restrictions for a period one year following termination.

**Director Compensation**

The following table represents compensation earned by our non-executive directors in 2022.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Name** | **Fees <br> earned<br> in cash<br> ($)** | **Stock<br> awards<br> ($)** | **Option<br> awards<br> ($)** | **All other<br> compensation<br> ($)** | **Total<br> ($)** |
| Mingyue Cai <sup>(1)</sup> | $10000 |  |  |  | $10000 |
| Junhong He <sup>(2)</sup> | $2917 |  |  |  | $2917 |
| Jing Zhang <sup>(3)</sup> | $2917 |  |  |  | $2917 |
| Siyang Hu <sup>(4)</sup> | $7083 |  |  |  | 7083 |
| Fei Gan <sup>(5)</sup> | $7083 |  |  |  | 7083 |

---

(1) Mr. Mingyue Cai was appointed as a director of the Company on February 25, 2020.

(2) Ms. Junhong He was appointed as a director of the Company on September 15, 2022. Ms. He resigned from her position on February 17, 2023.

(3) Ms. Jing Zhang was appointed as a director of the Company on September 15, 2022. Ms. Zhang resigned from her position on February 9, 2023.

(5) Mr. Siyang Hu was appointed as a director of the Company on September 2, 2021. Mr. Hu resigned from his position on September 15, 2022.

(6) Mr. Fei Gan was appointed as a director of the Company on February 11, 2021. Mr. Gan resigned from his position on September 15, 2022.

**Item 12**. **Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters**

The following table sets forth information regarding the beneficial ownership of our common stock as of March 31, 2023 based on information obtained from the persons named below, with respect to the beneficial ownership of shares of our common stock, by:

● each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;

● each of our executive officers and directors that beneficially owns shares of our common stock; and

● all our executive officers and directors as a group.

Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.

The percentage ownership information shown in the table below is based on that there were 1,711,544 shares of common stock outstanding as of March 31, 2023. Unless otherwise noted, the business address of each of the following entities or individuals is Flat 1512, 15F, Lucky Centre, No.165-171 Wan Chai Road,Wan Chai, Hong Kong.

---

| | | |
|:---|:---|:---|
| **Name and Address of Beneficial Owner** | **Amount and<br> Nature of<br> Beneficial<br> Ownership** | **Percent<br> of Class** |
| Directors and Named Executive Officers |  |  |
| Hongxiang Yu, *Chief Executive Officer, President and Chairman of the Board* | 210000 | 12.27% |
| Yi Li, *Chief Financial Officer* |  |  |
| Lu Cai, *Chief Operating Officer* |  |  |
| Shuang Zhang, *Vice President and Director* | 90000 | 5.26% |
| Mingyue Cai, *Director* |  |  |
| Shuaiheng Zhang, *Director* |  |  |
| Yi Zhong, *Director* |  |  |
| **All officers and directors as a group (7 persons):** | **300000** | **17.53%** |
| **5% Beneficial Owner** |  |  |
| Yimin Jin | 144491 | 8.44% |
| Wei Xu | 294007 | 17.18% |

---

&nbsp;&nbsp;&nbsp;&nbsp;

**Changes in Control**

There has been no change in control during the fiscal year ended December 31, 2022.

**Item 13. Certain Relationships and Related Transactions, and Director Independence**

**Certain Relationships and Related Transactions**

Except for the employment agreements previously entered into between us and certain of our named executive officers, and the related party transaction described below, none of our directors or named executive officers, nor any person who owned of record or was known to own beneficially more than 5% of the outstanding Shares of our common stock, nor any associate or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction, or in any proposed transaction, which has materially affected or will affect us.

<u>Related party balances</u>

a. Other receivable – related party:

---

| | | | |
|:---|:---|:---|:---|
| **Name of related party** | **Relationship** | **December 31,<br> 2022** | **December 31,<br> 2021** |
| Chengdu Yuan Code Chain Technology Co. Ltd | A company controlled by former shareholder of the Company | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- | $513387 |
| Marchain (Shanghai) Network Technology Co., LTD | A company controlled by shareholder of the Company |  | 78423 |
| Chenghua District Code To Code To Commerce And Trade Department | A company controlled by employee of the Company | - | 19138 |
| Total |  | - | 610948 |

---

The Company advanced funds to the related party for technical services.

b. Other payables – related parties:

---

| | | | |
|:---|:---|:---|:---|
| **Name of related party** | **Relationship** | **December 31,<br> 2022** | **December 31,<br> 2021** |
| Chuanliu Ni | Chief Executive Officer and director of a former subsidiary | $- | $325907 |
| Zhong Hui Holding Limited | Shareholder of the Company |  | 140500 |
| Shanghai Highlight Asset Management Co. LTD | Shareholder of the Company | 195732 | - |
| Total |  | $195732 | $466407 |

---

The above payables represent interest free loans and advances. These loans and advances are unsecured and due on demand.

**Director Independence**

Nasdaq listing standards require that a majority of our board of directors be independent. An "independent director" is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company's board of directors, would interfere with the director's exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Mr. Shuaiheng Zhang, Mr. Mingyue Cai and Mr. Yi Zhong are "independent directors" as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors have regularly scheduled meetings at which only independent directors are present.

**Item 14*.* Principal Accountant Fees and Services.**

Enrome LLP, ("Enrome") was appointed by the Company to serve as its independent registered public accounting firm for fiscal years ended December 31, 2022. During the period from October 26, 2018 to October 11, 2022, WWC, P.C. served as the independent registered public accounting firm of the Company. The following is a summary of fees paid or to be paid to Enrome or WWC, P.C. for services rendered.

Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by Friedman in connection with regulatory filings. The aggregate fees billed by WWC, P.C. for professional services rendered for the audit of our annual financial statements, review of the financial information included in our Forms 10-Q for the respective periods and other required filings with the SEC for the years ended December 31, 2022 and 2021 totaled $105,000 and $225,000, respectively. The aggregate fees billed or to be billed by Enrome for professional services rendered for the audit of our annual financial statements, review of the financial information included in our Forms 10-Q for the respective periods and other required filings with the SEC for the years ended December 31, 2022 and 2021 totaled $140,000 and $0, respectively. The above amounts include interim procedures and audit fees, as well as attendance at audit committee meetings.

Audit-Related Fees. Audit-related services consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our financial statements and are not reported under "Audit Fees." These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. During the year ended December 31, 2022, we did not pay Enrome or WWC, P.C. for consultations concerning financial accounting and reporting standards.

*Tax Fees*. We paid WWC $5,000 for preparation of our 2021 US Income Tax Returns in 2022.

*All Other Fees*. We did not Enrome or WWC, P.C. for other services for the year ended December 31, 2022 and 2021.

**Pre-Approval Policy**

Our audit committee was formed upon the consummation of our initial public offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).

**PART IV**

**Item 15. Exhibits, Financial Statement Schedules**

(a) The following documents are filed as part of this Report:

(1) Financial Statements

(2) Financial Statements Schedule

All financial statement schedules are omitted because they are not applicable or the amounts are immaterial and not required, or the required information is presented in the financial statements and notes thereto in is Item 15 of Part IV below.

(3) Exhibits

We hereby file as part of this Report the exhibits listed in the attached Exhibit Index. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington D.C. 20549. Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates or on the SEC website at **www.sec.gov**.

**EXHIBIT INDEX**

---

| | |
|:---|:---|
| **Exhibit Number** | **Description of Document** |
| 3.1 | [Articles of Incorporation, filed as exhibit 3.1 to the registration statement on Form S-1 filed on May 10, 2019 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390018008257/f8k062018ex3-1_tmsrhold.htm) |
| 3.2 | [Certificate of Amendment to Articles of Incorporation, filed as exhibit 3.2 to the registration statement on Form S-1 filed on May 10, 2019 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390018008257/f8k062018ex3-2_tmsrhold.htm) |
| 3.3 | [Certificate of Amendment of Articles of Incorporation, filed as exhibit 3.1 to the current report on Form 8-K filed on May 18, 2020 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390020012851/ea122035ex3-1_codechain.htm) |
| 3.4 | [Certificate of Amendment to Articles of Incorporation, filed as exhibit 3.1 to the Current Report on Form 8-K of the Company filed on November 8, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022070180/ea168172ex3-1_codechain.htm) |
| 3.5 | [Certificate of Amendment to Articles of Incorporation, filed as exhibit 3.1 to the Current Report on Form 8-K of the Company filed on January 10, 2023 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390023002086/ea171517ex3-1_gdculture.htm) |
| 3.6 | [Second Amended and Restated Bylaws, filed as exhibit 3.2 to the current report on Form 8-K filed on January 10, 2023 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390023002086/ea171517ex3-2_gdculture.htm) |
| 4.1 | [Form of Registered Warrant, filed as exhibit 4.1 to the current report on Form 8-K filed on February 18, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021010378/ea135988ex4-1_codechain.htm) |
| 4.2 | [Form of Investor Warrant, filed as exhibit 4.2 to the current report on Form 8-K filed on February 18, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021010378/ea135988ex4-2_codechain.htm) |
| 4.3 | [Form of Placement Agent Warrant, filed as exhibit 4.3 to the current report on Form 8-K filed on February 18, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021010378/ea135988ex4-3_codechain.htm) |
| 4.4 | [Form of Lock-up Agreement, filed as exhibit 4.4 to the current report on Form 8-K filed on February 18, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021010378/ea135988ex4-4_codechain.htm) |
| 4.5 | [Description of Securities](f10k2022ex4-5_gdculture.htm) |

---

10.1 [Technical Consultation and Services Agreement dated January 3, 2020, filed as exhibit 10.2 to the current report on Form 8-K filed on January 3, 2020 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390020000164/f8k010320ex10-2_tmsrhold.htm)

10.2 [Equity Pledge Agreement dated January 3, 2020, filed as exhibit 10.3 to the current report on Form 8-K filed on January 3, 2020 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390020000164/f8k010320ex10-3_tmsrhold.htm)

10.3 [Equity Option Agreement dated January 3, 2020, filed as exhibit 10.4 to the current report on Form 8-K filed on January 3, 2020 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390020000164/f8k010320ex10-4_tmsrhold.htm)

10.4 [Voting Rights Proxy and Financial Support Agreement dated January 3, 2020, filed as exhibit 10.5 to the current report on Form 8-K filed on January 3, 2020 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390020000164/f8k010320ex10-5_tmsrhold.htm)

10.5 [Agreement to Assign Technical Consultation and Service Agreement dated January 11, 2021, filed as exhibit 10.2 to the current report on Form 8-K filed on January 11, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021001488/ea133030ex10-2_codechain.htm)

10.6 [Agreement to Assign Equity Option Agreement dated January 11, 2021, filed as exhibit 10.3 to the current report on Form 8-K filed on January 11, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021001488/ea133030ex10-3_codechain.htm)

10.7 [Agreement to Assign Equity Pledge Agreement dated January 11, 2021, filed as exhibit 10.4 to the current report on Form 8-K filed on January 11, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021001488/ea133030ex10-4_codechain.htm)

10.8 [Agreement to Assign Voting Rights Proxy and Financial Supporting Agreement dated January 11, 2021, filed as exhibit 10.5 to the current report on Form 8-K filed on January 11, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021001488/ea133030ex10-5_codechain.htm)

10.9 [Share Purchase Agreement dated November 30, 2018, filed as exhibit 10.1 to the current report on Form 8-K filed on December 3, 2018 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390018016851/f8k113018ex10-1_tmsrhold.htm)

10.10 [Consulting Services Agreement dated November 30, 2018, filed as exhibit 10.2 to the current report on Form 8-K filed on December 3, 2018 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390018016851/f8k113018ex10-2_tmsrhold.htm)

10.11 [Equity Pledge Agreement dated November 30, 2018, filed as exhibit 10.3 to the current report on Form 8-K filed on December 3, 2018 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390018016851/f8k113018ex10-3_tmsrhold.htm)

10.12 [Call Option Agreement dated November 30, 2018, filed as exhibit 10.4 to the current report on Form 8-K filed on December 3, 2018 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390018016851/f8k113018ex10-4_tmsrhold.htm)

10.13 [Voting Rights Proxy Agreement dated November 30, 2018, filed as exhibit 10.5 to the current report on Form 8-K filed on December 3, 2018 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390018016851/f8k113018ex10-5_tmsrhold.htm)

10.14 [Operating Agreement dated November 30, 2018, filed as exhibit 10.6 to the current report on Form 8-K filed on December 03, 2018 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390018016851/f8k113018ex10-6_tmsrhold.htm)

10.15 [Agreement to Assign Call Option Agreement dated April 30, 2020, filed as exhibit 10.2 to the current report on Form 8-K filed on May 1, 2020 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390020010745/ea121297ex10-2_tmsrholding.htm)

10.16 [Agreement to Assign Consulting Services Agreement dated April 30, 2020, filed as exhibit 10.3 to the current report on Form 8-K filed on May 1, 2020 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390020010745/ea121297ex10-3_tmsrholding.htm)

10.17 [Agreement to Assign Equity Pledge Agreement dated April 30, 2020, filed as exhibit 10.4 to the current report on Form 8-K filed on May 1, 2020 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390020010745/ea121297ex10-4_tmsrholding.htm)

10.18 [Agreement to Assign Voting Rights Proxy Agreement dated April 30, 2020, filed as exhibit 10.5 to the current report on Form 8-K filed on May 1, 2020 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390020010745/ea121297ex10-5_tmsrholding.htm)

10.19 [Agreement to Assign Operating Agreement dated April 30, 2020, filed as exhibit 10.6 to the current report on Form 8-K filed on May 1, 2020 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390020010745/ea121297ex10-6_tmsrholding.htm)

10.20 [Share Purchase Agreement by and Among The Company, Jiazhen Li, Long Liao and Chunyong Zheng, dated June 30, 2020, filed as exhibit 10.1 to the current report on Form 8-K filed on July 6, 2020 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390020016724/ea123774ex10-1_codechain.htm)

10.21 [Placement Agency Agreement, dated as of February 18, 2021, by and between the Company and Univest Securities, LLC, filed as exhibit 10.1 to the current report on Form 8-K filed on February 18, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021010378/ea135988ex10-1_codechain.htm)

10.22 [Securities Purchase Agreement, dated as of February 18, 2021, by and between the Company and certain Investors, filed as exhibit 10.2 to the current report on Form 8-K filed on February 18, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021010378/ea135988ex10-2_codechain.htm)

10.23 [Asset Purchase Agreement dated February 23, 2021, filed as exhibit 10.1 to the current report on Form 8-K filed on March 1, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021012600/ea136772ex10-1_codechain.htm)

10.24 [Share Purchase Agreement dated March 30, 2021, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on March 31, 2021 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390021019014/ea138670ex10-1_codechain.htm)

10.25 [Amended and Restated Asset Purchase Agreement dated April 16, 2021, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on April 19, 2021 and incorporated by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021022133/ea139643ex10-1_codechainnew.htm)

10.26 [Amendment to the Amended and Restated Asset Purchase Agreement dated May 28, 2021, filed as exhibit 10.2 to the Current Report on Form 8-K of the Company filed on June 1, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021030325/ea141895ex10-2_codechain.htm)

10.27 [English Translation of the Joint Venture Agreement between the Company and Zhongyou Technology (Shenzhen) Co., Ltd. dated June 1, 2021, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on June 7, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021031263/ea142196ex10-1_codechain.htm)

10.28 [Asset Purchase Agreement dated July 28, 2021, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on August 3, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021040039/ea145127ex10-1_codechainnew.htm)

10.29 [Asset Purchase Agreement dated September 27, 2021, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on October 1, 2021 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390021051158/ea148163ex10-1_codechain.htm)

