UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2023

 

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

 

For the transition period from __________ to __________

 

Commission File Number: 001-37513

 

GD CULTURE GROUP LIMITED

(Exact name of registrant as specified in its charter)

 

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

 

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

 

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

 

Not applicable

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

As of November 20, 2023, there were 4,489,816 shares of the Company’s common stock issued and outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
PART I. FINANCIAL INFORMATION 1
     
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) 1
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF O PERATIONS 34
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 45
     
ITEM 4. CONTROLS AND PROCEDURES 46
     
PART II. OTHER INFORMATION 47
     
ITEM 1. LEGAL PROCEEDINGS 47
     
ITEM 1A. RISK FACTORS 47
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 47
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 47
     
ITEM 4. MINE SAFETY DISCLOSURES 47
     
ITEM 5. OTHER INFORMATION 47
     
ITEM 6. EXHIBITS 48

 

i

 

 

CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS

 

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

 

our goals and strategies;

 

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

 

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

 

our estimates regarding the market opportunity for our services;

 

the impact of government laws and regulations;

 

our ability to recruit and retain qualified personnel;

 

our failure to comply with regulatory guidelines;

 

uncertainty in industry demand;

 

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

 

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

 

depth of the trading market in our securities.

 

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties, including those described in Item 1A “Risk Factors” of our Annual Report of Form 10-K for the fiscal year ended December 31, 2022 and elsewhere in this Quarterly Report on Form 10-Q.

 

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

 

ii

 

 

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

   September 30,   December 31, 
   2023   2022 
ASSETS       
CURRENT ASSETS        
Cash and cash equivalents  $1,647,148   $389,108 
Accounts receivable, net   150,000    194,520 
Other receivables, net   146,575    1,026,293 
Prepaid expense - related party   100,000    
-
 
Prepayments   4,582,684    
-
 
Total current assets   6,626,407    1,609,921 
           
NON-CURRENT ASSETS          
Plant and equipment, net   8,866    502 
Operating lease right-of-use assets, net   1,683,518    
-
 
Goodwill   
-
    2,190,485 
Intangible assets, net   3,087,500    
-
 
Long-term investments, net   2,500,000    
-
 
Total non-current assets   7,279,884    2,190,987 
Total assets  $13,906,291   $3,800,908 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
           
CURRENT LIABILITIES          
Accounts payable  $3,838   $127,475 
Other payables and accrued liabilities   2,729    2,099 
Other payables - related parties   
-
    195,732 
Current portion of operating lease liabilities   324,162    
-
 
Taxes payable   
-
    8,478 
Total current liabilities   330,729    333,784 
           
NON-CURRENT LIABILITIES          
Non-current portion of operating lease liabilities   1,388,238    
-
 
Total non-current liabilities   1,388,238    
-
 
Total liabilities   1,718,967    333,784 
COMMITMENTS AND CONTINGENCIES (NOTE 14)   
-
    
-
 
           
SHAREHOLDERS’ EQUITY          
Preferred stock, $0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively   
-
    
-
 
Common stock, $0.0001 par value, 200,000,000 shares authorized, 3,053,563 and 1,844,877 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively   305    184 
Stock subscription receivable   (1,370,614)   
-
 
Additional paid-in capital   68,544,206    60,124,087 
Statutory reserves   4,467    4,467 
Accumulated deficit   (60,446,156)   (56,841,074)
Accumulated other comprehensive income   71,468    179,460 
Total GD Culture Group Limited shareholders’ equity   6,803,676    3,467,124 
Noncontrolling interest   5,383,648    
-
 
Total shareholders’ equity   12,187,324    3,467,124 
Total liabilities and shareholders’ equity  $13,906,291   $3,800,908 

 

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

 

1

  

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
REVENUES                
Enterprise brand management services   
-
    
-
    150,000    
-
 
Software copyright   
-
    
-
    
-
    
-
 
TOTAL REVENUES   
-
    
-
    150,000    
-
 
                     
COST OF REVENUES                    
Enterprise brand management services   
-
    
-
         
-
 
TOTAL COST OF REVENUES   
-
    
-
         
-
 
GROSS PROFIT   
-
    
-
         
-
 
                     
OPERATING EXPENSES                    
Selling, general and administrative   3,667,011    64,041    3,942,947    6,800,079 
Impairment of prepayments   
-
    
-
    
-
    12,949,329 
TOTAL OPERATING EXPENSES   3,667,011    64,041    3,942,947    19,749,408 
                     
LOSS FROM OPERATIONS   (3,667,011)   (64,041)   (3,792,947)   (19,749,408)
                     
OTHER INCOME (EXPENSE)                    
Interest income   46,891    
-
    47,070    
-
 
Interest expense   (52)   
-
    (52)   
-
 
Other income   
-
    
-
    100,000    
-
 
Total other income, net   46,839    
-
    147,018    
-
 
                     
LOSS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS   (3,620,172)   (64,041)   (3,645,929)   (19,749,408)
PROVISION FOR INCOME TAXES   
-
    
-
    
-
    
-
 
LOSS FROM CONTINUING OPERATIONS   (3,620,172)   (64,041)   (3,645,929)   (19,749,408)
Net loss attributable to noncontrolling interest   (102,485)   
-
    (102,485)   
-
 
LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO GD CULTURE GROUP LIMITED   (3,517,687)   (64,041)   (3,543,444)   (19,749,408)
                     
Discontinued operations:                    
Loss from discontinued operations, net of taxes   (10,358)   
-
    (61,408)   303,089 
Loss on disposal, net of taxes   (230)   (4,027,930)   (230)   (4,027,930)
Net loss   (3,528,275)   (4,091,971)   (3,605,082)   (23,474,249)
                     
OTHER COMPREHENSIVE LOSS                    
Foreign currency translation adjustment   4,291    (261,985)   (107,992)   (118,184)
COMPREHENSIVE LOSS   (3,523,984)   (4,353,956)   (3,713,074)   (23,592,433)
                     
WEIGHTED AVERAGE NUMBER OF COMMON SHARES                    
Basic and diluted*
   3,053,563    1,427,927    2,447,446    1,427,927 
                     
Loss per share from continuing operations                    
Basic and diluted
   (1.15)   (0.04)   (1.45)   (13.83)
                     
Loss per share from discontinued operations                    
Basic and diluted
   (0.00)   (2.82)   (0.03)   (2.61)
                     
Loss per share available to common shareholders                    
Basic and diluted
   (1.16)   (2.87)   (1.47)   (16.44)

 

2

 

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

 

   For the Nine Months Ended September 30, 2022 
           Additional   Stock   Retained Earnings
(Accumulated Deficit)
   Accumulated
Other
     
   Preferred Stock   Common Stock   Paid-in   Subscription   Statutory       Comprehensive     
   Shares   Amount   Shares   Amount   Capital   Receivable   Reserves   Unrestricted   Income (Loss)   Total 
BALANCE, January 1, 2022            -                 -    1,543,793    154    83,038,827    (25,165,728)   -    (26,019,119)   225,857    32,079,991 
Net loss   -    -    -    -    -    -    -    (23,474,249)   -    (23,474,249)
Issuance of common stock for acquisition Yuanma   -    -    256,000    26    7,679,974    -    -    -    -    7,680,000 
Issuance of common stock for acquisition Highlight Media   -    -    300,000    30    2,249,970    -    4,467    -    -    2,254,467 
The cancellation of the common stock   -    -    (254,916)   (26)   (32,844,684)   -    -    -    -    (32,844,710)
Stock subscription receivable from issuance of common stock   -    -    -    -    -    25,165,728    -    -    -    25,165,728 
Foreign currency translation   -    -    -    -    -    -    -    -    (118,184)   (118,184)
BALANCE, September 30, 2022 (Unaudited)   -   $-    1,844,877   $184   $60,124,087   $-   $4,467   $(49,493,368)  $107,673   $10,743,043 

   

3

 

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(CONTINUED) (UNAUDITED)

 

   For the Three Months Ended September 30, 2022 
           Additional   Stock   Retained Earnings
(Accumulated Deficit)
   Accumulated
Other
     
   Preferred Stock   Common Stock   Paid-in   Subscription   Statutory       Comprehensive     
   Shares   Amount   Shares   Amount   Capital   Receivable   Reserves   Unrestricted   Income (Loss)   Total 
BALANCE, July 1, 2022   -    -    1,544,877    154    74,276,715    (16,403,618)   -    (45,401,397)   369,658    

12,841,512

 
Net loss   -    -    -    -    -    -    -    (4,091,971)   -    (4,091,971)
Issuance of common stock for acquisition Yuanma   -    -    -    -    -    -    -    -    -    - 
Issuance of common stock for acquisition Highlight Media   -    -    300,000    30    2,249,970    -    4,467    -    -    2,254,467 
The cancellation of the common stock   -    -    -    -    (16,402,598)   -    -    -    -    (16,402,598)
Stock subscription receivable from issuance of common stock   -    -    -    -    -    16,403,618    -    -    -    16,403,618 
Foreign currency translation   -    -    -    -    -    -    -    -    (261,985)   (261,985)
BALANCE, September 30, 2022 (Unaudited)   -   $-    1,844,877   $184   $60,124,087   $-   $4,467   $(49,493,368)  $107,673   $

10,743,043

 

 

4

 

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(CONTINUED) (UNAUDITED)

 

   For the Nine Months Ended September 30, 2023 
         Additional   Stock   Retained Earnings
(Accumulated Deficit)
   Accumulated
Other
   Total GD
Culture
Group
Limited
       Total 
   Preferred Stock   Common Stock   Paid-in   Subscription   Statutory       Comprehensive   Shareholders’   Noncontrolling   Shareholders’ 
   Shares   Amount   Shares   Amount   Capital   Receivable   Reserves   Unrestricted   Loss   Equity   interest   Equity 
BALANCE, January 1, 2023        -         -    1,844,877    184    60,124,087    -    4,467    (56,841,074)   179,460    3,467,124    -    3,467,124 
Net loss   -    -    -    -    -    -    -    

(3,605,082

)   -    

(3,605,082

)   

(102,485

)   

(3,707,567

)
Issuance of common stock for cash   -    -    1,154,519    115    

8,618,125

    -    -    -    -    8,618,240    -    8,618,240 
Contribution by noncontrolling shareholder   -    -    -    -    -    -    -    -    -    -    5,486,133    5,486,133 
Issuance of common stock for acquisition right, title, and interest in and to the certain software   -    -    187,500    19    749,981    -    -    -    -    750,000    -    750,000 
The cancellation of the common stock   -    -    (133,333)   (13)   (947,987)   -    -    -    -    (948,000)   -    (948,000)
Stock subscription receivable from issuance of common stock   -    -    -    -    -    (1,370,614)   -    -    -    (1,370,614)   -    (1,370,614)
Foreign currency translation   -    -    -    -    -    -    -    -    

(107,992

)   

(107,992

)   -    

(107,992

)
BALANCE, September 30, 2023 (Unaudited)   -   $-    3,053,563   $305   $

68,544,206

   $(1,370,614)  $4,467   $

(60,446,156

)  $

71,468

   $

6,803,676

    

5,383,648

    

12,187,324

 

 

5

 

GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(CONTINUED) (UNAUDITED) 

 

   For the Three Months Ended September 30, 2023 
           Additional   Stock   Retained Earnings
(Accumulated Deficit)
   Accumulated
Other
   Total GD
Culture
Group
Limited
       Total 
   Preferred Stock   Common Stock   Paid-in   Subscription   Statutory       Comprehensive   Shareholders’   Noncontrolling   Shareholders’ 
   Shares   Amount   Shares   Amount   Capital   Receivable   Reserves   Unrestricted   Loss   Equity   interest   Equity 
BALANCE, July 1, 2023   -    -    3,053,563    305    

68,544,206

    -    4,467    

(56,917,881

)   67,177    11,698,274    -    11,698,274 
Net loss   -    -    -    -    -    -    -    

(3,528,275

)   -    

(3,528,275

)   (102,485)   

(3,630,760

)
Issuance of common stock for cash   -    -    -    -    -    -    -    -    -    -    -    - 
Contribution by noncontrolling shareholder   -    -    -    -    -    -    -    -    -    -    5,486,133    5,486,133 
Issuance of common stock for acquisition right, title, and interest in and to the certain software   -    -    -    -    -    -    -    -    -    -    -    - 
The cancellation of the common stock   -    -    -    -    -    -    -    -    -    -    -    - 
Stock subscription receivable from issuance of common stock   -    -    -    -    -    (1,370,614)   -    -    -    (1,370,614)   -    (1,370,614)
Foreign currency translation   -    -    -    -    -    -    -    -    4,291    4,291    -    4,291 
BALANCE, September 30, 2023 (Unaudited)   -   $-    3,053,563    305    

68,544,206

   $(1,370,614)  $4,467   $

(60,446,156

)  $71,468   $6,803,676    5,383,648    12,187,324 

 

6

 

GD CULTURE GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

    For the Nine Months Ended
September 30,
 
    2023     2022  
CASH FLOWS FROM OPERATING ACTIVITIES:            
Net loss   $ (3,707,567 )   $ (23,474,249 )
Adjustments to reconcile net income to net cash used in operating activities:                
Depreciation of plant and equipment     751       33,192  
Amortization of intangible assets     162,500       98  
Lease expenses of right-of-use assets     60,224       -  
Impairment of prepayments     -       12,949,329  
Disposal of the company     230       4,027,930  
Goodwill impairments     2,070,753       6,590,339  
Change in operating assets and liabilities                
                 
Accounts receivables     (52,196 )     -  
Other receivables     (51,399 )     757  
Prepaid expense - related party     (100,000 )     192,863  
Inventories     -       (3,001 )
Prepayments     (4,610,398 )     (68,962 )
Accounts payable     (91,273 )     196,417  
Other payables and accrued liabilities     (16,410 )     (99,892 )
Customer deposits     68,531       (2,156,462 )
Lease liabilities     (31,342 )     -  
Taxes payable     (6,994 )     (493 )
Other payables - related parties     (160,760 )     845,389  
Net cash used in operating activities     (6,465,350 )     (966,745 )
                 
CASH FLOWS FROM INVESTING ACTIVITY:                
Net increase in cash from acquisition of Highlight Media     -       47,498  
Net decrease in cash from disposal of discontinued operations     -       (12,316,416 )
Purchase of intangible assets     (2,500,000 )     -  
Purchase of equipment     (9,617 )     (6,689 )
Purchase of convertible notes     (2,500,000 )     -  
Net cash used in investing activity     (5,009,617 )     (12,275,607 )
                 
CASH FLOWS FROM FINANCING ACTIVITY:                
Proceeds from issuance of common stock     8,618,240       -  
Contribution by noncontrolling shareholder     4,115,519       -  
Net cash provided by financing activity     12,733,759       -  
                 
EFFECT OF EXCHANGE RATE ON CASH     (752 )     (1,095,699 )
                 
NET INCREASE/(DECREASE) IN CASH     1,258,040       (14,338,051 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD     389,108       14,588,330  
CASH AND CASH EQUIVALENTS, END OF PERIOD   $ 1,647,148     $ 250,279  
                 
SUPPLEMENTAL CASH FLOW INFORMATION:                
Cash paid for interest   $ -     $ 935  
                 
NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES                
Issuance of common stock for acquisition Yuanma     -       7,680,000  
Issuance of common stock for acquisition Highlight Media     -       2,250,000  
Issuance of common stock for acquisition right, title, and interest in and to the certain software     750,000       -  
The cancellation of the common stock     948,000       32,844,710  
Initial recognition of right-of-use assets and lease liabilities     1,731,824       -  

  

7

 

GD CULTURE GROUP LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 – Nature of business and organization

 

GD Culture Group Limited (“GDC” or the “Company”), formerly known as Code Chain New Continent Limited, 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’s current subsidiaries, Citi Profit Investment Holding Limited (“Citi Profit”), Highlights Culture Holding Co., Limited (“Highlight HK”), Shanghai Highlight Entertainment Co., Ltd. (“Highlight WFOE”), and previous subsidiaries, TMSR Holdings Limited (“TMSR HK”) and Makesi IoT Technology (Shanghai) Co., Ltd. (“Makesi WFOE”) are also holding companies with no material operations.

 

Shanghai Xianzhui Technology Co., Ltd. (“SH Xianzhui”) was incorporated by Highlight WFOE and other two shareholders on August 10, 2023. SH Xianzhui is principally engaged in the provision of social media marketing agency service. Highlight WFOE owns 60% of the total equity interest of SH Xianzhui.

 

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

 

Prior to 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. For accounting purposes, Makesi WFOE was the primary beneficiary of Wuge. Accordingly, under U.S. GAAP, GDC treated Wuge as the consolidated affiliated entity and has consolidated Yuanma’s financial results in Wuge’s financial statements prior to September 28, 2022. 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 shareholders of Wuge to terminate the VIE Agreements and to cancel the shares previously issued to the shareholders of Wuge, 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 June 26, 2023, we had a subsidiary TMSR HK, which owns 100% equity interest in Makesi WFOE. Makesi WFOE had a series of contractual arrangement with Shanghai Yuanma Food and Beverage Management Co., Ltd. (“Yuanma”) that established a VIE structure. For accounting purposes, Makesi WFOE was the primary beneficiary of Yuanma. Accordingly, under U.S. GAAP, GDC treated Yuanma as the consolidated affiliated entity and has consolidated Yuanma’s financial results in GDC’s financial statements prior to June 26, 2023. On June 26, 2023, GDC entered into a share purchase agreement with a buyer unaffiliated with the Company. Pursuant to the agreement, the Company agreed to sell and the buyer agreed to purchase all the issued and outstanding equity interest in TMSR HK. The purchase price for the transaction contemplated by the Agreement was $100,000. The sale of TMSR HK included the sale of Makesi WFOE and Yuanma. None of TMSR HK, Makesi WFOE or Yuanma had any assets, employees or operation. The sale of TMSR HK did not have any material impact on the Company’s consolidated financial statements.

 

8

 

Prior to September 26, 2023, we also conducted business through Shanghai Highlight Media Co., Ltd. (“Highlight Media”). Highlight WFOE had a series of contractual arrangement with Highlight Media. For accounting purposes, Highlight WFOE was the primary beneficiary of Highlight Media. Accordingly, under U.S. GAAP, GDC treated Highlight Media as the consolidated affiliated entity and has consolidated Highlight Media’s financial results in GDC’s financial statements prior to September 26, 2023. Highlight Media was an integrated marketing service agency, focusing on enterprise brand management, crisis public relations, intelligent public opinion monitoring, media PR, financial and economic we-media operation, digital face application, large-scale exhibition services and other businesses. On September 26, 2023, Highlight WFOE entered into a termination agreement with Highlight Media and the shareholders of Highlight Media to terminate the VIE Agreements and sold the interest in the VIE Agreements for a purchase price of $100,000. As a result of such termination, the Company no longer treats Highlight Media as a consolidated affiliated entity or consolidates the financial results and balance sheet of Highlight Media in the Company’s consolidated financial statements under U.S. GAAP.

 

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
TMSR HK2   ●  A Hong Kong company
●  Incorporated on April 2019
  100% owned by Citi Profit BVI
Highlight HK  

●  A Hong Kong company

●  Incorporated on November 2022

  100% owned by Citi Profit BVI
Makesi WFOE2  

●  A PRC limited liability company and deemed a wholly foreign owned enterprise (WFOE)

●  Incorporated on December 2020

  100% owned by TMSR HK
Highlight WFOE  

●  A PRC limited liability company and deemed a wholly foreign owned enterprise (WFOE)

●  Incorporated on January 2023

  100% owned by Highlight HK
Wuge1  

●  A PRC limited liability company

●  Incorporated on July 4, 2019

  VIE of Makesi WFOE
Highlight Media3  

●  A PRC limited liability company

●  Incorporated on September 16, 2022

  VIE of Highlight WFOE
AI Catalysis  

●  A Nevada company

●  Incorporated on May 2023

  100% owned by the Company
SH Xianzhui  

●  A PRC limited liability company

●  Incorporated on May 2023

  60% owned by Highlight WFOE

 

1Disposed on September 28, 2022
2Disposed on June 26, 2023
3

Disposed on September 26, 2023

  

Contractual Arrangements

 

Wuge, Yuanma, 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.

 

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.

 

9

 

Technical Consultation and Services Agreement.

 

Pursuant to the technical consultation and services agreement between Wuge and Tongrong Technology (Jiangsu) Co., Ltd., a then indirect subsidiary of the Company (“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 30 days’ prior written notice to Wuge.

 

Equity Pledge Agreement.

 

Under the equity pledge agreement among Tongrong WFOE, Wuge and the shareholders of Wuge dated January 3, 2020, the shareholders of Wuge 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, the shareholders of Wuge 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 shareholders of Wuge cease to be shareholders of Wuge.

