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, ~~2022~~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

~~CODE CHAIN NEW CONTINENT~~GD CULTURE GROUP LIMITED

(Exact name of registrant as specified in its charter)

Nevada

47-3709051

7((State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

~~(I.R.S. Employer~~

Identification Number)

~~1678 Jinshajiang Road~~

~~Building No. 6, Room 901~~

~~Shanghai, China~~

22F - 810 Seventh Avenue,

~~200062~~

New York, NY 10019

10019

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: +~~86 021-32583578~~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 ~~and posted on its corporate Website, if any,~~ every Interactive Date File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ~~14, 2022,~~20, 2023, there were ~~1,837,136~~4,489,816 shares of the Company’s common stock issued and outstanding.

~~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~~		~~CCNC~~		~~Nasdaq Capital Market~~

TABLE OF CONTENTS

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, ~~2021~~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~~forward- looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q, to conform these statements to actual results or to changes in our expectations.

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

~~CODE CHAIN NEW CONTINENT~~GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

September 30, December 31,
2022 2021
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 250,279 $ 14,588,330
Accounts receivable, net 30,247
Other receivables, net 1,095,859 728,361
Other receivable - related party - 610,948
Inventories - 3,714
Prepayments 872 -
Total current assets 1,377,257 15,931,353

PLANT AND EQUIPMENT, NET 1,205 283,896

RIGHT-OF-USE ASSETS - 22,733

OTHER ASSETS
Prepayments for purchases of equipment 12,949,328 27,706,681
Goodwill 2,123,879 6,590,339
Intangible assets, net - 255

Total other assets 15,073,207 34,297,275

Total assets $ 16,451,669 $ 50,535,257 ��

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable $ 14,170 $ 3,543,839
Other payables and accrued liabilities 5,227,686 5,005,271
Other payables - related parties 466,407 466,407
Customer deposits - 7,171,255
Lease liabilities - current - 13,338
Taxes payable 363 2,246,418
Total current liabilities 5,708,626 18,446,528

OTHER LIABILITIES
Lease liabilities – non-current - 8,738
Total other liabilities - 8,738

Total liabilities 5,708,626 18,455,266

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, 2022 and December 31, 2021, respectively - -
Common stock, $0.0001 par value, 200,000,000 shares authorized, 1,837,136 and 1,536,052 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively 184 154
Additional paid-in capital 60,124,087 83,038,827
Statutory reserves 4,467 -
Stock subscriptions receivable - (25,165,728 )
Accumulated deficit (49,493,368 ) (26,019,119 )
Accumulated other comprehensive income 107,673 225,857
Total shareholders’ equity 10,743,043 32,079,991

Total liabilities and shareholders’ equity $ 16,451,669 $ 50,535,257

	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.

~~CODE CHAIN NEW CONTINENT~~GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~LOSS AND

COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(UNAUDITED)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021			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 (INCOME)
OPERATING EXPENSES
Selling, general and administrative		64,041			747,708			209,740			21,996,804			3,667,011			64,041			3,942,947			6,800,079
Impairment of prepayments		-			-			12,949,329			-			-			-			-			12,949,329
TOTAL OPERATING EXPENSES		64,041			747,708			13,159,069			21,996,804			3,667,011			64,041			3,942,947			19,749,408

INCOME FROM OPERATIONS		(64,041	)		(747,708	)		(13,159,069	)		(21,996,804	)
LOSS FROM OPERATIONS														(3,667,011	)		(64,041	)		(3,792,947	)		(19,749,408	)

OTHER INCOME (EXPENSE)
Interest income		-			298			-			793			46,891			-			47,070			-
Interest expense		-			-			-			-			(52	)		-			(52	)		-
Investment income		-			-			-			-
Other expense, net		-			556,195			-			2,366,518
Total other expense, net		-			556,493			-			2,367,311
Other income														-			-			100,000			-
Total other income, net														46,839			-			147,018			-

LOSS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS		(64,041	)		(191,215	)		(13,159,069	)		(19,629,493	)		(3,620,172	)		(64,041	)		(3,645,929	)		(19,749,408	)
PROVISION FOR INCOME TAXES		-			-			-			-			-			-			-			-
LOSS FROM CONTINUING OPERATIONS		(64,041	)		(191,215	)		(13,159,069	)		(19,629,493	)		(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		-			(2,463,494	)		(6,287,250	)		(1,344,503	)		(10,358	)		-			(61,408	)		303,089
Loss(Gain) on disposal, net of taxes		(4,027,930	)		15,661			(4,027,930	)		(11,218,835	)
Loss on disposal, net of taxes														(230	)		(4,027,930	)		(230	)		(4,027,930	)
Net loss		(4,091,971	)		(2,639,048	)		(23,474,249	)		(32,192,831	)		(3,528,275	)		(4,091,971	)		(3,605,082	)		(23,474,249	)

OTHER COMPREHENSIVE INCOME
OTHER COMPREHENSIVE LOSS
Foreign currency translation adjustment		(261,985	)		3,386			(118,184	)		(736,058	)		4,291			(261,985	)		(107,992	)		(118,184	)
COMPREHENSIVE LOSS	$	(4,353,956	)	$	(2,635,662	)	$	(23,592,433	)	$	(32,928,889	)		(3,523,984	)		(4,353,956	)		(3,713,074	)		(23,592,433	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
Basic and diluted*		1,427,927			1,368,852			1,427,927			1,368,852			3,053,563			1,427,927			2,447,446			1,427,927

Loss per share from continuing operations
Basic and diluted		(0.04	)		(0.15	)		(9.22	)		(15.66	)		(1.15	)		(0.04	)		(1.45	)		(13.83	)

Loss per share from discontinued operations
Basic and diluted		(2.82	)		(1.95	)		(7.22	)		(10.02	)		(0.00	)		(2.82	)		(0.03	)		(2.61	)

Loss per share available to common shareholders
Basic and diluted*	$	(2.87	)	$	(2.11	)	$	(16.44	)	$	(25.68	)
Basic and diluted														(1.16	)		(2.87	)		(1.47	)		(16.44	)

~~CODE CHAIN NEW CONTINENT~~GD CULTURE GROUP LIMITED AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

For the Nine Months Ended September 30, 2021

　 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, 2021 - - 972,682 97 20,025,248 - - 951,773 935,637 21,912,755
Net loss - - - - - - - (32,192,831 ) - (32,192,831 )
Issuance of common stock for Bonus - - 30,850 3 2,563,615 - 　　　 2,563,618
Issuance of common stock for purchase Bitcoin mining machines - - 52,927 5 6,159,995 - 　　　 6,160,000
Issuance of common stock for purchase digital currency mining machines 　　 254,916 26 16,442,085 - 　　　 16,442,111
Issuance of shares for cash - - 138,889 14 22,539,982 - - - - 22,539,996
Issuance of common stock for employee compensation - - 100,000 10 16,923,840 - - - - 16,923,850
The cancellation of the common stock - - (14,212 ) (1 ) (1,615,938 ) - - - - (1,615,939 )
Issuance of common stock 　　　　　 (16,442,110 ) 　　　 (16,442,110 )
Foreign currency translation - - - - - - - - (736,058 ) (736,058 )
BALANCE, September 30, 2021 (Unaudited) - $ - 1,536,052 $ 154 $ 83,038,827 $ (16,442,110 ) $ - $ (31,241,058 ) $ 199,579 $ 35,555,392

	For the Nine Months Ended September 30, 2022																											For the Nine Months Ended September 30, 2022
											Additional			Stock			Accumulated Deficit					Accumulated Other																Additional			Stock			Retained Earnings (Accumulated Deficit)					Accumulated Other
	Preferred Stock				Common Stock						Paid-in			Subscription			Statutory					Comprehensive						Preferred Stock				Common Stock						Paid-in			Subscription			Statutory					Comprehensive
	Shares		Amount		Shares			Amount			Capital			Receivable			Reserves		Unrestricted			Income (Loss)			Total			Shares		Amount		Shares			Amount			Capital			Receivable			Reserves		Unrestricted			Income (Loss)			Total
BALANCE, January 1, 2022		-		-		1,536,052			154			83,038,827			(25,165,728	)		-		(26,019,119	)		225,857			32,079,991			-		-		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	)		-		-		-			-			-			-			-		(23,474,249	)		-			(23,474,249	)
Issuance of common stock for acquisition Yuan Ma						256,000			26			7,679,974														7,680,000
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			-		-		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	)		-		-		(254,916	)		(26	)		(32,844,684	)		-			-		-			-			(32,844,710	)
Stock subscription receivable from issuance of common stock															25,165,728											25,165,728			-		-		-			-			-			25,165,728			-		-			-			25,165,728
Foreign currency translation		-		-		-			-			-			-			-		-			(118,184	)		(118,184	)		-		-		-			-			-			-			-		-			(118,184	)		(118,184	)
BALANCE, September 30, 2022 (Unaudited)		-	$	-		1,837,136		$	184		$	60,124,087		$	-		$	4,467	$	(49,493,368	)	$	107,673		$	10,743,043			-	$	-		1,844,877		$	184		$	60,124,087		$	-		$	4,467	$	(49,493,368	)	$	107,673		$	10,743,043

~~CODE CHAIN NEW CONTINENT~~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

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

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

GD CULTURE GROUP LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the Nine Months Ended September 30,
2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (23,474,249 ) $ (32,192,831 )
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation of plant and equipment 33,192 1,237,480
Amortization of intangible assets 98 151
Impairment of prepayments 12,949,329 -
Issuance of common stock for employee compensation - 16,923,850
Issuance of common stock for  Bonus - 2,563,618
Disposal of the company 4,027,930 11,218,835
Goodwill impairments 6,590,339
Bitcoin revenue - (2,366,518 )
Change in operating assets and liabilities