10.30 [Termination Agreement dated February 23, 2022, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on February 24, 2022 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390022009249/ea156156ex10-1_codechain.htm)

10.31 [Share Purchase Agreement by and among Makesi IoT Technology (Shanghai) Co., Ltd., Shanghai Yuanma Food and Beverage Management Co., Ltd. and the shareholders of Shanghai Yuanma Food and Beverage Management Co., Ltd., dated April 14, 2022, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on April 14, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022019891/ea158478ex10-1_codechain.htm)

10.32 [Technical Consultation and Service Agreement, by and between Makesi IoT Technology (Shanghai) Co., Ltd. and Shanghai Yuanma Food and Beverage Management Co., Ltd., dated June 21, 2022, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on June 27, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022035250/ea162129ex10-1_codechain.htm)

10.33 [Equity Pledge Agreement, by and among Makesi IoT Technology (Shanghai) Co., Ltd., Shanghai Yuanma Food and Beverage Management Co., Ltd. and the shareholders of Shanghai Yuanma Food and Beverage Management Co., Ltd., dated June 21, 2022, filed as exhibit 10.2 to the Current Report on Form 8-K of the Company filed on June 27, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022035250/ea162129ex10-2_codechain.htm)

10.34 [Equity Option Agreement, by and among Makesi IoT Technology (Shanghai) Co., Ltd., Shanghai Yuanma Food and Beverage Management Co., Ltd. and the shareholders of Shanghai Yuanma Food and Beverage Management Co., Ltd., dated June 21, 2022, filed as exhibit 10.3 to the Current Report on Form 8-K of the Company filed on June 27, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022035250/ea162129ex10-3_codechain.htm)

10.35 [Voting Rights Proxy and Financial Support Agreement, by and among Makesi IoT Technology (Shanghai) Co., Ltd., Shanghai Yuanma Food and Beverage Management Co., Ltd. and the shareholders of Shanghai Yuanma Food and Beverage Management Co., Ltd., dated June 21, 2022, filed as exhibit 10.4 to the Current Report on Form 8-K of the Company filed on June 27, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022035250/ea162129ex10-4_codechain.htm)

10.36 [Share Purchase Agreement by and among Makesi IoT Technology (Shanghai) Co., Ltd., Shanghai Highlight Media Co., Ltd. and the shareholders of Shanghai Highlight Media Co., Ltd., dated September 16, 2022, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on September 19, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022056991/ea165986ex10-1_codechain.htm)

10.37 [Technical Consultation and Service Agreement, by and between Makesi IoT Technology (Shanghai) Co., Ltd. and Shanghai Highlight Media Co., Ltd., dated September 16, 2022, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on October 5, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022062235/ea166761ex10-1_codechain.htm)

10.38 [Equity Pledge Agreement, by and among Makesi IoT Technology (Shanghai) Co., Ltd., Shanghai Highlight Media Co., Ltd. and the shareholders of Shanghai Highlight Media Co., Ltd., dated September 16, 2022, filed as exhibit 10.2 to the Current Report on Form 8-K of the Company filed on October 5, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022062235/ea166761ex10-2_codechain.htm)

10.39 [Equity Option Agreement, by and among Makesi IoT Technology (Shanghai) Co., Ltd., Shanghai Highlight Media Co., Ltd. and the shareholders of Shanghai Highlight Media Co., Ltd., dated September 16, 2022, filed as exhibit 10.3 to the Current Report on Form 8-K of the Company filed on October 5, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022062235/ea166761ex10-3_codechain.htm)

10.40 [Voting Rights Proxy and Financial Support Agreement, by and among Makesi IoT Technology (Shanghai) Co., Ltd., Shanghai Highlight Media Co., Ltd. and the shareholders of Shanghai Highlight Media Co., Ltd., dated September 16, 2022, filed as exhibit 10.4 to the Current Report on Form 8-K of the Company filed on October 5, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022062235/ea166761ex10-4_codechain.htm)

10.41 [Agreement to Assign Technical Consultation and Service Agreement, by and between Makesi IoT Technology (Shanghai) Co., Ltd. and Shanghai Highlight Media Co., Ltd., dated February 27, 2023, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on February 27, 2023 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390023015456/ea174351ex10-1_gdculture.htm)

10.42 [Agreement to Assign Equity Pledge Agreement, by and among Makesi IoT Technology (Shanghai) Co., Ltd., Shanghai Highlight Media Co., Ltd. and the shareholders of Shanghai Highlight Media Co., Ltd., dated February 27, 2023, filed as exhibit 10.2 to the Current Report on Form 8-K of the Company filed on February 27, 2023 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390023015456/ea174351ex10-2_gdculture.htm)

10.43 [Agreement to Assign Equity Option Agreement, by and among Makesi IoT Technology (Shanghai) Co., Ltd., Shanghai Highlight Media Co., Ltd. and the shareholders of Shanghai Highlight Media Co., Ltd., dated February 27, 2023, filed as exhibit 10.3 to the Current Report on Form 8-K of the Company filed on February 27, 2023 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390023015456/ea174351ex10-3_gdculture.htm)

10.44 [Agreement to Assign Voting Rights Proxy and Financial Support Agreement, by and among Makesi IoT Technology (Shanghai) Co., Ltd., Shanghai Highlight Media Co., Ltd. and the shareholders of Shanghai Highlight Media Co., Ltd., dated February 27, 2023, filed as exhibit 10.4 to the Current Report on Form 8-K of the Company filed on February 27, 2023 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390023015456/ea174351ex10-4_gdculture.htm)

10.45 [Termination Agreement by and among Makesi IoT Technology (Shanghai) Co., Ltd., Sichuan Wuge Network Games Co., Ltd. and the shareholders of Sichuan Wuge Network Games Co., Ltd., dated September 28, 2022, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on September 30, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022060708/ea166558ex10-1_codechain.htm)

10.46 [Employment Agreement between the Company and Yi Li dated April 25, 2019, filed as exhibit 10.1 to the current report on Form 8-K filed on April 26, 2019 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390019007205/f8k042419ex10-1_tmsrhold.htm)

10.47 [Employment Agreement between the Company and Xiangtian Zhu, dated April 5, 2022, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on April 5, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022018208/ea158044ex10-1_codechain.htm)

10.48 [Employment Agreement between the Company and Hongxiang Yu, dated October 4, 2022, filed as exhibit 10.5 to the Current Report on Form 8-K of the Company filed on October 5, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022062235/ea166761ex10-5_codechain.htm)

10.49 [Employment Agreement between the Company and Shuang Zhang, dated October 4, 2022, filed as exhibit 10.6 to the Current Report on Form 8-K of the Company filed on October 5, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022062235/ea166761ex10-6_codechain.htm)

10.50 [Employment Agreement between the Company and Lu Cai, dated February 9, 2023, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on February 9, 2023 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390023009778/ea173098ex10-1gdculture.htm)

10.51 [Director Offer Letter to Junhong He, dated September 19, 2022, filed as exhibit 10.2 to the Current Report on Form 8-K of the Company filed on September 19, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022056991/ea165986ex10-2_codechain.htm)

10.52 [Director Offer Letter to Jing Zhang, dated September 19, 2022, filed as exhibit 10.3 to the Current Report on Form 8-K of the Company filed on September 19, 2022 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390022056991/ea165986ex10-3_codechain.htm)

10.53 [Director Offer Letter to Shuaiheng Zhang, dated February 9, 2023, filed as exhibit 10.2 to the Current Report on Form 8-K of the Company filed on February 9, 2023 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390023009778/ea173098ex10-2gdculture.htm)

10.54 [Director Offer Letter to Yi Zhong, dated February 17, 2023, filed as exhibit 10.1 to the Current Report on Form 8-K of the Company filed on February 17, 2023 and incorporated herein by reference](https://www.sec.gov/Archives/edgar/data/1641398/000121390023012888/ea173918ex10-1_gdculture.htm)

---

| | |
|:---|:---|
| 14.1 | [Code of Business and Ethics, filed as exhibit 14.1 to the registration statement on Form S-1 filed on June 16, 2015 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390015004525/fs12015ex14i_jmglobalhold.htm) |
| 21.1\* | [List of Subsidiaries](f10k2022ex21-1_gdculture.htm) |
| 23.1\* | [Consent of Enrome LLP](f10k2022ex23-1_gdculture.htm) |
| 23.2\* | [Consent of Enrome LLP](f10k2022ex23-2_gdculture.htm) |
| 23.3\* | [Consent of WWC, P.C.](f10k2022ex23-3_gdculture.htm) |
| 23.4\* | [Consent of WWC, P.C.](f10k2022ex23-4_gdculture.htm) |
| 31.1 | [Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).\*](f10k2022ex31-1_gdculture.htm) |
| 31.2 | [Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).\*](f10k2022ex31-2_gdculture.htm) |
| 32.1 | [Certification of the Chief Executive Officer required by 18 U.S.C. 1350.\*](f10k2022ex32-1_gdculture.htm) |
| 32.2 | [Certification of the Chief Financial Officer required by 18 U.S.C. 1350.\*](f10k2022ex32-2_gdculture.htm) |
| 99.1 | [Form of Audit Committee Charter, filed as exhibit 99.1 to the registration statement on Form S-1 filed on June 16, 2015 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390015004525/fs12015ex99i_jmglobalhold.htm) |
| 99.2 | [Form of Compensation Committee Charter, filed as exhibit 99.2 to the registration statement on Form S-1 filed on June 16, 2015 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/1641398/000121390015004525/fs12015ex99ii_jmglobalhold.htm) |
| 101.INS | Inline XBRL Instance Document. |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |

---

\* Filed herewith

\*\* Furnished herewith

**FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

**Index to Financial Statements**

---

| | |
|:---|:---|
|  | Page |
| [Reports of Independent Registered Public Accounting Firms-Enrome LLP (PCAOB ID:6907)](#F_001) | F-2 - F-3 |
| [Reports of Independent Registered Public Accounting Firms-WWC.A.C (PCAOB ID:1171)](#r_001) | F-4 |
| Financial Statements: |  |
| &nbsp;&nbsp;&nbsp;[Consolidated Balance Sheets as of December 31, 2022 and 2021](#F_002) | F-5 |
| &nbsp;&nbsp;&nbsp;[Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income For the years ended December 31, 2022 and 2021](#F_003) | F-6 |
| &nbsp;&nbsp;&nbsp;[Consolidated Statements of Changes in Shareholders' Equity For the years ended December 31, 2022 and 2021](#F_004) | F-7 |
| &nbsp;&nbsp;&nbsp;[Consolidated Statements of Cash Flows For the years ended December 31, 2022 and 2021](#F_005) | F-8 |
| &nbsp;&nbsp;&nbsp;[Notes to Consolidated Financial Statements](#F_006) | F-9 |

---

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To: The Board of Directors and Stockholders of GD Culture Group Limited

**Opinion on the Consolidated Financial Statements**

We have audited the accompanying consolidated balance sheets of GD Culture Group Limited and its subsidiaries (the "Company") as of December 31, 2022, and the related consolidated statements of loss and comprehensive loss, changes in shareholders' equity, and cash flows for the year ended December 31, 2022, 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 December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP").

**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 audit to obtain reasonable assurance about whether the 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.

**Critical Audit Matters**

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to accounts or disclosures that were material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

*Goodwill-Shanghai Hightlight Media Co., Ltd. ("Hightlight Media")*

As described in Note 3 and Note 10 to the consolidated financial statements, the Company acquired Hightlight Media. The goodwill arising on this acquisition amounted to $2.12 million as of December 31, 2022.

Management assessed goodwill for potential impairment as of December 31 2022 by comparing the carrying amount of the cash-generating unit to which goodwill has been allocated with the recoverable amount determined by assessing the value-in-use ("VIU") by preparing a discounted cash flow forecast. Preparing a discounted cash flow forecast involves the exercise of significant management judgement, in particular in forecasting revenue growth and operating profit and in determining an appropriate discount rate

Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired. The Company has elected to perform quantitative assessment. In the quantitative assessment, the Company's evaluation of goodwill for impairment involves the comparison of the fair value of Hightlight Media to the carrying value. The Company used the discounted cash flow model to estimate fair value, which requires management to make significant estimates and assumptions related to discount rates and forecasts of future revenues and operating margins. Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge. Based on the quantitative assessment performed, if it is more likely than not that the fair value is less than its carrying amount. During the year ended December 31, 2022, no impairment charge on goodwill arising on this acquisition of Hightlight Media was recognized based on the quantitative assessment performed.

We identified goodwill impairment for the Hightlight Media as a critical audit matter because it is the material to the consolidated financial statements of the Company and certain significant judgments in respect of the assumption made which are inherently uncertain and could be subject to management bias made by management to estimate the fair value of the Hightlight Media and the difference between its fair value and carrying value. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management's estimates and assumptions related to selection of the discount rate and forecasts of future revenue and operating margin.

Our audit procedures relating to the discount rate and forecasts of future revenue and operating margin used by management to estimate the fair value of the Hightlight Media included the following, among others:

● We evaluated management's ability to accurately forecast future revenues and operating margins by comparing actual results to management's forecasts.

● We evaluated the reasonableness of the (1) valuation methodology and (2) discount rate by:

&nbsp;&nbsp;&nbsp;&nbsp;a. Testing the source information underlying
the determination of the discount rate and the mathematical accuracy of the calculation;

b. Developing a range of independent estimates
and comparing those to the discount rate selected by management.

---

| |
|:---|
| /s/ Enrome LLP |
| Certified Public Accountants |
| PCAOB ID: 6907 |

---

We have served as the Company's auditor since September 23, 2022.

Singapore <br> March 31, 2023

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To: The Board of Directors and Stockholders of Code Chain New Continent Limited

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of Code Chain New Continent Limited and its subsidiaries (the "Company") as of December 31, 2021 and 2020, and the related consolidated statements of income (loss) and comprehensive loss, changes in shareholders' equity, and cash flows for the two-year period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's 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 audit to obtain reasonable assurance about whether the 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 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matters**

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

**Critical Audit Matter Description**

The Company's evaluation of goodwill and related impairment, if any, involves the comparison of the fair value of each reporting unit to its carrying value. The Company uses the discounted cash flow model to estimate fair value, which requires management to make significant estimates and assumptions related to forecasts of future revenues and operating margins. Changes in these assumptions which may include but are not limited to macroeconomic factors, political risks, product adoption or obsoletion rates, and effectiveness of sales channels may have a significant impact on the fair value, and related potential impairment, if any. The Company's reporting unit, Sichuan Wuge Network Games Co., Ltd. ("Wuge") generated a substantial proportion of the Company's consolidated revenues and gross margins via the sales of digital door signs. The value of goodwill related to Wuge is derived from the sales generated by this unit. As a result of the significant judgments made by management to estimate the fair value of Wuge for which there is limited historical data and the judgments involved in selecting significant business assumptions to forecast future revenue and operating margin for Wuge, performing audit procedures to evaluate the reasonableness of management's estimates and assumptions required a high degree of auditor judgment and an increased effort.

**How the Critical Audit Matter Was Addressed in the Audit**

Our audit procedures related to the determination of forecasts of future revenue and operating margin used by management to estimate the fair value contributed by Wuge included the following, among others:

We evaluated management's ability to accurately forecast future revenue and operating margin by comparing actual results to management's historical forecasts for the sales of Wuge's products. We also developed our own independent analysis and estimate of revenues and profits and applied them and a discounted cash flow model to evaluate the fair value of goodwill. To support our independent model we enquired of management regarding their assumptions, searched for market data, used historical data, and performed sensitivity and scenario analysis to test different outcomes from the model.