 

Equity Option Agreement.

 

Under the equity option agreement among Tongrong WFOE, Wuge and the shareholders of Wuge dated January 3, 2020, each of the shareholders of Wuge 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.

 

Voting Rights Proxy and Financial Support Agreement.

 

Under the voting rights proxy and financial support agreement among Tongrong WFOE, Wuge and the shareholders of Wuge 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 with Tongrong WFOE, Wuge and the shareholders of Wuge, pursuant to which Tongrong WFOE assign all its rights and obligations under the VIE agreements to Makesi WFOE. The VIE agreements and the assignment agreements granted 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 did not have any impact on Company’s consolidated financial statements.

 

10

 

On September 28, 2022, Makesi WFOE entered into a termination agreement with Wuge and the shareholders of Wuge to terminate the VIE agreements and to cancel the shares previously issued to the shareholders of Wuge, 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.

 

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

Technical Consultation and Services Agreement.

 

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

 

Equity Pledge Agreement.

 

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

 

Equity Option Agreement.

 

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

 

Voting Rights Proxy and Financial Support Agreement.

 

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

 

On June 26, 2023, the Company entered into a share purchase agreement with a buyer unaffiliated with the Company. Pursuant to the agreement, the Company agreed to sell and the buyer agreed to purchase all the issued and outstanding equity interest in TMSR HK. The purchase price for the transaction contemplated by the Agreement was $100,000. TMSR HK has a direct wholly-owned subsidiary, Makesi WFOE, and an indirect wholly-owned subsidiary, Yuanma. The sale of TMSR included the sale of Makesi WFOE and Yuanma. None of TMSR HK, Makesi WFOE or Yuanma had any assets, employees or operation. The sale of TMSR did not have any material impact on the Company’s consolidated financial statements.

 

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

 

11

 

Technical Consultation and Services Agreement.

 

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

 

Equity Pledge Agreement.

 

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

 

Equity Option Agreement.

 

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

 

Voting Rights Proxy and Financial Support Agreement.

 

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

 

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

 

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

 

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 in China, and on the AI Catalysis business that is in the livestreaming market with focus on e-commerce and livestreaming interactive game in the United States. All Wuge digital door signs business have been disposed.

 

12

 

Note 2 – Summary of significant accounting policies

 

Basis of presentation

 

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”).

 

Principles of consolidation

 

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

 

Use of estimates and assumptions

 

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

 

Foreign currency translation and transaction

 

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 statement of income accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

 

Translation adjustments included in accumulated other comprehensive income amounted to $71,468 and $179,460 as of September 30, 2023 and December 31, 2022, respectively. The balance sheet amounts, with the exception of shareholders’ equity at September 30, 2023 and December 31, 2022 were translated at 7.30 RMB and 6.38 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 nine months ended September 30, 2023 and 2022 were 7.03 RMB and 6.61 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.

 

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.

 

Accounts receivable, net

 

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.

 

13

 

Prepayments

 

Prepayments are funds deposited or advanced to outside vendors for future inventory or services 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.

 

Plant and equipment

 

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

 

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

 

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

 

Intangible assets

 

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

 

    Useful Life
Software   5 years

 

Lease

 

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

 

The Company recognizes lease liabilities and corresponding right-of-use assets on the balance sheet for leases. Operating lease right- of-use assets 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.

 

14

 

Goodwill

 

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.

 

Impairment for long-lived assets

 

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.

 

Fair value measurement

 

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash, notes receivable, accounts receivable, other receivables, prepayments, accounts payable, other payables and accrued liabilities, customer deposits 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.

 

15

 

Customer deposits

 

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.

 

Revenue recognition

 

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

 

The core principle underlying the revenue recognition 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.

 

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

 

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

 

The Company’s disaggregate revenue streams from continuing operations are summarized as follows:

 

   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
                 
Software copyright  $
    -
   $
    -
   $150,000   $
   -
 
Total revenues  $
-
   $
-
   $150,000   $
-
 

 

16

 

Income taxes

 

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 is accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the 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 three months ended September 30, 2023 and 2022. As of September 30, 2023, the Company’s PRC tax returns filed for 2020, 2021 and 2022 remain subject to examination by any applicable tax authorities.

 

Earnings per share

 

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 three months ended September 30, 2023 and 2022, respectively. 824,000 of outstanding options were excluded from the diluted earnings per share calculation due to its antidilutive effect for the three months ended September 30, 2023 and 2022.

 

Reclassification

 

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

 

Recently accounting pronouncements

 

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

 

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. This guidance also requires certain disclosures for equity securities subject to contractual sale restrictions. The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This guidance is effective for fiscal years beginning after 15 December 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on the financial position, results of operations and cash flows.

 

17

 

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.

 

Note 3 – Business combination and restructuring

 

Highlight Media

 

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”). Pursuant to the share purchase agreement, the Company agreed to issue an aggregate of 9,000,000 shares of the Company’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, Highlight Media 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 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.

 

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 expenses.

 

18

 

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:

 

Total consideration at fair value  $2,250,000 

 

   Fair Value 
Cash  $47,498 
Other current assets   107,828 
Plant and equipment   1,205 
Other noncurrent assets   
-
 
Goodwill   2,121,947 
Total asset   2,278,478 
Accounts payable   14,170 
Taxes Payable   363 
Other Payable   13,945 
Total liabilities   28,478 
Net asset acquired  $2,250,000 

 

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

 

Wuge

 

On January 3, 2020, Tongrong WFOE entered into contractual arrangements with Wuge and its shareholders. The significant terms of these contractual arrangements are summarized in “Note 1 - Nature of business and organization” above. As a result, the Company classified Wuge as VIE.

 

On January 11, 2021, Makesi WFOE entered into a series of assignment agreements with Tongrong WFOE, Wuge and the shareholders of Wuge, pursuant to which Tongrong WFOE assign all its rights and obligations under the VIE agreements to Makesi WFOE. The VIE agreements and the assignment agreements granted 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 did not have any impact on Company’s consolidated financial statements.

 

On September 28, 2022, Makesi WFOE entered into a termination agreement with Wuge and the shareholders of Wuge to terminate the VIE agreements and to cancel the shares previously issued to the shareholders of Wuge, 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.

 

19

 

Yuanma

 

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

 

On June 26, 2023, GDC entered into a share purchase agreement with a buyer unaffiliated with the Company. Pursuant to the agreement, the Company agreed to sell and the buyer agreed to purchase all the issued and outstanding equity interest in TMSR HK. The purchase price for the transaction contemplated by the Agreement was $100,000. The sale of TMSR HK included the sale of Makesi WFOE and Yuanma. None of TMSR HK, Makesi WFOE or Yuanma had any assets, employees or operation. The sale of TMSR HK did not have any material impact on the Company’s consolidated financial statements.

 

Highlight Media

 

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

 

On February 27, 2023, Highlight WFOE entered into a series of assignment agreements with Makesi WFOE, Highlight Media and Highlight Shareholders, pursuant to which Makesi WFOE assign all its rights and obligations under the VIE agreements to Highlight WFOE. The VIE agreements and the assignment agreements granted Highlight WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Highlight Media, including absolute rights to control the management, operations, assets, property and revenue of Highlight Media. The assignment did not have any impact on Company’s 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. Makesi 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 prior to September 30, 2023.

 

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

 

20

 

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

 

   September 30,   December 31, 
   2023   2022 
Cash and cash equivalents   
      -
    215,880 
Accounts receivable, net   
-
    194,520 
Other receivables, net   
-
    78,293 
Prepayments   
-
    
-
 
Total current assets  $
-
   $488,693 
Plants and equipment   
-
    502 
Goodwill   
-
    2,190,485 
Total assets   
-
    2,679,680 
Current liabilities   
-
    333,784 
Non-current liabilities   
-
    
-
 
Total liabilities   
-
    333,784 
Net assets  $
-
   $2,345,896 
           
Accounts payable  $
-
   $116,105 
Other payables and accrued liabilities   
-
    13,469 
Other payables – related party   
-
    
-
 
Tax payables   
-
    195,732 
Customer Advances   
-
    8,478 
Wages payable   
-
    
-
 
Total current liabilities   
-
    333,784 
Lease liabilities – non-current   
-
    
-
 
Total liabilities  $
-
   $333,784 

 

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

 

    For the
Nine Months Ended
September 30,
 
    2023 
Operating revenues  $
-
 
Gross profit   
-
 
Income from operations   
-
 
Net loss  $
-
 

 

Note 5 – Accounts receivable

 

Accounts receivable consist of the following:

 

   September 30,
2023
   December 31,
2022
 
Accounts receivable  $150,000   $197,640 
Less: Allowance for doubtful accounts   -    (3,120)
Total accounts receivable, net  $150,000   $194,520 

 

21

 

Movement of allowance for doubtful accounts is as follows:

 

   September 30,
2023
   December 31,
2022
 
Beginning balance  $(3,120)  $- 
Addition   
-
    (3,120)
Disposal of Highlight Media   2,949    
-
 
Exchange rate effect   171    
-
 
Ending balance  $-   $(3,120)

 

Note 6 – Other receivables

 

   September 30,
2023
   December 31,
2022
 
Receivable from disposal of Wuge  $
-
   $948,000 
Receivable from disposal of Highlight Media   100,000    
-
 
Interest receivable from convertible notes   46,575    
-
 
Others   
-
    78,293 
Total other receivables, net  $146,575   $1,026,293 

 

The balance of $100,000 on September 30, 2023 is the consideration required to be received upon disposal of Highlight Media.

 

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 – Plant and equipment, net

 

Plant and equipment consist of the following:

 

  

September 30,
2023

  

December 31,
2022

 
Office equipment and furniture  $9,617   $10,039 
Subtotal   9,617    10,039 
Less: accumulated depreciation   (751)   (9,537)
Total  $8,866   $502 

 

Depreciation expense for the nine months ended September 30, 2023 and 2022 amounted to $751 and $33,192, respectively.

 

Note 8 – Intangible assets, net

 

Intangible assets consist of the following:

 

  

September 30,
2023

   December 31,
2022
 
Software  $3,250,000   $
     -
 
Subtotal   3,250,000    
-
 
Less: accumulated amortization   (162,500)   - 
Total  $3,087,500   $
          -
 

 

Amortization expense for the nine months ended September 30, 2023 and 2022 amounted to $162,500 and $98, respectively.

 

22

 

Note 9 – Goodwill

 

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

 

  Highlight
Media
   Total 
Balance as of December 31, 2022  $2,190,485   $2,190,485 
Impairment   (2,070,753)   (2,070,753)
Foreign currency translation adjustment   (119,732)   (119,732)
Balance as of September 30, 2023  $
-
   $
-
 

 

Note 10 – Related party balances and transactions

 

Related party balances

 

Prepaid expense – related party:

 

Name of related party  Relationship  September 30,
2023
   December 31,
2022
 
XIAO JIAN WANG  Chief Executive Officer of the Company  $100,000   $
        -
 
Total     $100,000   $
-
 

 

The above balances represent travel advances to the Chief Executive Officer of the Company.

 

Other payables – related parties:

 

Name of related party  Relationship  September 30,
2023
   December 31,
2022
 
Shanghai Highlight Asset Management Co. LTD  A company in which shareholder hold shares  $
-
   $195,732 
Total     $
                 -
   $195,732 

 

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

 

Note 11 – Long-term investment, net

 

The Company’s long-term investments consisted of the following:  

 

  

September 30,

2023

   December 31,
2022
 
Available-for-sale debt investments  $2,500,000   $
-
 
Total  $2,500,000   $
             -
 

 

As of September 30, 2023, the Company subscribed to a total of $2,500,000 in convertible notes of Liquid Marketplace Corp and DigiTrax Entertainment Inc.

 

23

 

Note 12 – Leases

 

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

 

   September 30,
2023
   December 31,
2022
 
Weighted average discount rate:        
Operating lease   5.25 years    N/A 
           
Weighted average discount rate:          
Operating lease   4.24%   N/A 

 

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

 

  

September 30,

2023

   December 31,
2022
 
Operating lease right-of-use assets, net        
Operating lease   1,683,518    
    -
 
           
Lease liabilities          
Current portion of operating lease liabilities   324,162    
-
 
Non-current portion of operating lease liabilities   1,388,238    
-
 
    1,712,400    
-
 

 

Future lease payments under operating leases as of September 30, 2023 were as follows:

 

   Operating Leases 
     
FY2024   344,768 
FY2025   383,632 
FY2026   391,305 
FY2027   399,131 
FY2028   407,114 
Total lease payments   1,925,949 
Less: imputed interest   213,549 
Present value of lease liabilities (1)   1,712,400 

 

(1)Present value of future operating lease payments consisted of current portion of operating lease liabilities and non-current portion of operating lease liabilities, amounting to $324,162 and $1,388,238 for the nine months ended September 30, 2023, respectively.

 

 

24

 

Note 13 – Taxes

 

Income tax

 

United States

 

GDC was organized in the state of Delaware in April 2015 and the nine months ended September 30, 2023 amounted to nil. As of September 30, 2023, GDC’s net operating loss carry forward for United States income taxes was approximately $0. 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 is no impact of GILTI for the nine months ended September 30, 2023 and 2022, 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 is exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.

 

PRC

 

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

 

25

 

Deferred tax assets

 

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:

 

   September 30,
2023
   December 31,
2022
 
Net operating losses carried forward – U.S.  $276,982   $4,574,581 
Valuation allowance   (276,982)   (4,574,581)
Deferred tax assets, net  $
-
   $
-
 

 

Value added tax

 

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:

 

  

September 30,
2023

   December 31,
2022
 
VAT taxes payable  $
        -
   $8,478 
Other taxes payable   
-
    
-
 
Total  $
-
   $8,478 

 

Note 14 – Concentration of risk

 

Credit risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. As of September 30, 2023 and December 31, 2022, $1,143,611 and $215,880 and were deposited with various financial institutions located in the PRC, respectively. As of September 30, 2023 and December 31, 2022, $503,537 and $173,228 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.

 

26

 

Note 15 – Equity

 

Restricted net assets

 

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 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 Highlight 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, 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, 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 Highlight WFOE and Highlight Media from transferring funds to Highlight HK in the form of dividends, loans and advances. As of September 30, 2023 and December 31, 2022, amounts restricted are the net assets of Highlight WFOE and Highlight Media which amounted to nil and $492,315, respectively.

 

Common stock

 

On May 4, 2023, the Company sold an aggregate of 310,168 shares of common stock of the Company, par value $0.0001 per share, and pre-funded warrants to purchase up to an aggregate of 844,351 shares of common stock are sold to certain purchasers, pursuant to a securities purchase agreement, dated May 1, 2023, as amended on May 16, 2023. The purchase price of each share of common stock is $8.35. The purchase price of each pre-funded warrant is $8.349, which equals the price per share of common stock being sold to the public in this offering, minus $0.001. The RD Offering is being made pursuant to a shelf registration statement (No. 333-254366) on Form S-3, which was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on March 26, 2021, and related prospectus supplement.

 

27

 

In the concurrent PIPE offering, the Company sold warrants to purchase up to 1,154,519 shares of common stock to the Purchasers, pursuant to a private warrant securities purchase agreement, dated May 1, 2023. In connection with the offering, the Company paid Univest Securities, LLC, the placement agent, a total cash fee equal to 7.0% of the aggregate gross proceeds received in the offering, a non-accountable expense allowance equal to 1% of the aggregate gross proceeds, and reimbursement for certain out-of-pocket accountable expenses incurred in this offering in the amount of $150,000. In addition, the Company issued to the placement agent warrants to purchase up to 115,452 shares of common stock at an exercise price of $10.02 per share, which represents 120% of the offering price of each share. The net proceeds from the Offering, after deducting placement agent discounts and commissions and estimated offering expenses payable by the Company, are approximately $8.5 million (assuming the warrants are not exercised). The Company used the net proceeds from the Offering for working capital and general corporate purposes.

 

On June 22, 2023, the Company entered into a software purchase agreement with Northeast Management LLC, a seller unaffiliated with the Company. Pursuant to the agreement, the Company agreed to purchase and the seller agreed to sell all of seller’s right, title, and interest in and to the certain software. The purchase price of the software shall be $750,000, payable in the form of issuance of 187,500 shares of common stock of the Company, valued at $4.00 per share. The Company plans to use the software to develop video games. On June 26, 2023, the Company issued the shares to the seller’s designees and the transaction was completed.

 

Warrants and options

 

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 expired on 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.

 

28

 

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.

 

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 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.

 

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.

 

29

 

On May 1, 2023, the Company entered into a placement agency agreement, as amended on May 16, 2023 (the “Placement Agency Agreement”), with Univest Securities, LLC (the “Placement Agent”). Pursuant to the Placement Agency Agreement, the Placement Agent agrees to use its reasonable best efforts to sell the Company’s common stock in a registered direct offering (the “RD Offering”), and a concurrent private placement (the “PIPE Offering”, together with the RD Offering, collectively the “Offering”). The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of securities.

 

In the RD Offering, an aggregate of 310,168 shares of common stock (the “Common Shares”) of the Company, par value $0.0001 per share, and pre-funded warrants to purchase up to an aggregate of 844,351 shares of common stock (the “Pre-Funded Warrants”, and the common stock underlying such warrants, the “Pre-Funded Warrant Shares”) are sold to certain purchasers (the “Purchasers”), pursuant to a securities purchase agreement, dated May 1, 2023, as amended on May 16, 2023 (the “RD Securities Purchase Agreement”). The purchase price of each Common Share is $8.35. The purchase price of each Pre-funded Warrant is $8.349, which equals the price per Common Share being sold to the public in the Offering, minus $0.001. The RD Offering is being made pursuant to a shelf registration statement (No. 333-254366) on Form S-3, which was declared effective by the U.S. Securities and Exchange Commission on March 26, 2021, and related prospectus supplement.

 

In connection with the Pre-Funded Warrant Shares, “Pre-funded” refers to the fact that the purchase price of the warrants in the offering includes almost the entire exercise price that will be paid under the Pre-funded Warrants, except for a nominal remaining exercise price of $0.001. The purpose of the Pre-funded Warrants is to enable Purchasers that may have restrictions on their ability to beneficially own more than 4.99% (or, upon election of the holder, 9.99%) of the Company’s outstanding common stock following the consummation of the offering the opportunity to make an investment in the Company without triggering their ownership restrictions, by receiving Pre-funded Warrants in lieu of the Company’s common stock which would result in such ownership of more than 4.99% (or 9.99%), and receive the ability to exercise their option to purchase the shares underlying the Pre-funded Warrants at such nominal price at a later date. In the RD Offering, each Pre-funded Warrant is exercisable for one share of our common stock, with an exercise price equal to $0.001 per share, at any time that the Pre-funded Warrant is outstanding. The Pre-funded Warrants will be exercisable immediately after issuance and will expire five (5) years from the date of issuance. The holder of a Pre-funded Warrant will not be deemed a holder of our underlying common stock until the Pre-funded Warrant is exercised.

 

In the concurrent PIPE Offering, warrants to purchase up to 1,154,519 shares of common stock (the “Unregistered Warrants”, and the common stock underlying such warrants, the “Unregistered Warrant Shares”) are also sold to the Purchasers, pursuant to a private warrant securities purchase agreement, dated May 1, 2023. The Unregistered Warrants are exercisable immediately after issuance and will expire five (5) years from the date of issuance. The Exercise Price of the Unregistered Warrants is $8.35, subject to adjustment as provided in the form of Unregistered Warrants.

 

The Company also paid the Placement Agent a total cash fee equal to 7.0% of the aggregate gross proceeds received in the Offering and a non-accountable expense allowance equal to 1% of the aggregate gross proceeds. The Placement Agent were also reimbursed for certain out-of-pocket accountable expenses incurred in this offering up to $150,000. The Placement Agent also received warrants to purchase up to 115,452 shares of common stock (equal to 5.0% of the aggregate number of Common Shares, Pre-Funded Warrant Shares, and the Unregistered Warrant Shares) at an exercise price of $10.02 per share, which represents 120% of the offering price of each Common Share. The Placement Agent’s warrants will have substantially the same terms as the Unregistered Warrants.