Accounts receivables - (419,509 )
Other receivables 757 439,725
Other receivable - related party 192,863 (273,570 )
Inventories (3,001 ) (599,768 )
Prepayments (68,962 ) (21,217,981 )
Accounts payable 196,417 (420,377 )
Other payables and accrued liabilities (99,892 ) 145,934
Customer deposits (2,156,462 ) 10,094,951
Lease liabilities (493 ) 3,227
Taxes payable 845,389 263,930
Net cash used in operating activities (966,745 ) (14,598,852 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in cash from acquisition of Highlight Media 47,498
Net decrease in cash from disposal of discontinued operations (12,316,416 ) (271,099 )
Purchase of Intangible assets - 463,679

Purchase of equipment (6,689 ) (287,821 )
Net cash used in investing activities (12,275,607 ) (95,241 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 22,539,996
Proceeds from short-term loans - bank - 255,023
Net cash provided by financing activities - 22,795,019

EFFECT OF EXCHANGE RATE ON CASH (1,095,699 ) (25,129 )

NET (DECREASE)/INCREASE IN CASH (14,338,051 ) 8,075,796
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 14,588,330 308,110
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 250,279 $ 8,383,906

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income tax $ - $ -
Cash paid for interest $ 935 $ 7,708

NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for  Bonus $ - $ 2,563,618
Issuance of common stock for purchase Bitcoin mining machines - 6,160,000
Issuance of common stock for  purchase digital currency mining machines - 16,442,111
Issuance of common stock for employee compensation - 16,923,850
Issuance of common stock for  acquisition Yuan Ma 7,680,000 -
Issuance of common stock for Highlight Media 2,250,000 -
The cancellation of the common stock 32,844,710 1,615,939
Bitcoin revenue - 2,366,518

	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			-

~~CODE CHAIN NEW CONTINENT~~GD CULTURE GROUP LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Nature of business and organization

~~Code Chain New Continent~~GD Culture Group Limited (“~~CCNC”~~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’~~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 ~~Holdings”~~HK”), and Makesi IoT Technology (Shanghai) Co., Ltd. (“Makesi WFOE”) are also holding companies with no material operations.

~~Makesi WFOE has a series of contractual arrangement with~~ Shanghai ~~Highlight Media~~Xianzhui Technology Co., Ltd. (“SH Xianzhui”) was incorporated by Highlight ~~Media”~~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”) ~~(“Highlight Media”)that established~~is a ~~VIE structure. For accounting purposes, Makesi WFOE~~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 ~~primary beneficiary~~application of ~~Highlight Media. Accordingly, under U.S. GAAP, CCNC treats Highlight Media as~~AI digital human technology with the ~~consolidated affiliated entity~~sectors of e-commerce and ~~has consolidated Highlight Media’s financial results~~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 ~~CCNC’s financial statements. Highlight Media was founded in 2016. It is an integrated marketing service agency, focusing~~different scenarios. AI Catalysis plans to enter into the livestreaming market with a focus on ~~enterprise brand management, crisis public relations, intelligent public opinion monitoring, media PR, financial~~e-commerce 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.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 ~~Shareholders~~ to terminate the VIE Agreements and to cancel the ~~Shares,~~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 ~~March 30, 2021, CCNC~~June 26, 2023, we had ~~an indirect~~a subsidiary ~~Tongrong Technology (Jiangsu) Co., Ltd. (“Tongrong WFOE”),~~TMSR HK, which ~~is a holding company with no material operations. Tongrong~~owns 100% equity interest in Makesi WFOE. Makesi WFOE had a series of contractual arrangement with ~~Jiangsu Rong Hai Electric Power Fuel~~Shanghai Yuanma Food and Beverage Management Co., Ltd. (“~~Rong Hai”~~Yuanma”) that established a VIE structure. ~~Rong Hai was primarily engaged in the coal wholesales and sales of coke, steel, construction materials, mechanical equipment and steel scrap.~~ For accounting purposes, ~~Tongrong~~Makesi WFOE was the primary beneficiary of ~~Wuge.~~Yuanma. Accordingly, under U.S. GAAP, ~~CCNC~~GDC treated ~~Rong Hai~~Yuanma as the consolidated affiliated entity and has consolidated ~~Rong Hai’s~~Yuanma’s financial results in ~~CCNC’s~~GDC’s financial statements prior to ~~March 30, 2021.~~June 26, 2023. On ~~March 30, 2021, CCNC~~June 26, 2023, GDC entered into a share purchase agreement with a buyer unaffiliated with the ~~Company (the “Buyer”), and Qihai Wang, former director of the Company (the “Payee”).~~Company. Pursuant to the agreement, ~~on March 31, 2021, CCNC sold~~the Company agreed to sell and the buyer agreed to purchase all the issued and outstanding ~~ordinary shares~~equity interest in TMSR HK. The purchase price for the transaction contemplated by the Agreement was $100,000. The sale of ~~Tongrong~~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 ~~Buyer at~~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 ~~$2,464,411 and caused 426,369 shares of common stock of CCNC owned by the Payee to be cancelled. The sale of Tongrong Shares included disposition of Rong Hai.~~$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 ~~March 31, 2021, operations of Tongrong WFOE and Rong Hai have been designated as discontinued operations.~~Highlight Media in the Company’s consolidated financial statements under U.S. GAAP.

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

The accompanying consolidated financial statements reflect the activities of ~~CCNC~~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

~~TMSR HK~~	~~● A Hong Kong company~~	100% owned by Citi Profit BVI
Highlight HK
	● A Hong Kong company ● Incorporated on ~~April 2019~~November 2022
		100% owned by Citi Profit BVI
Makesi WFOE2	● A PRC limited liability company and deemed a wholly foreign owned enterprise ~~(“WFOE”)~~(WFOE) ● Incorporated on December 2020	100% owned by TMSR HK

Highlight WFOE	~~● Incorporated on December 2020~~

~~Rong Hai~~¹	● A PRC limited liability company	~~VIE of Tongrong WFOE~~
	and deemed a wholly foreign owned enterprise (WFOE) ● Incorporated on ~~May 20, 2009~~January 2023
	~~● Registered capital of USD 3,171,655 (RMB 20,180,000), fully funded~~
	~~● Coal wholesales and sales of coke, steels, construction materials, mechanical equipment and steel scrap~~
		100% owned by Highlight HK
Wuge²¹	● A PRC limited liability company	~~VIE of Makesi WFOE~~
	● Incorporated on July 4, 2019	VIE of Makesi WFOE
Highlight Media³	● A PRC limited liability company	~~VIE of Makesi WFOE~~
	● 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

¹	~~Disposed on March 31, 2021~~
²1	Disposed on September 28, 2022
	2	Disposed on June 26, 2023
	3	Disposed on September 26, 2023

Contractual ~~Arrangements~~Arrangements

~~Rong Hai and~~ Wuge, ~~were and~~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 (collectively the “Contractual Arrangements”).~~

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

~~Consulting Services Agreement~~

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

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

~~Equity Pledge Agreement.~~

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

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

~~Call Option Agreement~~

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

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

~~Voting Rights Proxy Agreement~~

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

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

~~Operating Agreement~~

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

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

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

Technical Consultation and Services Agreement.

Pursuant to the technical consultation and services agreement between Wuge and Tongrong ~~WFOE~~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 a 30 days’ prior written notice to Wuge.

Equity Pledge Agreement.

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

Equity Option Agreement.

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

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

On January 11, 2021, Makesi WFOE entered into a series of assignment agreements ~~(the “Assignment Agreements”)~~ with Tongrong WFOE, Wuge and the shareholders of Wuge, ~~Shareholders,~~ pursuant to which Tongrong WFOE assign all its rights and obligations under the VIE ~~Agreements~~agreements to Makesi ~~WFOE (the “Assignment”).~~WFOE. The VIE ~~Agreements~~agreements and the ~~Assignment Agreements grant~~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 does~~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 ~~Highlight Media~~Yuanma are described ~~below:~~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 ~~Highlight Media~~WFOE and ~~Makesi WFOE~~Yuanma dated ~~September 16,~~June 21, 2022, ~~Makesi~~ WFOE has the exclusive right to provide consultation services to ~~Wuge~~Yuanma relating to ~~Wuge’s~~Yuanma’s business, including but not limited to business consultation services, human resources development, and business development. ~~Makesi~~ WFOE exclusively owns any intellectual property rights arising from the performance of this agreement. ~~Makesi~~ WFOE has the right to determine the service fees based on ~~Wuge’s~~Yuanma’s actual operation on a quarterly basis. This agreement will be effective ~~as long as Wuge exists. Makesi~~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 ~~Wuge.~~Yuanma. If any party breaches the agreement and fails to cure within 30 days from the written notice from the non-breach party, the non-breach party may (i) terminate the agreement and request the breaching party to compensate the non-breaching party’s loss or (ii) request special performance by the breaching party and the breaching party to compensate the non-breaching party’s loss.

Equity Pledge Agreement.

Under the equity pledge agreement among ~~Makesi~~ WFOE, ~~Wuge~~Yuanma and ~~Wuge~~Yuanma Shareholders dated ~~September 16,~~June 21, 2022, ~~Wuge~~Yuanma Shareholders pledged all of their equity interests in ~~Wuge~~Yuanma to ~~Makesi~~ WFOE to guarantee ~~Wuge’s~~Yuanma’s performance of relevant obligations and indebtedness under the technical consultation and services agreement. In addition, ~~Wuge~~Yuanma Shareholders will complete the registration of the equity pledge under the agreement with the competent local authority. If ~~Wuge~~Yuanma breaches its obligation under the technical consultation and services agreement, ~~Makesi~~ WFOE, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. This pledge will remain effective until all the guaranteed obligations are performed or the ~~Wuge~~Yuanma Shareholders cease to be shareholders of ~~Wuge.~~Yuanma.

Equity Option Agreement.