---

| |
|:---|
| /s/ WWC, P.C. |
| WWC, P.C. |
| Certified Public Accountants |
| PCAOB ID: 1171 |

---

We have served as the Company's auditor since October 26, 2018.

San Mateo, California <br> March 31, 2022

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

---

| | | |
|:---|:---|:---|
|  | **December 31,**<br>**2022** | **December 31,**<br>**2021** |
| ASSETS |  |  |
| CURRENT ASSETS |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $389108 | $14588330 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net | 194520 | - |
| &nbsp;&nbsp;&nbsp;Other receivables, net | 1026293 | 728361 |
| &nbsp;&nbsp;&nbsp;Other receivable - related party | - | 610948 |
| &nbsp;&nbsp;&nbsp;Inventories | - | 3714 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 1609921 | 15931353 |
| PLANT AND EQUIPMENT, NET | 502 | 283896 |
| RIGHT-OF-USE ASSETS | - | 22733 |
| OTHER ASSETS |  |  |
| &nbsp;&nbsp;&nbsp;Prepayments for purchases of equipment | - | 27706681 |
| &nbsp;&nbsp;&nbsp;Goodwill | 2190485 | 6590339 |
| &nbsp;&nbsp;&nbsp;Intangible assets, net | - | 255 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other assets | 2190485 | 34297275 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $3800908 | $50535257 |
| <u>LIABILITIES AND SHAREHOLDERS' EQUITY</u> |  |  |
| CURRENT LIABILITIES |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $127475 | $3543839 |
| &nbsp;&nbsp;&nbsp;Other payables and accrued liabilities | 2099 | 5005271 |
| &nbsp;&nbsp;&nbsp;Other payables - related parties | 195732 | 466407 |
| &nbsp;&nbsp;&nbsp;Customer deposits | - | 7171255 |
| &nbsp;&nbsp;&nbsp;Lease liabilities - current | - | 13338 |
| &nbsp;&nbsp;&nbsp;Taxes payable | 8478 | 2246418 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 333784 | 18446528 |
| OTHER LIABILITIES |  |  |
| &nbsp;&nbsp;&nbsp;Lease liabilities – non-current | - | 8738 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other liabilities | - | 8738 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 333784 | 18455266 |
| COMMITMENTS AND CONTINGENCIES | - | - |
| SHAREHOLDERS' EQUITY |  |  |
| Preferred stock, $0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and 2021, respectively | - | - |
| Common stock, $0.0001 par value, 200,000,000 shares authorized, 1,844,877 and 1,543,793 shares issued and outstanding as of December 31, 2022 and 2021, respectively | 184 | 154 |
| Additional paid-in capital | 60124087 | 83038827 |
| Statutory reserves | 4467 | - |
| Stock subscriptions receivable | - | (25165728) |
| Accumulated deficit | (56841074) | (26019119) |
| Accumulated other comprehensive income | 179460 | 225857 |
| &nbsp;&nbsp;&nbsp;Total shareholders' equity | 3467124 | 32079991 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $3800908 | $50535257 |

---

\* Giving retroactive effect to the 1-for-30 reverse stock split effective on November 9, 2022.

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

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS**

---

| | | |
|:---|:---|:---|
|  | **For the year ended<br> December 31,** | **For the year ended<br> December 31,** |
|  | **2022** | **2021** |
| REVENUES |  |  |
| &nbsp;&nbsp;&nbsp;Enterprise brand management services | $153304 | $- |
| TOTAL REVENUES | 153304 | - |
| COST OF REVENUES |  |  |
| &nbsp;&nbsp;&nbsp;Enterprise brand management services | 97770 |  |
| TOTAL COST OF REVENUES | 97770 | - |
| GROSS PROFIT | 55534 | - |
| OPERATING EXPENSES (INCOME) |  |  |
| &nbsp;&nbsp;&nbsp;Selling, general and administrative | 475857 | 19546151 |
| &nbsp;&nbsp;&nbsp; Provision for doubtful accounts | 3120 | - |
| TOTAL OPERATING EXPENSES | 478977 | 19546151 |
| LOSS FROM OPERATIONS | (423443) | (19546151) |
| OTHER INCOME (EXPENSE) |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | 23 | 799 |
| &nbsp;&nbsp;&nbsp;Interest expense | (87) |  |
| &nbsp;&nbsp;&nbsp;Other income, net | 1 |  |
|  |  | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other expense (income), net | (63) | 799 |
| LOSS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS | (423506) | (19545352) |
| PROVISION FOR INCOME TAXES | 1146 | - |
| LOSS FROM CONTINUING OPERATIONS | (424652) | (19545352) |
| Discontinued operations: |  |  |
| Loss (income) from discontinued operations, net of taxes | (26336694) | 3745098 |
| Loss on disposal, net of taxes | (4060609) | (11170638) |
| Net loss | (30821955) | (26970892) |
| OTHER COMPREHENSIVE (LOSS) INCOME |  |  |
| &nbsp;&nbsp;&nbsp;Foreign currency translation adjustment | (46397) | (709780) |
| COMPREHENSIVE LOSS | $(30868352) | $(27680672) |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES |  |  |
| &nbsp;&nbsp;&nbsp;Basic and diluted | 1531316 | 1324958 |
| Loss per share from continuing operations |  |  |
| &nbsp;&nbsp;&nbsp;Basic and diluted | (0.28) | (14.75) |
| Loss per share from discontinued operations |  |  |
| &nbsp;&nbsp;&nbsp;Basic and diluted | (19.85) | (5.60) |
| Loss per share available to common shareholders |  |  |
| &nbsp;&nbsp;&nbsp;Basic and diluted | $(20.13) | $(20.36) |

---

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

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY**

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**For the year ended December 31, 2021** | &nbsp;&nbsp;&nbsp;**For the year ended December 31, 2021** | &nbsp;&nbsp;&nbsp;**For the year ended December 31, 2021** | &nbsp;&nbsp;&nbsp;**For the year ended December 31, 2021** | &nbsp;&nbsp;&nbsp;**For the year ended December 31, 2021** | &nbsp;&nbsp;&nbsp;**For the year ended December 31, 2021** | &nbsp;&nbsp;&nbsp;**For the year ended December 31, 2021** | &nbsp;&nbsp;&nbsp;**For the year ended December 31, 2021** | &nbsp;&nbsp;&nbsp;**For the year ended December 31, 2021** | &nbsp;&nbsp;&nbsp;**For the year ended December 31, 2021** | |
|  | | | | | **Additional** | **Stock** | **Retained Earnings** | **Retained Earnings** | **Accumulated Other** | |
|  | **Preferred Stock** | **Preferred Stock** | **Common Stock** | **Common Stock** | **Paid-in** | **Subscription** | **Statutory** | | **Comprehensive** | |
|  | **Shares** | Amount | **Shares** | **Amount** | **Capital** | **Receivable** | **Reserves** | **Unrestricted** | **Income (Loss)** | **Total** |
| BALANCE, January 1, 2021 |  |  | 980423 | 98 | 20025248 |  |  | 951773 | 935637 | 21912755 |
| Net loss |  |  |  |  |  |  |  | (26970892) |  | (26970892) |
| Issuance of common stock for Bonus |  |  | 30850 | 3 | 2563616 |  |  |  |  | 2563619 |
| Issuance of common stock for purchase Bitcoin mining machines |  | &nbsp;&nbsp;&nbsp;&nbsp;- | 52927 | 5 | 6159995 |  |  |  |  | 6160000 |
| Issuance of common stock for purchase digital currency mining machines |  |  | 254916 | 25 | 16442084 |  |  |  |  | 16442111 |
| Issuance of shares for cash |  |  | 138889 | 14 | 22539982 |  |  |  |  | 22539996 |
| Issuance of common stock for employee compensation |  |  | 100000 | 10 | 16923840 |  |  |  |  | 16923850 |
| The cancellation of the common stock |  |  | (14212) | (1) | (1615938) |  |  |  |  | (1615939) |
| Stock subscription receivable from issuance of common stock |  |  |  |  |  | (25165728) |  |  |  | (25165728) |
| Foreign currency translation |  | - | - | - | - | - | - | - | (709780) | (709780) |
| BALANCE, December 31, 2021 |  | $- | 1543793 | $154 | $83038827 | $(25165728) | $- | $(26019119) | $225857 | $32079991 |
| **For the year ended December 31, 2022** | **For the year ended December 31, 2022** | **For the year ended December 31, 2022** | **For the year ended December 31, 2022** | **For the year ended December 31, 2022** | **For the year ended December 31, 2022** | **For the year ended December 31, 2022** | **For the year ended December 31, 2022** | **For the year ended December 31, 2022** | **For the year ended December 31, 2022** |  |
|  |  |  |  |  | **Additional** | **Stock** | **Accumulated Deficit** | **Accumulated Deficit** | **Accumulated Other** |  |
|  | **Preferred Stock** | **Preferred Stock** | **Common Stock** | **Common Stock** | **Paid-in** | **Subscription** | **Statutory** |  | **Comprehensive** |  |
|  | **Shares** | **Amount** | **Shares** | **Amount** | **Capital** | **Receivable** | **Reserves** | **Unrestricted** | **Income (Loss)** | **Total** |
| BALANCE, January 1, 2022 |  |  | 1543793 | 154 | 83038827 | (25165728) |  | (26019119) | 225857 | 32079991 |
| Net loss |  |  |  |  |  |  |  | (30821955) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- | (30821955) |
| Issuance of common stock for acquisition Yuan Ma |  |  | 256000 | 26 | 7679974 |  |  |  |  | 7680000 |
| Issuance of common stock for acquisition Highlight Media |  |  | 300000 | 30 | 2249970 |  | 4467 |  |  | 2254467 |
| The cancellation of the common stock |  |  | (254916) | (26) | (32844684) |  |  |  |  | (32844710) |
| Stock subscription receivable from issuance of common stock |  |  |  |  |  | 25165728 |  |  |  | 25165728 |
| Foreign currency translation |  | - | - | - | - | - | - | - | (46397) | (46397) |
| BALANCE, December 31, 2022 |  | $- | 1844877 | $184 | $60124087 | $- | $4467 | $(56841074) | $179460 | $3467124 |

---

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

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

---

| | | |
|:---|:---|:---|
|  | **For the year ended<br> December 31,** | **For the year ended<br> December 31,** |
|  | **2022** | **2021** |
| CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Net Loss | $(30821955) | $(26970892) |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation of plant and equipment | 718 | 59089 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of intangible assets |  | 1240281 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of prepayments | 20082123 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of common stock for employee compensation | - | 16923850 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issuance of common stock for Bonus | - | 2563618 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Disposal of the company  | 4060609 | 11170638 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill impairment | 6590339 | 1163001 |
| &nbsp;&nbsp;&nbsp;Change in operating assets and liabilities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivables | (158392) | (420731) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other receivables | 1540 | 469542 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other receivable - related party | 189320 | (371035) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories | (2946) | (591636) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepayments | (66823) | (27626241) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 291234 | 2746201 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other payables and accrued liabilities | 227636 | 5362044 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Customer deposits | (2116847) | 6582582 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lease liabilities | (484) | 2587 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxes payable | 837717 | 2186050 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in operating activities | (886211) | (5511052) |
| CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Net increase in cash from acquisition of Highlight Media | 215880 | - |
| &nbsp;&nbsp;&nbsp;Net decrease in cash from disposal of discontinued operations | (12702666) | (961706) |
| &nbsp;&nbsp;&nbsp;Purchase of equipment | (6566) | (308778) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (12493352) | (1270484) |
| CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from issuance of common stock | - | 22539996 |
| &nbsp;&nbsp;&nbsp;Proceeds from short-term loans - bank | - | 255766 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | - | 22795762 |
| EFFECT OF EXCHANGE RATE ON CASH | (819659) | (2424613) |
| NET (DECREASE)/INCREASE IN CASH | (14199222) | 13589613 |
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 14588330 | 998717 |
| CASH AND CASH EQUIVALENTS, END OF YEAR | $389108 | $14588330 |
| SUPPLEMENTAL CASH FLOW INFORMATION: |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid for income tax | $- | $- |
| &nbsp;&nbsp;&nbsp;Cash paid for interest | $1022 | $7804 |
| NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES |  |  |
| &nbsp;&nbsp;&nbsp;Issuance of common stock for Bonus | - | 2563618 |
| &nbsp;&nbsp;&nbsp;Issuance of common stock for purchase Bitcoin mining machines | - | 6160000 |
| &nbsp;&nbsp;&nbsp;Issuance of common stock for purchase digital currency mining machines | - | 16442111 |
| &nbsp;&nbsp;&nbsp;Issuance of common stock for employee compensation | - | 16923850 |
| &nbsp;&nbsp;&nbsp;Issuance of common stock for acquisition Yuan Ma | 7680000 | - |
| &nbsp;&nbsp;&nbsp;Issuance of common stock for acquisition Highlight Media | 2250000 | - |
| &nbsp;&nbsp;&nbsp;The cancellation of the common stock | 32844710 | 1615939 |
| &nbsp;&nbsp;&nbsp;Initial recognition of right-of-use assets and lease liabilities | - | 22076 |

---

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

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note 1 – Nature of business and organization**

GD Culture Group Limited ("GDC" or the "Company"), formerly known as Code Chain New Continent Limited, TMSR Holding Company Limited and JM Global Holding Company is a Nevada corporation and a holding company that has no material operation of its own. The Company' subsidiaries, Citi Profit Investment Holding Limited ("Citi Profit"), TMSR Holdings Limited ("TMSR HK"), Highlights Culture Holding Co., Limited ("Highlight HK"), Shanghai Highlight Entertainment Co., Ltd. ("Highlight WFOE") and Makesi IoT Technology (Shanghai) Co., Ltd. ("Makesi WFOE") are also holding companies with material operations.

Highlight WFOE has a series of contractual arrangement with Shanghai Highlight Media Co., Ltd. ("Highlight Media") that established a VIE structure. For accounting purposes, Highlight WFOE is the primary beneficiary of Highlight Media. Accordingly, under U.S. GAAP, CCNC treats Highlight Media as the consolidated affiliated entity and has consolidated Highlight Media's financial results in CCNC's financial statements. Highlight Media was founded in 2016. It is an integrated marketing service agency, focusing on enterprise brand management, crisis public relations, intelligent public opinion monitoring, media PR, financial and economic we-media operation, digital face application, large-scale exhibition services and other businesses. It is committed to becoming a modern science and technology media organization that fully empowers the development of customer enterprises in the era of artificial intelligence and big data.

Prior to September 28, 2022, we also conducted business through Sichuan Wuge Network Games Co., Ltd. ("Wuge"). Makesi WFOE had a series of contractual arrangement with Wuge that established a VIE structure. Wuge focused its business on research, development and application of Internet of Things (IoT) and electronic tokens Wuge digital door signs. On September 28, 2022, Makesi WFOE entered into a termination agreement with Wuge and the Wuge Shareholders to terminate the VIE Agreements and to cancel the Shares, based on the average closing price of $0.237 per share of the Company during the 30 trading days immediately prior to the date of the termination agreement. As a result of such termination, the Company no longer treats Wuge as a consolidated affiliated entity or consolidates the financial results and balance sheet of Wuge in the Company's consolidated financial statements under U.S. GAAP.