 

The summary of warrant activity is as follows:  

 

   Warrants   Exercisable
Into Number of
   Weighted Average Exercise   Average Remaining Contractual 
   Outstanding   Shares   Price   Life 
December 31, 2022   4,539,674      151,323    172.5    0.10 
Granted/Acquired   2,114,322    844,351   $8.53    4.63 
Expired   164,675    5,488   $172.5    0.10 
Exercised   844,351    844,351   0.001    
-
 
September 30, 2023   5,644,970    145,835   $25.03    4.34 

 

The summary of option activity is as follows:

 

   Options   Exercisable
Into Number of
   Weighted Average Exercise   Average Remaining Contractual 
   Outstanding   Shares   Price   Life 
December 31, 2022   824,000    27,467   $150.00    0.10 
Granted/Acquired   
-
    
-
   $
-
    
-
 
Expired   824,000    27,467   $150.00    0.10 
Exercised   
-
    
-
    
-
    
-
 
September 30, 2023   -    -   $-    
-
 

 

30

 

Note 16 – Commitments and contingencies

 

Contingencies

 

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 17 – 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 are Highlight Media (prior to September 30, 2023) and AI Catalysis. The Company’s consolidated results of operations and consolidated financial position from continuing operations are almost all attributable to Highlight Media and AI Catalysis; accordingly, management believes that the consolidated balance sheets and statement of operations provide the relevant information to assess Highlight Media and AI Catalysis’s performance.

The following represents assets by division as of:

 

Total assets as of 

September 30,

2023

  

December 31,

2022

 
Highlight Media  $
-
   $489,195 
SH Xianzhui   3,871,388    
-
 
GDC, AI Catalysis, Citi Profit BVI , TMSR HK , Highlight HK, Highlight WFOE and Makesi WFOE   10,034,903    3,311,713 
Total Assets  $13,906,291   $3,800,908 

 

   For the Nine Months Ended
September 30,
 
Total revenues of  2023   2022 
Highlight Media  $
                  -
   $
                 -
 
SH Xianzhui          
GDC, AI Catalysis, Citi Profit BVI , TMSR HK , Highlight HK, Highlight WFOE and Makesi WFOE   150,000    
-
 
Total revenues  $150,000   $
-
 

 

31

 

Note 18 – Discontinued Operations

 

The following depicts the result of operations for the discounted operations of Highlight Media for the nine months ended September 30, 2023 and Wuge for the nine months ended September 30, 2022, respectively.

 

   For the Nine Months Ended
September 30,
 
   2023   2022 
REVENUES        
Enterprise brand management services   165,993    
-
 
Wuge digital door signs   
-
    7,616,615 
TOTAL REVENUES   165,993    7,616,615 
           
COST OF REVENUES          
Enterprise brand management services   114,247    
-
 
Wuge digital door signs   
-
    5,527,950 
TOTAL COST OF REVENUES   114,247    5,527,950 
GROSS PROFIT   51,746    2,088,665 
           
OPERATING EXPENSES          
Selling, general and administrative   113,552    1,605,935 
TOTAL OPERATING EXPENSES   113,552    1,605,935 
           
(LOSS) INCOME FROM OPERATIONS   (61,806)   482,730 
           
OTHER INCOME (EXPENSE)          
Interest income   49    65,251 
Interest expense   (248)   (935)
Other income, net   709    70,830 
Total other expense, net   510    135,146 
           
(LOSS) INCOME BEFORE INCOME TAXES FROM CONTINUING OPERATIONS   (61,296)   617,876 
PROVISION FOR INCOME TAXES   112    314,787 
           
(LOSS) INCOME FROM CONTINUING OPERATIONS   (61,408)   303,089 
           
Net loss attributable to noncontrolling interest   
-
    
-
 
(LOSS) INCOME FROM CONTINUING OPERATIONS OF GD CULTURE GROUP LIMITED   (61,408)   303,089 

 

Note 19 – Subsequent events

 

(i) Investment in JV

 

On October 27, 2023, the Company entered into an equity purchase agreement with Highlight WFOE and Beijing Hehe, which was amended on November 10, 2023 (such equity purchase agreement, as amended, the “Agreement” for purpose of this section “Investment in JV”), pursuant to which the Highlight WFOE agreed to purchase 13.3333% equity interest in SH Xianzhui from Beijing Hehe and the Company agreed to issue 400,000 shares of common stock of the Company, valued at $2.7820 per share, the average closing bid price of the common stock of GDC as of the five trading days immediately preceding the date of the Agreement, to Beijing Hehe or its assigns. The closing of the transaction shall take place within thirty (30) days from the execution of the Agreement. The Agreement is effective for thirty (30) days from the date of the Agreement, which can be extended for additional thirty (30) days upon all parties’ written agreement. The Company or Highlight WFOE may terminate the Agreement at any time with a three (3) day advance written notice to Beijing Hehe.

 

32

 

(ii) November 2023 Registered Direct Offering

 

On November 1, 2023, the Company entered into a placement agency agreement (the “Placement Agency Agreement”), with Univest Securities, LLC (the “Placement Agent” or “Univest”). Pursuant to the Placement Agency Agreement, the Placement Agent agrees to use its reasonable best efforts to sell the Company’s common stock (the “Common Stock”) in a registered direct offering (the “Offering”). The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of securities.

 

In the Offering, (i) an aggregate of 1,436,253 shares of common stock (the “Common Shares”) of the Company, par value $0.0001 per share, (ii) pre-funded warrants to purchase up to an aggregate of 1,876,103 shares of common stock (the “Pre-Funded Warrants”, and the common stock underlying such warrants, the “Pre-Funded Warrant Shares”), and (iii) registered warrants to purchase up to an aggregate of 3,312,356 shares of common stock (the “Registered Warrants”, and the common stock underlying such warrants, the “Registered Warrant Shares”) are sold to certain purchasers (the “Purchasers”), pursuant to a securities purchase agreement, dated October 31, 2023 (the “Securities Purchase Agreement”). The purchase price of each Common Share is $3.019. The purchase price of each Pre-funded Warrant is $3.018, which equals the price per Common Share being sold in this Offering, minus $0.001. The Pre-funded Warrants will be exercisable immediately after issuance and will expire five (5) years from the date of issuance. The Registered Warrants will be exercisable immediately and will expire five (5) years from the date of issuance.

 

The Offering is being made pursuant to a shelf registration statement (No. 333-254366) on Form S-3, which was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on March 26, 2021, and related prospectus supplement.

 

The net proceeds from the Offering, after deducting placement agent discounts and commissions and estimated offering expenses payable by the Company, are approximately $9.05 million (assuming the Registered Warrants are not exercised). The Company intends to use the net proceeds from the Offering for working capital and general corporate purposes.

 

Pursuant to the Placement Agency Agreement, the Company has agreed to pay the Placement Agent a total cash fee equal to 7.0% of the aggregate gross proceeds received in the Offering. The Company also agreed to reimburse the Placement Agent certain out-of-pocket accountable expenses incurred in this Offering up to $150,000.

 

In concurrent with the Offering, on November 1, 2023, the Company entered into certain warrant exchange agreements (the “Warrant Exchange Agreements”) with certain holders of warrants issued by the Company on May 16, 2023 in a private placement (the “Existing Warrants”), to purchase up to 1,154,519 shares of the Company’s Common Stock (the “Holders”). Pursuant to the Warrant Exchange Agreements, the Holders shall surrender the Existing Warrants, and the Company shall cancel the Existing Warrants and shall issue to Holders pre-funded warrants to purchase up to 577,260 shares of the Company’s Common Stock (the “Exchange Warrants”). The Exchange Warrants were issued to Holders on November 3, 2023 and the warrant exchange closed on the same day.

 

On November 17, 2023, the Company entered into an amendment to the Securities Purchase Agreement with the Purchasers, pursuant to which Exhibit B to the Securities Purchase Agreement (form of Registered Warrants) was deleted and replaced with an amended and restated the Form of Registered Warrant, to remove Section 2(b) Adjustment Upon Issuance of Common Stock and Section 2(e) Other Events.

 

The Registered Warrants that were issued to Purchasers under the Securities Purchase Agreement were returned to and cancelled by the Company on November 17, 2023. Concurrently, the Company issued amended and restated Registered Warrants to each Purchaser.

33

 

ITEM 2. 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 unaudited condensed financial statements, and the notes to those unaudited condensed 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, formerly known as JM Global Holding Company, TMSR Holding Company Limited and Code Chain New Continent Limited (“GDC” or the “Company”), focuses its business on three segments mainly through one of its subsidiaries, AI Catalysis Corp.: 1) AI-driven digital human creation and customization; 2) Live streaming and ecommerce and 3) Live Streaming Interactive Game. The company has relentlessly been focusing on serving its customers and creating value for them through the continual innovation and optimization of its products and services.

 

For AI-Driven Digital Human sector, the Company uses AI algorithms and software to generate realistic 3D or 2D digital human models. AI algorithms and machine learning models are used to simulate human characteristics, such as facial expressions, body movements, and even speech patterns. These models can be customized to create and personalize lifelike digital representations of humans. Customization may involve adjusting facial features, body proportions, skin textures, hair styles, clothing, and more. Once created and customized, digital humans find applications in a wide range of industries, including gaming, entertainment, advertising, education, and more. Depending on the specific industry and use case, the Company helps the customers to define the objectives to achieve with digital humans, choose the technology for character customization, then create unique aviators and deploy in the chosen platform.

 

34

 

For e-Commerce and Live Streaming sector, the Company applies Digital Human technology in live streaming e-commerce businesses. Livestream usage is taking off globally. The integration of cutting-edge AI digital human technologies and live streaming platforms will transform the way businesses, sellers and consumers engage in online commerce. Digital anchors can offer long-duration intelligent live broadcasting. It also supports customized avatars that perfectly adapt to different live streaming scenarios. The company has introduced online e-commerce businesses on TikTok.

 

For Live Streaming Interactive Game sector, the Company has launched a live-streamed game called "Trible Light." This game is owned by the company, and we independently operate it. Currently, the game is being livestreamed on TikTok (TikTok account: almplify001). In addition to "Trible Light," we have also introduced other licensed games on the same TikTok account, providing a diverse gaming experience for our players.

 

We generate our revenue primarily from: 1) Service revenue and advertising revenue from Digital Human Creation and Customization; 2) Products’ Sales revenue from social live streaming ecommerce business; and 3) Virtual paid gifts revenue from live streaming interactive gaming.

 

Our principal executive office is located at 810 Seventh Avenue, 22nd Floor, New York, NY 10019, and our telephone number is: +1-347-2590292.

 

Discontinued Business

 

Prior to September 28, 2022, we also conducted business through Wuge Network Games Co., Ltd. (“Wuge”). Makesi WFOE had a series of contractual arrangement with Wuge that established a VIE structure. For accounting purposes, Makesi WFOE was the primary beneficiary of Wuge. Accordingly, under U.S. GAAP, GDC treated Wuge as the consolidated affiliated entity and has consolidated Yuanma’s financial results in Wuge’s financial statements prior to September 28, 2022. 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 shareholders of Wuge to terminate the VIE agreements and to cancel the shares previously issued to the shareholders of Wuge, 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 June 26, 2023, we had a subsidiary TMSR HK, which owns 100% equity interest in Makesi WFOE. Makesi WFOE had a series of contractual arrangement with Yuanma that established a VIE structure. For accounting purposes, Makesi WFOE was the primary beneficiary of Yuanma. Accordingly, under U.S. GAAP, GDC treated Yuanma as the consolidated affiliated entity and has consolidated Yuanma’s financial results in GDC’s financial statements prior to June 26, 2023. On June 26, 2023, GDC entered into a share purchase agreement with a buyer unaffiliated with the Company. Pursuant to the agreement, the Company agreed to sell and the buyer agreed to purchase all the issued and outstanding equity interest in TMSR HK. The purchase price for the transaction contemplated by the Agreement was $100,000. The sale of TMSR HK included the sale of Makesi WFOE and Yuanma. None of TMSR HK, Makesi WFOE or Yuanma had any assets, employees or operation. The sale of TMSR HK did not have any material impact on the Company’s consolidated financial statements.

 

Prior to September 26, 2023, we also conducted business through Shanghai Highlight Media Co., Ltd. (“Highlight Media”). Highlight WFOE had a series of contractual arrangement with Highlight Media. For accounting purposes, Highlight WFOE was the primary beneficiary of Highlight Media. Accordingly, under U.S. GAAP, GDC treated Highlight Media as the consolidated affiliated entity and has consolidated Highlight Media’s financial results in GDC’s financial statements prior to September 26, 2023. Highlight Media was an integrated marketing service agency, focusing on enterprise brand management, crisis public relations, intelligent public opinion monitoring, media PR, financial and economic we-media operation, digital face application, large-scale exhibition services and other businesses. On September 26, 2023, Highlight WFOE entered into a termination agreement with Highlight Media and the shareholders of Highlight Media to terminate the VIE Agreements and sold the interest in the VIE Agreements for a purchase price of $100,000. As a result of such termination, the Company no longer treats Highlight Media as a consolidated affiliated entity or consolidates the financial results and balance sheet of Highlight Media in the Company’s consolidated financial statements under U.S. GAAP.

 

35

 

Recent Development

 

Change of Auditor

 

On October 9, 2023, the Company notified its independent registered public accounting firm, Enrome LLP, its decision to dismiss Enrome LLP as the Company’s auditor. On October 12, 2023, the Audit Committee and the Board of Directors of the Company approved the appointment of HTL International, LLC as its new independent registered public accounting firm to audit the Company’s financial statements.

 

Investment in SH Xianzhui

 

On August 10, 2023, Highlight WFOE, Beijing Hehe Property Management Co., Ltd. (“Beijing Hehe”), and a third party, established SH Xianzhui under the laws of the People’s Republic of China for social media marketing. Highlight WFOE owns 60% of the equity interest of SH Xianzhui, Beijing Hehe owns 20% of the equity interest of SH Xianzhui and the third party owns the remaining 20% of the equity interest of SH Xianzhui.

 

On October 27, 2023, the Company entered into an equity purchase agreement with Highlight WFOE and Beijing Hehe, which was amended on November 10, 2023 (such equity purchase agreement, as amended, the “Agreement” for purpose of this section “Investment in SH Xianzhui”), pursuant to which the Highlight WFOE agreed to purchase 13.3333% equity interest in SH Xianzhui from Beijing Hehe and the Company agreed to issue 400,000 shares of common stock of the Company, valued at $2.7820 per share, the average closing bid price of the common stock of GDC as of the five trading days immediately preceding the date of the Agreement, to Beijing Hehe or its assigns. The closing of the transaction shall take place within thirty (30) days from the execution of the Agreement. The Agreement is effective for thirty (30) days from the date of the Agreement, which can be extended for additional thirty (30) days upon all parties’ written agreement. The Company or Highlight WFOE may terminate the Agreement at any time with a three (3) day advance written notice to Beijing Hehe.

 

November 2023 Registered Direct Offering

 

On November 1, 2023, the Company entered into a placement agency agreement (the “Placement Agency Agreement”), with Univest Securities, LLC (the “Placement Agent” or “Univest”). Pursuant to the Placement Agency Agreement, the Placement Agent agrees to use its reasonable best efforts to sell the Company’s common stock (the “Common Stock”) in a registered direct offering (the “Offering”). The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of securities.

 

In the Offering, (i) an aggregate of 1,436,253 shares of common stock (the “Common Shares”) of the Company, par value $0.0001 per share, (ii) pre-funded warrants to purchase up to an aggregate of 1,876,103 shares of common stock (the “Pre-Funded Warrants”, and the common stock underlying such warrants, the “Pre-Funded Warrant Shares”), and (iii) registered warrants to purchase up to an aggregate of 3,312,356 shares of common stock (the “Registered Warrants”, and the common stock underlying such warrants, the “Registered Warrant Shares”) are sold to certain purchasers (the “Purchasers”), pursuant to a securities purchase agreement, dated October 31, 2023 (the “Securities Purchase Agreement”). The purchase price of each Common Share is $3.019. The purchase price of each Pre-funded Warrant is $3.018, which equals the price per Common Share being sold in this Offering, minus $0.001. The Pre-funded Warrants will be exercisable immediately after issuance and will expire five (5) years from the date of issuance. The Registered Warrants will be exercisable immediately and will expire five (5) years from the date of issuance.

 

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The Offering is being made pursuant to a shelf registration statement (No. 333-254366) on Form S-3, which was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on March 26, 2021, and related prospectus supplement.

  

The net proceeds from the Offering, after deducting placement agent discounts and commissions and estimated offering expenses payable by the Company, are approximately $9.05 million (assuming the Registered Warrants are not exercised). The Company intends to use the net proceeds from the Offering for working capital and general corporate purposes.

 

Pursuant to the Placement Agency Agreement, the Company has agreed to pay the Placement Agent a total cash fee equal to 7.0% of the aggregate gross proceeds received in the Offering. The Company also agreed to reimburse the Placement Agent certain out-of-pocket accountable expenses incurred in this Offering up to $150,000.

 

In concurrent with the Offering, on November 1, 2023, the Company entered into certain warrant exchange agreements (the “Warrant Exchange Agreements”) with certain holders of warrants issued by the Company on May 16, 2023 in a private placement (the “Existing Warrants”), to purchase up to 1,154,519 shares of the Company’s Common Stock (the “Holders”). Pursuant to the Warrant Exchange Agreements, the Holders shall surrender the Existing Warrants, and the Company shall cancel the Existing Warrants and shall issue to Holders pre-funded warrants to purchase up to 577,260 shares of the Company’s Common Stock (the “Exchange Warrants”). The Exchange Warrants were issued to Holders on November 3, 2023 and the warrant exchange closed on the same day.

 

On November 17, 2023, the Company entered into an amendment to the Securities Purchase Agreement with the Purchasers, pursuant to which Exhibit B to the Securities Purchase Agreement (form of Registered Warrants) was deleted and replaced with an amended and restated the Form of Registered Warrant, to remove Section 2(b) Adjustment Upon Issuance of Common Stock and Section 2(e) Other Events.

 

The Registered Warrants that were issued to Purchasers under the Securities Purchase Agreement were returned to and cancelled by the Company on November 17, 2023. Concurrently, the Company issued amended and restated Registered Warrants to each Purchaser.

 

Key Factors that Affect Operating Results

 

Competition

 

E-commerce and live streaming is a competitive industry. Our competition varies and includes content creators on TikTok and other social media platform. Each of these competitors competes with us based on quality of content, activeness and responsiveness on the social placement, product selection, product quality, customer service, price, store format, location, or a combination of these factors. Some of these competitors may have been in business longer, may have more experience, or may have greater financial or marketing resources than us. As competition intensifies, our results of operations may be negatively impacted through a loss of sales and decrease in market share.

 

Retention of Key Management Team Members

 

Our management team comprises executives with extensive experience in technology and content creation. The management team has led us to take leaps in deploying AI technology in live-steaming, e-commerce, gaming and other sectors. The loss of any of our key executive team member might affect our business and our result of operation.

 

Our Ability to Grow Market Presence and Penetrate New Markets

 

We are still in an early development stage. We intend to expand our presence on social media to increase the market presence. If we cannot grow market presence and penetrate new markets in an effective and cost-efficient way, our results of operation will be negatively impacted.

 

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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 nine months ended September 30, 2023 and 2022. 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

 

Three Months Ended September 30, 2023 vs. September 30, 2022

 

                      Percentage  
    2023     2022     Change     Change  
Revenues                        
Enterprise brand management     -       -       -       N/A %
Software copyright     -       -       -       N/A %
                                 
Total revenues     -       -       -       N/A %
                                 
Cost of Revenues                                
Enterprise brand management service     -       -       -       N/A %
Software copyright     -       -       -       N/A %
                                 
Total cost of revenues     -       -       -       N/A %
                                 
Gross profit     -       -       -       N/A %
Operating expenses     3,667,011       64,041       3,602,970       5,626.0 %
Loss from operations     (3,667,011 )     (64,041 )     (3,602,970 )     5,626.0 %
Other income, net     46,839       -       46,839       100.0 %
Loss before income tax from continuing operations     (3,620,172 )     (64,041 )     (3,556,131 )     5,552.9 %
Provision for income taxes     -       -       -       N/A %
Loss from continuing operations     (3,620,172 )     (64,041 )     (3,556,131 )     5,552.9 %
Net loss attributable to noncontrolling interest     (102,485 )     -       (102,485 )     (100.0 )%
Loss from continuing operations attributable to GD Culture Group Limited     (3,517,687 )     (64,041 )     (3,453,646 )     5,392.9 %
Discontinued operations:                                
Loss from discontinued operations     (10,358 )     -       (10,358 )     (100.0 )%
Loss on disposal, net of taxes     (230 )     (4,027,930 )     4,027,700       (100.0 )%
Net Loss     (3,528,275 )     (4,091,971 )     563,696       (13.8 )%

 

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Operating Expenses

 

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

 

SG&A expenses increased by approximately $3.6 million from approximately $0.1 million for the three months ended September 30, 2022 to approximately $3.7 million for the three months ended September 30, 2023. The increase was mainly due to the combined impact of (i) the reduction of impairment of prepayments, (ii) increase in professional service fees incurred for industry research and analysis and daily operation management, (iii) the expansion of our administrative associated personnel cost, and (iv) increase in operating and lease expenses for offices.