Under the equity option agreement among ~~Makesi~~ WFOE, ~~Wuge~~Yuanma and ~~Wuge~~Yuanma Shareholders dated ~~September 16,~~June 21, 2022, each of ~~Wuge~~Yuanma Shareholders irrevocably granted to ~~Makesi~~ WFOE or its designee an option to purchase at any time, to the extent permitted under PRC law, all or a portion of his equity interests in ~~Wuge.~~Yuanma. Also, ~~Makesi~~ WFOE or its designee has the right to acquire any and all of its assets of ~~Wuge.~~Yuanma. Without ~~Makesi~~ WFOE’s prior written consent, ~~Wuge’s~~Yuanma’s shareholders cannot transfer their equity interests in ~~Wuge~~Yuanma and ~~Wuge~~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, ~~Wuge~~Highlight Media and ~~Wuge Shareholders~~the shareholders of Highlight Media dated September 16, 2022, each ~~Wuge~~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 ~~Wuge,~~Highlight Media, including but not limited to the power to vote on its behalf on all matters of ~~Wuge~~Highlight Media requiring shareholder approval in accordance with the articles of association of ~~Wuge.~~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.~~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 ~~prior energy and~~ Wuge digital door signs business have been disposed. ~~Substantially all of the Company’s primary operations are conducted in the PRC.~~

Note 2 – Summary of significant accounting policies

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 ~~CCNC~~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, ~~inventory valuation allowance,~~ present value ofand lease ~~liabilities and realization of deferred tax assets.~~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 ~~loss~~income amounted to ~~$107,673~~$71,468 and ~~$225,857~~$179,460 as of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The balance sheet amounts, with the exception of shareholders’ equity at September 30, ~~2022~~2023 and December 31, ~~2021~~2022 were translated at ~~7.11~~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 ~~and 2021~~ were ~~6.61~~7.03 RMB and ~~6.47~~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.

~~Investments~~

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

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.

~~Inventories~~

Inventories are comprised of raw materials and work in progress and are stated at the lower of cost or net realizable value using the weighted average method in Highlight Media. Management reviews inventories for obsolescence and cost in excess of net realizable value at least annually and recognize an impairment charge against the inventory when the carrying value exceeds net realizable value. As of September 30, 2022 and December 31, 2021, no obsolescence and cost in excess of net realizable value were recognized.

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 and amortization.~~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
~~Building~~	~~5 - 20 years~~		5	%
Office equipment and furnishing		5 years			5	%
~~Production equipment~~	~~3 - 10 years~~		5	%
~~Automobile~~	~~5 years~~		5	%
~~Leasehold improvements~~	~~Shorter of the remaining lease terms or estimated useful lives~~		0	%

The cost and related accumulated depreciation ~~and amortization~~ of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income 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 ~~and amortization~~ to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

Intangible assets

Intangible assets represent ~~land use rights~~software, and ~~patents, and they are~~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. ~~All land in the PRC is owned by the government; however, the government grants “land use rights.”~~ The ~~Company~~software has ~~obtained the rights to use various parcels of land. The patents have~~ finite useful lives and ~~are~~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 ~~the land use rights and patents,~~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 ~~warrant~~ revised estimates of useful lives. The estimated useful ~~lives are~~life is as follows:

			Useful Life
~~Land use rights~~			~~50 years~~
~~Patents~~			~~10 - 20 years~~
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 ~~impairment exists,~~the fair value of the reporting unit exceeds its carrying amount, goodwill is ~~immediately written off~~not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, ~~and~~ the ~~loss~~amount by which the carrying amount exceeds the reporting unit’s fair value is recognized inas impairment. Application of a goodwill impairment test requires significant management judgment, including the ~~consolidated statements~~identification of ~~income. Impairment losses on~~reporting units, allocation of assets, liabilities and goodwill ~~are not reversed.~~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 ~~short term loans~~ and taxes payable to approximate their fair values because of their short term nature.

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

●

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

●

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

●

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

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

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.

~~Revenues from~~The company, as a principal, provides services to clients under separate contracts, generating revenue. The pricing terms specified in the ~~goods~~contracts are ~~recognized at a point~~fixed. An obligation to perform is identified in ~~time when legal title and control~~contracts with clients. Revenue is recognized over the ~~sign is transferred to~~period in which the customer. Management has determined that for the sales of the goods there is a single performance obligation that is met when the aforementioned control is transferred. Typically, customers make payment for the product in advance; the Company will record the payment as contract liabilities under the liability account customer deposits until the Company delivers the product by transferring control. Such revenuesservices are ~~recognized at a point in time after all performance obligations are satisfied under the new five-step model.~~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,			For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		2022		2021		2022		2021	2023		2022		2023		2022
Revenues –Enterprise brand management services	$	-	$	-	$	-	$	-

Software copyright									$	-	$	-	$	150,000	$	-
Total revenues	$	-	$	-	$	-	$	-	$	-	$	-	$	150,000	$	-

~~Research and Development (“R&D”) Expenses~~

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

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 ~~nine~~three months ended September 30, ~~2022~~2023 and ~~2021.~~2022. As of September 30, ~~2022,~~2023, the Company’s PRC tax returns filed for ~~2019,~~ 2020, 2021 and ~~2021~~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 ~~nine~~three months ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively. 824,000 of outstanding options were excluded from the diluted earnings per share calculation due to its antidilutive effect for the ~~nine~~three months ended September 30, ~~2022~~2023 and ~~2021.~~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 ~~issued~~ accounting pronouncements

In ~~February 2018,~~October 2021, the FASB issued ASU ~~2018-02, Income Statement - Reporting Comprehensive Income~~No. 2021-08, Business Combinations (Topic ~~220)~~805): ~~Reclassification~~Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08), which clarifies that an acquirer of ~~Certain Tax Effects~~a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Topic 606, Revenue from ~~Accumulated Other Comprehensive Income.~~Contracts with Customers. The new 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,~~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 ~~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.permitted. The Company does not ~~believe~~expect that the adoption of this ~~ASU would~~guidance will have a material ~~effect~~impact on the ~~Company’s unaudited condensed consolidated~~ financial ~~statements.~~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 ~~Shanghai~~ Highlight Media ~~Co., Ltd. (“Highlight Media”)~~ and all the shareholders of Highlight Media (“Highlight Media Shareholders”). Pursuant to the share purchase agreement, the Company agreed to issue an aggregate of 9,000,000 shares of ~~CCNC’s~~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 ~~expense.~~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.

Note 4 – Variable interest entity

Wuge

On ~~November 30, 2018,~~January 3, 2020, Tongrong WFOE entered into ~~Contractual Arrangements~~contractual arrangements with ~~Rong Hai~~Wuge and its ~~shareholders upon executing of the “Purchase Agreement”.~~shareholders. The significant terms of these ~~Contractual Arrangements~~contractual arrangements are summarized in “Note 1 - Nature of business and organization” above. As a result, the Company ~~classifies Rong Hai as VIE.~~

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

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

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

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

On September 28, 2022, Makesi WFOE entered into a termination agreement ~~(the “Termination Agreement”)~~ with Wuge and the shareholders of Wuge ~~Shareholders~~ to terminate the VIE ~~Agreements~~agreements and to cancel the ~~Shares,~~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.~~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~~its financial positions and results of operations are included in the Company’s consolidated financial statements ~~beginning on~~prior to September 30, ~~2022.~~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,		September 30,		December 31,
	2022		2021		2023		2022
Cash and cash equivalents		47,498		14,385,549		-		215,880
Accounts receivable, net		30,247		-		-		194,520
Other receivables, net		76,709		1,600,240		-		78,293
Other receivable - related party				610,948
Inventories				3,714
Prepayments		872		657,858		-		-
Total current assets	$	155,326	$	17,258,309	$	-	$	488,693
Property, plants and equipment		1,205		284,151
Other noncurrent assets		-		1,825,048
Plants and equipment						-		502
Goodwill		2,123,879		6,590,339		-		2,190,485
Total assets		2,280,410		25,957,847		-		2,679,680

Current liabilities		28,478		15,825,043		-		333,784
Non-current liabilities		-		8,738		-		-
Total liabilities		28,478		15,833,781		-		333,784
Net assets	$	2,251,932	$	10,124,066	$	-	$	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

September 30, December 31,
2022 2021
Accounts payable $ 14,170 $ 3,202,771
Other payables and accrued liabilities 13,945 1,622,689
Other payables – related party - 2,841,242
Tax payables 363 973,748
Customer Advances - 7,171,255
Lease liabilities - 13,338
Total current liabilities 28,478 15,825,043
Lease liabilities - noncurrent - 8,738
Total liabilities $ 28,478 $ 15,833,781

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

		For the ~~nine months ended~~Nine Months Ended September 30,
		~~2022~~2023
Operating revenues	$	-
Gross profit		-
Income from operations		-
Net ~~income~~loss	$	-

Note 5 – ~~Inventories~~Accounts receivable

~~Inventories~~Accounts receivable consist of the following:

September 30,
2022 December 31,
2021
Raw materialsc $ - $ -
Finished Goods - 3,714
Total inventories $ - $ 3,714

	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	)

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 67 – Plant and equipment, net

Plant and equipment consist of the following:

	September 30, 2022			December 31, 2021			September 30, 2023			December 31, 2022
Office equipment and furniture	$	9,734		$	124,248		$	9,617		$	10,039
Automobile		-			219,895
Subtotal		9,734			344,143			9,617			10,039
Less: accumulated depreciation		(8,529	)		(60,247	)		(751	)		(9,537	)
Total	$	1,205		$	283,896		$	8,866		$	502

Depreciation expense for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 amounted to ~~$33,192~~$751 and ~~$1,237,480,~~$33,192, respectively.

Note 78 – Intangible assets, net

Intangible assets consist of the following:

	September 30, 2022		December 31, 2021			September 30, 2023			December 31, 2022
Development of technology	$	-	$	784,227
Software		-		612		$	3,250,000		$	-
Subtotal							3,250,000			-
Less: accumulated amortization		-		(784,584	)		(162,500	)		-
Net intangible assets	$	-	$	255
Total						$	3,087,500		$	-

Amortization expense for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022 amounted to ~~$98~~$162,500 and ~~$100,~~$98, respectively.