Prior to March 30, 2021, CCNC had an indirect subsidiary, Tongrong Technology (Jiangsu) Co., Ltd. ("Tongrong WFOE"), which is a holding company with no material operations. Tongrong WFOE had a series of contractual arrangement with Jiangsu Rong Hai Electric Power Fuel Co., Ltd. ("Rong Hai") that established a VIE structure. Rong Hai was primarily engaged in the coal wholesales and sales of coke, steel, construction materials, mechanical equipment and steel scrap. For accounting purposes, Tongrong WFOE was the primary beneficiary of Wuge. Accordingly, under U.S. GAAP, CCNC treated Rong Hai as the consolidated affiliated entity and has consolidated Rong Hai's financial results in CCNC's financial statements prior to March 30, 2021. On March 30, 2021, CCNC entered into a share purchase agreement with a buyer unaffiliated with the Company (the "Buyer"), and Qihai Wang, former director of the Company (the "Payee"). Pursuant to the agreement, on March 31, 2021, CCNC sold all the issued and outstanding ordinary shares of Tongrong WFOE to the Buyer at a purchase price of $2,464,411 and caused 426,369 shares of common stock of CCNC owned by the Payee to be cancelled. The sale of Tongrong Shares included disposition of Rong Hai. As a result, as of March 31, 2021, operations of Tongrong WFOE and Rong Hai have been designated as discontinued operations.

The VIE structure involves unique risks to investors. The VIE agreements have not been tested in a court of law and the Chinese regulatory authorities could disallow this VIE structure, which would likely result in a material change in our operations and the value of our securities, including that it could cause the value of such securities to significantly decline or become worthless.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

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

---

| | | |
|:---|:---|:---|
| **Name** | **Background** | **Ownership** |
| Citi Profit BVI | ● A British Virgin Island company Incorporated on April 2019 | 100% owned by the Company |
| Makesi WFOE | ● A PRC limited liability company and deemed a wholly foreign owned enterprise ("WFOE") Incorporated on December 2020 | 100% owned by TMSR HK |

---

---

| | | |
|:---|:---|:---|
| Citi Profit BVI | ● A British Virgin Island company | 100% owned by the Company |
|  | ● Incorporated on April 2019 |  |
| TMSR HK | ● A Hong Kong company | 100% owned by Citi Profit BVI |
|  | ● Incorporated on April 2019 |  |
| Highlight HK | ● A Hong Kong company | 100% owned by Citi Profit BVI |
|  | ● Incorporated on November 2022 |  |
| Makesi WFOE | ● A PRC limited liability company and deemed a wholly foreign owned enterprise ("WFOE") | 100% owned by TMSR HK |
|  | ● Incorporated on December 2020 |  |
| Highlight WFOE | ● A PRC limited liability company and deemed a wholly foreign owned enterprise ("WFOE") | 100% owned by Highlight HK |
|  | ● Incorporated on January 2023 |  |
| Rong Hai<sup>1</sup> | ● A PRC limited liability company | VIE of Tongrong WFOE |
|  | ● Incorporated on May 20, 2009 |  |
|  | ● Registered capital of USD 3,171,655 (RMB 20,180,000), fully funded |  |
|  | ● Coal wholesales and sales of coke, steels, construction materials, mechanical equipment and steel scrap |  |
| Wuge<sup>2</sup> | ● A PRC limited liability company | VIE of Makesi WFOE |
|  | ● Incorporated on July 4, 2019 |  |
| Highlight Media | ● A PRC limited liability company | VIE of Makesi WFOE |
|  | ● Incorporated on September 16, 2022 |  |

---

<sup>1</sup> Disposed on March 31, 2021 <br> <sup>2</sup> Disposed on September 28, 2022

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**<u>Contractual Arrangements</u>**

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

Material terms of each of the Rong Hai VIE Agreements are described below. The Company disposed Tongrong WFOE and Rong Hai as of March 31, 2021.

*Consulting Services Agreement*

Pursuant to the consulting services agreement between Rong Hai and Shengrong WFOE dated November 30, 2018 and the agreement to assign consulting services agreement among Rong Hai, Shengrong WFOE and Tongrong WFOE dated April 30, 2020, Tongrong WFOE has the exclusive right to provide consulting services to Rong Hai relating to Rong Hai's business, including but not limited to business consulting services, human resources development, and business development. Tongrong WFOE exclusively owns any intellectual property rights arising from the performance of this agreement. Tongrong WFOE has the right to determine the service fees based on Rong Hai's actual operation on a quarterly basis.

This consulting services agreement took effect upon execution and shall remain in full force and effective until Rong Hai's valid operation term expires. Tongrong WFOE may, at its discretion, decide to renew or terminate this consulting services agreement.

*Equity Pledge Agreement.*

Under the equity pledge agreement among Shengrong WFOE, Rong Hai and the shareholders of Rong Hai dated November 30, 2018, and the agreement to assign equity pledge agreement among Rong Hai, Shengrong WFOE and Tongrong WFOE dated April 30, 2020, the shareholders pledged all of their equity interests in Rong Hai to Tongrong WFOE to guarantee Rong Hai's performance of relevant obligations and indebtedness under the consulting services agreement. In addition, the shareholders of Rong Hai have completed the registration of the equity pledge under the agreement with the competent local authority. If Rong Hai breaches its obligation under the consulting services agreement, Tongrong WFOE, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests.

This equity pledge agreement took effect upon execution and shall remain in full force and effective until Rong Hai and Tongrong WFOE's satisfaction of all contractual obligations and settlement of all secured indebtedness. Upon Tongrong WFOE's request, Rong Hai shall extend its operation period to sustain the effectiveness of this equity pledge agreement.

*Call Option Agreement*

Under the call option agreement among Shengrong WFOE, Rong Hai and the shareholders of Rong Hai dated November 30, 2018 and the agreement to assign call option agreement among Rong Hai, Shengrong WFOE and Tongrong WFOE dated April 30, 2020, each of the shareholders of Rong Hai irrevocably granted to WFOE or its designee an option to purchase at any time, to the extent permitted under PRC law, all or a portion of his equity interests in Rong Hai. Also, Tongrong WFOE or its designee has the right to acquire any and all of its assets of Rong Hai. Without Tongrong WFOE's prior written consent, Rong Hai's shareholders cannot transfer their equity interests in Rong Hai, and Rong Hai cannot transfer its assets. The acquisition price for the shares or assets will be the minimum amount of consideration permitted under the PRC law at the time of the exercise of the option.

This call option agreement shall took effect upon execution. Rong Hai and Tongrong WFOE shall not terminate this call option agreement under any circumstances for any reason unless it is early terminated by Tongrong WFOE or by the requirements under the applicable laws. This call option agreement shall be terminated provided that all equity interest or assets under this option is transferred to Tongrong WFOE or its designee.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

*Voting Rights Proxy Agreement*

Under the voting rights proxy agreement among Shengrong WFOE and the shareholders of Rong Hai dated November 30, 2018 and the agreement to assign voting rights proxy agreement among Rong Hai, Shengrong WFOE and Tongrong WFOE dated April 30, 2020, each shareholder of Rong Hai irrevocably appointed Shengrong WFOE as its attorney-in-fact to exercise on such shareholder's behalf any and all rights that such shareholder has in respect of his equity interests in Rong Hai, including but limited to the power to vote on its behalf on all matters of Rong Hai requiring shareholder approval in accordance with the articles of association of Rong Hai.

The voting rights proxy agreement took effect upon execution of and shall remain in effect indefinitely for the maximum period of time permitted by law in consideration of Tongrong WFOE.

*Operating Agreement*

Pursuant to the operating agreement among Shengrong WFOE, Rong Hai and the shareholders of Rong Hai dated November 30, 2018 and the agreement to assign operating agreement among Rong Hai, Shengrong WFOE and Tongrong WFOE dated April 30, 2020, Rong Hai and the shareholders of Rong Hai agreed not to enter into any transaction that could materially affect Rong Hai's assets, obligations, rights or operations without prior written consent from Tongrong WFOE, including but not limited to the amendment of the articles of association of Rong Hai. Rong Hai and its shareholders agree to accept and follow our corporate policies provided by Tongrong WFOE in connection with Rong Hai's daily operations, financial management and the employment and dismissal of Rong Hai's employees. Rong Hai agreed that it should seek guarantee from Tongrong WFOE first if any guarantee is needed for Rong Hai's performance of any contract or loan in the course of its business operation.

This operating agreement took effect upon execution and shall remain in full force and effective until Rong Hai's valid operation term expires. Either party of Tongrong WFOE and Rong Hai shall complete approval or registration procedures for the extension of its business term three months prior to the expiration of its business term, for the purpose of the maintenance of the effectiveness of this operating agreement.

Material terms of each of the VIE agreements with Wuge are described below. The VIE agreements with Wuge were terminated and the Company disposed Wuge as of September 28, 2022.

*Technical Consultation and Services Agreement.*

Pursuant to the technical consultation and services agreement between Wuge and Tongrong WFOE dated January 3, 2020, Tongrong WFOE has the exclusive right to provide consultation services to Wuge relating to Wuge's business, including but not limited to business consultation services, human resources development, and business development. Tongrong WFOE exclusively owns any intellectual property rights arising from the performance of this agreement. Tongrong WFOE has the right to determine the service fees based on Wuge's actual operation on a quarterly basis. This agreement will be effective as long as Wuge exists. Tongrong WFOE may terminate this agreement at any time by giving a 30 days' prior written notice to Wuge.

*Equity Pledge Agreement.*

Under the equity pledge agreement among Tongrong WFOE, Wuge and Wuge Shareholders dated January 3, 2020, Wuge Shareholders pledged all of their equity interests in Wuge to Tongrong WFOE to guarantee Wuge's performance of relevant obligations and indebtedness under the technical consultation and services agreement. In addition, Wuge Shareholders will complete the registration of the equity pledge under the agreement with the competent local authority. If Wuge breaches its obligation under the technical consultation and services agreement, Tongrong WFOE, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. This pledge will remain effective until all the guaranteed obligations are performed or the Wuge Shareholders cease to be shareholders of Wuge.

*Equity Option Agreement.*

Under the equity option agreement among Tongrong WFOE, Wuge and Wuge Shareholders dated January 3, 2020, each of Wuge Shareholders irrevocably granted to Tongrong WFOE or its designee an option to purchase at any time, to the extent permitted under PRC law, all or a portion of his equity interests in Wuge. Also, Tongrong WFOE or its designee has the right to acquire any and all of its assets of Wuge. Without Tongrong WFOE's prior written consent, Wuge's shareholders cannot transfer their equity interests in Wuge and Wuge cannot transfer its assets. The acquisition price for the shares or assets will be the minimum amount of consideration permitted under the PRC law at the time of the exercise of the option. This pledge will remain effective until all options have been exercised.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

*Voting Rights Proxy and Financial Support Agreement.*

Under the voting rights proxy and financial support agreement among Tongrong WFOE, Wuge and Wuge Shareholders dated January 3, 2020, each Wuge Shareholder irrevocably appointed Tongrong WFOE as its attorney-in-fact to exercise on such shareholder's behalf any and all rights that such shareholder has in respect of his equity interests in Wuge, including but not limited to the power to vote on its behalf on all matters of Wuge requiring shareholder approval in accordance with the articles of association of Wuge. The proxy agreement is for a term of 20 years and can be extended by Tongrong WFOE unilaterally by prior written notice to the other parties.

On January 11, 2021, Makesi WFOE entered into a series of assignment agreements (the "Assignment Agreements") with Tongrong WFOE, Wuge and Wuge Shareholders, pursuant to which Tongrong WFOE assign all its rights and obligations under the VIE Agreements to Makesi WFOE (the "Assignment"). The VIE Agreements and the Assignment Agreements grant Makesi WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Wuge, including absolute rights to control the management, operations, assets, property and revenue of Wuge. The Assignment does not have any impact on Company's consolidated financial statements.

Material terms of each of the VIE agreements with Highlight Media are described below:

*Technical Consultation and Services Agreement.*

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

*Equity Pledge Agreement.*

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

*Equity Option Agreement.*

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

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

*Voting Rights Proxy and Financial Support Agreement.*

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

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

As of the date of this report, the Company primary operations are focused on the Highlight Media business that is in enterprise brand management service. All prior energy and Wuge digital door signs business have been disposed. Substantially all of the Company's primary operations are conducted in the PRC.

**Note 2 – Summary of significant accounting policies**

<u>Basis of presentation</u>

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for information pursuant to the rules and regulations of the Securities Exchange Commission ("SEC").

<u>Principles of consolidation</u>

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

<u>Use of estimates and assumptions</u>

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company's consolidated financial statements include the useful lives of intangible assets, revenues, deferred revenues and plant and equipment, impairment of long-lived assets, collectability of receivables, inventory valuation allowance, and realization of deferred tax assets. Actual results could differ from these estimates.

<u>Foreign currency translation and transaction</u>

The reporting currency of the Company is the U.S. dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the People's Bank of China at the end of the period. The results of operations are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Translation adjustments included in accumulated other comprehensive income amounted to $179,383 and $225,857 as of December 31, 2022 and 2021, respectively. The balance sheet amounts, with the exception of shareholders' equity as of December 31, 2022 and 2021 were translated at 6.38 RMB and 6.90 RMB to $1.00, respectively. The shareholders' equity accounts were stated at their historical rate. The average translation rates applied to statement of income accounts for the years ended December 31, 2022 and 2021 were 6.73 RMB and 6.45 RMB, respectively. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

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

<u>Investments</u>

The Company purchases certain liquid short term investments such as money market funds and or other short term debt securities marketed by financial institutions. These investments are not insured against loss of principal. These investments are accounted for as financial instruments that are marked to fair market value at the end of each reporting period. For investments that are held to maturity debt instruments, which have short maturities, and limited risk profiles, amortized cost may be the best approximation of their fair value and used for such investments.

<u>Accounts receivable, net</u>

Accounts receivable include trade accounts due from customers. An allowance for doubtful accounts may be established and recorded based on management's assessment of potential losses based on the credit history and relationships with the customers. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

<u>Inventories</u>

Inventories are comprised of raw materials and work in progress and are stated at the lower of cost or net realizable value using the weighted average method in Wuge. Management reviews inventories for obsolescence and cost in excess of net realizable value at least annually and recognize an impairment charge against the inventory when the carrying value exceeds net realizable value. As of December 31, 2022 and 2021, no obsolescence and cost in excess of net realizable value were recognized.

<u>Prepayments</u>

Prepayments are funds deposited or advanced to outside vendors for future inventory or services to be received. As a standard practice in China, many of the Company's vendors require a partial or full payment prior to production and shipment of finished goods This amount is refundable and bears no interest. The Company has legally binding contracts with its vendors, which require any outstanding prepayments to be returned to the Company when the contract ends.

<u>Plant and equipment</u>

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

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| | | |
|:---|:---|:---|
|  | **Useful Life** | **Estimated <br> Residual <br> Value** |
| Office equipment and furniture | 5 years | 5% |
| Automobile | 5 years | 5% |

---

The cost and related accumulated depreciation and amortization of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income (loss) and comprehensive loss. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation and amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

<u>Intangible assets</u>

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

---

| | |
|:---|:---|
|  | **Useful Life** |
| Patents | 10 - 20 years |
| Software | 5 years |

---

<u>Lease</u>

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

The Company recognizes lease liabilities and corresponding right-of-use assets on the balance sheet for leases. Operating lease right-of-use assets are included in non-current prepayments, receivables and other assets and operating lease liabilities are included in current accrued expenses, accounts payable and other liabilities and other non-current liabilities on the consolidated balance sheets. Operating lease right-of-use assets and operating lease liabilities are initially recognized based on the present value of future lease payments at lease commencement. The operating lease right-of-use asset also includes any lease payments made prior to lease commencement and the initial direct costs incurred by the lessee and is recorded net of any lease incentives received. As the interest rates implicit in most of the leases are not readily determinable, the Company uses the incremental borrowing rates based on the information available at lease commencement to determine the present value of the future lease payments. Operating lease expenses are recognized on a straight-line basis over the term of the lease.