 

Other Income, Net

 

The Company’s other income increased by approximately $47 thousand during the three months ended September 30, 2023, compared to nil for the three months ended September 30, 2022. The increase was due to the accrued interest for the investment in convertible notes.

 

Loss from Continuing Operations

 

As a result of the foregoing, loss from continuing operations for the three months ended September 30, 2023 was approximately $3.6 million, an increase of approximately 5552.9%, from approximately loss from continuing operations of $0.1 million for the three months ended September 30, 2022.

 

Net Loss

 

The Company’s net loss decreased by approximately $0.6 million, or 13.8%, to approximately $3.5 million net loss for the three months ended September 30, 2023, from approximately $4.1 million net loss for the same period in 2022. The decrease was mainly due to the combined impact of (i) the reduction of impairment of prepayments, (ii) increase in professional service fees incurred for industry research and analysis and daily operation management, (iii) the expansion of our administrative associated personnel cost, (iv) increase in operating and lease expenses for offices the reduction of impairment of prepayments, and (v) loss on disposal of Wuge in 2022.

 

Nine Months Ended September 30, 2023 vs. September 30, 2022

 

               Percentage 
   2023   2022   Change   Change 
Revenues                
Enterprise brand management   -    -    -    N/A%
Software copyright   150,000    -    150,000    100.0%
                     
Total revenues   150,000    -    150,000    100.0%
                     
Cost of Revenues                    
Enterprise brand management service   -    -    -    N/A% 
Software copyright   -    -    -    N/A% 
                     
Total cost of revenues   -    -    -    N/A% 
                     
Gross profit   150,000    -    150,000    100.0%
Operating expenses   3,942,947    19,749,408    (15,806,461)   (80.0)%
Loss from operations   (3,792,947)   (19,749,408)   15,956,461    (80.8)%
Other income, net   147,018    -    147,018    100.0%
Loss before income tax from continuing operations   (3,645,929)   (19,749,408)   16,103,479    (81.5)%
Provision for income taxes   -    -    -    N/A% 
Loss from continuing operations   (3,645,929)   (19,749,408)   16,103,479    (81.5)%
Net loss attributable to noncontrolling interest   (102,485)   -    (102,485)   (100.0)%
Loss from continuing operations attributable to GD Culture Group Limited   (3,543,444)   (19,749,408)   16,205,964    (82.1)%
Discontinued operations:                    
Loss from discontinued operations   (61,408)   303,089    (364,497)   (120.3)%
Loss on disposal, net of taxes   (230)   (4,027,930)   4,027,700    (100.0)%
Net Loss   (3,605,082)   (23,474,249)   19,869,167    (84.6)%

  

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Revenues

 

The Company’s revenue consists of software copyright. Total revenues increased by $0.2 million, compared to nil for the nine months ended September 30, 2022. The increase was mainly due to the start of operation of AI Catalysis.

 

Gross Profit

 

The Company’s gross profit increased by $0.2 million, during the nine months ended September 30, 2023, compared to nil for the nine months ended September 30, 2022. The increase was due to the start of operation of AI Catalysis.

 

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 $15.8 million from approximately $19.7 million for the nine months ended September 30, 2022 to approximately $3.9 million for the nine months ended September 30, 2023. The decrease was mainly due to the combined impact of (i) the reduction of impairment of prepayments, (ii) increase in professional service fees incurred for industry research and analysis and daily operation management, (iii) the expansion of our administrative associated personnel cost, (iv) increase in operating and lease expenses for offices, and (v) the reduction of impairment of goodwill.

 

Other Income, Net

 

The Company’s other income increased by approximately $147 thousand during the nine months ended September 30, 2023, compared to nil for the nine months ended September 30, 2022. The increase was due to the accrued interest for the investment in convertible notes.

 

Loss from Continuing Operations

 

As a result of the foregoing, loss from continuing operations for the nine months ended September 30, 2023 was approximately $3.6 million, a decrease of approximately $16.1 million, or approximately 81.5%, from approximately loss from operations of $19.7 million for the nine months ended September 30, 2022. The decrease was mainly due to the combined impact of (i) the reduction of impairment of prepayments, (ii) increase in professional service fees incurred for industry research and analysis and daily operation management, (iii) the expansion of our administrative associated personnel cost, (iv) increase in operating and lease expenses for offices, and (v) the reduction of impairment of goodwill.

 

Net Loss

 

The Company’s net loss decreased by approximately $19.9 million, or 84.6%, to approximately $3.6 million net loss for the nine months ended September 30, 2023, from approximately $23.5 million net loss for the same period in 2022. The decrease was mainly due to the combined impact of (i) the reduction of impairment of prepayments, (ii) increase in professional service fees incurred for industry research and analysis and daily operation management, (iii) the expansion of our administrative associated personnel cost, (iv) increase in operating and lease expenses for offices, and (v) the reduction of impairment of goodwill.

 

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Critical Accounting Policies and Estimates

 

The preparation of the unaudited condensed 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 unaudited condensed 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 unaudited condensed consolidated financial statements.

 

Cash and cash equivalents

 

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.

 

Investments

 

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.

 

Accounts receivable, net

 

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.

 

Prepayments

 

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.

 

Fair value measurement

 

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by 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.

 

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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.

 

Revenue recognition

 

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of January 1, 2018. This did not result in an adjustment to retained earnings upon adoption of this new guidance as the Company’s revenue, other than 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.

 

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 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.

 

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Gross versus Net Revenue Reporting

 

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 proceeds 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 September 30, 2023, our net working capital was approximately $6.3 million and is expected to continue to generate cash flow by operations from the acquisitions of new companies 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.

 

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The following summarizes the key components of the Company’s cash flows for the nine months ended September 30, 2023 and 2022. 

 

    For the Nine Months Ended
September 30,
 
    2023     2022  
Net cash used in by operating activities   $ (6,465,350 )   $ (966,745 )
Net cash used in investing activities     (5,009,617 )     (12,275,607 )
Net cash provided by financing activities     12,733,759       -  
Effect of exchange rate change on cash     (752 )     (1,095,699 )
Net change in cash   $ 1,258,040     $ (14,338,051 )

 

As of September 30, 2023 and December 31, 2022, the Company had cash in the amount of $1.6 million and $0.4 million, respectively. As of September 30, 2023 and December 31, 2022, $1.1 million and $0.2 million and were deposited with various financial institutions located in the PRC, respectively. As of September 30, 2023 and December 31, 2022, $0.5 million and $0.2 million were deposited with one financial institution located in the United States, respectively.

 

Operating activities

 

Net cash used in operating activities was approximately $6.5 million for the nine months ended September 30, 2023, as compared to approximately $1.0 million net cash used in operating activities for the September 30, 2022. Net cash used in operating activities was mainly due to the increase of approximately $4.6 million of prepayments, the increase of $0.1 million of prepaid expense-related party, the decrease of approximately $0.2 million of other payables-related parties, and the increase of approximately $0.1 million of customer deposits.

 

Investing activities

 

Net cash used in investing activities was $5.0 million for the nine months ended September 30, 2023, as compared to approximately $12.3 million net cash used in investing activities for the nine months ended September 30, 2022. Net cash used in investing activities was mainly due to the purchase of intangible assets with the amount of $2.5 million and investment in convertible notes of Liquid Marketplace Corp and DigiTrax Entertainment Inc. with the amount of $2.5 million.

 

Financing activities

 

Net cash provided by financing activities was $12.7 million for the nine months ended September 30, 2023, as compared to nil net cash used in financing activities for the nine months ended September 30, 2022. Net cash provided by financing activities was mainly due to the increase of approximately $8.6 million of issuance of common stock and contribution by noncontrolling shareholder with the amount of $4.1 million.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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.

 

45

 

ITEM 4. 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.

 

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.

 

46

 

PART II — OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

Investing in our common stock involves a high degree of risk. You should carefully consider the information included in this Quarterly Report on Form 10-Q and the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 before making an investment in our common stock. Our business, financial condition, results of operations, or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our common stock could decline and you could lose all or part of your investment. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There are no material changes to the risk factors described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below.

 

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

 

On August 10, 2023, Highlight WFOE, Beijing Hehe, and a third party, established Sha SH Xianzhui under the laws of the People’s Republic of China for social media marketing. Highlight WFOE owns 60% of the equity interest of SH Xianzhui, Beijing Hehe owns 20% of the equity interest of the Joint Venture and the third party owns the remaining 20% of the equity interest of the Joint Venture.

 

On October 27, 2023, the Company entered into an equity purchase agreement with Highlight WFOE and Beijing Hehe, which was amended on November 10, 2023 (such equity purchase agreement, as amended, the “Agreement” for purpose of this section), pursuant to which the Highlight WFOE agreed to purchase 13.3333% equity interest in SH Xianzhui from Beijing Hehe and the Company agreed to issue 400,000 shares of common stock of the Company, valued at $2.7820 per share, the average closing bid price of the common stock of GDC as of the five trading days immediately preceding the date of the Agreement, to Beijing Hehe or its assigns. The closing of the transaction shall take place within thirty (30) days from the execution of the Agreement. The Agreement is effective for thirty (30) days from the date of the Agreement, which can be extended for additional thirty (30) days upon all parties’ written agreement. The Company or Highlight WFOE may terminate the Agreement at any time with a three (3) day advance written notice to Beijing Hehe.

 

As of the date of this report, the transaction has not been completed and such shares have not been issued.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

47

 

ITEM 6. EXHIBITS

 

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

Exhibit
Number
  Description
31.1   Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2   Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1   Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
32.2   Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
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).

 

48

 

SIGNATURES

 

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  GD CULTURE GROUP LIMITED
     
Date: November 20, 2023 By: /s/ Xiaojian Wang
  Name:  Xiaojian Wang
  Title: Chief Executive Officer, President and
    Chairman of the Board
     
Date: November 20, 2023 By: /s/ Zihao Zhao
  Name:  Zihao Zhao
  Title: Chief Financial Officer and Secretary
    (Principal Financial Officer and
Principal Accounting Officer)

 

 

 

49

 

 

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EXHIBIT 31.1

 

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Xiao Jian Wang, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the three and nine months’ periods ended September 30, 2023 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;
     
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;
     
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:
     
  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:
   
  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.

 

Date: November 20, 2023 By: /s/ Xiao Jian Wang
   

Xiao Jian Wang

    Chief Executive Officer, President and
    Chairman of the Board
    (Principal Executive Officer)

EXHIBIT 31.2

 

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Zihao Zhao, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the three and nine months’ periods ended September 30, 2023 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;
     
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;
     
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:
     
  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:
   
  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.

 

Date: November 20, 2023 By: /s/ Zihao Zhao
    Zihao Zhao
    Chief Financial Officer
    (Principal Financial and Chief Accounting Officer)

 

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

SECTION 906 OF SARBANES-OXLEY ACT OF 2002

 

I, Xiao Jian Wang, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

  1. The Quarterly Report on Form 10-Q of GD Culture Group Limited. (the “Company”) for the quarterly period ended September 30, 2023 (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.

 

Date: November 20, 2023 By: /s/ Xiao Jian Wang
    Xiao Jian Wang
    Chief Executive Officer, President and
    Chairman of the Board
    (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

 

CERTIFICATION PURSUANT TO

SECTION 906 OF SARBANES-OXLEY ACT OF 2002

  

I, Zihao Zhao, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

  1. The Quarterly Report on Form 10-Q of GD Culture Group Limited (the “Company”) for the quarterly period ended September 30, 2023 (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.

 

Date: November 20, 2023 By: /s/ Zihao Zhao
    Zihao Zhao
   

Chief Financial Officer

    (Principal Financial and Chief 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.

v3.23.3
Document And Entity Information - shares
9 Months Ended
Sep. 30, 2023
Nov. 20, 2023
Document Information Line Items    
Entity Registrant Name GD CULTURE GROUP LIMITED  
Trading Symbol GDC  
Document Type 10-Q  
Current Fiscal Year End Date --12-31  
Entity Common Stock, Shares Outstanding   4,489,816
Amendment Flag false  
Entity Central Index Key 0001641398  
Entity Current Reporting Status Yes  
Entity Filer Category Non-accelerated Filer  
Document Period End Date Sep. 30, 2023  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus Q3  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 001-37513  
Entity Incorporation, State or Country Code NV  
Entity Tax Identification Number 47-3709051  
Entity Address, Address Line One 22F - 810  
Entity Address, Address Line Two Seventh Avenue  
Entity Address, City or Town New York  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10019  
City Area Code +1-347-  
Local Phone Number 2590292  
Title of 12(b) Security Common Stock, par value $0.0001  
Security Exchange Name NASDAQ  
Entity Interactive Data Current Yes  
v3.23.3
Consolidated Balance Sheets (Unaudited) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
CURRENT ASSETS    
Cash and cash equivalents $ 1,647,148 $ 389,108
Accounts receivable, net 150,000 194,520
Other receivables, net 146,575 1,026,293
Prepayments 4,582,684
Total current assets 6,626,407 1,609,921
NON-CURRENT ASSETS    
Plant and equipment, net 8,866 502
Operating lease right-of-use assets, net 1,683,518
Goodwill 2,190,485
Intangible assets, net 3,087,500
Long-term investments, net 2,500,000
Total non-current assets 7,279,884 2,190,987
Total assets 13,906,291 3,800,908
CURRENT LIABILITIES    
Accounts payable 3,838 127,475
Other payables and accrued liabilities 2,729 2,099
Current portion of operating lease liabilities 324,162
Taxes payable 8,478
Total current liabilities 330,729 333,784
NON-CURRENT LIABILITIES    
Non-current portion of operating lease liabilities 1,388,238
Total non-current liabilities 1,388,238
Total liabilities 1,718,967 333,784
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY    
Preferred stock, $0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
Common stock, $0.0001 par value, 200,000,000 shares authorized, 3,053,563 and 1,844,877 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively 305 184
Stock subscription receivable (1,370,614)
Additional paid-in capital 68,544,206 60,124,087
Statutory reserves 4,467 4,467
Accumulated deficit (60,446,156) (56,841,074)
Accumulated other comprehensive income 71,468 179,460
Total GD Culture Group Limited shareholders’ equity 6,803,676 3,467,124
Noncontrolling interest 5,383,648
Total shareholders’ equity 12,187,324 3,467,124
Total liabilities and shareholders’ equity 13,906,291 3,800,908
Related Party    
CURRENT ASSETS    
Prepaid expense - related party 100,000
CURRENT LIABILITIES    
Other payables - related parties $ 195,732
v3.23.3
Consolidated Balance Sheets (Unaudited) (Parentheticals) - $ / shares
Sep. 30, 2023
Dec. 31, 2022
Statement of Financial Position [Abstract]    
Preferred stock, par value (in Dollars per share) $ 0.0001 $ 0.0001
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value (in Dollars per share) $ 0.0001 $ 0.0001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 3,053,563 1,844,877
Common stock, shares outstanding 3,053,563 1,844,877
v3.23.3
Condensed Consolidated Statements of Loss and Comprehensive Loss (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
REVENUES        
Enterprise brand management services $ 150,000
Software copyright
TOTAL REVENUES 150,000
COST OF REVENUES        
TOTAL COST OF REVENUES  
GROSS PROFIT  
OPERATING EXPENSES        
Selling, general and administrative 3,667,011 64,041 3,942,947 6,800,079
Impairment of prepayments 12,949,329
TOTAL OPERATING EXPENSES 3,667,011 64,041 3,942,947 19,749,408
LOSS FROM OPERATIONS (3,667,011) (64,041) (3,792,947) (19,749,408)
OTHER INCOME (EXPENSE)        
Interest income 46,891 47,070
Interest expense (52) (52)
Other income 100,000
Total other income, net 46,839 147,018
LOSS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS (3,620,172) (64,041) (3,645,929) (19,749,408)
PROVISION FOR INCOME TAXES
LOSS FROM CONTINUING OPERATIONS (3,620,172) (64,041) (3,645,929) (19,749,408)
Net loss attributable to noncontrolling interest (102,485) (102,485)
LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO GD CULTURE GROUP LIMITED (3,517,687) (64,041) (3,543,444) (19,749,408)
Loss from discontinued operations, net of taxes (10,358) (61,408) 303,089
Loss on disposal, net of taxes (230) (4,027,930) (230) (4,027,930)
Net loss (3,528,275) (4,091,971) (3,605,082) (23,474,249)
OTHER COMPREHENSIVE LOSS        
Foreign currency translation adjustment 4,291 (261,985) (107,992) (118,184)
COMPREHENSIVE LOSS $ (3,523,984) $ (4,353,956) $ (3,713,074) $ (23,592,433)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES        
Weighted Average Number of Common Shares Basic (in Shares) 3,053,563 1,427,927 2,447,446 1,427,927
Loss per share from continuing operations Basic (in Dollars per share) $ (1.15) $ (0.04) $ (1.45) $ (13.83)
Loss per share from discontinued operations Basic (in Dollars per share) 0 (2.82) (0.03) (2.61)
Loss per share available to common shareholders Basic (in Dollars per share) $ (1.16) $ (2.87) $ (1.47) $ (16.44)
Enterprise Brand Management Services        
COST OF REVENUES        
Enterprise brand management services  
v3.23.3
Condensed Consolidated Statements of Loss and Comprehensive Loss (Unaudited) (Parentheticals) - $ / shares
3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Income Statement [Abstract]        
Weighted Average Number of Common Shares Diluted (in Shares) 3,053,563 1,427,927 2,447,446 1,427,927
Loss per share from continuing operations Diluted $ (1.15) $ (0.04) $ (1.45) $ (13.83)
Loss per share from discontinued operations Diluted 0.00 (2.82) (0.03) (2.61)
Loss per share available to common shareholders Diluted $ (1.16) $ (2.87) $ (1.47) $ (16.44)
v3.23.3
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) - USD ($)
Preferred Stock
Common Stock
Additional Paid-in Capital
Stock Subscription Receivable
Retained Earnings (Accumulated Deficit) Statutory Reserves
Retained Earnings (Accumulated Deficit) Unrestricted
Accumulated Other Comprehensive Income (Loss)
Total GD Culture Group Limited Shareholders’ Equity
Noncontrolling interest
Total
Balance at Dec. 31, 2021 $ 154 $ 83,038,827 $ (25,165,728) $ (26,019,119) $ 225,857     $ 32,079,991
Balance (in Shares) at Dec. 31, 2021 1,543,793                
Net loss (23,474,249)     (23,474,249)
Issuance of common stock for acquisition Yuanma $ 26 7,679,974     7,680,000
Issuance of common stock for acquisition Yuanma (in Shares) 256,000                
Issuance of common stock for acquisition Highlight Media $ 30 2,249,970 4,467     2,254,467
Issuance of common stock for acquisition Highlight Media (in Shares) 300,000                
The cancellation of the common stock (in Shares) (254,916)                
The cancellation of the common stock $ (26) (32,844,684)     (32,844,710)
Stock subscription receivable from issuance of common stock 25,165,728     25,165,728
Foreign currency translation (118,184)     (118,184)
BALANCE, September 30, 2022 (Unaudited) at Sep. 30, 2022 $ 184 60,124,087 4,467 (49,493,368) 107,673     10,743,043
BALANCE, September 30, 2022 (Unaudited) (in Shares) at Sep. 30, 2022 1,844,877                
Balance at Jun. 30, 2022 $ 154 74,276,715 (16,403,618) (45,401,397) 369,658     12,841,512
Balance (in Shares) at Jun. 30, 2022 1,544,877                
Net loss (4,091,971)     (4,091,971)
Issuance of common stock for acquisition Yuanma    
Issuance of common stock for acquisition Highlight Media $ 30 2,249,970 4,467     2,254,467
Issuance of common stock for acquisition Highlight Media (in Shares) 300,000                
The cancellation of the common stock (16,402,598)     (16,402,598)
Stock subscription receivable from issuance of common stock 16,403,618     16,403,618
Foreign currency translation (261,985)     (261,985)
BALANCE, September 30, 2022 (Unaudited) at Sep. 30, 2022 $ 184 60,124,087 4,467 (49,493,368) 107,673     10,743,043
BALANCE, September 30, 2022 (Unaudited) (in Shares) at Sep. 30, 2022 1,844,877                
Balance at Dec. 31, 2022 $ 184 60,124,087 4,467 (56,841,074) 179,460 $ 3,467,124 3,467,124
Balance (in Shares) at Dec. 31, 2022 1,844,877                
Net loss (3,605,082) (3,605,082) (102,485) (3,707,567)
Reclassification of disposal of TMSR   $ 115 8,618,125         8,618,240   8,618,240
(in Shares)   1,154,519                
Contribution by noncontrolling shareholder 5,486,133 5,486,133
Issuance of common stock for acquisition right, title, and interest in and to the certain software $ 19 749,981 750,000 750,000
Issuance of common stock for acquisition right, title, and interest in and to the certain software (in Shares) 187,500                
The cancellation of the common stock (in Shares) (133,333)                
The cancellation of the common stock $ (13) (947,987) (948,000) (948,000)
Stock subscription receivable from issuance of common stock (1,370,614) (1,370,614) (1,370,614)
Foreign currency translation (107,992) (107,992) (107,992)
BALANCE, September 30, 2022 (Unaudited) at Sep. 30, 2023 $ 305 68,544,206 (1,370,614) 4,467 (60,446,156) 71,468 6,803,676 5,383,648 12,187,324
BALANCE, September 30, 2022 (Unaudited) (in Shares) at Sep. 30, 2023 3,053,563                
Balance at Jun. 30, 2023 $ 305 68,544,206 4,467 (56,917,881) 67,177 11,698,274 11,698,274
Balance (in Shares) at Jun. 30, 2023 3,053,563                
Net loss           (3,528,275)   (3,528,275) (102,485) (3,630,760)
Reclassification of disposal of TMSR
Contribution by noncontrolling shareholder 5,486,133 5,486,133
Issuance of common stock for acquisition right, title, and interest in and to the certain software
The cancellation of the common stock
Stock subscription receivable from issuance of common stock (1,370,614) (1,370,614) (1,370,614)
Foreign currency translation 4,291 4,291 4,291
BALANCE, September 30, 2022 (Unaudited) at Sep. 30, 2023 $ 305 $ 68,544,206 $ (1,370,614) $ 4,467 $ (60,446,156) $ 71,468 $ 6,803,676 $ 5,383,648 $ 12,187,324
BALANCE, September 30, 2022 (Unaudited) (in Shares) at Sep. 30, 2023 3,053,563                
v3.23.3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (3,707,567) $ (23,474,249)
Adjustments to reconcile net income to net cash used in operating activities:    
Depreciation of plant and equipment 751 33,192
Amortization of intangible assets 162,500 98
Lease expenses of right-of-use assets 60,224
Impairment of prepayments 12,949,329
Disposal of the company 230 4,027,930
Goodwill impairments 2,070,753 6,590,339
Change in operating assets and liabilities    
Accounts receivables (52,196)
Other receivables (51,399) 757
Prepaid expense - related party (100,000) 192,863
Inventories (3,001)
Prepayments (4,610,398) (68,962)
Accounts payable (91,273) 196,417
Other payables and accrued liabilities (16,410) (99,892)
Customer deposits 68,531 (2,156,462)
Lease liabilities (31,342)  
Taxes payable (6,994) (493)
Other payables - related parties (160,760) 845,389
Net cash used in operating activities (6,465,350) (966,745)
CASH FLOWS FROM INVESTING ACTIVITY:    
Net increase in cash from acquisition of Highlight Media 47,498
Net decrease in cash from disposal of discontinued operations (12,316,416)
Purchase of intangible assets (2,500,000)
Purchase of equipment (9,617) (6,689)
Purchase of convertible notes (2,500,000)
Net cash used in investing activity (5,009,617) (12,275,607)
CASH FLOWS FROM FINANCING ACTIVITY:    
Proceeds from issuance of common stock 8,618,240
Contribution by noncontrolling shareholder 4,115,519
Net cash provided by financing activity 12,733,759
EFFECT OF EXCHANGE RATE ON CASH (752) (1,095,699)
NET INCREASE/(DECREASE) IN CASH 1,258,040 (14,338,051)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 389,108 14,588,330
CASH AND CASH EQUIVALENTS, END OF PERIOD 1,647,148 250,279
SUPPLEMENTAL CASH FLOW INFORMATION:    
Cash paid for interest 935
NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES    
Issuance of common stock for acquisition Yuanma 7,680,000
Issuance of common stock for acquisition Highlight Media 2,250,000
Issuance of common stock for acquisition right, title, and interest in and to the certain software 750,000
The cancellation of the common stock 948,000 32,844,710
Initial recognition of right-of-use assets and lease liabilities $ 1,731,824
v3.23.3
Nature of Business and Organization
9 Months Ended
Sep. 30, 2023
Nature of Business and Organization [Abstract]  
Nature of business and organization