~~Note 8 – Goodwill~~

Note 9 – Goodwill

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

Highlight Media Wuge Total
Balance as of December 31, 2021 $ - $ 6,590,339 $ 6,590,339
Goodwill acquired through acquisition 2,123,879 2,123,879
Goodwill impairments - (6,590,339 ) (6,590,339 )
Balance as of September 30, 2022 $ 2,123,879 $ - $ 2,123,879

	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 910 – 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	$	-

~~Other receivable – related parties:~~

Name of related party Relationship September 30,
2022 December 31,
2021

Chengdu Yuan Code Chain Technology Co. Ltd A company controlled by former shareholder of the Company $ - $ 513,387
Marchain (Shanghai) Network Technology Co., LTD A company controlled by shareholder of the Company - 78,423
Chenghua District Code To Code To Commerce And Trade Department A company controlled by employee of the Company - 19,138

Total - 610,948

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

Other payables – related ~~party for technical services.~~parties:

b.	~~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

Name of related party Relationship September 30,
2022 December 31,
2021

Chuanliu Ni Chief Executive Officer and director of a former subsidiary $ 325,907 $ 325,907
Zhong Hui Holding Limited Shareholder of the Company 140,500 140,500

Total $ 466,407 $ 466,407

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.

Note 1012 – 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.

Note 13 – Taxes

Income tax

United States

~~CCNC~~GDC was organized in the state of Delaware in April 2015 and ~~re-incorporated in the state of Nevada in June 2018. CCNC’s U.S. net operating loss for~~ the nine months ended September 30, ~~2022~~2023 amounted to ~~approximately $14.4 million.~~nil. As of September 30, ~~2022, CCNC’s~~2023, GDC’s net operating loss carry forward for United States income taxes was approximately ~~$3.0 million.~~$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 ~~are~~is no impact of GILTI for the nine months ended September 30, ~~2022~~2023 and ~~2021,~~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 isand 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, ~~and~~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, 2022			December 31, 2021			September 30, 2023			December 31, 2022
Net operating losses carried forward – U.S.	$	3,026,905		$	5,191,512		$	276,982		$	4,574,581
Net operating losses carried forward – PRC		-			-
Bad debt allowance		-			-
Valuation allowance		(3,026,905	)		(5,191,512	)		(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, 2022		December 31, 2021		September 30, 2023		December 31, 2022
VAT taxes payable	$	363	$	973,748	$	-	$	8,478
Income taxes payable		-		1,272,670
Other taxes payable		-		-		-		-
Total	$	363	$	2,246,418	$	-	$	8,478

Note 1114 – 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, ~~2022~~2023 and December 31, ~~2021, $47,498~~2022, $1,143,611 and ~~$14,385,549~~$215,880 and were deposited with various financial institutions located in the PRC, respectively. As of September 30, ~~2022~~2023 and December 31, ~~2021, $202,781~~2022, $503,537 and ~~$202,781~~$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.

Note 1215 – 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 ~~Makesi~~Highlight WFOE only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the accompanying unaudited condensed consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of ~~Makesi~~Highlight WFOE.

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

As a result of the foregoing restrictions, ~~Makesi~~Highlight WFOE and Highlight Media are restricted in their ability to transfer their net assets to the Company. Foreign exchange and other regulation in the PRC may further restrict ~~Makesi~~Highlight WFOE and Highlight Media from transferring funds to ~~TMSR~~Highlight HK in the form of dividends, loans and advances. As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, amounts restricted are the net assets of ~~Makesi~~Highlight WFOE and Highlight Media which amounted to ~~$128,053~~nil and ~~$4,519,455,~~$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.

~~Common stock~~

~~On February 22, 2021, pursuant to a securities purchase agreement (the “Purchase Agreement”) with two institutional investors,~~In the concurrent PIPE offering, the Company ~~, closed (a) a registered direct offering (the “Registered Direct Offering”) for the sale of (i) 4,166,666~~sold warrants to purchase up to 1,154,519 shares of common stock ~~par value $0.0001~~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 ~~(the “Shares”) and (ii) registered investor~~issued to the placement agent warrants ~~with a term of five years, exercisable immediately upon issuance,~~ to purchase ~~an aggregate of~~ up to ~~1,639,362~~115,452 shares of common stock ~~(the “Registered Investor Warrant Shares”)~~ at an exercise price of ~~$6.72~~$10.02 per share, subject to adjustments thereunder, including a reduction in the exercise price, in the event of a subsequent offering at a price less than the then current exercise price, to the same price as the price in such offering (a “Price Protection Adjustment”) (the “Registered Investor Warrants”), and (b) a concurrent private placement (the “Private Placement” and collectively with the Registered Direct Offering, the “Offering”) for the sale of unregistered investor warrants, with a term of five and one-half years, first exercisable on the date that is the earlier of (i) six months after the date of issuance or (ii) the date on which ~~the Company obtains stockholder approval approving the sale of all~~represents 120% of the securities offered and sold under the Purchase Agreement (the “Stockholder Approval”) to purchase an aggregate of up to 2,527,304 shares of common stock (the “Unregistered Investor Warrant Shares”) at an exerciseoffering price of $6.72 per share, subject to adjustments thereunder, including (x) a Price Protection Adjustment and (y) in the event the exercise price is more than $6.10, a reduction of the exercise price to $6.10, upon obtaining the Stockholder Approval (the “Unregistered Investor Warrants”).each share. The Shares, the Registered Investor Warrants, the Unregistered Investor Warrants, the Registered Investor Warrant Shares and the Unregistered Investor Warrant Shares are collectively referred to as the “Securities.” The Company received grossnet proceeds from the ~~sale of the Securities of $24,999,996, before~~Offering, after deducting placement agent ~~fees~~discounts and ~~other Offering expenses.~~commissions and estimated offering expenses payable by the Company, are approximately $8.5 million (assuming the warrants are not exercised). The Company ~~intends to use~~used the net proceeds from ~~this~~the Offering for working capital and general ~~business~~corporate purposes.

On ~~February 23, 2021,~~June 22, 2023, the Company entered into ~~an asset~~a software purchase agreement with ~~Sichuan RiZhanYun Jisuan Co., Ltd. (the “Seller”), which was amended and restated on April 16, 2021, and further amended on May 28, 2021.~~Northeast Management LLC, a seller unaffiliated with the Company. Pursuant to the ~~asset purchase~~ agreement, the Company ~~purchased a total~~agreed to purchase and the seller agreed to sell all of ~~10,000 Bitcoin mining machines (the “Assets”) for a total~~seller’s right, title, and interest in and to the certain software. The purchase price of ~~RMB 40,000,000 or US$6,160,000 based on~~ the ~~exchange rate as of April 8, 2021 (the “Purchase Price”),~~software shall be $750,000, payable in the form of ~~1,587,800~~issuance of 187,500 shares of common stock of the Company, valued at US$3.88 per share, which is the closing bid price of the common stock of the Company on the Nasdaq Stock Market on April 8, 2021. The Seller shall cause revenue and any other source of income from the operation of the Assets to be paid to the Company, payable in cryptocurrency to be deposited into a cryptocurrency wallet held by the Company on a daily basis. The Company shall issue to the Seller or its designees RMB 5,000,000 or US$770,000 worth of common stock of the Company (the “Bonus Shares”) if the Assets generate an average net profit per day/10,000 machines (the “Daily Profit”) on behalf of the Company during the one-year period from March 19, 2021 to March 19, 2022 (the “Valuation Period”) equals to RMB 200,000 or US$30,800 and if the Assets generate an average net profit per month/10,000 machines (the “Monthly Profit”) on behalf of the Company during the Valuation Period equals to RMB 6,000,000 or US$924,000. If the Daily Profit is more than RMB 200,000 or US$30,800 and the Monthly Profit is more than RMB 6,000,000 or US$924,000, the Company shall issue to the Seller or its designees additional shares of common stock in proportion to the amount that is in excess. If the Daily Profit is less than RMB 200,000 or US$30,800 or the Monthly Profit is less than RMB 6,000,000 or US$924,000, the Company shall not issue to the Seller or its designees any Bonus Shares and such month is deemed a “Re-evaluated Month”. At the end of the Valuation Period, the Monthly Profit of such Re-evaluated Month(s) shall be aggregated (the “Aggregate Profit”), and the Company shall issue RMB5,000,000 or US$770,000 worth of common stock of the Company for every RMB6,000,000 or US$924,000 in Aggregate Profit on a pro rata basis. Such Daily Profit and Monthly Profit shall be determined on a monthly basis on the first day of the next month. Such Bonus Shares and additional shares, when applicable, shall be issued on the fifteenth day of the next month. For any month that has 28 days or 31 days, the Monthly Profit is calculated based on the actual number of days in the month. Notwithstanding the foregoing, no share pursuant to this Agreement shall be issued earlier than May 24, 2021 in any event. The total number of shares of common stock, including the Bonus Shares, issuable to the Seller or its designees pursuant to the Agreement shall in no event be more than 19.99% of the total shares issued and outstanding of Company as of the February 23, 2021, the date of the asset purchase agreement.

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

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

On July 28, 2021, the Company entered into an asset purchase agreement with certain seller(the “Seller”) pursuant to which the Company agreed to purchase from the Seller digital currency mining machines for a total purchase price of RMB 106,388,672.43, or US$ 16,442,109.95 (based on the exchange rate between RMB and USD of 1: 6.4705 as of July 8, 2021), payable in the form of 7,647,493 shares of common stock of the Company(“CCNC Shares”). The CCNC Shares are valued at $2.15$4.00 per share. The Company plans to use the ~~assets~~software to ~~further~~ develop ~~its digital currency mining operation.~~video games. On ~~February 23, 2022,~~June 26, 2023, the Company ~~entered into a termination agreement (the “Termination Agreement) with~~issued the Seller to terminate the Asset Purchase Agreement and forfeit the transaction. The parties agreed that the CCNC Shares shall be cancelled within 15 business days from the date of the Termination Agreement.

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

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

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

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

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

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 ~~will expire~~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.

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

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

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

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:

Exercisable
Into Weighted
Average Average
Remaining
Warrants Number of Exercise Contractual
Outstanding Shares Price Life
December 31, 2021 4,539,674 151,323 $ 172.5 2.13
Granted/Acquired - - $ - -
Forfeited - - $ - -
Exercised - - - -
September 30, 2022 4,539,674 151,323 $ 172.5 0.36

	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:

Exercisable
Into Weighted
Average Average
Remaining
Options Number of Exercise Contractual
Outstanding Shares Price Life
December 31, 2021 824,000 27,467 $ 150.00 2.13
Granted/Acquired - - $ - -
Forfeited - - $ - -
Exercised - - - -
September 30, 2022 824,000 27,467 $ 150.00 0.36

	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		-		-	$	-		-

Note 1316 – 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 1417 – 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 isare Highlight ~~Media.~~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;~~Media and AI Catalysis; accordingly, management believes that the consolidated balance sheets and statement of operations provide the relevant information to assess Highlight ~~Media’s~~Media and AI Catalysis’s performance.