<u>Goodwill</u>

Goodwill represents the excess of the consideration paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred. Goodwill is carried at cost less accumulated impairment losses. In accordance with ASC 350, the Company may first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. In the qualitative assessment, the Company considers factors such as macroeconomic conditions, industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations, business plans and strategies of the reporting unit, including consideration of the impact of the COVID-19 pandemic. Based on the qualitative assessment, if it is more likely than not that the fair value of a reporting unit is less than the carrying amount, the quantitative impairment test is performed. The Company may also bypass the qualitative assessment and proceed directly to perform the quantitative impairment test. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, the amount by which the carrying amount exceeds the reporting unit's fair value is recognized as impairment. Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, allocation of assets, liabilities and goodwill to reporting units, and determination of the fair value of each reporting unit.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

<u>Impairment for long-lived assets</u>

Long-lived assets, including plant, equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values.

<u>Fair value measurement</u> 

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash, short term held to maturity investments, notes receivable, accounts receivable, other receivables, prepayments, accounts payable, other payables and accrued liabilities, customer deposits, short term loans and taxes payable to approximate their fair values because of their short term nature.

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.

<u>Customer deposits</u>

Highlight Media typically receives customer deposits for services to be rendered from its customers. As Highlight Media delivers the services, it will recognize these deposits to results of operations in accordance to its revenue recognition policy.

<u>Revenue recognition</u>

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

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

The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition except its retainage revenues.

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

Revenues from the goods are recognized at a point in time when legal title and control over the sign is transferred to the customer. Management has determined that for the sales of the goods there is a single performance obligation that is met when the aforementioned control is transferred. Typically, customers make payment for the product in advance; the Company will record the payment as contract liabilities under the liability account customer deposits until the Company delivers the product by transferring control. Such revenues are recognized at a point in time after all performance obligations are satisfied under the new five-step model.

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

The Company's disaggregate revenue streams are summarized as follows:

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| | | |
|:---|:---|:---|
|  | **For the year ended <br> December 31,** | **For the year ended <br> December 31,** |
|  | **2022** | **2021** |
| Revenues –Enterprise brand management services | $153304 | $- |
| Total revenues | $153304 | $- |

---

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

<u>Research and Development ("R&D") Expenses</u>

Research and development expenses include salaries and other compensation-related expenses paid to the Company's research and product development personnel while they are working on R&D projects, as well as raw materials used for the R&D projects. R&D expenses incurred by the Company are included in the selling, general and administrative expenses.

<u>Income taxes</u>

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

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

An uncertain tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company incurred no such penalties and interest for the year ended December 31, 2022 and 2021. As of December 31, 2022, the Company's PRC tax returns filed for 2019, 2020 and 2021 remain subject to examination by any applicable tax authorities.

<u>Earnings per share</u>

Basic earnings per share are computed by dividing income available to common shareholders of the Company by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares. 9,079,348 and 10,500,000 of outstanding warrants which is equivalent to convertible of 4,539,674 and 5,250,000 common shares were excluded from the diluted earnings per share calculation due to its antidilutive effect for the nine months ended December 31, 2022 and 2021, respectively. 824,000 of outstanding options were excluded from the diluted earnings per share calculation due to its antidilutive effect for the year ended December 31, 2022 and 2021.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

<u>Recently issued accounting pronouncements</u>

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

In November 2021, the FASB issued ASU 2021-10, "Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance", which provides guidance on the disclosure of transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. The new guidance is required to be applied either prospectively to all transactions within the scope of ASU 2021-10 that are reflected in financial statements at the date of adoption and new transactions that are entered into after the date of adoption or retrospectively to those transactions. This guidance is effective for the Company for the year ending March 31, 2023. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on the financial position, results of operations and cash flows.

In June 2022, the FASB issued ASU 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions", which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. This guidance also requires certain disclosures for equity securities subject to contractual sale restrictions. The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This guidance is effective for the Company for the year ending March 31, 2025 and interim reporting periods during the year ending March 31, 2025. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on the financial position, results of operations and cash flows.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company's unaudited condensed consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note 3 – Business combination and restructuring** 

*<u>Highlight Media</u>*

On September 16, 2022, the Company entered into a share purchase agreement with Shanghai Highlight Media Co., Ltd. ("Highlight Media") and all the shareholders of Highlight Media ("Highlight Media Shareholders"). Pursuant to the share purchase agreement, the Company agreed to issue an aggregate of 9,000,000 shares of CCNC's common stock to the Highlight Media Shareholders, in exchange for Highlight Media Shareholders' agreement to enter into, and their agreement to cause Highlight Media to enter into, certain VIE agreements ("VIE Agreements") with Makesi WFOE the Company's indirectly owned subsidiary, through which Makesi WFOE shall have the right to control, manage and operate Highlight Media in return for a service fee equal to 100% of Highlight Media's net income (the "Acquisition"). On September 16, 2022 Makesi WFOE entered into a series of VIE Agreements with Highlight Media and the Highlight Media Shareholders. The VIE Agreements are designed to provide Makesi WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Highlight Media, including absolute rights to control the management, operations, assets, property and revenue of Highlight Media. Highlight Media, founded in 2016, is an integrated marketing service agency, focusing on enterprise brand management, crisis public relations, intelligent public opinion monitoring, media PR, financial and economic we-media operation, digital face application, large-scale exhibition services and other businesses. It is committed to becoming a modern science and technology media organization that fully empowers the development of customer enterprises in the era of artificial intelligence and big data. The Acquisition closed on September 29, 2022.

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

The Company's acquisition of Highlight Media was accounted for as a business combination in accordance with ASC 805. The Company has allocated the purchase price of Highlight Media based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, plant and equipment, and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Highlight Media based on a valuation performed by an independent valuation firm engaged by the Company:

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| | |
|:---|:---|
| Total consideration at fair value | $2250000 |

---

---

| | |
|:---|:---|
|  | **Fair <br> Value** |
| Cash | $47498 |
| Other current assets | 107828 |
| Plant and equipment | 1205 |
| Other noncurrent assets | - |
| Goodwill | 2121947 |
| Total asset | 2278478 |
| Accounts payable | 14170 |
| Taxes Payable | 363 |
| Other Payable | 13945 |
| Total liabilities | 28478 |
| Net asset acquired | $2250000 |

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Approximately $2.1 million of goodwill arising from the acquisition consists largely of synergies expected from combining the operations of the Company and Highlight Media. None of the goodwill is expected to be deductible for income tax purposes.

**Note 4 – Variable interest entity**

On November 30, 2018, Tongrong WFOE entered into Contractual Arrangements with Rong Hai and its shareholders upon executing of the "Purchase Agreement". The significant terms of these Contractual Arrangements are summarized in "Note 1 - Nature of business and organization" above. As a result, the Company classifies Rong Hai as VIE.

On January 3, 2020, Tongrong WFOE entered into Contractual Arrangements with Wuge and its shareholders upon executing of the "Purchase Agreement". The significant terms of these Contractual Arrangements are summarized in "Note 1 - Nature of business and organization" above. As a result, the Company classifies Wuge as VIE.

On January 11, 2021, Makesi WFOE entered into a series of assignment agreements (the "Assignment Agreements") with Tongrong WFOE, Wuge and Wuge Shareholders, pursuant to which Tongrong WFOE assign all its rights and obligations under the VIE Agreements to Makesi WFOE (the "Assignment"). The VIE Agreements and the Assignment Agreements grant Makesi WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Wuge, including absolute rights to control the management, operations, assets, property and revenue of Wuge. The Assignment does not have any impact on Company's consolidated financial statements.

On March 30, 2021, the Company entered into a share purchase agreement with a buyer unaffiliated with the Company (the "Buyer"), and Qihai Wang, former director of the Company (the "Payee"). Pursuant to the agreement, the Company agreed to sell and the Buyer agreed to purchase all the issued and outstanding ordinary shares (the "Tongrong Shares") of Tongrong WFOE. The Payee agreed to be responsible for the payment of the purchase price on behalf of Buyer. The purchase price for the Tongrong Shares shall be $2,464,411, payable in the form of cancelling 426,369 shares of common stock of the Company owned by the Payee (the "CCNC Shares"). The CCNC Shares are valued at $5.78 per share, based on the average closing price of the Company's common stock during the 30 trading days immediately prior to the date of the agreement from February 12, 2021 to March 26, 2021. On March 31, 2021, the Company closed the sale of the Tongrong Shares and caused the CCNC Shares to be cancelled. Tongrong WFOE contractually controls Jaingsu Rong Hai Electric Power Fuel Co., Ltd. ("Rong Hai"), a variable interest entity of the Company. The disposition of Tongrong WFOE included disposition of Rong Hai.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

On September 16, 2022, Makesi WFOE entered into Contractual Arrangements with Highlight Media and its shareholders upon executing of the "Purchase Agreement". The significant terms of these Contractual Arrangements are summarized in "Note 1 - Nature of business and organization" above. As a result, the Company classifies Rong Hai as VIE.

In January, 2021, Tongrong Technology (Jiangsu) Co., Ltd., a then indirect subsidiary of the Company ("Tongrong WFOE"), Sichuan Wuge Network Games Co., Ltd. ("Wuge"), and shareholders of Wuge (the "Wuge Shareholders") entered into a share purchase agreement, pursuant to which the Company issued a total of 4,000,000 shares of common stock of the Company (the "Shares") to the Wuge Shareholders in exchange for Tongrong WFOE, Wuge and the Wuge Shareholders entering into certain Technical Consultation and Services Agreement., Equity Pledge Agreement, Equity Option Agreement, Voting Rights Proxy and Financial Support Agreement, which was assigned by Tongrong WFOE to Makesi IoT Technology (Shanghai) Co., Ltd., an indirect subsidiary of the Company ("Makesi WFOE") in January 2021 (such agreements, as assigned, the "VIE Agreements") . The VIE Agreements established a "Variable Interest Entity" (VIE) structure, and pursuant to which the Company treated Wuge as a consolidated affiliated entity and consolidated the financial results and balance sheet of Wuge in the Company's consolidated financial statements under U.S. GAAP.

On September 28, 2022, Makesi WFOE entered into a termination agreement (the "Termination Agreement") with Wuge and the Wuge Shareholders to terminate the VIE Agreements and to cancel the Shares, based on the average closing price of $0.237 per share of the Company during the 30 trading days immediately prior to the date of the Termination Agreement. As a result of such termination, the Company no longer treats Wuge as a consolidated affiliated entity or consolidates the financial results and balance sheet of Wuge in the Company's consolidated financial statements under U.S. GAAP.

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

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

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

(1) The power to direct activities at Highlight Media that most significantly impact such entity's economic performance, and

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

Accordingly, the accounts of Highlight Media are consolidated in the accompanying financial statements pursuant to ASC 810-10, Consolidation. In addition, Its financial positions and results of operations are included in the Company's consolidated financial statements beginning on December 31, 2022.

The carrying amount of the VIE's assets and liabilities are as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31,**<br>**2022** | **December 31,**<br>**2021** |
| Cash and cash equivalents | 215880 | 14385549 |
| Accounts receivable, net | 194520 | - |
| Other receivables, net | 78293 | 1600240 |
| Other receivable - related party | - | 610948 |
| Inventories | - | 3714 |
| Prepayments | - | 657858 |
| &nbsp;&nbsp;&nbsp;Total current assets | $488693 | $17258309 |
| &nbsp;&nbsp;&nbsp;Property, plants and equipment | 502 | 284151 |
| &nbsp;&nbsp;&nbsp;Other noncurrent assets | - | 1825048 |
| &nbsp;&nbsp;&nbsp;Goodwill | 2190485 | 6590339 |
| Total assets | 2679680 | 25957847 |
| &nbsp;&nbsp;&nbsp;Current liabilities | 333784 | 15825043 |
| &nbsp;&nbsp;&nbsp;Non-current liabilities | - | 8738 |
| Total liabilities | 333784 | 15833781 |
| Net assets | $2345896 | $10124066 |

---

---

| | | |
|:---|:---|:---|
|  | **December 31,**<br>**2022** | **December 31,**<br>**2021** |
| &nbsp;&nbsp;&nbsp;Accounts payable | $116105 | $3202771 |
| &nbsp;&nbsp;&nbsp;Other payables and accrued liabilities | 13469 | 1622689 |
| &nbsp;&nbsp;&nbsp;Other payables – related party | 195732 | 2841242 |
| &nbsp;&nbsp;&nbsp;Tax payables | 8478 | 973748 |
| &nbsp;&nbsp;&nbsp;Customer Advances | - | 7171255 |
| &nbsp;&nbsp;&nbsp;Lease liabilities | - | 13338 |
| Total current liabilities | 333784 | 15825043 |
| Lease liabilities - noncurrent | - | 8738 |
| Total liabilities | $333784 | $15833781 |

---

The summarized operating results of the VIE's are as follows:

---

| | |
|:---|:---|
|  | **For the<br> Year ended<br> December 31,**<br>**2022** |
| Operating revenues | $153304 |
| Gross profit | 55534 |
| Income from operations | 118489 |
| Net income | $117406 |

---

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note 5 – Accounts receivable** 

Accounts receivable consist of the following:

---

| | | |
|:---|:---|:---|
|  | **December 31, <br> 2022** | **December 31, <br> 2021** |
| Accounts receivable | $197640 | $&nbsp;&nbsp;&nbsp;&nbsp; - |
| Less: Allowance for doubtful accounts | (3120) | - |
| Total accounts receivable, net | $194520 | $- |

---

Movement of allowance for doubtful accounts is as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31, <br> 2022** | **December 31, <br> 2021** |
| Beginning balance | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; - |
| &nbsp;&nbsp;&nbsp;Addition | (3120) | - |
| Ending balance | $(3120) | $- |

---

**Note 6 – Other receivables**

---

| | | |
|:---|:---|:---|
|  | **December 31, <br> 2022** | **December 31, <br> 2021** |
| Receivable from disposal of Wuge | $948000 | $- |
| Others | 78293 | 728361 |
| Total other receivables, net | $1026293 | $728361 |

---

The balance of $948,000 on December 31, 2022 is the consideration required to be received upon disposal of Wuge, the shares that have cancelled their corresponding value on March 9, 2023.

**Note 7 – Inventories**

Inventories consist of the following:

---

| | | |
|:---|:---|:---|
|  | **December 31, <br> 2022** | **December 31, <br> 2021** |
| Finished goods | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- | $3714 |
| Total inventories | $- | $3714 |

---

**Note 8 – Plant and equipment, net**

Plant and equipment consist of the following:

---

| | | |
|:---|:---|:---|
|  | **December 31, <br> 2022** | **December 31, <br> 2021** |
| Office equipment and furniture | 10039 | 124248 |
| Automobile | - | 219895 |
| &nbsp;&nbsp;&nbsp;Subtotal | 10039 | 344143 |
| Less: accumulated depreciation | (9537) | (60247) |
| Total | $502 | $283896 |

---

Depreciation expense for the year ended December 31, 2022 and 2021 amounted to $718 and $59,089, respectively.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note 9 – Intangible assets, net**

Intangible assets consist of the following:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2022** | **December 31,<br> 2021** |
| Development of technology | $&nbsp;&nbsp;&nbsp;&nbsp; - | $784227 |
| Software | - | 612 |
| Less: accumulated amortization | - | (784584) |
| Net intangible assets | $- | $255 |

---

Amortization expense for the year ended December 31, 2022 and 2021 amounted to nil and $1,240,281, respectively.