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’s current subsidiaries, Citi Profit Investment Holding Limited (“Citi Profit”), Highlights Culture Holding Co., Limited (“Highlight HK”), Shanghai Highlight Entertainment Co., Ltd. (“Highlight WFOE”), and previous subsidiaries, TMSR Holdings Limited (“TMSR HK”) and Makesi IoT Technology (Shanghai) Co., Ltd. (“Makesi WFOE”) are also holding companies with no material operations.

 

Shanghai Xianzhui Technology Co., Ltd. (“SH Xianzhui”) was incorporated by Highlight WFOE and other two shareholders on August 10, 2023. SH Xianzhui is principally engaged in the provision of social media marketing agency service. Highlight WFOE owns 60% of the total equity interest of SH Xianzhui.

 

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

 

Prior to 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. For accounting purposes, Makesi WFOE was the primary beneficiary of Wuge. Accordingly, under U.S. GAAP, GDC treated Wuge as the consolidated affiliated entity and has consolidated Yuanma’s financial results in Wuge’s financial statements prior to September 28, 2022. 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 shareholders of Wuge to terminate the VIE Agreements and to cancel the shares previously issued to the shareholders of Wuge, 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 June 26, 2023, we had a subsidiary TMSR HK, which owns 100% equity interest in Makesi WFOE. Makesi WFOE had a series of contractual arrangement with Shanghai Yuanma Food and Beverage Management Co., Ltd. (“Yuanma”) that established a VIE structure. For accounting purposes, Makesi WFOE was the primary beneficiary of Yuanma. Accordingly, under U.S. GAAP, GDC treated Yuanma as the consolidated affiliated entity and has consolidated Yuanma’s financial results in GDC’s financial statements prior to June 26, 2023. On June 26, 2023, GDC entered into a share purchase agreement with a buyer unaffiliated with the Company. Pursuant to the agreement, the Company agreed to sell and the buyer agreed to purchase all the issued and outstanding equity interest in TMSR HK. The purchase price for the transaction contemplated by the Agreement was $100,000. The sale of TMSR HK included the sale of Makesi WFOE and Yuanma. None of TMSR HK, Makesi WFOE or Yuanma had any assets, employees or operation. The sale of TMSR HK did not have any material impact on the Company’s consolidated financial statements.

 

Prior to September 26, 2023, we also conducted business through Shanghai Highlight Media Co., Ltd. (“Highlight Media”). Highlight WFOE had a series of contractual arrangement with Highlight Media. For accounting purposes, Highlight WFOE was the primary beneficiary of Highlight Media. Accordingly, under U.S. GAAP, GDC treated Highlight Media as the consolidated affiliated entity and has consolidated Highlight Media’s financial results in GDC’s financial statements prior to September 26, 2023. Highlight Media was an integrated marketing service agency, focusing on enterprise brand management, crisis public relations, intelligent public opinion monitoring, media PR, financial and economic we-media operation, digital face application, large-scale exhibition services and other businesses. On September 26, 2023, Highlight WFOE entered into a termination agreement with Highlight Media and the shareholders of Highlight Media to terminate the VIE Agreements and sold the interest in the VIE Agreements for a purchase price of $100,000. As a result of such termination, the Company no longer treats Highlight Media as a consolidated affiliated entity or consolidates the financial results and balance sheet of Highlight Media in the Company’s consolidated financial statements under U.S. GAAP.

 

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
TMSR HK2   ●  A Hong Kong company
●  Incorporated on April 2019
  100% owned by Citi Profit BVI
Highlight HK  

●  A Hong Kong company

●  Incorporated on November 2022

  100% owned by Citi Profit BVI
Makesi WFOE2  

●  A PRC limited liability company and deemed a wholly foreign owned enterprise (WFOE)

●  Incorporated on December 2020

  100% owned by TMSR HK
Highlight WFOE  

●  A PRC limited liability company and deemed a wholly foreign owned enterprise (WFOE)

●  Incorporated on January 2023

  100% owned by Highlight HK
Wuge1  

●  A PRC limited liability company

●  Incorporated on July 4, 2019

  VIE of Makesi WFOE
Highlight Media3  

●  A PRC limited liability company

●  Incorporated on September 16, 2022

  VIE of Highlight WFOE
AI Catalysis  

●  A Nevada company

●  Incorporated on May 2023

  100% owned by the Company
SH Xianzhui  

●  A PRC limited liability company

●  Incorporated on May 2023

  60% owned by Highlight WFOE

 

1Disposed on September 28, 2022
2Disposed on June 26, 2023
3

Disposed on September 26, 2023

  

Contractual Arrangements

 

Wuge, Yuanma, 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.

 

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 Technology (Jiangsu) Co., Ltd., a then indirect subsidiary of the Company (“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 30 days’ prior written notice to Wuge.

 

Equity Pledge Agreement.

 

Under the equity pledge agreement among Tongrong WFOE, Wuge and the shareholders of Wuge dated January 3, 2020, the shareholders of Wuge 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, the shareholders of Wuge 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 shareholders of Wuge cease to be shareholders of Wuge.

 

Equity Option Agreement.

 

Under the equity option agreement among Tongrong WFOE, Wuge and the shareholders of Wuge dated January 3, 2020, each of the shareholders of Wuge 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.

 

Voting Rights Proxy and Financial Support Agreement.

 

Under the voting rights proxy and financial support agreement among Tongrong WFOE, Wuge and the shareholders of Wuge 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 with Tongrong WFOE, Wuge and the shareholders of Wuge, pursuant to which Tongrong WFOE assign all its rights and obligations under the VIE agreements to Makesi WFOE. The VIE agreements and the assignment agreements granted 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 did not have any impact on Company’s consolidated financial statements.

 

On September 28, 2022, Makesi WFOE entered into a termination agreement with Wuge and the shareholders of Wuge to terminate the VIE agreements and to cancel the shares previously issued to the shareholders of Wuge, 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.

 

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

Technical Consultation and Services Agreement.

 

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

 

Equity Pledge Agreement.

 

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

 

Equity Option Agreement.

 

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

 

Voting Rights Proxy and Financial Support Agreement.

 

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

 

On June 26, 2023, the Company entered into a share purchase agreement with a buyer unaffiliated with the Company. Pursuant to the agreement, the Company agreed to sell and the buyer agreed to purchase all the issued and outstanding equity interest in TMSR HK. The purchase price for the transaction contemplated by the Agreement was $100,000. TMSR HK has a direct wholly-owned subsidiary, Makesi WFOE, and an indirect wholly-owned subsidiary, Yuanma. The sale of TMSR included the sale of Makesi WFOE and Yuanma. None of TMSR HK, Makesi WFOE or Yuanma had any assets, employees or operation. The sale of TMSR did not have any material impact on the Company’s consolidated financial statements.

 

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

 

Technical Consultation and Services Agreement.

 

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

 

Equity Pledge Agreement.

 

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

 

Equity Option Agreement.

 

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

 

Voting Rights Proxy and Financial Support Agreement.

 

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

 

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

 

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

 

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 in China, and on the AI Catalysis business that is in the livestreaming market with focus on e-commerce and livestreaming interactive game in the United States. All Wuge digital door signs business have been disposed.

v3.23.3
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2023
Summary of Significant Accounting Policies [Abstract]  
Summary of significant accounting policies

Note 2 – Summary of significant accounting policies

 

Basis of presentation

 

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”).

 

Principles of consolidation

 

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

 

Use of estimates and assumptions

 

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

 

Foreign currency translation and transaction

 

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 statement of income accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

 

Translation adjustments included in accumulated other comprehensive income amounted to $71,468 and $179,460 as of September 30, 2023 and December 31, 2022, respectively. The balance sheet amounts, with the exception of shareholders’ equity at September 30, 2023 and December 31, 2022 were translated at 7.30 RMB and 6.38 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 nine months ended September 30, 2023 and 2022 were 7.03 RMB and 6.61 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.

 

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.

 

Accounts receivable, net

 

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.

 

Prepayments

 

Prepayments are funds deposited or advanced to outside vendors for future inventory or services 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.

 

Plant and equipment

 

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

 

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

 

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

 

Intangible assets

 

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

 

    Useful Life
Software   5 years

 

Lease

 

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

 

The Company recognizes lease liabilities and corresponding right-of-use assets on the balance sheet for leases. Operating lease right- of-use assets 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.

 

Goodwill

 

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.

 

Impairment for long-lived assets

 

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.

 

Fair value measurement

 

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash, notes receivable, accounts receivable, other receivables, prepayments, accounts payable, other payables and accrued liabilities, customer deposits 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.

 

Customer deposits

 

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.

 

Revenue recognition

 

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

 

The core principle underlying the revenue recognition 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.

 

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

 

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

 

The Company’s disaggregate revenue streams from continuing operations are summarized as follows:

 

   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
                 
Software copyright  $
    -
   $
    -
   $150,000   $
   -
 
Total revenues  $
-
   $
-
   $150,000   $
-
 

 

Income taxes

 

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 is accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the 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 three months ended September 30, 2023 and 2022. As of September 30, 2023, the Company’s PRC tax returns filed for 2020, 2021 and 2022 remain subject to examination by any applicable tax authorities.

 

Earnings per share

 

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 three months ended September 30, 2023 and 2022, respectively. 824,000 of outstanding options were excluded from the diluted earnings per share calculation due to its antidilutive effect for the three months ended September 30, 2023 and 2022.

 

Reclassification

 

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

 

Recently accounting pronouncements

 

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

 

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. This guidance also requires certain disclosures for equity securities subject to contractual sale restrictions. The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This guidance is effective for fiscal years beginning after 15 December 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company 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.

v3.23.3
Business Combination and Restructuring
9 Months Ended
Sep. 30, 2023
Business Combination and Restructuring [Abstract]  
Business combination and restructuring

Note 3 – Business combination and restructuring

 

Highlight Media

 

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”). Pursuant to the share purchase agreement, the Company agreed to issue an aggregate of 9,000,000 shares of the Company’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, Highlight Media 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 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.

 

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 expenses.

 

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:

 

Total consideration at fair value  $2,250,000 

 

   Fair Value 
Cash  $47,498 
Other current assets   107,828 
Plant and equipment   1,205 
Other noncurrent assets   
-
 
Goodwill   2,121,947 
Total asset   2,278,478 
Accounts payable   14,170 
Taxes Payable   363 
Other Payable   13,945 
Total liabilities   28,478 
Net asset acquired  $2,250,000 

 

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.

v3.23.3
Variable Interest Entity
9 Months Ended
Sep. 30, 2023
Variable Interest Entity [Abstract]  
Variable interest entity

Note 4 – Variable interest entity

 

Wuge

 

On January 3, 2020, Tongrong WFOE entered into contractual arrangements with Wuge and its shareholders. The significant terms of these contractual arrangements are summarized in “Note 1 - Nature of business and organization” above. As a result, the Company classified Wuge as VIE.

 

On January 11, 2021, Makesi WFOE entered into a series of assignment agreements with Tongrong WFOE, Wuge and the shareholders of Wuge, pursuant to which Tongrong WFOE assign all its rights and obligations under the VIE agreements to Makesi WFOE. The VIE agreements and the assignment agreements granted 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 did not have any impact on Company’s consolidated financial statements.

 

On September 28, 2022, Makesi WFOE entered into a termination agreement with Wuge and the shareholders of Wuge to terminate the VIE agreements and to cancel the shares previously issued to the shareholders of Wuge, 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.

 

Yuanma

 

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

 

On June 26, 2023, GDC entered into a share purchase agreement with a buyer unaffiliated with the Company. Pursuant to the agreement, the Company agreed to sell and the buyer agreed to purchase all the issued and outstanding equity interest in TMSR HK. The purchase price for the transaction contemplated by the Agreement was $100,000. The sale of TMSR HK included the sale of Makesi WFOE and Yuanma. None of TMSR HK, Makesi WFOE or Yuanma had any assets, employees or operation. The sale of TMSR HK did not have any material impact on the Company’s consolidated financial statements.

 

Highlight Media

 

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

 

On February 27, 2023, Highlight WFOE entered into a series of assignment agreements with Makesi WFOE, Highlight Media and Highlight Shareholders, pursuant to which Makesi WFOE assign all its rights and obligations under the VIE agreements to Highlight WFOE. The VIE agreements and the assignment agreements granted Highlight WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Highlight Media, including absolute rights to control the management, operations, assets, property and revenue of Highlight Media. The assignment did not have any impact on Company’s 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. Makesi 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 prior to September 30, 2023.

 

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

 

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

 

   September 30,   December 31, 
   2023   2022 
Cash and cash equivalents   
      -
    215,880 
Accounts receivable, net   
-
    194,520 
Other receivables, net   
-
    78,293 
Prepayments   
-
    
-
 
Total current assets  $
-
   $488,693 
Plants and equipment   
-
    502 
Goodwill   
-
    2,190,485 
Total assets   
-
    2,679,680 
Current liabilities   
-
    333,784 
Non-current liabilities   
-
    
-
 
Total liabilities   
-
    333,784 
Net assets  $
-
   $2,345,896 
           
Accounts payable  $
-
   $116,105 
Other payables and accrued liabilities   
-
    13,469 
Other payables – related party   
-
    
-
 
Tax payables   
-
    195,732 
Customer Advances   
-
    8,478 
Wages payable   
-
    
-
 
Total current liabilities   
-
    333,784 
Lease liabilities – non-current   
-
    
-
 
Total liabilities  $
-
   $333,784 

 

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

 

    For the
Nine Months Ended
September 30,
 
    2023 
Operating revenues  $
-
 
Gross profit   
-
 
Income from operations   
-
 
Net loss  $
-
 
v3.23.3
Accounts Receivable
9 Months Ended
Sep. 30, 2023
Accounts Receivable [Abstract]  
Accounts receivable

Note 5 – Accounts receivable

 

Accounts receivable consist of the following:

 

   September 30,
2023
   December 31,
2022
 
Accounts receivable  $150,000   $197,640 
Less: Allowance for doubtful accounts   -    (3,120)
Total accounts receivable, net  $150,000   $194,520 

 

Movement of allowance for doubtful accounts is as follows:

 

   September 30,
2023
   December 31,
2022
 
Beginning balance  $(3,120)  $- 
Addition   
-
    (3,120)
Disposal of Highlight Media   2,949    
-
 
Exchange rate effect   171    
-
 
Ending balance  $-   $(3,120)
v3.23.3
Other Receivables
9 Months Ended
Sep. 30, 2023
Other Receivables [Abstract]  
Other receivables

Note 6 – Other receivables

 

   September 30,
2023
   December 31,
2022
 
Receivable from disposal of Wuge  $
-
   $948,000 
Receivable from disposal of Highlight Media   100,000    
-
 
Interest receivable from convertible notes   46,575    
-
 
Others   
-
    78,293 
Total other receivables, net  $146,575   $1,026,293 

 

The balance of $100,000 on September 30, 2023 is the consideration required to be received upon disposal of Highlight Media.

 

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.

v3.23.3
Plant and Equipment, Net
9 Months Ended
Sep. 30, 2023
Plant and Equipment, Net [Abstract]  
Plant and equipment, net

Note 7 – Plant and equipment, net

 

Plant and equipment consist of the following:

 

  

September 30,
2023

  

December 31,
2022

 
Office equipment and furniture  $9,617   $10,039 
Subtotal   9,617    10,039 
Less: accumulated depreciation   (751)   (9,537)
Total  $8,866   $502 

 

Depreciation expense for the nine months ended September 30, 2023 and 2022 amounted to $751 and $33,192, respectively.

v3.23.3
Intangible Assets, Net
9 Months Ended
Sep. 30, 2023
Intangible Assets, Net [Abstract]  
Intangible assets, net

Note 8 – Intangible assets, net

 

Intangible assets consist of the following:

 

  

September 30,
2023

   December 31,
2022
 
Software  $3,250,000   $
     -
 
Subtotal   3,250,000    
-
 
Less: accumulated amortization   (162,500)   - 
Total  $3,087,500   $
          -
 

 

Amortization expense for the nine months ended September 30, 2023 and 2022 amounted to $162,500 and $98, respectively.

v3.23.3
Goodwill
9 Months Ended
Sep. 30, 2023
Goodwill [Abstract]  
Goodwill

Note 9 – Goodwill

 

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

 

  Highlight
Media
   Total 
Balance as of December 31, 2022  $2,190,485   $2,190,485 
Impairment   (2,070,753)   (2,070,753)
Foreign currency translation adjustment   (119,732)   (119,732)
Balance as of September 30, 2023  $
-
   $
-
 
v3.23.3
Related Party Balances and Transactions
9 Months Ended
Sep. 30, 2023
Related Party Balances and Transactions [Abstract]  
Related Party Balances and Transactions

Note 10 – Related party balances and transactions

 

Related party balances

 

Prepaid expense – related party:

 

Name of related party  Relationship  September 30,
2023
   December 31,
2022
 
XIAO JIAN WANG  Chief Executive Officer of the Company  $100,000   $
        -
 
Total     $100,000   $
-
 

 

The above balances represent travel advances to the Chief Executive Officer of the Company.