The following represents assets by division as of:

Total assets as of	September 30, 2022		December 31, 2021		September 30, 2023		December 31, 2022
Highlight Media	$	156,531	$	-	$	-	$	489,195
Wuge		-		19,367,508
CCNC, Citi Profit BVI ,TMSR HK and Makesi WFOE		16,295,138		31,167,749

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	$	16,451,669	$	50,535,257	$	13,906,291	$	3,800,908

~~Total revenues of~~	September 30, 2022		September 30, 2021
~~Highlight Media~~	$	-	$	-
~~CCNC, Citi Profit BVI ,TMSR HK and Makesi WFOE~~		-		-
		-		-
~~Total revenues~~	$	-	$	-

	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	$	-

Note 1518 – Discontinued Operations

The following depicts ~~the financial position for the discounted operations of Tongrong WOFE, Rong Hai and Wuge as of September 30, 2022 and December 31, 2021, and~~ the result of operations for the discounted operations of ~~Tongrong WOFE, Rong Hai~~Highlight Media for the nine months ended September 30, 2023 and Wuge for the nine months ended September 30, 2022, ~~and 2021.~~respectively.

Results of Operations	For the nine months ended September 30, 2022			For the nine months ended September 30, 2021
							For the Nine Months Ended September 30,
							2023			2022
REVENUES
Enterprise brand management services								165,993			-
Wuge digital door signs	$	7,616,615		$	9,541,992			-			7,616,615
Fuel materials		-			4,890,734
TOTAL REVENUES		7,616,615			14,432,726			165,993			7,616,615

COST OF REVENUES
Enterprise brand management services								114,247			-
Wuge digital door signs		5,527,950			199,342			-			5,527,950
Fuel materials		-			4,690,388
TOTAL COST OF REVENUES		5,527,950			4,889,730			114,247			5,527,950

GROSS PROFIT		2,088,665			9,542,996			51,746			2,088,665

OPERATING EXPENSES
Selling, general and administrative		1,605,935			10,912,323			113,552			1,605,935

TOTAL OPERATING EXPENSES		1,605,935			10,912,323			113,552			1,605,935

INCOME FROM OPERATIONS		482,730			(1,369,327	)
(LOSS) INCOME FROM OPERATIONS								(61,806	)		482,730

OTHER INCOME (EXPENSE)
Interest income		65,251			34,388			49			65,251
Interest expense		(935	)		(7,708	)		(248	)		(935	)
Investment income		-			-
Other income, net		70,830			7,040			709			70,830
Total other income, net		135,146			33,720
Total other expense, net								510			135,146

INCOME (LOSS) BEFORE INCOME TAXES		617,876			(1,335,607	)
(LOSS) INCOME BEFORE INCOME TAXES FROM CONTINUING OPERATIONS								(61,296	)		617,876
PROVISION FOR INCOME TAXES								112			314,787

PROVISION FOR INCOME TAXES		314,787			8,896
NET INCOME (LOSS)	$	303,089		$	(1,344,503	)
(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 1619 – Subsequent events

(i) Investment in JV

On October ~~4, 2022, Mr. Wei Xu tendered his resignation as the Chief Executive Officer, President, Chairman of the Board and a director of~~27, 2023, the Company ~~effective October 4, 2022. The resignation~~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 ~~Mr. Wei Xu was not a result of any disagreement with~~this section “Investment in JV”), pursuant to which the ~~Company’s operations, policies or procedures.~~

~~On October 4, 2022, Mr. Bibo Lin tendered his resignation as the Vice President~~Highlight WFOE agreed to purchase 13.3333% equity interest in SH Xianzhui from Beijing Hehe and ~~a director of~~ the Company ~~effective October 4, 2022. The resignation of Mr. Bibo Lin was not a result of any disagreement with the Company’s operations, policies or procedures.~~

On October 4, 2022, approved by the Board of Directors, the Nominating and Corporate Governance Committee and the Compensation Committee, Mr. Hongxiang Yu was appointed as the Chief Executive Officer, President, Chairman of the Board and a director of the Company, effective October 4, 2022, and Ms. Shuang Zhang was appointed as the Vice President and a director of the Company, effective October 4, 2022.

~~On October 11, 2022, the Company notified its independent registered public accounting firm, WWC, P.C. its decision~~agreed to ~~dismiss WWC, P.C. as the Company’s auditor.~~

On October 11, 2022, the Audit Committee and the Board of Directors of the Company appointed Enrome LLP as its new independent registered public accounting firm to audit the Company’s financial statements.

On November 4, 2022, the Company filed a Certificate of Amendment to the Articles of Incorporation (the “Certificate of Amendment”) with the Nevada Secretary of State to effect a reverse stock split of the outstandingissue 400,000 shares of common stock ~~par value $0.0001 per shares,~~ of the Company, valued at ~~a ratio of one-for-thirty (30), which became effective at 12:01 a.m. on November 9, 2022 (the “Reverse Stock Split”). Upon effectiveness of~~$2.7820 per share, the Reverse Stock Split, every thirty (30) outstanding shares of common stock were combined into and automatically become one share of common stock. No fractional shares were issued in connection with the Reverse Stock Split and all such fractional interests were rounded up to the nearest whole number of shares of common stock. The authorized shares prior to and following the Reverse Stock Split remains the same at 200,000,000 shares of common stock, par value $0.0001 per shares, and 20,000,000 shares of preferred stock, par value $0.0001 per shares. The Reverse Stock Split does not alter the par value of the Company’s common stock or modify any voting rights or other termsaverage closing bid price of the common ~~stock. The Reverse Stock Split was approved and authorized by a majority~~stock of GDC as of the ~~Company’s stockholder at a special meeting of stockholders held on October 18, 2022 and by~~five trading days immediately preceding the ~~Board of Directors~~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 ~~on October 21, 2022. The Company’s common stock continues~~or Highlight WFOE may terminate the Agreement at any time with a three (3) day advance written notice to ~~trade on the Nasdaq Capital Market under the existing symbol “CCNC”. The new CUSIP number following the Reverse Stock Split is 19200A204.~~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.

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.

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. 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~~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

~~Code Chain New Continent~~GD Culture Group Limited, ~~(“CCNC”,~~ formerly known as JM Global Holding Company, ~~and~~ TMSR Holding Company ~~Limited) is~~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 ~~holding company incorporated~~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 ~~State~~chosen platform.

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 ~~Nevada with no material operations of its own.~~ 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 currently conduct business through Shanghai Highlight Media Co., Ltd. (“Highlight Media”) (“Highlight Media”). For accounting purposes, Makesi IoT Technology (Shanghai) Co., Ltd. (“Makesi WFOE”)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 ~~the primary beneficiary of Highlight Media. Accordingly, under U.S. GAAP, CCNC treats Highlight Media as the consolidated affiliated entity~~located at 810 Seventh Avenue, 22nd Floor, New York, NY 10019, and has consolidated Wuge’s financial results in CCNC’s financial statements. The VIE structure involves unique risks to investors. The VIE agreements have not been tested in a court of law and the Chinese regulatory authorities could disallow this VIE structure, which would likely result in a material change in our ~~operations and the value of our securities, including that it could cause the value of such securities to significantly decline or become worthless.~~telephone number is: +1-347-2590292.

~~Book Publishing Planning~~Discontinued Business

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

~~Financial Self-Media~~

In 2016, Highlight Media founded the financial self-media "Guangdian 2049", which was renamed as "Guangdian Finance” in 2019, focusing on new ideas, new businesses, technologies, characters, investments, management, etc. in finance and economics. Since 2019, Highlight Media has posted 195 original articles and has cumulated more than 10,000 followers. Some of the top articles have more than 27,000 views. In 2021, Highlight Media created an account "Highlight Finance" on Tou Tiao, a Chinese news and information content platform. The "Highlight Finance" account has posted 70 original articles. Some of the top articles on Highlight Finance has more than 60,000 views. Highlight Finance has been trusted by various high-quality enterprises, and has directed more than 100 original articles on finance and economics. Highlight Finance’s contracted authors have also been invited to create than 10 manuscripts for the well-known financial self-media "Qin Shuo Moments". Some of the top articles have more than 20,000 views.

~~Public Relations~~

Highlight Media also offer corporate clients with serviced regarding marketing materials, press releases, seminars, exhibitions, conferences, and public relations management. Highlight Media has established stable and long-term cooperative relations with many companies in the financial industry, such as Deshijia Ophthalmology, Haitong Hengxin, Shanshan Co., Ltd. etc., and has gained rich experience, resources and connections and strong Internet communication service capabilities.

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 ~~Shareholders~~ to terminate the VIE ~~Agreements~~agreements and to cancel the ~~Shares,~~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 ~~March 30, 2021,~~June 26, 2023, we ~~were also engaged~~had a subsidiary TMSR HK, which owns 100% equity interest in ~~coal wholesales~~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 ~~sales of coke, steels, construction materials, mechanical equipment and steel scrap through Jiangsu Rong Hai Electric Power Fuel Co., Ltd. (“Rong Hai”), a then VIE of the Company.~~has consolidated Yuanma’s financial results in GDC’s financial statements prior to June 26, 2023. On ~~March 30, 2021, the Company~~June 26, 2023, GDC entered into a share purchase agreement with a buyer unaffiliated with the ~~Company (the “Buyer”), and Qihai Wang, former director of the Company (the “Payee”).~~Company. Pursuant to the agreement, the Company agreed to sell and the ~~Buyer~~buyer agreed to purchase all the issued and outstanding ~~ordinary shares (the “Tongrong Shares”)~~equity interest in TMSR HK. The purchase price for the transaction contemplated by the Agreement was $100,000. The sale of ~~Tongrong Technology (Jiangsu)~~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. (“~~Tongrong WFOE”~~Highlight Media”), a PRC company and an indirect subsidiary of the Company. The Payee agreed to be responsible for the payment of the purchase price on behalf of Buyer. On March 31, 2021, the Company closed the sale of the Tongrong Shares and caused the CCNC Shares to be cancelled. Tongrong. Highlight WFOE had a series of ~~VIE agreements~~contractual arrangement with Rong Hai and the shareholders of Rong Hai. The sale of Tongrong Shares included disposition of Rong Hai. As a result, as of March 31, 2021, operations of Tongrong WFOE and Rong Hai have been designated as discontinued operations.