**Note 10 – Goodwill**

The changes in the carrying amount of goodwill by business units are as follows**:** 

---

| | | | |
|:---|:---|:---|:---|
|  | **Highlight Media** | **Wuge** | **Total** |
| Balance as of December 31, 2021 | $- | $6590339 | $6590339 |
| Goodwill acquired through acquisition | 2190485 |  | 2190485 |
| Goodwill impairments |  | (6590339) | (6590339) |
| Balance as of December 31, 2022 | $2190485 | $- | $2190485 |

---

**Note 11 – Related party balances and transactions**

<u>Related party balances</u>

a. Other receivable – related party:

---

| | | | |
|:---|:---|:---|:---|
| **Name of related party** | **Relationship** | **December 31,<br> 2022** | **December 31,<br> 2021** |
| Chengdu Yuan Code Chain Technology Co. Ltd | A company controlled by former shareholder of the Company | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- | $513387 |
| Marchain (Shanghai) Network Technology Co., LTD | A company controlled by shareholder of the Company | - | 78423 |
| Chenghua District Code To Code To Commerce And Trade Department | A company controlled by employee of the Company | - | 19138 |
| Total |  | - | 610948 |

---

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

The Company advanced funds to the related party for technical services.

b. Other payables – related parties:

---

| | | | |
|:---|:---|:---|:---|
| **Name of related party** | **Relationship** | **December 31,<br> 2022** | **December 31,<br> 2020** |
| Chuanliu Ni | Chief Executive Officer and director of a former subsidiary | $- | $325907 |
| Zhong Hui Holding Limited | Shareholder of the Company |  | 140500 |
| Shanghai Highlight Asset Management Co. LTD | A company in which shareholder hold shares | 195732 | - |
| Total |  | $195732 | $466407 |

---

The above payables represent interest free loans and advances. These loans and advances are unsecured and due on demand.

**Note 12 – Taxes**

<u>Income tax</u>

*United States*

 

GDC was organized in the state of Delaware in April 2015 and re- year ended December 31, 2022 amounted to approximately $21.2 million. As of December 31, 2022, GDC's net operating loss carry forward for United States income taxes was approximately $4.6 million. The net operating loss carry forwards are available to reduce future years' taxable income through year 2038. Management believes that the realization of the benefits from these losses appears uncertain due to the Company's operating history and continued losses in the United States. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. Management reviews this valuation allowance periodically and makes changes accordingly.

On December 22, 2017, the "Tax Cuts and Jobs Act" ("The 2017 Tax Act") was enacted in the United States. Under the provisions of the Act, the U.S. corporate tax rate decreased from 34% to 21%. The 2017 Tax Act imposed a global intangible low-taxed income tax ("GILTI"), which is a new tax on certain off-shore earnings at an effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial offset for foreign tax credits. The Company determined that there are no impact of GILTI for the nine months ended December 31, 2022 and 2021, which the Company believes that it will be imposed a minimum tax rate of 10.5% and to the extent foreign tax credits are available to reduce its US corporate tax, which may result in no additional US federal income tax being due.

*Cayman Islands*

China Sunlong is incorporated in the Cayman Islands and are not subject to tax on income or capital gains under current Cayman Islands law. In addition, upon payments of dividends by China Sunlong to its shareholders, no Cayman Islands withholding tax will be imposed.

 

*British Virgin Islands*

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

*Hong Kong*

TMSR HK and Highlight HK are incorporated in Hong Kong and are subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax law, TMSR HK and Highlight HK are exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

*PRC*

Makesi WFOE, Highlight WFOE and Highlight Media are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the "EIT Laws"), Chinese enterprises are subject to income tax at a rate of 25% after appropriate tax adjustments.

<u>Deferred tax assets</u> 

Bad debt allowances must be approved by the Chinese tax authority prior to being deducted as an expense item on the tax return.

Significant components of deferred tax assets were as follows:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2022** | **December 31,<br> 2021** |
| Net operating losses carried forward – U.S. | $4574581 | $5191512 |
| Valuation allowance | (4574581) | (5191512) |
| Deferred tax assets, net | $- | $- |

---

<u>Value added tax</u>

Enterprises or individuals who sell commodities, engage in repair and maintenance or import and export goods in the PRC are subject to a value added tax in accordance with PRC laws. The value added tax ("VAT") standard rates are 6% to 17% of the gross sales price and changed to 6% to 16% of gross sales starting in May 2018. The VAT standard rates changed to 6% to 13% of the gross sales prices starting in April 2019. A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company's finished products can be used to offset the VAT due on sales of the finished products and services.

Taxes payable consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2022** | **December 31,<br> 2021** |
| VAT taxes payable | $8478 | $973748 |
| Income taxes payable | - | 1272670 |
| Total | $8478 | $2246418 |

---

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note 13 – Concentration of risk**

<u>Credit risk</u>

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. As of December 31, 2022 and 2021, $215,880 and $14,385,549 and were deposited with various financial institutions located in the PRC, respectively. As of December 31, 2022 and 2021, $173,228 and $202,781 were deposited with one financial institution located in the U.S., respectively. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.

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.

**Note 14 – Equity**

<u>Restricted net assets</u>

The Company's ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by Makesi WFOE and Highlight WFOE only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the accompanying unaudited condensed consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of Makesi WFOE and Highlight WFOE.

Makesi WFOE, Highlight WFOE and Highlight Media are required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, Makesi WFOE and Highlight WFOE may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at its discretion. Highlight Media may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by State Administration of Foreign Exchange.

As a result of the foregoing restrictions, Makesi WFOE, Highlight WFOE and Highlight Media are restricted in their ability to transfer their net assets to the Company. Foreign exchange and other regulation in the PRC may further restrict Makesi WFOE, Highlight WFOE and Highlight Media from transferring funds to TMSR HK in the form of dividends, loans and advances. As of December 31, 2022 and 2021, amounts restricted are the net assets of Makesi WFOE, Highlight WFOE and Highlight Media which amounted to $492,315 and $4,519,455, respectively.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

<u>Common stock</u>

On February 22, 2021, pursuant to a securities purchase agreement (the "Purchase Agreement") with two institutional investors, the Company , closed (a) a registered direct offering (the "Registered Direct Offering") for the sale of (i) 4,166,666 shares of common stock, par value $0.0001 of the Company (the "Shares") and (ii) registered investor warrants, with a term of five years, exercisable immediately upon issuance, to purchase an aggregate of up to 1,639,362 shares of common stock (the "Registered Investor Warrant Shares") at an exercise price of $6.72 per share, subject to adjustments thereunder, including a reduction in the exercise price, in the event of a subsequent offering at a price less than the then current exercise price, to the same price as the price in such offering (a "Price Protection Adjustment") (the "Registered Investor Warrants"), and (b) a concurrent private placement (the "Private Placement" and collectively with the Registered Direct Offering, the "Offering") for the sale of unregistered investor warrants, with a term of five and one-half years, first exercisable on the date that is the earlier of (i) six months after the date of issuance or (ii) the date on which the Company obtains stockholder approval approving the sale of all of the securities offered and sold under the Purchase Agreement (the "Stockholder Approval") to purchase an aggregate of up to 2,527,304 shares of common stock (the "Unregistered Investor Warrant Shares") at an exercise price of $6.72 per share, subject to adjustments thereunder, including (x) a Price Protection Adjustment and (y) in the event the exercise price is more than $6.10, a reduction of the exercise price to $6.10, upon obtaining the Stockholder Approval (the "Unregistered Investor Warrants"). The Shares, the Registered Investor Warrants, the Unregistered Investor Warrants, the Registered Investor Warrant Shares and the Unregistered Investor Warrant Shares are collectively referred to as the "Securities." The Company received gross proceeds from the sale of the Securities of $24,999,996, before deducting placement agent fees and other Offering expenses. The Company intends to use the net proceeds from this Offering for working capital and general business purposes.

On February 23, 2021, the Company entered into an asset purchase agreement with Sichuan RiZhanYun Jisuan Co., Ltd. (the "Seller"), which was amended and restated on April 16, 2021, and further amended on May 28, 2021. Pursuant to the asset purchase agreement, the Company purchased a total of 10,000 Bitcoin mining machines (the "Assets") for a total purchase price of RMB 40,000,000 or US$6,160,000 based on the exchange rate as of April 8, 2021 (the "Purchase Price"), payable in the form of 1,587,800 shares of common stock of the Company, valued at US$3.88 per share, which is the closing bid price of the common stock of the Company on the Nasdaq Stock Market on April 8, 2021. The Seller shall cause revenue and any other source of income from the operation of the Assets to be paid to the Company, payable in cryptocurrency to be deposited into a cryptocurrency wallet held by the Company on a daily basis. The Company shall issue to the Seller or its designees RMB 5,000,000 or US$770,000 worth of common stock of the Company (the "Bonus Shares") if the Assets generate an average net profit per day/10,000 machines (the "Daily Profit") on behalf of the Company during the one-year period from March 19, 2021 to March 19, 2022 (the "Valuation Period") equals to RMB 200,000 or US$30,800 and if the Assets generate an average net profit per month/10,000 machines (the "Monthly Profit") on behalf of the Company during the Valuation Period equals to RMB 6,000,000 or US$924,000. If the Daily Profit is more than RMB 200,000 or US$30,800 and the Monthly Profit is more than RMB 6,000,000 or US$924,000, the Company shall issue to the Seller or its designees additional shares of common stock in proportion to the amount that is in excess. If the Daily Profit is less than RMB 200,000 or US$30,800 or the Monthly Profit is less than RMB 6,000,000 or US$924,000, the Company shall not issue to the Seller or its designees any Bonus Shares and such month is deemed a "Re-evaluated Month". At the end of the Valuation Period, the Monthly Profit of such Re-evaluated Month(s) shall be aggregated (the "Aggregate Profit"), and the Company shall issue RMB5,000,000 or US$770,000 worth of common stock of the Company for every RMB6,000,000 or US$924,000 in Aggregate Profit on a pro rata basis. Such Daily Profit and Monthly Profit shall be determined on a monthly basis on the first day of the next month. Such Bonus Shares and additional shares, when applicable, shall be issued on the fifteenth day of the next month. For any month that has 28 days or 31 days, the Monthly Profit is calculated based on the actual number of days in the month. Notwithstanding the foregoing, no share pursuant to this Agreement shall be issued earlier than May 24, 2021 in any event. The total number of shares of common stock, including the Bonus Shares, issuable to the Seller or its designees pursuant to the Agreement shall in no event be more than 19.99% of the total shares issued and outstanding of Company as of the February 23, 2021, the date of the asset purchase agreement.

On June 1, 2021, the Company issued to a designee of the Seller 2,513,294 shares of common stock, consisted of (i) the Purchase Price in the form of 1,587,800 shares of common stock and (ii) 925,494 Bonus Shares, valued at US$2.51 per share, which is the closing bid price of the common stock of the Company on the Nasdaq Stock Market on May 12, 2021, for meeting and exceeding the Daily Profit and Monthly Profit benchmark.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

Because the Assets were never delivered to the Company and the Company has not received and is not able to accept cryptocurrency from the operation of the Assets, the Company and the Seller agreed to rescind the Agreement and cancel the Shares on September 26, 2022.

On July 28, 2021, the Company entered into an asset purchase agreement with certain seller(the "Seller") pursuant to which the Company agreed to purchase from the Seller digital currency mining machines for a total purchase price of RMB 106,388,672.43, or US$16,442,109.95 (based on the exchange rate between RMB and USD of 1: 6.4705 as of July 8, 2021), payable in the form of 7,647,493 shares of common stock of the Company("CCNC Shares"). The CCNC Shares are valued at $2.15 per share. The Company plans to use the assets to further develop its digital currency mining operation. On February 23, 2022, the Company entered into a termination agreement (the "Termination Agreement) with the Seller to terminate the Asset Purchase Agreement and forfeit the transaction. The parties agreed that the CCNC Shares shall be cancelled within 15 business days from the date of the Termination Agreement.

On February 23, 2022, the Company entered into a termination agreement (the "Termination Agreement) with the Seller to terminate the Asset Purchase Agreement and forfeit the transaction. The parties agreed that the CCNC Shares shall be cancelled within 15 business days from the date of the Termination Agreement.

On April 14, 2022, the Company entered into a Share Purchase Agreement ("SPA") with Shanghai Yuanma Food and Beverage Management Co., Ltd., a PRC company ("Yuan Ma"), and all the shareholders of Yuan Ma ("Yuanma Shareholders"). Yuanma Shareholders are Wei Xu, the Chief Executive Officer and Chairman of the Board of the Company, and Jiangsu Lingkong Network Joint Stock Co., Ltd., which is controlled by Wei Xu. Pursuant to the SPA, the Company agreed to issue an aggregate of 7,680,000 shares of common stock of the Company, valued at $1.00 per share, to the Yuanma Shareholders, in exchange for Yuanma Shareholders' agreement to enter into and to cause Yuan Ma to enter into certain agreements ("VIE Agreements") with Makesi IoT Technology (Shanghai) Co., Ltd. ("Makesi WFOE"), the Company's indirectly owned subsidiary, to establish a VIE (variable interest entity) structure (the "Acquisition"). On June 13, 2022, the Company held a special meeting of stockholders and approved the issuance of the 7,680,000 shares of common stock to Wei Xu. On June 21, 2022, pursuant to the SPA, Makesi WFOE entered into a series of VIE Agreements with Yuan Ma and Yuanma Shareholders, and the 7,680,000 shares of common stock were issued to Wei Xu. The transaction contemplated in the SPA was completed.

On September 16, 2022, the Company entered into a Share Purchase Agreement ("SPA") with Shanghai Highlight Media Co., Ltd., a PRC company ("Highlight Media"), and all the shareholders of Highlight Media ("Highlight Media Shareholders").

Pursuant to the SPA, the Company agreed to issue an aggregate of 9,000,000 shares of common stock of the Company (the "Shares"), valued at $0.25 per share, to the Highlight Media Shareholders, in exchange for Highlight Media's and Highlight Media Shareholders' agreement to enter into certain agreements (the "VIE Agreements") with Makesi IoT Technology (Shanghai) Co., Ltd. ("WFOE"), the Company's indirectly owned subsidiary, to establish a VIE (variable interest entity) structure (the "Acquisition"). A "Variable Interest Entity" does not describe a legal relationship; it is an accounting concept. Under U.S. Generally Accepted Accounting Principles (U.S. GAAP), if through contractual arrangements, Entity A will absorb the losses or receive potentially significant benefits from the operations of Entity B, then the financial results and balance sheet of Entity B should be consolidated with the financial results and balance sheet in Entity A's consolidated financial statements. We have evaluated the guidance in FASB ASC 810 and determined that, after the VIE Agreements are signed, WFOE will be the primary beneficiary of Highlight Media for accounting purposes, because, pursuant to the VIE Agreements, once signed, Highlight Media shall pay service fees to WFOE in the amount of 100% of Highlight Media's after-tax net income, while WFOE shall be obligated to absorb all of losses of Highlight Media. Accordingly, under U.S. GAAP, WFOE will treat Highlight Media as a consolidated affiliated entity and will consolidate the financial results and balance sheet of Highlight Media in the consolidated financial statements under U.S. GAAP.

On September 29, 2022. the Shares were issued to the Highlight Media Shareholders. The Acquisition was completed.