 

Other payables – related parties:

 

Name of related party  Relationship  September 30,
2023
   December 31,
2022
 
Shanghai Highlight Asset Management Co. LTD  A company in which shareholder hold shares  $
-
   $195,732 
Total     $
                 -
   $195,732 

 

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

v3.23.3
Long-Term Investment, Net
9 Months Ended
Sep. 30, 2023
Long-term investment, net [Abstract]  
Long-term investment, net

Note 11 – Long-term investment, net

 

The Company’s long-term investments consisted of the following:  

 

  

September 30,

2023

   December 31,
2022
 
Available-for-sale debt investments  $2,500,000   $
-
 
Total  $2,500,000   $
             -
 

 

As of September 30, 2023, the Company subscribed to a total of $2,500,000 in convertible notes of Liquid Marketplace Corp and DigiTrax Entertainment Inc.

v3.23.3
Leases
9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
Leases

Note 12 – Leases

 

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

 

   September 30,
2023
   December 31,
2022
 
Weighted average discount rate:        
Operating lease   5.25 years    N/A 
           
Weighted average discount rate:          
Operating lease   4.24%   N/A 

 

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

 

  

September 30,

2023

   December 31,
2022
 
Operating lease right-of-use assets, net        
Operating lease   1,683,518    
    -
 
           
Lease liabilities          
Current portion of operating lease liabilities   324,162    
-
 
Non-current portion of operating lease liabilities   1,388,238    
-
 
    1,712,400    
-
 

 

Future lease payments under operating leases as of September 30, 2023 were as follows:

 

   Operating Leases 
     
FY2024   344,768 
FY2025   383,632 
FY2026   391,305 
FY2027   399,131 
FY2028   407,114 
Total lease payments   1,925,949 
Less: imputed interest   213,549 
Present value of lease liabilities (1)   1,712,400 

 

(1)Present value of future operating lease payments consisted of current portion of operating lease liabilities and non-current portion of operating lease liabilities, amounting to $324,162 and $1,388,238 for the nine months ended September 30, 2023, respectively.
v3.23.3
Taxes
9 Months Ended
Sep. 30, 2023
Taxes [Abstract]  
Taxes

Note 13 – Taxes

 

Income tax

 

United States

 

GDC was organized in the state of Delaware in April 2015 and the nine months ended September 30, 2023 amounted to nil. As of September 30, 2023, GDC’s net operating loss carry forward for United States income taxes was approximately $0. 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 is no impact of GILTI for the nine months ended September 30, 2023 and 2022, 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 is exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.

 

PRC

 

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

 

Deferred tax assets

 

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:

 

   September 30,
2023
   December 31,
2022
 
Net operating losses carried forward – U.S.  $276,982   $4,574,581 
Valuation allowance   (276,982)   (4,574,581)
Deferred tax assets, net  $
-
   $
-
 

 

Value added tax

 

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:

 

  

September 30,
2023

   December 31,
2022
 
VAT taxes payable  $
        -
   $8,478 
Other taxes payable   
-
    
-
 
Total  $
-
   $8,478 
v3.23.3
Concentration of Risk
9 Months Ended
Sep. 30, 2023
Concentration of Risk [Abstract]  
Concentration of risk

Note 14 – Concentration of risk

 

Credit risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. As of September 30, 2023 and December 31, 2022, $1,143,611 and $215,880 and were deposited with various financial institutions located in the PRC, respectively. As of September 30, 2023 and December 31, 2022, $503,537 and $173,228 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.

v3.23.3
Equity
9 Months Ended
Sep. 30, 2023
Equity [Abstract]  
Equity

Note 15 – Equity

 

Restricted net assets

 

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 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 Highlight 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, 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, 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 Highlight WFOE and Highlight Media from transferring funds to Highlight HK in the form of dividends, loans and advances. As of September 30, 2023 and December 31, 2022, amounts restricted are the net assets of Highlight WFOE and Highlight Media which amounted to nil and $492,315, respectively.

 

Common stock

 

On May 4, 2023, the Company sold an aggregate of 310,168 shares of common stock of the Company, par value $0.0001 per share, and pre-funded warrants to purchase up to an aggregate of 844,351 shares of common stock are sold to certain purchasers, pursuant to a securities purchase agreement, dated May 1, 2023, as amended on May 16, 2023. The purchase price of each share of common stock is $8.35. The purchase price of each pre-funded warrant is $8.349, which equals the price per share of common stock being sold to the public in this offering, minus $0.001. The RD Offering is being made pursuant to a shelf registration statement (No. 333-254366) on Form S-3, which was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on March 26, 2021, and related prospectus supplement.

 

In the concurrent PIPE offering, the Company sold warrants to purchase up to 1,154,519 shares of common stock to the Purchasers, pursuant to a private warrant securities purchase agreement, dated May 1, 2023. In connection with the offering, the Company paid Univest Securities, LLC, the placement agent, a total cash fee equal to 7.0% of the aggregate gross proceeds received in the offering, a non-accountable expense allowance equal to 1% of the aggregate gross proceeds, and reimbursement for certain out-of-pocket accountable expenses incurred in this offering in the amount of $150,000. In addition, the Company issued to the placement agent warrants to purchase up to 115,452 shares of common stock at an exercise price of $10.02 per share, which represents 120% of the offering price of each share. The net proceeds from the Offering, after deducting placement agent discounts and commissions and estimated offering expenses payable by the Company, are approximately $8.5 million (assuming the warrants are not exercised). The Company used the net proceeds from the Offering for working capital and general corporate purposes.

 

On June 22, 2023, the Company entered into a software purchase agreement with Northeast Management LLC, a seller unaffiliated with the Company. Pursuant to the agreement, the Company agreed to purchase and the seller agreed to sell all of seller’s right, title, and interest in and to the certain software. The purchase price of the software shall be $750,000, payable in the form of issuance of 187,500 shares of common stock of the Company, valued at $4.00 per share. The Company plans to use the software to develop video games. On June 26, 2023, the Company issued the shares to the seller’s designees and the transaction was completed.

 

Warrants and options

 

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 expired on 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.

 

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.

 

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 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.

 

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.

 

On May 1, 2023, the Company entered into a placement agency agreement, as amended on May 16, 2023 (the “Placement Agency Agreement”), with Univest Securities, LLC (the “Placement Agent”). Pursuant to the Placement Agency Agreement, the Placement Agent agrees to use its reasonable best efforts to sell the Company’s common stock in a registered direct offering (the “RD Offering”), and a concurrent private placement (the “PIPE Offering”, together with the RD Offering, collectively the “Offering”). The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of securities.

 

In the RD Offering, an aggregate of 310,168 shares of common stock (the “Common Shares”) of the Company, par value $0.0001 per share, and pre-funded warrants to purchase up to an aggregate of 844,351 shares of common stock (the “Pre-Funded Warrants”, and the common stock underlying such warrants, the “Pre-Funded Warrant Shares”) are sold to certain purchasers (the “Purchasers”), pursuant to a securities purchase agreement, dated May 1, 2023, as amended on May 16, 2023 (the “RD Securities Purchase Agreement”). The purchase price of each Common Share is $8.35. The purchase price of each Pre-funded Warrant is $8.349, which equals the price per Common Share being sold to the public in the Offering, minus $0.001. The RD Offering is being made pursuant to a shelf registration statement (No. 333-254366) on Form S-3, which was declared effective by the U.S. Securities and Exchange Commission on March 26, 2021, and related prospectus supplement.

 

In connection with the Pre-Funded Warrant Shares, “Pre-funded” refers to the fact that the purchase price of the warrants in the offering includes almost the entire exercise price that will be paid under the Pre-funded Warrants, except for a nominal remaining exercise price of $0.001. The purpose of the Pre-funded Warrants is to enable Purchasers that may have restrictions on their ability to beneficially own more than 4.99% (or, upon election of the holder, 9.99%) of the Company’s outstanding common stock following the consummation of the offering the opportunity to make an investment in the Company without triggering their ownership restrictions, by receiving Pre-funded Warrants in lieu of the Company’s common stock which would result in such ownership of more than 4.99% (or 9.99%), and receive the ability to exercise their option to purchase the shares underlying the Pre-funded Warrants at such nominal price at a later date. In the RD Offering, each Pre-funded Warrant is exercisable for one share of our common stock, with an exercise price equal to $0.001 per share, at any time that the Pre-funded Warrant is outstanding. The Pre-funded Warrants will be exercisable immediately after issuance and will expire five (5) years from the date of issuance. The holder of a Pre-funded Warrant will not be deemed a holder of our underlying common stock until the Pre-funded Warrant is exercised.

 

In the concurrent PIPE Offering, warrants to purchase up to 1,154,519 shares of common stock (the “Unregistered Warrants”, and the common stock underlying such warrants, the “Unregistered Warrant Shares”) are also sold to the Purchasers, pursuant to a private warrant securities purchase agreement, dated May 1, 2023. The Unregistered Warrants are exercisable immediately after issuance and will expire five (5) years from the date of issuance. The Exercise Price of the Unregistered Warrants is $8.35, subject to adjustment as provided in the form of Unregistered Warrants.

 

The Company also paid the Placement Agent a total cash fee equal to 7.0% of the aggregate gross proceeds received in the Offering and a non-accountable expense allowance equal to 1% of the aggregate gross proceeds. The Placement Agent were also reimbursed for certain out-of-pocket accountable expenses incurred in this offering up to $150,000. The Placement Agent also received warrants to purchase up to 115,452 shares of common stock (equal to 5.0% of the aggregate number of Common Shares, Pre-Funded Warrant Shares, and the Unregistered Warrant Shares) at an exercise price of $10.02 per share, which represents 120% of the offering price of each Common Share. The Placement Agent’s warrants will have substantially the same terms as the Unregistered Warrants.

 

The summary of warrant activity is as follows:  

 

   Warrants   Exercisable
Into Number of
   Weighted Average Exercise   Average Remaining Contractual 
   Outstanding   Shares   Price   Life 
December 31, 2022   4,539,674      151,323    172.5    0.10 
Granted/Acquired   2,114,322    844,351   $8.53    4.63 
Expired   164,675    5,488   $172.5    0.10 
Exercised   844,351    844,351   0.001    
-
 
September 30, 2023   5,644,970    145,835   $25.03    4.34 

 

The summary of option activity is as follows:

 

   Options   Exercisable
Into Number of
   Weighted Average Exercise   Average Remaining Contractual 
   Outstanding   Shares   Price   Life 
December 31, 2022   824,000    27,467   $150.00    0.10 
Granted/Acquired   
-
    
-
   $
-
    
-
 
Expired   824,000    27,467   $150.00    0.10 
Exercised   
-
    
-
    
-
    
-
 
September 30, 2023   -    -   $-    
-
 
v3.23.3
Commitments and Contingencies
9 Months Ended
Sep. 30, 2023
Commitments and Contingencies [Abstract]  
Commitments and contingencies

Note 16 – Commitments and contingencies

 

Contingencies

 

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.

v3.23.3
Segment Reporting
9 Months Ended
Sep. 30, 2023
Segment Reporting [Abstract]  
Segment reporting

Note 17 – 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 are Highlight Media (prior to September 30, 2023) and AI Catalysis. The Company’s consolidated results of operations and consolidated financial position from continuing operations are almost all attributable to Highlight Media and AI Catalysis; accordingly, management believes that the consolidated balance sheets and statement of operations provide the relevant information to assess Highlight Media and AI Catalysis’s performance.

The following represents assets by division as of:

 

Total assets as of 

September 30,

2023

  

December 31,

2022

 
Highlight Media  $
-
   $489,195 
SH Xianzhui   3,871,388    
-
 
GDC, AI Catalysis, Citi Profit BVI , TMSR HK , Highlight HK, Highlight WFOE and Makesi WFOE   10,034,903    3,311,713 
Total Assets  $13,906,291   $3,800,908 

 

   For the Nine Months Ended
September 30,
 
Total revenues of  2023   2022 
Highlight Media  $
                  -
   $
                 -
 
SH Xianzhui          
GDC, AI Catalysis, Citi Profit BVI , TMSR HK , Highlight HK, Highlight WFOE and Makesi WFOE   150,000    
-
 
Total revenues  $150,000   $
-
 
v3.23.3
Discontinued Operations
9 Months Ended
Sep. 30, 2023
Discontinued Operations [Abstract]  
Discontinued Operations

Note 18 – Discontinued Operations

 

The following depicts the result of operations for the discounted operations of Highlight Media for the nine months ended September 30, 2023 and Wuge for the nine months ended September 30, 2022, respectively.

 

   For the Nine Months Ended
September 30,
 
   2023   2022 
REVENUES        
Enterprise brand management services   165,993    
-
 
Wuge digital door signs   
-
    7,616,615 
TOTAL REVENUES   165,993    7,616,615 
           
COST OF REVENUES          
Enterprise brand management services   114,247    
-
 
Wuge digital door signs   
-
    5,527,950 
TOTAL COST OF REVENUES   114,247    5,527,950 
GROSS PROFIT   51,746    2,088,665 
           
OPERATING EXPENSES          
Selling, general and administrative   113,552    1,605,935 
TOTAL OPERATING EXPENSES   113,552    1,605,935 
           
(LOSS) INCOME FROM OPERATIONS   (61,806)   482,730 
           
OTHER INCOME (EXPENSE)          
Interest income   49    65,251 
Interest expense   (248)   (935)
Other income, net   709    70,830 
Total other expense, net   510    135,146 
           
(LOSS) INCOME BEFORE INCOME TAXES FROM CONTINUING OPERATIONS   (61,296)   617,876 
PROVISION FOR INCOME TAXES   112    314,787 
           
(LOSS) INCOME FROM CONTINUING OPERATIONS   (61,408)   303,089 
           
Net loss attributable to noncontrolling interest   
-
    
-
 
(LOSS) INCOME FROM CONTINUING OPERATIONS OF GD CULTURE GROUP LIMITED   (61,408)   303,089 
v3.23.3
Subsequent Events
9 Months Ended
Sep. 30, 2023
Subsequent Events [Abstract]  
Subsequent events

Note 19 – Subsequent events

 

(i) Investment in JV

 

On October 27, 2023, the Company entered into an equity purchase agreement with Highlight WFOE and Beijing Hehe, which was amended on November 10, 2023 (such equity purchase agreement, as amended, the “Agreement” for purpose of this section “Investment in JV”), pursuant to which the Highlight WFOE agreed to purchase 13.3333% equity interest in SH Xianzhui from Beijing Hehe and the Company agreed to issue 400,000 shares of common stock of the Company, valued at $2.7820 per share, the average closing bid price of the common stock of GDC as of the five trading days immediately preceding the date of the Agreement, to Beijing Hehe or its assigns. The closing of the transaction shall take place within thirty (30) days from the execution of the Agreement. The Agreement is effective for thirty (30) days from the date of the Agreement, which can be extended for additional thirty (30) days upon all parties’ written agreement. The Company or Highlight WFOE may terminate the Agreement at any time with a three (3) day advance written notice to Beijing Hehe.

(ii) November 2023 Registered Direct Offering

 

On November 1, 2023, the Company entered into a placement agency agreement (the “Placement Agency Agreement”), with Univest Securities, LLC (the “Placement Agent” or “Univest”). Pursuant to the Placement Agency Agreement, the Placement Agent agrees to use its reasonable best efforts to sell the Company’s common stock (the “Common Stock”) in a registered direct offering (the “Offering”). The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of securities.

 

In the Offering, (i) an aggregate of 1,436,253 shares of common stock (the “Common Shares”) of the Company, par value $0.0001 per share, (ii) pre-funded warrants to purchase up to an aggregate of 1,876,103 shares of common stock (the “Pre-Funded Warrants”, and the common stock underlying such warrants, the “Pre-Funded Warrant Shares”), and (iii) registered warrants to purchase up to an aggregate of 3,312,356 shares of common stock (the “Registered Warrants”, and the common stock underlying such warrants, the “Registered Warrant Shares”) are sold to certain purchasers (the “Purchasers”), pursuant to a securities purchase agreement, dated October 31, 2023 (the “Securities Purchase Agreement”). The purchase price of each Common Share is $3.019. The purchase price of each Pre-funded Warrant is $3.018, which equals the price per Common Share being sold in this Offering, minus $0.001. The Pre-funded Warrants will be exercisable immediately after issuance and will expire five (5) years from the date of issuance. The Registered Warrants will be exercisable immediately and will expire five (5) years from the date of issuance.

 

The Offering is being made pursuant to a shelf registration statement (No. 333-254366) on Form S-3, which was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on March 26, 2021, and related prospectus supplement.

 

The net proceeds from the Offering, after deducting placement agent discounts and commissions and estimated offering expenses payable by the Company, are approximately $9.05 million (assuming the Registered Warrants are not exercised). The Company intends to use the net proceeds from the Offering for working capital and general corporate purposes.

 

Pursuant to the Placement Agency Agreement, the Company has agreed to pay the Placement Agent a total cash fee equal to 7.0% of the aggregate gross proceeds received in the Offering. The Company also agreed to reimburse the Placement Agent certain out-of-pocket accountable expenses incurred in this Offering up to $150,000.

 

In concurrent with the Offering, on November 1, 2023, the Company entered into certain warrant exchange agreements (the “Warrant Exchange Agreements”) with certain holders of warrants issued by the Company on May 16, 2023 in a private placement (the “Existing Warrants”), to purchase up to 1,154,519 shares of the Company’s Common Stock (the “Holders”). Pursuant to the Warrant Exchange Agreements, the Holders shall surrender the Existing Warrants, and the Company shall cancel the Existing Warrants and shall issue to Holders pre-funded warrants to purchase up to 577,260 shares of the Company’s Common Stock (the “Exchange Warrants”). The Exchange Warrants were issued to Holders on November 3, 2023 and the warrant exchange closed on the same day.

 

On November 17, 2023, the Company entered into an amendment to the Securities Purchase Agreement with the Purchasers, pursuant to which Exhibit B to the Securities Purchase Agreement (form of Registered Warrants) was deleted and replaced with an amended and restated the Form of Registered Warrant, to remove Section 2(b) Adjustment Upon Issuance of Common Stock and Section 2(e) Other Events.

 

The Registered Warrants that were issued to Purchasers under the Securities Purchase Agreement were returned to and cancelled by the Company on November 17, 2023. Concurrently, the Company issued amended and restated Registered Warrants to each Purchaser.

v3.23.3
Accounting Policies, by Policy (Policies)
9 Months Ended
Sep. 30, 2023
Summary of Significant Accounting Policies [Abstract]  
Basis of presentation

Basis of presentation

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”).

Principles of consolidation

Principles of consolidation

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

Use of estimates and assumptions

Use of estimates and assumptions

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

Foreign currency translation and transaction

Foreign currency translation and transaction

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 statement of income accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Translation adjustments included in accumulated other comprehensive income amounted to $71,468 and $179,460 as of September 30, 2023 and December 31, 2022, respectively. The balance sheet amounts, with the exception of shareholders’ equity at September 30, 2023 and December 31, 2022 were translated at 7.30 RMB and 6.38 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 nine months ended September 30, 2023 and 2022 were 7.03 RMB and 6.61 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.

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.

Accounts receivable, net

Accounts receivable, net

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.

 

Prepayments

Prepayments

Prepayments are funds deposited or advanced to outside vendors for future inventory or services 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.

Plant and equipment

Plant and equipment

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

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

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

Intangible assets

Intangible assets

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

    Useful Life
Software   5 years
Lease

Lease

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

The Company recognizes lease liabilities and corresponding right-of-use assets on the balance sheet for leases. Operating lease right- of-use assets 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.

 

Goodwill

Goodwill

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.

Impairment for long-lived assets

Impairment for long-lived assets

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.

Fair value measurement

Fair value measurement

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash, notes receivable, accounts receivable, other receivables, prepayments, accounts payable, other payables and accrued liabilities, customer deposits 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.

 

Customer deposits

Customer deposits

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.

Revenue recognition

Revenue recognition

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

The core principle underlying the revenue recognition 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.

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

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

The Company’s disaggregate revenue streams from continuing operations are summarized as follows:

   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
                 
Software copyright  $
    -
   $
    -
   $150,000   $
   -
 
Total revenues  $
-
   $
-
   $150,000   $
-
 

 

Income taxes

Income taxes

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 is accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the 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 three months ended September 30, 2023 and 2022. As of September 30, 2023, the Company’s PRC tax returns filed for 2020, 2021 and 2022 remain subject to examination by any applicable tax authorities.