~~Recent Development~~

~~Acquisition of Shanghai Yuanma Food and Beverage Management Co., Ltd.~~

Pursuant to the SPA, the Company agreed to issue an aggregate of 7,680,000 shares of common stock of the Company (the “Shares”), valued at $1.00 per share, to the Yuanma Shareholders, in exchange for Yuanma Shareholders’ agreement to enter into and to cause Yuan Ma to enter into certain agreements (“Yuan Ma VIE Agreements”) with WFOE, the Company’s indirectly owned subsidiary, to establish a VIE (variable interest entity) structure (the “Acquisition”). Through the Yuan Ma VIE Agreements, Makesi WFOE will receive the economic benefits of Yuan Ma and, forHighlight Media. For accounting purposes, the Company will consolidate the financial results of Yuan Ma in the consolidated financial statements under generally accepted accounting principles in the U.S. (U.S. GAAP). The Company has also agreed to hold a special meeting of the stockholders of the Company as soon as possible in connection with the Acquisition. The closing of the Acquisition is conditioned on the approval of the stockholders of the Company and any required regulatory approval.

~~On June 13, 2022, the Company held a special meeting of stockholders and approved the issuance of the Shares to Wei Xu. On June 21, 2022, pursuant to the SPA, Makesi~~Highlight WFOE ~~entered into a series of Yuan Ma VIE Agreements with Yuan Ma and Yuanma Shareholders, and the Shares were issued to Wei Xu. The transaction contemplated in the SPA~~ was ~~completed. We plan to file the financial statements and pro forma financial information in a current report on Form 8-K to be filed on or before September 6, 2022.~~

~~Material terms of each of the Yuan Ma VIE Agreements are described below:~~

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

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

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

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

~~Cancellation of Asset Purchase Agreement with Sichuan RiZhanYun Jisuan Co., Ltd.~~

On February 23, 2021, the Company entered into an asset purchase agreement with Sichuan RiZhanYun Jisuan Co., Ltd., (the “Seller”), which was amended and restated on April 16, 2021 and further amended on May 28, 2021 (the “Agreement”). Pursuant to the Agreement, the Company purchased, and the Seller sold, a total of 10,000 Bitcoin mining machines (the “Assets”) for a total purchase price of RMB 40,000,000 or US$6,160,000 based on the exchange rate as of April 8, 2021 (the “Purchase Price”), payable in the form of 1,587,800 shares of common stock of the Company. In addition, pursuant to the Agreement, the Seller agreed to cause revenue and any other source of income from the operation of the Assets to be paid to the Company, payable in cryptocurrency to be deposited into a cryptocurrency wallet held by the Company on a daily basis. The Company agreed to issue to the Seller or its designees certain bonuses, payable in the common stock of the Company upon meeting certain milestones. On June 1, 2021, the Company issued to the Seller’s designee 2,513,294 shares of common stock (the “Shares”), consisted of (i) the Purchase Price in the form of 1,587,800 shares of common stock and (ii) 925,494 bonus shares for meeting and exceeding certain milestones. Because the Assets were never delivered to the Company and the Company has not received and is not able to accept cryptocurrency from the operation of the Assets, the Company and the Seller agreed to rescind the Agreement and cancel the Shares on September 26, 2022.

~~Termination of the VIE Agreements with Sichuan Wuge Network Games Co., Ltd.~~

In January 2020, Tongrong Technology (Jiangsu) Co., Ltd., a then indirect subsidiary of the Company (“Tongrong WFOE”), Sichuan Wuge Network Games Co., Ltd. (“Wuge”), and shareholders of Wuge (the “Wuge Shareholders”) entered into a share purchase agreement, pursuant to which the Company issued a total of 4,000,000 shares of common stock of the Company (the “Shares”) to the Wuge Shareholders in exchange for Tongrong WFOE, Wuge and the Wuge Shareholders entering into certain Technical Consultation and Services Agreement., Equity Pledge Agreement, Equity Option Agreement, Voting Rights Proxy and Financial Support Agreement, which was assigned by Tongrong WFOE to Makesi IoT Technology (Shanghai) Co., Ltd., an indirect subsidiary of the Company (“Makesi WFOE”) in January 2021 (such agreements, as assigned, the “VIE Agreements”) . The VIE Agreements established a “Variable Interest Entity” (VIE) structure, and pursuant to which the Company treated Wuge as a consolidated affiliated entity and consolidated the financial results and balance sheet of Wuge in the Company’s consolidated financial statements under U.S. GAAP.

On September 28, 2022, Makesi WFOE entered into a termination agreement (the “Termination Agreement”) with Wuge and the Wuge Shareholders to terminate the VIE Agreements and to cancel the Shares, based on the average closing price of $0.237 per share of the Company during the 30 trading days immediately prior to the date of the Termination Agreement. As a result of such termination, the Company no longer treat 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.

~~Acquisition of Shanghai Highlight Media Co., Ltd.~~

Pursuant to the SPA, the Company agreed to issue an aggregate of 9,000,000 shares of common stock of the Company (the “Shares”), valued at $0.25 per share, to the Highlight Media Shareholders, in exchange for Highlight Media’s and Highlight Media Shareholders’ agreement to enter into certain agreements (the “VIE Agreements”) with Makesi IoT Technology (Shanghai) Co., Ltd. (“WFOE”), the Company’s indirectly owned subsidiary, to establish a VIE (variable interest entity) structure (the “Acquisition”). A “Variable Interest Entity” does not describe a legal relationship; it is an accounting concept. Under U.S. Generally Accepted Accounting Principles (U.S. GAAP), if through contractual arrangements, Entity A will absorb the losses or receive potentially significant benefits from the operations of Entity B, then the financial results and balance sheet of Entity B should be consolidated with the financial results and balance sheet in Entity A’s consolidated financial statements. We have evaluated the guidance in FASB ASC 810 and determined that, after the VIE Agreements are signed, WFOE will be the primary beneficiary of Highlight Media for accounting purposes, because, pursuant to the VIE Agreements, once signed, Highlight Media shall pay service fees to WFOE in the amount of 100% of the Highlight Media’s after-tax net income, while WFOE shall be obligated to absorb all of losses of Highlight Media. Accordingly, under U.S. GAAP, ~~WFOE will treat~~GDC treated Highlight Media as athe consolidated affiliated entity and ~~will consolidate the~~has consolidated Highlight Media’s financial results ~~and balance sheet of~~in GDC’s financial statements prior to September 26, 2023. Highlight Media ~~in the consolidated financial statements under U.S. GAAP.~~

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

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

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

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

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

~~Change of Directors and Officers~~

On September 15, 2022, Mr. Fei Gan tendered his resignation as a director, the chairman of the Nominating and Corporate Governance Committee, a member of the Compensation Committee, and a member of the Audit Committee of the Company, effective September 15, 2022. The resignation of Mr. Gan was ~~not a result of any disagreement with the Company’s operations, policies or procedures.~~

On September 15, 2022, Mr. Siyang Hu tendered his resignation as a director and a member of the Nominating and Corporate Governance Committee, the Compensation Committee, and the Audit Committee of the Company, effective September 15, 2022. The resignation of Mr. Hu was not a result of any disagreement with the Company’s operations, policies or procedures.

On September 15, 2022, approved by the Board of Directors, the Nominating and Corporate Governance Committee and the Compensation Committee, Ms. Junhong He was appointed as a director and the chairman of the Nominating and Corporate Governance Committee, a member of the Compensation Committee, and a member of the Audit Committee of the Company, effective September 15, 2022, and Ms. Jing Zhang was appointed as a director and a member of the Nominating and Corporate Governance Committee, the Compensation Committee, and the Audit Committee of the Company, effective September 15, 2022.

~~The Board has determined that each of Ms. Junhong He and Ms. Jing Zhang is independent within the meaning of Nasdaq Listing Rule 5605(a)(2).~~

On October 4, 2022, Mr. Wei Xu tendered his resignation as the Chief Executive Officer, President, Chairman of the Board and a director of the Company, effective October 4, 2022. The resignation of Mr. Wei Xu was not a result of any disagreement with the Company’s operations, policies or procedures.

On October 4, 2022, Mr. Bibo Lin tendered his resignation as the Vice President and a director of the Company, effective October 4, 2022. The resignation of Mr. Bibo Lin was not a result of any disagreement with the Company’s operations, policies or procedures.

On November 10, 2022, Mr. Tianxiang Zhu tendered his resignation as the Chief Operating Officer and a director of the Company, effective November 10, 2022. The resignation of Mr. Tianxiang Zhu was not a result of any disagreement with the Company’s operations, policies or procedures.

On November 10, 2022, Mr. Chengwei Mo tendered his resignation as a director, the Chair of the Audit Committee, and a member of the Nominating and Corporate Governance Committee and the Compensation Committee of the Company, effective November 10, 2022. The resignation of Mr. Chengwei Mo was not a result of any disagreement with the Company’s operations, policies or procedures.

On November 10, 2022, the Board of Directors appointed Ms. Jing Zhang as the Chair of the Audit Committee, effective November 10, 2022. The Board has determined that Ms. Zhang meets the “audit committee financial expert” standards of the SEC for service on the Audit Committee.