On November 4, 2022, the Company filed a Certificate of Amendment to the Articles of Incorporation (the "Certificate of Amendment") with the Nevada Secretary of State to effect a reverse stock split of the outstanding shares of common stock, par value $0.0001 per shares, of the Company at a ratio of one-for-thirty (30), which became effective at 12:01 a.m. on November 9, 2022 (the "Reverse Stock Split"). Upon effectiveness of the Reverse Stock Split, every thirty (30) outstanding shares of common stock were combined into and automatically become one share of common stock. No fractional shares will be issued in connection with the Reverse Stock Split and all such fractional interests will be rounded up to the nearest whole number of shares of common stock. The authorized shares prior to and following the Reverse Stock Split will remain the same at 200,000,000 shares of common stock, par value $0.0001 per shares, and 20,000,000 shares of preferred stock, par value $0.0001 per shares. The Reverse Stock Split does not alter the par value of the Company's common stock or modify any voting rights or other terms of the common stock.

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

<u>Warrants and options</u>

On July 29, 2015, the Company sold 10,000,000 units at a purchase price of $5.00 per unit ("Public Units") in its initial public offering. Each Public Unit consists of one share of the Company's common stock, $0.0001 par value, and one warrant. Each warrant will entitle the holder to purchase one-half of one share of common stock at an exercise price of $2.88 per half share ($5.75 per whole share). Warrants may be exercised only for a whole number of shares of common stock. No fractional shares will be issued upon exercise of the warrants. The warrants will become exercisable on 30 days after the consummation of its initial Business Combination with China Sunlong on February 6, 2018. The warrants will expire February 5, 2023. The warrants will be redeemable by the Company at a price of $0.01 per warrant upon 30 days prior written notice after the warrants become exercisable, only in the event that the last sale price of the common stock equals or exceeds $12.00 per share for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which notice of redemption is given.

The sponsor of the Company purchased, simultaneously with the closing of the Public Offering on July 29, 2015, 500,000 units at $5.00 per unit in a private placement for an aggregate price of $2,500,000. Each unit purchased is substantially identical to the units sold in the Public Offering.

The Company sold to the underwriter (and/or its designees), for $100, as additional compensation, an option to purchase up to a total of 800,000 units exercisable at $5.00 per unit (or an aggregate exercise price of $4,000,000) upon the closing of the Public Offering. Since the option is not exercisable until the earliest on the closing the initial Business Combination, the option will effectively represent the right to purchase up to 800,000 shares of common stock and 800,000 warrants to purchase 400,000 shares at $5.75 per full share for an aggregate maximum amount of $6,300,000. The units issuable upon exercise of this option are identical to those issued in the Public Offering.

In July 2016, the board of directors of the Company appointed two new directors. In August 2016, the sponsor of the Company granted an option to each of the two new directors to acquire 12,000 shares of common stock at a price of $4.90 per share vested immediately and exercisable commencing six months after closing of the initial Business Combination and expiring five years from the closing of the initial Business Combination.

The aforementioned warrants and options are deemed to be effective on February 6, 2018, the date of the consummation of its initial business combination with China Sunlong, as the Company was deemed to be the accounting acquiree in the transaction and the transaction was treated as a recapitalization of China Sunlong.

After the 1-for-30 reverse stock split effective on November 9, 2022, all options, warrants and other convertible securities of the Company outstanding immediately prior to the reverse stock split were adjusted by dividing the number of shares of common stock into which the options, warrants and other convertible securities are exercisable or convertible by thirty (30) and multiplying the exercise or conversion price thereof by thirty (30), all in accordance with the terms of the plans, agreements or arrangements governing such options, warrants and other convertible securities and subject to rounding to the nearest whole share.

The summary of warrant activity is as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
|  |<br>**Warrants**<br>**Outstanding** | **Exercisable<br> Into**<br>**Number of**<br>**Shares** | **Weighted<br> Average**<br>**Exercise**<br>**Price** | **Average<br> Remaining**<br>**Contractual**<br>**Life** |
| December 31, 2021 | 4539674 | 151323 | $172.5 | 2.13 |
| &nbsp;&nbsp;&nbsp;Granted/Acquired | - | - | $- |  |
| &nbsp;&nbsp;&nbsp;Forfeited | - | - | $- |  |
| &nbsp;&nbsp;&nbsp;Exercised | - | - | - | - |
| December 31, 2022 | 4539674 | 151323 | $172.5 | 0.10 |

---

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

The summary of option activity is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  |<br>**Options**<br>**Outstanding** | **Exercisable<br> Into**<br>**Number of**<br>**Shares** | **Weighted<br> Average**<br>**Exercise**<br>**Price** | **Average<br> Remaining**<br>**Contractual**<br>**Life** |
| December 31, 2021 | 824000 | 27467 | $150.00 | 2.13 |
| &nbsp;&nbsp;&nbsp;Granted/Acquired | - | - | $- | - |
| &nbsp;&nbsp;&nbsp;Forfeited | - | - | $- | - |
| &nbsp;&nbsp;&nbsp;Exercised | - | - | - | - |
| December 31, 2022 | 824000 | 27467 | $150.00 | 0.10 |

---

**Note 15 – Commitments and contingencies**

<u>Contingencies</u>

From time to time, the Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity.

**Note 16 – Segment reporting**

The Company follows ASC 280, Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance. The Company's chief operating decision maker evaluates performance and determines resource allocations based on a number of factors, the primary measure being income from operations.

The Company's remain business segment and operations is Highlight Media. The Company's consolidated results of operations and consolidated financial position from continuing operations are almost all attributable to Highlight Media; accordingly, management believes that the consolidated balance sheets and statement of operations provide the relevant information to assess Highlight Media's performance.

The following represents assets by division as of:

---

| | | |
|:---|:---|:---|
| **Total assets as of** | **December 31,<br> 2022** | **December 31,<br> 2021** |
| Highlight Media | $492315 | $- |
| Wuge | - | 19367508 |
| GDC, Citi Profit BVI , TMSR HK , Highlight HK, Highlight WFOE and Makesi WFOE | 3311713 | 31167749 |
| Total Assets | $3804028 | $50535257 |

---

---

| | | |
|:---|:---|:---|
| **Total revenues of** | **December 31,<br> 2022** | **December 31,<br> 2021** |
| Highlight Media | $153304 | $&nbsp;&nbsp;&nbsp;&nbsp; - |
| GDC, Citi Profit BVI , TMSR HK , Highlight HK, Highlight WFOE and Makesi WFOE | - | - |
| Total revenues | $153304 | $- |

---

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note 17 – Discontinued Operations**

The following depicts the financial position for the discounted operations of Tongrong WOFE, Rong Hai and Wuge as of December 31, 2022 and 2021, and the result of operations for the discounted operations of Tongrong WOFE, Rong Hai and Wuge for the nine months ended December 31, 2022 and 2021.

---

| | | |
|:---|:---|:---|
| **Results of Operations** | **December 31,<br> 2022** | **December 31,<br> 2021** |
| REVENUES |  |  |
| Wuge digital door signs | $7616615 | $25029949 |
| Fuel materials | - | 4890734 |
| TOTAL REVENUES | 7616615 | 29920683 |
| COST OF REVENUES |  |  |
| Wuge digital door signs | 5527950 | 16779949 |
| Fuel materials | - | 4690388 |
| TOTAL COST OF REVENUES | 5527950 | 21470337 |
| GROSS PROFIT | 2088665 | 8450346 |
| OPERATING EXPENSES |  |  |
| Selling, general and administrative | 8163595 | 3510705 |
| Impairment of prepayments | 20082123 |  |
| TOTAL OPERATING EXPENSES | 28245718 | 3510705 |
| LOSS (INCOME) FROM OPERATIONS | (26157053) | 4939641 |
| OTHER INCOME (EXPENSE) |  |  |
| Interest income | 65251 | 50509 |
| Interest expense | (935) | (7804) |
| Investment income | - | - |
| Other income, net | 70830 | 66789 |
| Total other income, net | 135146 | 109494 |
| LOSS (INCOME) BEFORE INCOME TAXES | (26021907) | 5049135 |
| PROVISION FOR INCOME TAXES | 314787 | 1304037 |
| NET LOSS (INCOME) | $(26336694) | $3745098 |

---

**Note 18 – Subsequent events**

Effective as of January 10, 2023, GD Culture Group Limited (the "Company") changed its corporate name from "Code Chain New Continent Limited" to "GD Culture Group Limited", pursuant to a Certificate of Amendment to the Company's Articles of Incorporation (the "Certificate of Amendment") filed with the Secretary of State of the State of Nevada (the "Name Change").

**GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

In connection with the Name Change, effective as of the opening of trading on January 10, 2023, the Company's common stock is trading on the Nasdaq Capital Market under the ticker symbol "GDC" and the Company's warrants (the "Warrants") to purchase one-thirtieth of one shares of Common Stock at a price of $172.50 per whole share is quoting on the OTC Pink Market under the ticker symbol "CCNCW". The CUSIP numbers for the Company's common stock and Warrants remain the same. The warrants expired on February 5, 2023.

On February 9, 2023, approved by the Board of Directors of GD Culture Group Limited (the "Company"), Ms. Lu Cai was appointed as the Chief Operating Officer of the Company, effective February 9, 2023.

On February 9, 2023, Ms. Jing Zhang tendered her resignation as a director and a member of the Nominating and Corporate Governance Committee, the Compensation Committee, and the Audit Committee of the Company, effective February 9, 2023. The resignation of Ms. Jing Zhang was not a result of any disagreement with the Company's operations, policies or procedures.

On February 9, 2023, approved by the Board of Directors, the Nominating and Corporate Governance Committee and the Compensation Committee, Mr. Shuaiheng Zhang was appointed as a director and a member of the Nominating and Corporate Governance Committee, the Compensation Committee, and the Audit Committee of the Company, effective February 9, 2023.

On February 17, 2023, Ms. Junhe Hong tendered her resignation as a director and a member of the Nominating and Corporate Governance Committee, the Compensation Committee, and the Audit Committee of the Company, effective February 17, 2023. The resignation of Ms. Junhe Hong was not a result of any disagreement with the Company's operations, policies or procedures.

On February 17, 2023, approved by the Board of Directors, the Nominating and Corporate Governance Committee and the Compensation Committee, Mr. Yi Zhong was appointed as a director and a member of the Nominating and Corporate Governance Committee, the Compensation Committee, and the Audit Committee of the Company, effective February 17, 2023.

As previously disclosed on the current report on Form 8-K filed with the Securities and Exchange Commission on September 30, 2022, on September 28, 2022, Makesi IoT Technology (Shanghai) Co., Ltd. ("Makesi WFOE"), a indirect subsidiary of GD Culture Group Limited (the "Company"), entered into a termination agreement with Sichuan Wuge Network Games Co., Ltd. ("Wuge") and shareholders of Wuge (the "Wuge Shareholders") to cancel 133,333 shares of common stock, after giving effect to the reverse stock split which became effective on November 9, 2022 (the "Shares"), that were issued to the Wuge Shareholders, and to terminate certain technical consultation and services agreement., equity pledge agreement, equity option agreement, voting rights proxy and financial support agreement, by and among Tongrong Technology (Jiangsu) Co., Ltd., a then indirect subsidiary of the Company ("Tongrong WFOE"), Wuge and the Wuge Shareholders, which were assigned by Tongrong WFOE to Makesi WFOE. On March 9, 2023, the Shares were cancelled.

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on March 31, 2023.

---

| | | |
|:---|:---|:---|
| **GD CULTURE GROUP LIMITED** | **GD CULTURE GROUP LIMITED** | **GD CULTURE GROUP LIMITED** |
| By: | */s/ Hongxiang Yu* | */s/ Hongxiang Yu* |
|  | Name: | Hongxiang Yu |
|  | Title: | Chief Executive Officer, President and Chairman of the Board<br> *(Principal Executive Officer)* |

---

---

| | | |
|:---|:---|:---|
| By: | */s/ Yi Li* | */s/ Yi Li* |
|  | Name: | Yi Li |
|  | Title: | Chief Financial Officer and Secretary<br> (*Principal Financial Officer and <br> Principal Accounting Officer)* |

---

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

---

| | | |
|:---|:---|:---|
| **Name** | **Position** | **Date** |
| /s/ Hongxiang Yu | Chief Executive Officer, President and <br> Chairman of the Board of Directors | March 31, 2023 |
| Hongxiang Yu | *(Principal Executive Officer)* |  |
| /s/ Yi Li | Chief Financial Officer and Secretary | March 31, 2023 |
| Yi Li | *(Principal Financial Officer and Principal Accounting Officer)* |  |
| /s/ Mingyue Cai | Director | March 31, 2023 |
| Mingyue Cai |  |  |
| /s/ Yi Zhong | Director | March 31, 2023 |
| Yi Zhong |  |  |
| /s/ Shuaiheng Zhang | Director | March 31, 2023 |
| Shuaiheng Zhang |  |  |

---

## Exhibit 4.5

**EXHIBIT 4.5**

**DESCRIPTION OF SECURITIES**

**<u>Description of Capital Stock</u>**

**General**

The following description of our capital stock does not purport to be complete and is subject to and qualified in its entirety by our certificate of incorporation, our bylaws and by the applicable provisions of Nevada law.

Our authorized capital stock consists of 220,000,000 shares, par value $0.0001 per share, consisting of 200,000,000 shares of common stock and 20,000,000 shares of preferred stock.

On November 4, 2022, the Company filed a Certificate of Amendment to the Articles of Incorporation (the "Certificate of Amendment") with the Nevada Secretary of State to effect a reverse stock split of the outstanding shares of common stock, par value $0.0001 per shares, of the Company at a ratio of one-for-thirty (30), which became effective at 12:01 a.m. on November 9, 2022. Upon effectiveness of the reverse stock split, every thirty (30) outstanding shares of common stock were combined into and automatically become one share of common stock.

Unless otherwise indicated, all references to common stock, warrants to purchase common stock, share data, per share data, and related information have been retroactively adjusted, where applicable, herein to reflect the reverse stock split of our common stock as if they had occurred at the beginning of the earlier period presented.

**Common Stock**

As of the date of this annual report, there were 1,711,544 shares of our common stock issued and outstanding, held by approximately 325 stockholders of record. The outstanding shares of common stock are fully paid and non-assessable. The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders.

We have one class of common stock. Holders of our common stock are entitled to one vote per share on all matters to be voted upon by stockholders and do not have cumulative voting rights in the election of directors. Holders of shares of common stock are entitled to receive on a pro rata basis such dividends, if any, as may be declared from time to time by our board of directors in its discretion from funds legally available for that use, subject to any preferential dividend rights of outstanding preferred stock. They are also entitled to share on a pro rata basis in any distribution to our common stockholders upon our liquidation, dissolution or winding up, subject to the prior rights of any outstanding preferred stock. Common stockholders do not have preemptive rights to subscribe to any additional stock issuances by us, and they do not have the right to require the redemption of their shares or the conversion of their shares into any other class of our stock. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of outstanding preferred stock and any series of preferred stock that we may designate and issue in the future.

*Anti-Takeover Effects of Our Articles of Incorporation and Bylaw*

The following provisions of our articles of incorporation and bylaws could have the effect of delaying or discouraging another party from acquiring control of us and could encourage persons seeking to acquire control of us to first negotiate with our board of directors:

● no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

● the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could adversely affect the rights of our common stockholders or be used to deter a possible acquisition of our company;

● the ability of our board of directors to alter our bylaws without obtaining stockholder approval;

● the required approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal the provisions of our articles of incorporation and bylaws regarding the election and removal of directors;

● the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer, the president or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and

● advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders' meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of us.

*Transfer Agent and Registrar*

The transfer agent of our common stock is Continental Stock Transfer & Trust Company. The address of our transfer agent is 1 State Street, 30th Floor, New York, NY 10004.