Earnings per share

Earnings per share

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 three months ended September 30, 2023 and 2022, respectively. 824,000 of outstanding options were excluded from the diluted earnings per share calculation due to its antidilutive effect for the three months ended September 30, 2023 and 2022.

Recently accounting pronouncements

Recently accounting pronouncements

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

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. This guidance also requires certain disclosures for equity securities subject to contractual sale restrictions. The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This guidance is effective for fiscal years beginning after 15 December 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company 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.

Reclassification

Reclassification

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

v3.23.3
Nature of Business and Organization (Tables)
9 Months Ended
Sep. 30, 2023
Nature of Business and Organization [Abstract]  
Schedule of Consolidated Financial Statements Reflect the Activities of CCNC 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
TMSR HK2   ●  A Hong Kong company
●  Incorporated on April 2019
  100% owned by Citi Profit BVI
Highlight HK  

●  A Hong Kong company

●  Incorporated on November 2022

  100% owned by Citi Profit BVI
Makesi WFOE2  

●  A PRC limited liability company and deemed a wholly foreign owned enterprise (WFOE)

●  Incorporated on December 2020

  100% owned by TMSR HK
Highlight WFOE  

●  A PRC limited liability company and deemed a wholly foreign owned enterprise (WFOE)

●  Incorporated on January 2023

  100% owned by Highlight HK
Wuge1  

●  A PRC limited liability company

●  Incorporated on July 4, 2019

  VIE of Makesi WFOE
Highlight Media3  

●  A PRC limited liability company

●  Incorporated on September 16, 2022

  VIE of Highlight WFOE
AI Catalysis  

●  A Nevada company

●  Incorporated on May 2023

  100% owned by the Company
SH Xianzhui  

●  A PRC limited liability company

●  Incorporated on May 2023

  60% owned by Highlight WFOE
1Disposed on September 28, 2022
2Disposed on June 26, 2023
3

Disposed on September 26, 2023

v3.23.3
Summary of Significant Accounting Policies (Tables)
9 Months Ended
Sep. 30, 2023
Summary of Significant Accounting Policies [Abstract]  
Schedule of Estimated Useful Lives of Plant and Equipment The estimated useful lives and residual value are as follows:
   Useful Life   Estimated
Residual
Value
 
Office equipment and furnishing   5 years    5%
Schedule of Estimated Useful Lives of Intangible Assets The estimated useful life is as follows:
    Useful Life
Software   5 years
Schedule of Disaggregate Revenue The Company’s disaggregate revenue streams from continuing operations are summarized as follows:
   For the Three Months Ended
September 30,
   For the Nine Months Ended
September 30,
 
   2023   2022   2023   2022 
                 
Software copyright  $
    -
   $
    -
   $150,000   $
   -
 
Total revenues  $
-
   $
-
   $150,000   $
-
 

 

v3.23.3
Business Combination and Restructuring (Tables)
9 Months Ended
Sep. 30, 2023
Business Combination and Restructuring [Abstract]  
Schedule of Net Purchase Price Allocation 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:
Total consideration at fair value  $2,250,000 
Schedule of the Fair Value of the Identifiable Assets Acquired and Liabilities Assumed at the Acquisition Date
   Fair Value 
Cash  $47,498 
Other current assets   107,828 
Plant and equipment   1,205 
Other noncurrent assets   
-
 
Goodwill   2,121,947 
Total asset   2,278,478 
Accounts payable   14,170 
Taxes Payable   363 
Other Payable   13,945 
Total liabilities   28,478 
Net asset acquired  $2,250,000 
v3.23.3
Variable Interest Entity (Tables)
9 Months Ended
Sep. 30, 2023
Variable Interest Entity [Abstract]  
Schedule of Carrying Amount of the VIE’s Assets and Liabilities The carrying amount of the VIE’s assets and liabilities are as follows:
   September 30,   December 31, 
   2023   2022 
Cash and cash equivalents   
      -
    215,880 
Accounts receivable, net   
-
    194,520 
Other receivables, net   
-
    78,293 
Prepayments   
-
    
-
 
Total current assets  $
-
   $488,693 
Plants and equipment   
-
    502 
Goodwill   
-
    2,190,485 
Total assets   
-
    2,679,680 
Current liabilities   
-
    333,784 
Non-current liabilities   
-
    
-
 
Total liabilities   
-
    333,784 
Net assets  $
-
   $2,345,896 
           
Accounts payable  $
-
   $116,105 
Other payables and accrued liabilities   
-
    13,469 
Other payables – related party   
-
    
-
 
Tax payables   
-
    195,732 
Customer Advances   
-
    8,478 
Wages payable   
-
    
-
 
Total current liabilities   
-
    333,784 
Lease liabilities – non-current   
-
    
-
 
Total liabilities  $
-
   $333,784 
Schedule of Summarized Operating Results of the VIE’s The summarized operating results of the VIE’s are as follows:
    For the
Nine Months Ended
September 30,
 
    2023 
Operating revenues  $
-
 
Gross profit   
-
 
Income from operations   
-
 
Net loss  $
-
 
v3.23.3
Accounts Receivable (Tables)
9 Months Ended
Sep. 30, 2023
Accounts Receivable [Abstract]  
Schedule of Accounts Receivable Accounts receivable consist of the following:
   September 30,
2023
   December 31,
2022
 
Accounts receivable  $150,000   $197,640 
Less: Allowance for doubtful accounts   -    (3,120)
Total accounts receivable, net  $150,000   $194,520 

 

Schedule of Movement of Allowance for Doubtful Accounts Movement of allowance for doubtful accounts is as follows:
   September 30,
2023
   December 31,
2022
 
Beginning balance  $(3,120)  $- 
Addition   
-
    (3,120)
Disposal of Highlight Media   2,949    
-
 
Exchange rate effect   171    
-
 
Ending balance  $-   $(3,120)
v3.23.3
Other Receivables (Tables)
9 Months Ended
Sep. 30, 2023
Other Receivables [Abstract]  
Schedule of Other Receivables
   September 30,
2023
   December 31,
2022
 
Receivable from disposal of Wuge  $
-
   $948,000 
Receivable from disposal of Highlight Media   100,000    
-
 
Interest receivable from convertible notes   46,575    
-
 
Others   
-
    78,293 
Total other receivables, net  $146,575   $1,026,293 
v3.23.3
Plant and Equipment, Net (Tables)
9 Months Ended
Sep. 30, 2023
Plant and Equipment, Net [Abstract]  
Schedule of Plant and Equipment, Net Plant and equipment consist of the following:
  

September 30,
2023

  

December 31,
2022

 
Office equipment and furniture  $9,617   $10,039 
Subtotal   9,617    10,039 
Less: accumulated depreciation   (751)   (9,537)
Total  $8,866   $502 
v3.23.3
Intangible Assets, Net (Tables)
9 Months Ended
Sep. 30, 2023
Intangible Assets, Net [Abstract]  
Schedule of Intangible Assets, Net Intangible assets consist of the following:
  

September 30,
2023

   December 31,
2022
 
Software  $3,250,000   $
     -
 
Subtotal   3,250,000    
-
 
Less: accumulated amortization   (162,500)   - 
Total  $3,087,500   $
          -
 
v3.23.3
Goodwill (Tables)
9 Months Ended
Sep. 30, 2023
Goodwill [Abstract]  
Schedule of Carrying Amount of Goodwill Business Units The changes in the carrying amount of goodwill by business units are as follows:
  Highlight
Media
   Total 
Balance as of December 31, 2022  $2,190,485   $2,190,485 
Impairment   (2,070,753)   (2,070,753)
Foreign currency translation adjustment   (119,732)   (119,732)
Balance as of September 30, 2023  $
-
   $
-
 
v3.23.3
Related Party Balances and Transactions (Tables)
9 Months Ended
Sep. 30, 2023
Related Party Balances and Transactions [Abstract]  
Schedule of Prepaid Expense – Related Party Prepaid expense – related party:
Name of related party  Relationship  September 30,
2023
   December 31,
2022
 
XIAO JIAN WANG  Chief Executive Officer of the Company  $100,000   $
        -
 
Total     $100,000   $
-
 
Name of related party  Relationship  September 30,
2023
   December 31,
2022
 
Shanghai Highlight Asset Management Co. LTD  A company in which shareholder hold shares  $
-
   $195,732 
Total     $
                 -
   $195,732 
v3.23.3
Long-Term Investment, Net (Tables)
9 Months Ended
Sep. 30, 2023
Long-term investment, net [Abstract]  
Schedule of Long-Term Investments Consisted The Company’s long-term investments consisted of the following:
  

September 30,

2023

   December 31,
2022
 
Available-for-sale debt investments  $2,500,000   $
-
 
Total  $2,500,000   $
             -
 
v3.23.3
Leases (Tables)
9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
Schedule of Lease Payments Over the Term For leases with terms greater than 12 months, the Company records the related asset and liability at the present value of lease payments over the term.
   September 30,
2023
   December 31,
2022
 
Weighted average discount rate:        
Operating lease   5.25 years    N/A 
           
Weighted average discount rate:          
Operating lease   4.24%   N/A 
Schedule of Balances for the Operating Leases The balances for the operating leases where the Group is the lessee are presented as follows within the consolidated balance sheets:
  

September 30,

2023

   December 31,
2022
 
Operating lease right-of-use assets, net        
Operating lease   1,683,518    
    -
 
           
Lease liabilities          
Current portion of operating lease liabilities   324,162    
-
 
Non-current portion of operating lease liabilities   1,388,238    
-
 
    1,712,400    
-
 
Schedule of Future Lease Payments under Operating Leases Future lease payments under operating leases as of September 30, 2023 were as follows:
   Operating Leases 
     
FY2024   344,768 
FY2025   383,632 
FY2026   391,305 
FY2027   399,131 
FY2028   407,114 
Total lease payments   1,925,949 
Less: imputed interest   213,549 
Present value of lease liabilities (1)   1,712,400 
(1)Present value of future operating lease payments consisted of current portion of operating lease liabilities and non-current portion of operating lease liabilities, amounting to $324,162 and $1,388,238 for the nine months ended September 30, 2023, respectively.
v3.23.3
Taxes (Tables)
9 Months Ended
Sep. 30, 2023
Taxes [Abstract]  
Schedule of Deferred Tax Assets 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:
   September 30,
2023
   December 31,
2022
 
Net operating losses carried forward – U.S.  $276,982   $4,574,581 
Valuation allowance   (276,982)   (4,574,581)
Deferred tax assets, net  $
-
   $
-
 
Schedule of Taxes Payable Taxes payable consisted of the following:
  

September 30,
2023

   December 31,
2022
 
VAT taxes payable  $
        -
   $8,478 
Other taxes payable   
-
    
-
 
Total  $
-
   $8,478 
v3.23.3
Equity (Tables)
9 Months Ended
Sep. 30, 2023
Equity [Abstract]  
Schedule of e Summary of Warrant Activity The summary of warrant activity is as follows:
   Warrants   Exercisable
Into Number of
   Weighted Average Exercise   Average Remaining Contractual 
   Outstanding   Shares   Price   Life 
December 31, 2022   4,539,674      151,323    172.5    0.10 
Granted/Acquired   2,114,322    844,351   $8.53    4.63 
Expired   164,675    5,488   $172.5    0.10 
Exercised   844,351    844,351   0.001    
-
 
September 30, 2023   5,644,970    145,835   $25.03    4.34 
   Options   Exercisable
Into Number of
   Weighted Average Exercise   Average Remaining Contractual 
   Outstanding   Shares   Price   Life 
December 31, 2022   824,000    27,467   $150.00    0.10 
Granted/Acquired   
-
    
-
   $
-
    
-
 
Expired   824,000    27,467   $150.00    0.10 
Exercised   
-
    
-
    
-
    
-
 
September 30, 2023   -    -   $-    
-
 
v3.23.3
Segment Reporting (Tables)
9 Months Ended
Sep. 30, 2023
Segment Reporting [Abstract]  
Schedule of Assets by Division The following represents assets by division as of:
Total assets as of 

September 30,

2023

  

December 31,

2022

 
Highlight Media  $
-
   $489,195 
SH Xianzhui   3,871,388    
-
 
GDC, AI Catalysis, Citi Profit BVI , TMSR HK , Highlight HK, Highlight WFOE and Makesi WFOE   10,034,903    3,311,713 
Total Assets  $13,906,291   $3,800,908 
   For the Nine Months Ended
September 30,
 
Total revenues of  2023   2022 
Highlight Media  $
                  -
   $
                 -
 
SH Xianzhui          
GDC, AI Catalysis, Citi Profit BVI , TMSR HK , Highlight HK, Highlight WFOE and Makesi WFOE   150,000    
-
 
Total revenues  $150,000   $
-
 
v3.23.3
Discontinued Operations (Tables)
9 Months Ended
Sep. 30, 2023
Discontinued Operations [Abstract]  
Schedule of Financial Position for the Discounted Operations The following depicts the result of operations for the discounted operations of Highlight Media for the nine months ended September 30, 2023 and Wuge for the nine months ended September 30, 2022, respectively.
   For the Nine Months Ended
September 30,
 
   2023   2022 
REVENUES        
Enterprise brand management services   165,993    
-
 
Wuge digital door signs   
-
    7,616,615 
TOTAL REVENUES   165,993    7,616,615 
           
COST OF REVENUES          
Enterprise brand management services   114,247    
-
 
Wuge digital door signs   
-
    5,527,950 
TOTAL COST OF REVENUES   114,247    5,527,950 
GROSS PROFIT   51,746    2,088,665 
           
OPERATING EXPENSES          
Selling, general and administrative   113,552    1,605,935 
TOTAL OPERATING EXPENSES   113,552    1,605,935 
           
(LOSS) INCOME FROM OPERATIONS   (61,806)   482,730 
           
OTHER INCOME (EXPENSE)          
Interest income   49    65,251 
Interest expense   (248)   (935)
Other income, net   709    70,830 
Total other expense, net   510    135,146 
           
(LOSS) INCOME BEFORE INCOME TAXES FROM CONTINUING OPERATIONS   (61,296)   617,876 
PROVISION FOR INCOME TAXES   112    314,787 
           