~~Change of Independent Registered Public Accounting Firm~~

~~On October 11, 2022, the Company notified its independent registered public accounting firm, WWC, P.C. its decision to dismiss WWC, P.C. as the Company’s auditor.~~

~~Notice of Failure to Satisfy a Continued Listing Rule and Reverse Split~~

On May 5, 2022, the Company received a written notice from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) regarding the Company’s failure to comply with Nasdaq Listing Rule 5550(a)(2), which requires listed securities to maintain a minimum bid price of $1.00 per share. A failure to comply with Nasdaq Listing Rule 5550(a)(2) exists when listed securities fail to maintain a closing bid price of at least $1.00 per share for 30 consecutive business days. Based on the closing bid price for the last 30 consecutive business days (including, in particular, the period March 23, 2022 through May 4, 2022), the Company failed to meet the aforesaid requirement. The Company was provided a period of 180 calendar days, until November 1, 2022, to regain compliance.

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

At the Company’s special meeting of stockholders held on October 18, 2022, the stockholders approved an amendment to the Company’s articles of incorporation, as amended, to effect a reverse stock split of the outstanding shares of our common stock, at a ratio of between 1-for-10 and 1-for-30 as determined by our Board of Directors in their sole discretion, prior to the one-year anniversary of the special meeting.

On November 4, 2022, as approved and authorized by the Board of Directors on October 21, 2022, the Company filed a Certificate of Amendment to the Articles of Incorporation (the “Certificate of Amendment”) with the Nevada Secretary of State to effect a reverse stock split of the outstanding shares of common stock, par value $0.0001 per shares, of the Company at a ratio of one-for-thirty (30), which will become effective at 12:01 a.m. on November 9, 2022 (the “Reverse Stock Split”). Upon effectiveness of the Reverse Stock Split, every thirty (30) outstanding shares of common stock will be combined into and automatically become one share of common stock. No fractional shares will be issued in connection with the Reverse Stock Split and all such fractional interests will be rounded up to the nearest whole number of shares of common stock. The authorized shares prior to and following the Reverse Stock Split will remain the same at 200,000,000 shares of common stock, par value $0.0001 per shares, and 20,000,000 shares of preferred stock, par value $0.0001 per shares. The Reverse Stock Split does not alter the par value of the Company’s common stock or modify any voting rights or other terms of the common stock. The Company’s common stock will continue to trade on the Nasdaq Capital Market under the existing symbol “CCNC”. The new CUSIP number following the Reverse Stock Split is 19200A204. Although the Company will use all reasonable efforts to achieve compliance with Rule 5550(a)(2), there can be no assurance that the Company will be able to regain compliance with that rule or will otherwise be in compliance with other Nasdaq listing criteria.

~~Key Factors that Affect Operating Results~~

~~Highlight Media, founded in 2016, is~~ an integrated marketing service agency, focusing on enterprise brand management, crisis public relations, intelligent public opinion monitoring, media PR, financial and economic we-media operation, digital face application, large-scale exhibition services and other businesses. ~~It is committed~~On September 26, 2023, Highlight WFOE entered into a termination agreement with Highlight Media and the shareholders of Highlight Media to ~~becoming a modern science~~terminate the VIE Agreements and ~~technology media organization that fully empowers~~sold the ~~development of customer enterprises~~interest in the ~~era~~VIE Agreements for a purchase price of ~~artificial intelligence~~$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 ~~big data. Its growth strategy is substantially dependent upon our ability to market our intended products and services successfully to prospective clients~~balance sheet of Highlight Media in China. This requires that we heavily rely upon our sales and marketing team and marketing partners. Failure to reach potential clients will significantly affect our results of operation and could have a material adverse effect on our business,the Company’s consolidated financial ~~conditions and the results of our operations.~~statements under U.S. GAAP.

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

The ~~threats~~Offering is being made pursuant to ~~network~~a shelf registration statement (No. 333-254366) on Form S-3, which was declared effective by the U.S. Securities and ~~data security~~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 ~~increasingly diverse~~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 ~~sophisticated. Despite~~general corporate purposes.

Pursuant to the ~~efforts and processes~~Placement Agency Agreement, the Company has agreed to ~~prevent breaches,~~pay the ~~social media platforms, systems and services~~Placement Agent a total cash fee equal to 7.0% of ~~third parties that Highlight Media uses~~the aggregate gross proceeds received in ~~its operations are vulnerable~~the Offering. The Company also agreed to cyber security risks, including cyber-attacks such as viruses and worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, employee theft or misuse, and similar disruptions from unauthorized tampering withreimburse the ~~servers and computer systems or those of third parties that Highlight Media use~~Placement Agent certain out-of-pocket accountable expenses incurred in ~~its operations, which could lead~~this Offering up to ~~interruptions, delays, loss of critical data, and loss of consumer confidence.~~$150,000.

In ~~addition, Highlight Media may be~~concurrent with the ~~target~~Offering, on November 1, 2023, the Company entered into certain warrant exchange agreements (the “Warrant Exchange Agreements”) with certain holders of ~~email scams that attempt~~warrants issued by the Company on May 16, 2023 in a private placement (the “Existing Warrants”), to ~~acquire sensitive information or company assets. Despite~~purchase up to 1,154,519 shares of the ~~efforts~~Company’s Common Stock (the “Holders”). Pursuant to ~~create security barriers~~the Warrant Exchange Agreements, the Holders shall surrender the Existing Warrants, and the Company shall cancel the Existing Warrants and shall issue to ~~such threats, Highlight Media may not be able~~Holders pre-funded warrants to ~~entirely mitigate these risks. Any cyber-attack that attempts~~purchase up to ~~obtain our data~~577,260 shares of the Company’s Common Stock (the “Exchange Warrants”). The Exchange Warrants were issued to Holders on November 3, 2023 and ~~assets, disrupt Highlight Media’s service, or otherwise access~~ the ~~social media platforms, systems~~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 ~~services~~replaced with an amended and restated the Form of ~~third parties that Highlight Media uses, if successful, could adversely affect the business, operating results,~~Registered Warrant, to remove Section 2(b) Adjustment Upon Issuance of Common Stock and ~~financial condition, be expensive to remedy, and damage the reputation of Highlight Media.~~Section 2(e) Other Events.

The ~~media industries involving IoT devices, software~~Registered Warrants that were issued to Purchasers under the Securities Purchase Agreement were returned to and ~~services are characterized~~cancelled by the ~~existence of a large number of patents, copyrights, trademarks~~Company on November 17, 2023. Concurrently, the Company issued amended and trade secrets and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. Much of this litigation involves patent holding companies or other adverse patent owners who have no relevant product revenues of their own, and against whom our own patent portfolio may provide little or no deterrence.restated Registered Warrants to each Purchaser.

~~The nature~~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 Highlight Media’s business and its publications involves copy rights. We cannot assure you that we, our subsidiaries or the variable interest entities will prevail in any future copyright infringement litigations. Defending such claims, regardless of their merit, could be time-consuming and distracting to management, result in costly litigation or settlement, cause delays, or requirethese competitors competes with us our subsidiaries or the variable interest to enter into royalty or licensing agreements. In addition, we, our subsidiaries or the variable interest entities could be obligated to indemnify our customers against third parties’ claims of intellectual property infringement based on ~~publications. If~~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 ~~products or solutions violate any third-party intellectual property rights, we could~~results of operations may be ~~required~~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 ~~withdraw them from the market, re-edit~~take leaps in deploying AI technology in live-steaming, e-commerce, gaming and re-publish them or seek to obtain licenses from third parties, which might not be available on reasonable terms or at all. Any efforts re-edit and re-publish our publications, obtain licenses from third parties on favorable terms might not be successful and, in any case, might substantially increase our costs and harm our business, financial condition and operating results. Withdrawalother sectors. The loss of any of our ~~publications from~~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 ~~could harm~~presence. If we cannot grow market presence and penetrate new markets in an effective and cost-efficient way, our ~~business, financial condition and operating results.~~results of operation will be negatively impacted.

Impact of the COVID-19 Pandemic

~~Coronavirus (COVID-19) Update~~

~~In December 2019,~~The COVID-19 pandemic did not have a ~~novel strain~~material impact on our business or results of ~~coronavirus causing respiratory illness (“COVID-19”) surfaced in Wuhan, China, spreading at a fast rate in January~~operation during the nine months ended September 30, 2023 and ~~February of 2020, and confirmed cases were also reported in other parts of~~2022. However, the world. In reaction to this outbreak, an increasing number of countries imposed travel suspensions to and from China following the World Health Organization’s “public health emergency of international concern” announcement on January 30, 2020. Since this outbreak, business activities in China and many other countries including U.S. have been disrupted by a series of emergency quarantine measures taken by the government.

As a result, our operations in China have been materially affected. Our office in Hubei Province, China were closed since the lockdown was enforced on January 23, 2020. The economic disruption caused by COVID-19 were catastrophic for the waste management business in Wuhan, which had no revenue and negative operating income since the fourth quarter of 2019 and no revenue or operating income for the first and second quarter of 2020. The waste management business lost employees, suppliers and customers and was notable to recover. As a result, we sold the waste management business located in Wuhan. In particular, on June 30, 2020, the Company disposed China Sunlong and its subsidiaries, including Shengrong Environmental Protection Holding Company Limited (“Shengrong BVI”), a British Virgin Islands company, Hong Kong Shengrong Environmental Company Limited (“Sunrong HK”), a Hong Kong company, Shengrong Environmental Protection Technology (Wuhan) Co., Ltd. (“Shengrong WFOE”), PRC company, and Wuhan HOST Coating Materials Co., Ltd. (“Wuhan HOST”), a PRC company, pursuant to a share purchase agreement with Jiazhen Li, a former Chief Executive Officer of the Company, and Long Liao and Chunyong Zheng, former shareholders of Wuhan Host. Pursuant to the share purchase agreement, the Company sold 100% equity interests in China Sunlong to Jiazhen Li in exchange for forfeition and cancellation of all 1,012,932 shares of common stock of the Company held by Long Liao and Chunyong Zheng. In addition, our offices in Jiangsu Province and Sichuan Province in China were temporarily closed from early February until early March 2020.