*Nasdaq Capital Market Listing*

Our common stock is listed on the Nasdaq Capital Market under the symbol "GDC."

**Preferred Stock**

As of the date of this annual report, no shares of preferred stock were designated or issued and outstanding. Our board may fix the rights, preferences, privileges and restrictions of our authorized but undesignated preferred shares, including:

● dividend rights and preferences over dividends on our common stock or any series of preferred stock;

● the dividend rate (and whether dividends are cumulative);

● conversion rights, if any;

● voting rights;

● rights and terms of redemption (including sinking fund provisions, if any);

● redemption price and liquidation preferences of any wholly unissued series of any preferred stock and the designation thereof of any of them; and

● to increase or decrease the number of shares of any series subsequent to the issue of shares of that series but not below the number of shares then outstanding.

You should refer to the prospectus supplement relating to the series of preferred stock being offered for the specific terms of that series, including:

● title of the series and the number of shares in the series;

● the price at which the preferred stock will be offered;

● the dividend rate or rates or method of calculating the rates, the dates on which the dividends will be payable, whether or not dividends will be cumulative or noncumulative and, if cumulative, the dates from which dividends on the preferred stock being offered will cumulate;

● the voting rights, if any, of the holders of shares of the preferred stock being offered;

● the provisions for a sinking fund, if any, and the provisions for redemption, if applicable, of the preferred stock being offered, including any restrictions on the foregoing as a result of arrearage in the payment of dividends or sinking fund installments;

● the liquidation preference per share;

● the terms and conditions, if applicable, upon which the preferred stock being offered will be convertible into our common stock, including the conversion price, or the manner of calculating the conversion price, and the conversion period;

● the terms and conditions, if applicable, upon which the preferred stock being offered will be exchangeable for debt securities, including the exchange price, or the manner of calculating the exchange price, and the exchange period;

● any listing of the preferred stock being offered on any securities exchange;

● a discussion of any material federal income tax considerations applicable to the preferred stock being offered;

● any preemptive rights;

● the relative ranking and preferences of the preferred stock being offered as to dividend rights and rights upon liquidation, dissolution or the winding up of our affairs;

● any limitations on the issuance of any class or series of preferred stock ranking senior or equal to the series of preferred stock being offered as to dividend rights and rights upon liquidation, dissolution or the winding up of our affairs; and

● any additional rights, preferences, qualifications, limitations and restrictions of the series.

Upon issuance, the shares of preferred stock will be fully paid and nonassessable, which means that its holders will have paid their purchase price in full and we may not require them to pay additional funds.

Any preferred stock terms selected by our board of directors could decrease the amount of earnings and assets available for distribution to holders of our common stock or adversely affect the rights and power, including voting rights, of the holders of our common stock without any further vote or action by the stockholders. The rights of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued by us in the future. The issuance of preferred stock could also have the effect of delaying or preventing a change in control of our company or make removal of management more difficult.

**<u>Description of the Investor Warrants</u>**

As of the date of this annual report, the Company has warrants to purchase up to 138,890 shares of common stock of the Company (the "Investor Warrants"). The terms of the Investor Warrants are as follows:

*Exercisability*. The Investor Warrants are exercisable, at an exercise price of $183.00 per share, for a period of five and one-half years commencing on April 29, 2021. The Investor Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance of shares of our common stock underlying the Investor Warrants under the Securities Act of 1933, as amended (the "Securities Act") is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number of shares of our common stock purchased upon such exercise. If a registration statement or current prospectus is not effective or available for the registration of the Investor Warrants or the resale of the shares of our common stock underlying the Investor Warrants under the Securities Act, at any time after the six-month anniversary of the closing date of the offering, the holder may, in its sole discretion, elect to exercise the Investor Warrants through a cashless exercise, in which case the holder would receive upon such exercise the net number of shares of our common stock determined according to the formula set forth in the Investor Warrants.

*Exercise Limitation*. A holder will not have the right to exercise any portion of the Investor Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of our shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Investor Warrants. Any holder may increase or decrease such percentage, but in no event may such percentage be increased to more than 9.99%, provided that any increase will not be effective until the 61<sup>st</sup> day after such election.

*Exercise Price Adjustment*. The exercise price of the Investor Warrants is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our shares of common stock and also upon any distributions of assets, including cash, stock or other property to our shareholders. The exercise price of the Investor Warrants will also be reduced, in the event that the Company subsequently sells shares of common stock or common stock equivalents at a price which is less than the then current exercise price of the Investor Warrants, to a price equal to the per share price of the common stock in such subsequent sale. Additionally, upon obtaining the Stockholder Approval, if the exercise price is then greater than $183.00 per share, the exercise price will be reduced to $183.00 per share.

*Participation Rights.* If at any time we grant, issue or sell any shares of our common stock or Common Stock Equivalents (as defined in the Securities Purchase Agreement) or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any shares of our common stock (the "Purchase Rights"), the holder of the Investor Warrants will be entitled to acquire, upon the terms applicable to such Purchase Rights, subject to the beneficial ownership limitations, the aggregate Purchase Rights which the holder of the Investor Warrants could have acquired if the holder had held the number of shares of our common stock acquirable upon complete exercise of the Investor Warrants.

*Fundamental Transactions*. If (i) we, directly or indirectly, in one or more related transactions effect any merger or consolidation of the Company with or into another person, (ii) we, directly or indirectly, effect any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of our assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by us or another person) is completed pursuant to which holders of our Common Shares are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding shares of our common stock, (iv) we, directly or indirectly, in one or more related transactions effect any reclassification, reorganization or recapitalization of our common stock or any compulsory share exchange pursuant to which our shares of common stock are effectively converted into or exchanged for other securities, cash or property, or (v) we, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another person or group of persons whereby such other person or group acquires more than 50% of the outstanding shares of our common stock (not including any shares of our common stock held by the other person or other persons making or party to, or associated or affiliated with the other persons making or party to, such stock or share purchase agreement or other business combination, each a "Fundamental Transaction," then the successor entity will succeed to, and be substituted for us, and may exercise every right and power that we may exercise and will assume all of our obligations under the Investor Warrants with the same effect as if such successor entity had been named in such warrant itself. If holders of our shares of common stock are given a choice as to the securities, cash or property to be received in a fundamental transaction, then the holder of Investor Warrants shall be given the same choice as to the consideration it receives upon any exercise of the Investor Warrants following such fundamental transaction. In addition, the successor entity, at the request of the holders of Investor Warrants, will be obligated to purchase any unexercised portion of the Investor Warrants in accordance with the terms of such warrants. Additionally, in the event of a Fundamental Transaction, each warrant holder will have the right to require us, or our successor, to repurchase the Investor Warrants for an amount equal to the Black-Scholes value of the remaining unexercised portion of the warrant on the terms set forth in the Investor Warrants.

**<u>Description of the Placement Agent Warrants</u>**

As of the date of this annual report, the Company has warrants to purchase up to 6.945 shares of common stock of the Company (the "Placement Agent Warrants"). The terms of the Placement Agent Warrants are as follows:

*Exercisability*. The Placement Agent Warrants are exercisable, at an exercise price of $180.00 per share, for a period of five years commencing six months from February 22, 2021. The Placement Agent Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance of shares of our common stock underlying the Placement Agent Warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number of shares of our common stock purchased upon such exercise. The Placement Agent Warrants will not be exercisable on a cashless basis.

*Exercise Limitation*. A holder will not have the right to exercise any portion of the Placement Agent Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of our shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Placement Agent Warrants. Any holder may increase or decrease such percentage, but in no event may such percentage be increased to more than 9.99%, provided that any increase will not be effective until the 61<sup>st</sup> day after such election.

*Exercise Price Adjustment*. The exercise price of the Placement Agent Warrants is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our shares of common stock and also upon any distributions of assets, including cash, stock or other property to our shareholders.

*Fundamental Transactions*. If (i) we, directly or indirectly, in one or more related transactions effect any merger or consolidation of the Company with or into another person, (ii) we, directly or indirectly, effect any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of our assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by us or another person) is completed pursuant to which holders of our Common Shares are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding shares of our common stock, (iv) we, directly or indirectly, in one or more related transactions effect any reclassification, reorganization or recapitalization of our common stock or any compulsory share exchange pursuant to which our shares of common stock are effectively converted into or exchanged for other securities, cash or property, or (v) we, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another person or group of persons whereby such other person or group acquires more than 50% of the outstanding shares of our common stock (not including any shares of our common stock held by the other person or other persons making or party to, or associated or affiliated with the other persons making or party to, such stock or share purchase agreement or other business combination, each a "Fundamental Transaction," then the successor entity will succeed to, and be substituted for us, and may exercise every right and power that we may exercise and will assume all of our obligations under the Placement Agent Warrants with the same effect as if such successor entity had been named in such warrant itself. If holders of our shares of common stock are given a choice as to the securities, cash or property to be received in a fundamental transaction, then the holder of Placement Agent Warrants shall be given the same choice as to the consideration it receives upon any exercise of the Placement Agent Warrants following such fundamental transaction. In addition, the successor entity, at the request of the holders of Placement Agent Warrants, will be obligated to purchase any unexercised portion of the Placement Agent Warrants in accordance with the terms of such warrants. Additionally, in the event of a Fundamental Transaction, each warrant holder will have the right to require us, or our successor, to repurchase the Placement Agent Warrants for an amount equal to the Black-Scholes value of the remaining unexercised portion of the warrant on the terms set forth in the Placement Agent Warrants.

## Exhibit 21.1

**EXHIBIT 21.1**

**Subsidiaries of GD Culture Group Limited**

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| | |
|:---|:---|
| **Subsidiary** | **Jurisdiction of Incorporation** |
| Citi Profit Investment Holding Limited | British Virgin Islands |
| Highlights Culture Holding Co., Limited | Hong Kong |
| TMSR Holdings Limited | Hong Kong |
| Shanghai Highlight Entertainment Co., Ltd. | People's Republic of China |
| Makesi Iot Technology (Shanghai) Co., Ltd. | People's Republic of China |
| **VIE** |  |
| Shanghai Highlight Media Co., Ltd. | People's Republic of China |
| Shanghai Yuanma Food and Beverage Management Co., Ltd. | People's Republic of China |

---

## Exhibit 23.1

**EXHIBIT 23.1**

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| | |
|:---|:---|
| ![](ex23-1_001.jpg) | **AUDIT \| ACCOUNTING \| TAX \| ADVISORY** |

---

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-254276) of GD Culture Group Limited. (the "Company") of our report dated March 31, 2023, relating to the consolidated balance sheets of the Company as of December 31, 2022, and the related consolidated statements of income (loss) and comprehensive loss, changes in shareholder's equity, and cash flows for the year ended December 31, 2022 and the related notes, included in its Annual Report on Form 10-K.

/s/ Enrome LLP

Singapore

March 31, 2023

## Exhibit 23.2

**EXHIBIT 23.2**

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| | |
|:---|:---|
| ![](ex23-2_001.jpg) | **AUDIT \| ACCOUNTING \| TAX \| ADVISORY** |

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**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-254366) of GD Culture Group Limited. (the "Company") of our report dated March 31, 2023, relating to the consolidated balance sheets of the Company as of December 31, 2022, and the related consolidated statements of income (loss) and comprehensive loss, changes in shareholder's equity, and cash flows for the year ended December 31, 2022 and the related notes, included in its Annual Report on Form 10-K.

/s/ Enrome LLP

Singapore

March 31, 2023

## Exhibit 23.3

**Exhibit 23.3**

![](ex23-3_002.jpg)

**<u>Consent of Independent Registered Public Accounting Firm</u>**

GD Culture Group Limited

(f/k/a Code Chain New Continent Limited)

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (File No. 333-254276) of our report dated March 31, 2022, relating to the audit of the consolidated balance sheet of GD Culture Group Limited (f/k/a Code Chain New Continent Limited) and subsidiaries (collectively the "Company") as of December 31, 2021 and 2020, and the related consolidated statements of income (loss) and comprehensive loss, changes in shareholders' equity, and cash flows for the two-year period ended December 31, 2021, and the related notes collectively referred to as the "financial statements") appearing in the Company's Annual Report on Form 10-K for year ended December 31, 2022.

---

| | |
|:---|:---|
|  | ![](ex23-3_001.jpg) |
| San Mateo, California | WWC, P.C. |
| March 31, 2023 | Certified Public Accountants |
|  | PCAOB ID: 1171 |

---

![](ex23-3_003.jpg)

## Exhibit 23.4

**Exhibit 23.4**

**<u>Consent of Independent Registered Public Accounting Firm</u>**

GD Culture Group Limited

(f/k/a Code Chain New Continent Limited)

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (File No. 333-254366) of our report dated March 31, 2022, relating to the audit of the consolidated balance sheet of GD Culture Group Limited (f/k/a Code Chain New Continent Limited) and subsidiaries (collectively the "Company") as of December 31, 2021 and 2020, and the related consolidated statements of income (loss) and comprehensive loss, changes in shareholders' equity, and cash flows for the two-year period ended December 31, 2021, and the related notes collectively referred to as the "financial statements") appearing in the Company's Annual Report on Form 10-K for year ended December 31, 2022.

---

| | |
|:---|:---|
|  | ![](ex23-4_002.jpg) |
| San Mateo, California | WWC, P.C. |
| March 31, 2023 | Certified Public Accountants |
|  | PCAOB ID: 1171 |

---

![](ex23-4_003.jpg)

## Exhibit 31.1

**EXHIBIT 31.1**

**CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT RULE 13A-14(A), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Hongxiang Yu, certify that:

---

| | | |
|:---|:---|:---|
| 1. | I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2022 of GD Culture Group Limited.; | I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2022 of GD Culture Group Limited.; |
| 2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4 | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|  | a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|  | b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|  | c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|  | d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5 | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: |
|  | a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|  | b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |

---

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| | | |
|:---|:---|:---|
| Date: March 31, 2023 | By: | */s/ Hongxiang Yu* |
|  |  | Hongxiang Yu<br> Chief Executive Officer, President and<br> Co-Chairman of the Board<br> (Principal Executive Officer) |

---

## Exhibit 31.2

**EXHIBIT 31.2**

**CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT RULE 13A-14(A),<br> AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002**

I, Yi Li, certify that:

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| | | |
|:---|:---|:---|
| 1. | I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2022 of GD Culture Group Limited. | I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2022 of GD Culture Group Limited. |
| 2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4 | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|  | a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|  | b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|  | c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|  | d. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5 | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: |
|  | a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|  | b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |

---

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| | | |
|:---|:---|:---|
| Date: March 31, 2023 | By: | /s/ *Yi Li* |
|  |  | Yi Li<br> Chief Financial Officer and Secretary<br> (Principal Financial and Accounting Officer) |

---

## Exhibit 32.1

**EXHIBIT 32.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

I, Hongxiang Yu, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Annual Report on Form 10-K of GD Culture Group Limited. (the "Company") for the fiscal year ended December 31, 2022 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

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| | | |
|:---|:---|:---|
| Date: March 31, 2023 | By: | */s/ Hongxiang Yu* |
|  |  | Hongxiang Yu |
|  |  | Chief Executive Officer, President and<br> Co-Chairman of the Board<br> (Principal Executive Officer) |

---

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

## Exhibit 32.2

**EXHIBIT 32.2**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

I, Yi Li, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Annual Report on Form 10-K of GD Culture Group Limited (the "Company") for the fiscal year ended December 31, 2022 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

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| | | |
|:---|:---|:---|
| Date: March 31, 2023 | By: | /s/ *Yi Li* |
|  |  | Yi Li |
|  |  | Chief Financial Officer and Secretary<br> (Principal Financial and Accounting Officer) |

---

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.