(LOSS) INCOME FROM CONTINUING OPERATIONS   (61,408)   303,089 
           
Net loss attributable to noncontrolling interest   
-
    
-
 
(LOSS) INCOME FROM CONTINUING OPERATIONS OF GD CULTURE GROUP LIMITED   (61,408)   303,089 
v3.23.3
Nature of Business and Organization (Details) - USD ($)
9 Months Ended
Sep. 30, 2023
Sep. 26, 2023
Jun. 26, 2023
Sep. 28, 2022
Purchase price $ 100,000      
Agreement term 20 years      
Makesi WFOE [Member]        
Agreement term 20 years      
Voting Rights Proxy and Financial Support Agreement [Member]        
Agreement term 20 years      
SH Xianzhui [Member]        
Equity interest percentage 60.00%      
Wuge Member        
Average closing price (in Dollars per share) $ 0.237     $ 0.237
Shanghai Yuanma Food and Beverage Management Co., Ltd. [Member]        
Equity interest percentage     100.00%  
TMSR HK [Member]        
Purchase price     $ 100,000  
TMSR HK [Member] | Share Purchase Agreement [Member]        
Purchase price     $ 100,000  
Highlight WFOE [Member] | VIE Agreements [Member]        
Purchase price   $ 100,000    
v3.23.3
Nature of Business and Organization (Details) - Schedule of Consolidated Financial Statements Reflect the Activities of CCNC
9 Months Ended
Sep. 30, 2023
Citi Profit BVI [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background ●  A British Virgin Island company Incorporated on April 2019
Ownership 100% owned by the Company
TMSR HK2 [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background ●  A Hong Kong company ●  Incorporated on April 2019 [1]
Ownership 100% owned by Citi Profit BVI [1]
Highlight HK [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background ●  A Hong Kong company ●  Incorporated on November 2022
Ownership 100% owned by Citi Profit BVI
Makesi WFOE2 [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background ●  A PRC limited liability company and deemed a wholly foreign owned enterprise (WFOE) ●  Incorporated on December 2020 [1]
Ownership 100% owned by TMSR HK [1]
Highlight WFOE [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background ●  A PRC limited liability company and deemed a wholly foreign owned enterprise (WFOE) ●  Incorporated on January 2023
Ownership 100% owned by Highlight HK
Wuge [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background ●  A PRC limited liability company ●  Incorporated on July 4, 2019 [2]
Ownership VIE of Makesi WFOE [2]
Highlight Media [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background ●  A PRC limited liability company ●  Incorporated on September 16, 2022 [3]
Ownership VIE of Highlight WFOE [3]
AI Catalysis [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background ●  A Nevada company ●  Incorporated on May 2023
Ownership 100% owned by the Company
SH Xianzhui [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background ●  A PRC limited liability company ●  Incorporated on May 2023
Ownership 60% owned by Highlight WFOE
[1] Disposed on June 26, 2023
[2] Disposed on September 28, 2022
[3] Disposed on September 26, 2023
v3.23.3
Summary of Significant Accounting Policies (Details)
9 Months Ended
Sep. 30, 2023
USD ($)
shares
Sep. 30, 2022
shares
Dec. 31, 2022
USD ($)
Summary of Significant Accounting Policies [Line Items]      
Accumulated other comprehensive income | $ $ 71,468   $ 179,460
Tax benefits, description The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.    
Outstanding warrants 9,079,348 10,500,000  
Antidilutive effect 4,539,674 5,250,000  
Options [Member]      
Summary of Significant Accounting Policies [Line Items]      
Antidilutive effect 824,000 824,000  
RMB [Member]      
Summary of Significant Accounting Policies [Line Items]      
Translation rate 7.3   6.38
RMB [Member] | Average Translation Rates [Member]      
Summary of Significant Accounting Policies [Line Items]      
Translation rate 7.03 6.61  
USD [Member]      
Summary of Significant Accounting Policies [Line Items]      
Translation rate 1   1
v3.23.3
Summary of Significant Accounting Policies (Details) - Schedule of Estimated Useful Lives of Plant and Equipment - Office equipment and furnishing [Member]
Sep. 30, 2023
Plant and equipment, Useful Life 5 years
Plant and equipment, Estimated Residual Value 5.00%
v3.23.3
Summary of Significant Accounting Policies (Details) - Schedule of Estimated Useful Lives of Intangible Assets
9 Months Ended
Sep. 30, 2023
Software [Member]  
Schedule of estimated useful lives of intangible assets [Abstract]  
Useful Life 5 years
v3.23.3
Summary of Significant Accounting Policies (Details) - Schedule of Disaggregate Revenue - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Total revenues $ 150,000
Software Copyright [Member]        
Total revenues $ 150,000
v3.23.3
Business Combination and Restructuring (Details) - USD ($)
$ in Millions
Sep. 30, 2023
Dec. 31, 2022
Sep. 16, 2022
Apr. 29, 2021
Business Combination and Restructuring [Line Items]        
Shares issued (in Shares) 3,053,563 1,844,877   231,802
Highlight Media [Member]        
Business Combination and Restructuring [Line Items]        
Service fee percentage     100.00%  
Goodwill $ 2.1      
Goodwill deductible for income tax purposes      
Purchase Agreement [Member]        
Business Combination and Restructuring [Line Items]        
Shares issued (in Shares)     9,000,000  
v3.23.3
Business Combination and Restructuring (Details) - Schedule of Net Purchase Price Allocation
9 Months Ended
Sep. 30, 2023
USD ($)
Highlight Media [Member]  
Total consideration at fair value $ 2,250,000
v3.23.3
Business Combination and Restructuring (Details) - Schedule of the Fair Value of the Identifiable Assets Acquired and Liabilities Assumed at the Acquisition Date - Wuge Member
Sep. 30, 2023
USD ($)
Cash $ 47,498
Other current assets 107,828
Plant and equipment 1,205
Other noncurrent assets
Goodwill 2,121,947
Total asset 2,278,478
Accounts payable 14,170
Taxes Payable 363
Other Payable 13,945
Total liabilities 28,478
Net asset acquired $ 2,250,000
v3.23.3
Variable Interest Entity (Details) - USD ($)
9 Months Ended
Sep. 30, 2023
Jun. 26, 2023
Sep. 28, 2022
Variable Interest Entity (Details) [Line Items]      
Purchase price $ 100,000    
Wuge [Member]      
Variable Interest Entity (Details) [Line Items]      
Average closing price (in Dollars per share) $ 0.237   $ 0.237
Yuanma [Member]      
Variable Interest Entity (Details) [Line Items]      
Purchase price for transaction   $ 100,000  
v3.23.3
Variable Interest Entity (Details) - Schedule of Carrying Amount of the VIE’s Assets and Liabilities - Variable Interest Entities [Member] - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Variable Interest Entity [Line Items]    
Cash and cash equivalents $ 215,880
Accounts receivable, net 194,520
Other receivables, net 78,293
Prepayments
Total current assets 488,693
Plants and equipment 502
Goodwill 2,190,485
Total assets 2,679,680
Current liabilities 333,784
Non-current liabilities
Total liabilities 333,784
Net assets 2,345,896
Accounts payable 116,105
Other payables and accrued liabilities 13,469
Tax payables 195,732
Customer Advances 8,478
Wages payable
Total current liabilities 333,784
Lease liabilities – non-current
Total liabilities 333,784
Related Party [Member]    
Variable Interest Entity [Line Items]    
Other payables – related party
v3.23.3
Variable Interest Entity (Details) - Schedule of Summarized Operating Results of the VIE’s - Variable Interest Entities Member
9 Months Ended
Sep. 30, 2023
USD ($)
Variable Interest Entity (Details) - Schedule of Summarized Operating Results of the VIE’s [Line Items]  
Operating revenues
Gross profit
Income from operations
Net loss
v3.23.3
Accounts Receivable (Details) - Schedule of Accounts Receivable - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Schedule of Accounts Receivable [Abstract]    
Accounts receivable $ 150,000 $ 197,640
Less: Allowance for doubtful accounts   (3,120)
Total accounts receivable, net $ 150,000 $ 194,520
v3.23.3
Accounts Receivable (Details) - Schedule of Movement of Allowance for Doubtful Accounts - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Schedule of Movement of Allowance for Doubtful Accounts [Abstract]    
Beginning balance $ (3,120)  
Addition $ (3,120)
Disposal of Highlight Media 2,949
Exchange rate effect $ 171
Ending balance   $ (3,120)
v3.23.3
Other Receivables (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Highlight Media [Member]    
Other Receivables (Details) [Line Items]    
Consideration amount $ 100,000  
Wuge [Member]    
Other Receivables (Details) [Line Items]    
Consideration amount   $ 948,000
v3.23.3
Other Receivables (Details) - Schedule of Other Receivables - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Schedule of Other Receivables [Abstract]    
Receivable from disposal of Wuge $ 948,000
Receivable from disposal of Highlight Media 100,000
Interest receivable from convertible notes 46,575
Others 78,293
Total other receivables, net $ 146,575 $ 1,026,293
v3.23.3
Plant and Equipment, Net (Details) - USD ($)
9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Plant and Equipment, Net [Abstract]    
Depreciation and expense $ 751 $ 33,192
v3.23.3
Plant and Equipment, Net (Details) - Schedule of Plant and Equipment, Net - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Property, Plant and Equipment [Line Items]    
Subtotal $ 9,617 $ 10,039
Less: accumulated depreciation (751) (9,537)
Total 8,866 502
Office equipment and furniture [Member]    
Property, Plant and Equipment [Line Items]    
Subtotal $ 9,617 $ 10,039
v3.23.3
Intangible Assets, Net (Details) - USD ($)
Sep. 30, 2023
Sep. 30, 2022
Intangible Assets, Net [Abstract]    
Amortization expense $ (162,500) $ 98
v3.23.3
Intangible Assets, Net (Details) - Schedule of Intangible Assets, Net - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Sep. 30, 2022
Finite-Lived Intangible Assets [Line Items]      
Subtotal $ 3,250,000  
Less: accumulated amortization (162,500)   $ 98
Total 3,087,500  
Software [Member]      
Finite-Lived Intangible Assets [Line Items]      
Subtotal $ 3,250,000  
v3.23.3
Goodwill (Details) - Schedule of Carrying Amount of Goodwill Business Units - USD ($)
9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Goodwill [Line Items]    
Balance as beginning $ 2,190,485  
Impairment (2,070,753) $ (6,590,339)
Foreign currency translation adjustment (119,732)  
Balance as ending  
Highlight Media [Member]    
Goodwill [Line Items]    
Balance as beginning 2,190,485  
Impairment (2,070,753)  
Foreign currency translation adjustment (119,732)  
Balance as ending  
v3.23.3
Related Party Balances and Transactions (Details) - Schedule of Prepaid Expense – Related Party - USD ($)
9 Months Ended
Sep. 30, 2023
Dec. 31, 2022
XIAO JIAN WANG [Member]    
Related Party Balances and Transactions (Details) - Schedule of Prepaid Expense – Related Party [Line Items]    
Relationship Chief Executive Officer of the Company  
Other payables - related parties $ 100,000
Shanghai Highlight Asset Management Co. LTD [Member]    
Related Party Balances and Transactions (Details) - Schedule of Prepaid Expense – Related Party [Line Items]    
Relationship A company in which shareholder hold shares  
Other payables - related parties $ 195,732
v3.23.3
Long-Term Investment, Net (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Long-term investment, net [Abstract]    
Convertible notes $ 2,500,000
v3.23.3
Long-Term Investment, Net (Details) - Schedule of Long-Term Investments Consisted - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Schedule of Long Term Investments Consisted [Abstract]    
Available-for-sale debt investments $ 2,500,000
Total $ 2,500,000
v3.23.3
Leases (Details) - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Leases [Line Items]    
Current portion of operating lease liabilities $ 324,162
Non-current portion of operating lease liabilities $ 1,388,238
v3.23.3
Leases (Details) - Schedule of Lease Payments Over the Term
Sep. 30, 2023
Dec. 31, 2022
Weighted average discount rate:    
Operating lease, weighted average Lease Term 5 years 3 months
Weighted average discount rate:    
Operating lease, weighted average discount rate 4.24%
v3.23.3
Leases (Details) - Schedule of Balances for the Operating Leases - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Operating lease right-of-use assets, net    
Operating lease $ 1,683,518
Lease liabilities    
Current portion of operating lease liabilities 324,162
Non-current portion of operating lease liabilities 1,388,238
Total $ 1,712,400 [1]
[1] Present value of future operating lease payments consisted of current portion of operating lease liabilities and non-current portion of operating lease liabilities, amounting to $324,162 and $1,388,238 for the nine months ended September 30, 2023, respectively.
v3.23.3
Leases (Details) - Schedule of Future Lease Payments under Operating Leases - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Schedule Of Future Lease Payments Under Operating Leases Abstract    
FY2024 $ 344,768  
FY2025 383,632  
FY2026 391,305  
FY2027 399,131  
FY2028 407,114  
Total lease payments 1,925,949  
Less: imputed interest 213,549  
Present value of lease liabilities $ 1,712,400 [1]
[1] Present value of future operating lease payments consisted of current portion of operating lease liabilities and non-current portion of operating lease liabilities, amounting to $324,162 and $1,388,238 for the nine months ended September 30, 2023, respectively.
v3.23.3
Taxes (Details) - USD ($)
$ in Millions
1 Months Ended 3 Months Ended 9 Months Ended
Apr. 30, 2019
May 31, 2018
Dec. 22, 2017
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Taxes (Details) [Line Items]              
GDC amounted (in Dollars)        
Valuation allowance           100.00%  
Effective rate percentage     10.50%        
Maximum [Member]              
Taxes (Details) [Line Items]              
Corporate tax rate     34.00%        
Effective rate percentage     13.125%        
Value added tax 13.00% 17.00%          
Value Added Tax Standard rates on gross sales price   16.00%          
Minimum [Member]              
Taxes (Details) [Line Items]              
Corporate tax rate     21.00%        
Effective rate percentage           10.50% 10.50%
Value added tax 6.00% 6.00%          
Value Added Tax Standard rates on gross sales price   6.00%          
United States [Member]              
Taxes (Details) [Line Items]              
GDC amounted (in Dollars)            
Operating loss carry forward (in Dollars)       $ 0   $ 0  
Hong Kong [Member]              
Taxes (Details) [Line Items]              
Foreign tax rate, percentage           16.50%  
PRC [Member]              
Taxes (Details) [Line Items]              
Foreign tax rate, percentage           25.00%  
v3.23.3
Taxes (Details) - Schedule of Deferred Tax Assets - USD ($)
Sep. 30, 2023
Dec. 31, 2022
Deferred Tax Assets [Abstract]    
Net operating losses carried forward – U.S. $ 276,982 $ 4,574,581
Valuation allowance (276,982) (4,574,581)
Deferred tax assets, net
v3.23.3
Taxes (Details) - Schedule of Taxes Payable - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Schedule of Taxes Payable [Abstract]    
VAT taxes payable $ 8,478
Other taxes payable
Total $ 8,478
v3.23.3
Concentration of Risk (Details) - Cash and Accounts Receivable [Member] - Credit Concentration Risk [Member] - USD ($)
Sep. 30, 2023
Dec. 31, 2022
PRC [Member]    
Concentration of Risk (Details) [Line Items]    
Deposited with various financial institutions $ 1,143,611 $ 215,880
UNITED STATES [Member]    
Concentration of Risk (Details) [Line Items]    
Deposited with various financial institutions $ 503,537 $ 173,228
v3.23.3
Equity (Details) - USD ($)
1 Months Ended 9 Months Ended
Jun. 22, 2023
Feb. 22, 2021
Feb. 17, 2021
Jul. 29, 2015
Sep. 30, 2023
May 16, 2023
Dec. 31, 2022
Apr. 29, 2021
Equity (Details) [Line Items]                
Tax profits percentage         10.00%      
Registered capital percentage         50.00%      
Restricted net assets           $ 492,315  
Asset purchase agreement, description         In the concurrent PIPE offering, the Company sold warrants to purchase up to 1,154,519 shares of common stock to the Purchasers, pursuant to a private warrant securities purchase agreement, dated May 1, 2023. In connection with the offering, the Company paid Univest Securities, LLC, the placement agent, a total cash fee equal to 7.0% of the aggregate gross proceeds received in the offering, a non-accountable expense allowance equal to 1% of the aggregate gross proceeds, and reimbursement for certain out-of-pocket accountable expenses incurred in this offering in the amount of $150,000. In addition, the Company issued to the placement agent warrants to purchase up to 115,452 shares of common stock at an exercise price of $10.02 per share, which represents 120% of the offering price of each share. The net proceeds from the Offering, after deducting placement agent discounts and commissions and estimated offering expenses payable by the Company, are approximately $8.5 million (assuming the warrants are not exercised).      
Price per share $ 4       $ 0.0001      
Common stock, shares issued         3,053,563   1,844,877 231,802
Purchase shares   84,244            
Exercise price         $ 201.6     $ 183
Purchase price per share         $ 183      
Cash         $ 2,310,000      
Aggregate gross proceeds percentage         120.00%      
Non-accountable expense         $ 250,000      
Accountable expenses         $ 60,000      
Options granted         180      
Common stock shares outstanding, percentage     19.99%   9.99%      
Aggregate common stock shares         310,168      
Pre-funded warrant         $ 8.349      
Public offering price per sahre         $ 0.001      
Exercise price per share         0.001      
Warrant is outstanding price per share         $ 0.001      
Warrants to purchase shares         1,154,519      
Aggregate percentage         7.00%      
Incurred offering cost         $ 150,000      
Common stock, shares issued         115,452      
Minimum [Member]                
Equity (Details) [Line Items]                
Outstanding common stock, percentage         4.99%      
Maximum [Member]                
Equity (Details) [Line Items]                
Outstanding common stock, percentage         9.99%      
Warrant [Member]                
Equity (Details) [Line Items]                
Warrants and options         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 expired on 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.      
Warrant [Member]                
Equity (Details) [Line Items]                
Aggregate gross proceeds percentage         1.00%      
Software [Member]                
Equity (Details) [Line Items]                
Purchase price $ 750,000              
Common Stock [Member]                
Equity (Details) [Line Items]                
issuance of shares of common stock as purchase consideration 187,500              
Price per share         $ 10.02      
Common stock, shares issued         84,244      
Aggregate gross proceeds percentage         5.00%      
Securities Purchase Agreement [Member]                
Equity (Details) [Line Items]                
Common stock, description         On May 4, 2023, the Company sold an aggregate of 310,168 shares of common stock of the Company, par value $0.0001 per share, and pre-funded warrants to purchase up to an aggregate of 844,351 shares of common stock are sold to certain purchasers, pursuant to a securities purchase agreement, dated May 1, 2023, as amended on May 16, 2023. The purchase price of each share of common stock is $8.35. The purchase price of each pre-funded warrant is $8.349, which equals the price per share of common stock being sold to the public in this offering, minus $0.001. The RD Offering is being made pursuant to a shelf registration statement (No. 333-254366) on Form S-3, which was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on March 26, 2021, and related prospectus supplement.      
Common stock, shares issued   138,889            
Unregistered Warrants [Member]                
Equity (Details) [Line Items]                
Common stock, shares issued   54,646            
Exercise price         $ 8.35      
Price Protection Adjustment [Member]                
Equity (Details) [Line Items]                
Exercise price         201.6      
Stockholder Approval [Member]                
Equity (Details) [Line Items]                
Common stock, shares issued               231,802
Purchase price per share         $ 183      
Placement Agency Agreement [Member]                
Equity (Details) [Line Items]                
Common stock, shares issued         6,945      
Commission fee         $ 2,000,000      
Aggregate gross proceeds percentage         8.00%      
Pre-Funded Warrants [Member]                
Equity (Details) [Line Items]                
Common stock shares outstanding, percentage         4.99%      
Aggregate common stock shares         844,351      
RD Securities Purchase Agreement [Member]                
Equity (Details) [Line Items]                
Purchase price per share           $ 8.35    
Placement Agent [Member]                
Equity (Details) [Line Items]                
Aggregate gross proceeds percentage         1.00%      
Sponsor [Member]                
Equity (Details) [Line Items]                
Number of shares in a unit       500,000        
PricePerUnit       $ 5        
Aggregate price       $ 2,500,000        
Underwriter Member                
Equity (Details) [Line Items]                
Common stock, description         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.      
v3.23.3
Equity (Details) - Schedule of e Summary of Warrant Activity
9 Months Ended
Sep. 30, 2023
$ / shares
shares
Warrant Activity [Member]  
Schedule of Warrant and Option Activity [Abstract]  
Outstanding, Beginning balance 4,539,674
Exercisable Into Number of Shares, Beginning balance 151,323
Weighted Average Exercise Price, Beginning balance (in Dollars per share) | $ / shares $ 172.5
Average Remaining Contractual Life, Beginning balance 1 month 6 days
Outstanding, Ending balance 5,644,970
Exercisable Into Number of Shares, Ending balance 145,835
Weighted Average Exercise Price, Ending balance (in Dollars per share) | $ / shares $ 25.03
Average Remaining Contractual Life, Ending balance 4 years 4 months 2 days
Outstanding, Granted/Acquired 2,114,322
Exercisable Into Number of Shares, Granted/Acquired 844,351
Weighted Average Exercise Price, Granted/Acquired (in Dollars per share) | $ / shares $ 8.53
Average Remaining Contractual Life, Granted/Acquired 4 years 7 months 17 days
Outstanding, Expired 164,675
Exercisable Into Number of Shares, Expired 5,488
Weighted Average Exercise Price, Expired (in Dollars per share) | $ / shares $ 172.5
Average Remaining Contractual Life, Expired 1 month 6 days
Outstanding, Exercised 844,351
Exercisable Into Number of Shares, Exercised 844,351
Weighted Average Exercise Price, Exercised (in Dollars per share) | $ / shares $ 0.001
Average Remaining Contractual Life, Exercised
Option Activity [Member]  
Schedule of Warrant and Option Activity [Abstract]  
Outstanding, Beginning balance 824,000
Exercisable Into Number of Shares, Beginning balance 27,467
Weighted Average Exercise Price, Beginning balance (in Dollars per share) | $ / shares $ 150
Average Remaining Contractual Life, Beginning balance 1 month 6 days
Average Remaining Contractual Life, Ending balance
Outstanding, Granted/Acquired
Exercisable Into Number of Shares, Granted/Acquired
Weighted Average Exercise Price, Granted/Acquired (in Dollars per share) | $ / shares
Average Remaining Contractual Life, Granted/Acquired
Outstanding, Expired 824,000
Exercisable Into Number of Shares, Expired 27,467
Weighted Average Exercise Price, Expired (in Dollars per share) | $ / shares $ 150
Average Remaining Contractual Life, Expired 1 month 6 days
Outstanding, Exercised
Exercisable Into Number of Shares, Exercised
Weighted Average Exercise Price, Exercised (in Dollars per share) | $ / shares
Average Remaining Contractual Life, Exercised
v3.23.3
Segment Reporting (Details) - Schedule of Assets by Division - Other Segments [Member] - USD ($)
9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Dec. 31, 2022
Segment Reporting Information [Line Items]      
Total Assets $ 13,906,291   $ 3,800,908
Total revenues 150,000  
Highlight Media [Member]      
Segment Reporting Information [Line Items]      
Total Assets   489,195
Total revenues  
SH Xianzhui [Member]      
Segment Reporting Information [Line Items]      
Total Assets 3,871,388  
GDC, AI Catalysis, Citi Profit BVI , TMSR HK , Highlight HK, Highlight WFOE and Makesi WFOE [Member]      
Segment Reporting Information [Line Items]      
Total Assets 10,034,903   $ 3,311,713
Total revenues $ 150,000  
v3.23.3
Discontinued Operations (Details) - Schedule of Financial Position for the Discounted Operations - Discounted operations [Member] - USD ($)
9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
REVENUES    
TOTAL REVENUES $ 165,993 $ 7,616,615
COST OF REVENUES    
TOTAL COST OF REVENUES 114,247 5,527,950
GROSS PROFIT 51,746 2,088,665
OPERATING EXPENSES    
Selling, general and administrative 113,552 1,605,935
TOTAL OPERATING EXPENSES 113,552 1,605,935
(LOSS) INCOME FROM OPERATIONS (61,806) 482,730
OTHER INCOME (EXPENSE)    
Interest income 49 65,251
Interest expense (248) (935)
Other income, net 709 70,830
Total other expense, net 510 135,146
(LOSS) INCOME BEFORE INCOME TAXES FROM CONTINUING OPERATIONS (61,296) 617,876
PROVISION FOR INCOME TAXES 112 314,787
(LOSS) INCOME FROM CONTINUING OPERATIONS (61,408) 303,089
Net loss attributable to noncontrolling interest
(LOSS) INCOME FROM CONTINUING OPERATIONS OF GD CULTURE GROUP LIMITED (61,408) 303,089
Discontinued Operations [Member]    
REVENUES    
Enterprise brand management services 165,993
Wuge digital door signs 7,616,615
COST OF REVENUES    
Enterprise brand management services 114,247
Wuge digital door signs $ 5,527,950
v3.23.3
Subsequent Events (Details) - USD ($)
Nov. 01, 2023
Oct. 27, 2023
Sep. 30, 2023
May 16, 2023
Apr. 29, 2021
Subsequent Events [Line Items]          
Common stock shares     115,452    
Purchase price (in Dollars per share)     $ 183    
Warrant purchase price (in Dollars per share)     $ 201.6   $ 183
Offering cost (in Dollars)     $ 150,000    
November 2023 Registered Direct Offering [Member] | Private Placement [Member]          
Subsequent Events [Line Items]          
Common stock shares       1,154,519  
Subsequent Event [Member]          
Subsequent Events [Line Items]          
Common stock shares   400,000      
Common stock per value (in Dollars per share)   $ 2.782      
Subsequent Event [Member] | November 2023 Registered Direct Offering [Member]          
Subsequent Events [Line Items]          
Common stock per value (in Dollars per share) $ 0.001        
Purchase price (in Dollars per share) $ 3.019        
Net proceeds from Offering (in Dollars) $ 9,050,000.00        
Gross proceeds received percentage 7.00%        
Offering cost (in Dollars) $ 150,000        
Subsequent Event [Member] | November 2023 Registered Direct Offering [Member] | Pre-Funded Warrants [Member]          
Subsequent Events [Line Items]          
Common stock shares 1,876,103        
Warrant purchase price (in Dollars per share) $ 3.018        
Subsequent Event [Member] | November 2023 Registered Direct Offering [Member] | Registered Warrants [Member]          
Subsequent Events [Line Items]          
Common stock shares 3,312,356        
Subsequent Event [Member] | November 2023 Registered Direct Offering [Member] | Exchange Warrants [Member]          
Subsequent Events [Line Items]          
Common stock shares 577,260        
Subsequent Event [Member] | Common Stock [Member] | November 2023 Registered Direct Offering [Member]          
Subsequent Events [Line Items]          
Common stock shares 1,436,253        
Common stock per value (in Dollars per share) $ 0.0001        
Subsequent Event [Member] | Highlight WFOE [Member]          
Subsequent Events [Line Items]          
Purchase of equity interest   13.3333%      

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