~~The~~ extent to which the COVID-19 pandemic may negatively ~~impacts~~impact the general economy and our business is highly uncertain and cannot be accurately predicted. We believe that the coronavirus outbreak and the measures taken to control it may have a significant negative impact on not only our business, but economic activities globally. The magnitude of this negative effect on the continuity of our business operation in China remains uncertain. These uncertainties may impede our ability to conduct our ~~daily~~ 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, ~~2022~~2023 vs. September 30, ~~2021~~2022

Percentage
2022 2021 Change Change
Revenues –Enterprise brand management service $ - - $ - -

Total revenues - - - -

Cost of Revenues –Enterprise brand management service - - - -

Total cost of revenues - - - -

Gross profit - - - -
Operating expenses 64,041 747,708 (683,667 ) (91.4 )%
Loss from operations (64,041 ) (747,708 ) 683,667 (91.4 )%
Other income, net - 556,493 (556,493 ) (100.0 )%
Loss from continuing operations (64,041 ) (191,215 ) 127,174 (66.5 )%
Discontinued operations:
Loss from discontinued operations - (2,463,494 ) 2,463,494 (100.0 )%
Gain(Loss) on disposal, net of taxes (4,027,930 ) 15,661 (4,043,591 ) (25819.5 )%
Net Loss (4,091,971 ) (2,639,048 ) (1,452,923 ) 55.1 %

										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	)%

Operating Expenses

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

SG~~& A~~&A expenses ~~decreased~~increased by approximately ~~$0.7~~$3.6 million from approximately ~~$0.7~~$0.1 million for the three months ended September 30, ~~2021~~2022 to approximately ~~$64,041~~$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 ~~decrease~~increase was ~~mainly~~ due to the ~~disposition of Wuge.~~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, ~~2022~~2023 was approximately ~~$64,041,~~$3.6 million, an ~~decrease~~increase of approximately ~~$0.7 million, or approximately 91.4%~~5552.9%, from approximately loss from continuing operations of ~~$0.7~~$0.1 million for the three months ended September 30, ~~2021. The decrease was mainly due to the disposition of Wuge.~~2022.

Net Loss

~~Net Loss~~

The Company’s net loss ~~increased~~decreased by approximately ~~$1.5~~$0.6 million, or ~~55.1%~~13.8%, to approximately ~~$4.0~~$3.5 million net loss for the three months ended September 30, ~~2022,~~2023, from approximately ~~$2.6~~$4.1 million net loss for the same period in ~~2021.~~2022. The ~~increase~~decrease was mainly due to the ~~disposition~~combined impact of ~~Wuge.~~(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, ~~2022~~2023 vs. September 30, ~~2021~~2022

										Percentage												Percentage
	2022			2021			Change			Change			2023			2022			Change			Change
Revenues –Enterprise brand management services	$	-			-		$	-			-
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 services		-			-			-			-
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		13,159,069			21,996,804			(8,837,735	)		(40.2	)%		3,942,947			19,749,408			(15,806,461	)		(80.0	)%
Loss from operations		(13,159,069	)		(21,996,804	)		8,837,735			(40.2	)%		(3,792,947	)		(19,749,408	)		15,956,461			(80.8	)%
Other income, net		-			2,367,311			(2,367,311	)		(100.0	)%		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		(13,159,069	)		(19,629,493	)		6,470,424			(33.0	)%		(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		(6,287,250	)		(1,344,503	)		(4,942,747	)		367.6	%		(61,408	)		303,089			(364,497	)		(120.3	)%
Loss on disposal, net of taxes		(4,027,930	)		(11,218,835	)		7,190,905			(64.1	)%		(230	)		(4,027,930	)		4,027,700			(100.0	)%
Net Loss		(23,474,249	)		(32,192,831	)		8,718,582			(27.1	)%		(3,605,082	)		(23,474,249	)		19,869,167			(84.6	)%

Revenues

~~Operating Expenses~~

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~~&A expenses decreased by approximately ~~$8.8~~$15.8 million from approximately ~~$22.0 million for the nine months ended September 30, 2021 to approximately $13.2~~$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 ~~disposition~~combined impact of ~~Wuge.~~(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.

~~Loss from Operations~~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, ~~2022~~2023 was approximately ~~$13.2~~$3.6 million, ana decrease of approximately ~~$8.8~~$16.1 million, or approximately ~~40.2%~~81.5%, from approximately loss from operations of ~~$22.0~~$19.7 million for the nine months ended September 30, ~~2021.~~2022. The decrease was mainly due to the ~~disposition~~combined impact of ~~Wuge.~~(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 ~~$8.7~~$19.9 million, or ~~27.1%~~84.6%, to approximately ~~$23.5~~$3.6 million net loss for the nine months ended September 30, ~~2022,~~2023, from approximately ~~$32.2~~$23.5 million net loss for the same period in ~~2021.~~2022. The decrease was mainly due to the ~~disposition~~combined impact of ~~Wuge.~~(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.

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~~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

~~Inventories~~

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

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.

●

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

●

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

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.

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.

~~Gross~~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 ~~proceed~~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, ~~2022,~~2023, our net working capital was approximately minus $4.3 million, over 8% of the Company’s current liabilities was from other payables – related parties due to major shareholders. Removing these liabilities, the Company had net working capital of $3.8$6.3 million and is expected to continue to generate cash flow by operations from the acquisitions of new companies ~~and loans from related-parties~~ in the twelve months period.

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

The following summarizes the key components of the Company’s cash flows for the nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022.

	For the Nine Months ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2023			2022
Net cash used in by operating activities	$	(966,745	)	$	(14,598,852	)	$	(6,465,350	)	$	(966,745	)
Net cash used in investing activities		(12,275,607	)		(95,241	)		(5,009,617	)		(12,275,607	)
Net cash provided by financing activities		-			22,795,019			12,733,759			-
Effect of exchange rate change on cash		(1,095,699	)		(25,129	)		(752	)		(1,095,699	)
Net change in cash	$	(14,338,051	)	$	8,075,796		$	1,258,040		$	(14,338,051	)

As of September 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had cash in the amount of ~~$250,279~~$1.6 million and ~~$14,588,330,~~$0.4 million, respectively. As of September 30, ~~2022~~2023 and December 31, ~~2021, $47,498~~2022, $1.1 million and ~~$14,385,549~~$0.2 million and were deposited with various financial institutions located in the PRC, respectively. As of September 30, ~~2022~~2023 and December 31, ~~2021, $202,781~~2022, $0.5 million and ~~$202,781~~$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 ~~$1.0~~$6.5 million for the nine months ended September 30, ~~2022,~~2023, as compared to approximately ~~$14.6~~$1.0 million net cash used in operating activities for the ~~nine months ended~~ September 30, ~~2021.~~2022. Net cash ~~provided by~~used in operating activities was mainly due to the increase of approximately ~~$12.9~~$4.6 million ~~impairment~~ of prepayments, the increase of ~~approximately $4.0~~$0.1 million ~~loss on disposal,~~of prepaid expense-related party, the decrease of approximately ~~$2.1~~$0.2 million of ~~customer deposits, the increase of approximately $6.6 million of Goodwill impairments,~~other payables-related parties, and the increase of approximately ~~$0.9~~$0.1 million of ~~taxes payable.~~customer deposits.

Investing activities

Net cash used in investing activities was ~~approximately $12.3~~$5.0 million for the nine months ended September 30, ~~2022,~~2023, as compared to approximately ~~$95,241~~$12.3 million net cash used in investing activities for the nine months ended September 30, ~~2021.~~2022. Net cash used in investing activities ~~for the nine months ended September 30, 2022~~ was mainly due to ~~approximately $6,689 spending on~~the purchase of ~~equipment,~~intangible assets with the ~~increase~~amount of ~~approximately $47,498 acquisition~~$2.5 million and investment in convertible notes of ~~Highlight Media~~Liquid Marketplace Corp and DigiTrax Entertainment Inc. with the ~~decrease~~amount of ~~approximately $12.3 million disposal of discontinued operations.~~$2.5 million.

Financing activities

Net cash provided by financing activities was ~~nil~~$12.7 million for the nine months ended September 30, ~~2022,~~2023, as compared to ~~approximately $22.8 million~~nil net cash used in financing activities for the nine months ended September 30, ~~2021.~~ 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.

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.

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.

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, ~~2021~~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, ~~2021.~~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 ~~September 16, 2022,~~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 ~~a Share Purchase Agreement (“SPA”)~~an equity purchase agreement with ~~Shanghai~~ Highlight ~~Media Co.~~WFOE and Beijing Hehe, which was amended on November 10, 2023 (such equity purchase agreement, as amended, the “Agreement” for purpose of this section), ~~Ltd., a PRC company (“~~pursuant to which the Highlight ~~Media”),~~WFOE agreed to purchase 13.3333% equity interest in SH Xianzhui from Beijing Hehe and ~~all the shareholders of Highlight Media (“Highlight Media Shareholders”).~~

~~Pursuant to the SPA,~~ the Company agreed to issue ~~an aggregate of 9,000,000~~400,000 shares of common stock of the Company, ~~(the “Shares”),~~ valued at ~~$0.25~~$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 Highlight Media Shareholders, in exchange for Highlight Media’s and Highlight Media Shareholders’ agreement to enter into certain agreements (the “VIE Agreements”) with Makesi IoT Technology (Shanghai) Co., Ltd. (“WFOE”), the Company’s indirectly owned subsidiary, to establish a VIE (variable interest entity) structure (the “Acquisition”). A “Variable Interest Entity” does not describe a legal relationship; it is an accounting concept. Under U.S. Generally Accepted Accounting Principles (U.S. GAAP), if through contractual arrangements, Entity A will absorb the losses or receive potentially significant benefitstransaction shall take place within thirty (30) days from the operations of Entity B, then the financial results and balance sheet of Entity B should be consolidated with the financial results and balance sheet in Entity A’s consolidated financial statements. We have evaluated the guidance in FASB ASC 810 and determined that, after the VIE Agreements are signed, WFOE will be the primary beneficiary of Highlight Media for accounting purposes, because, pursuant to the VIE Agreements, once signed, Highlight Media shall pay service fees to WFOE in the amount of 100%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 ~~Media’s after-tax net income, while~~ WFOE ~~shall be obligated~~may terminate the Agreement at any time with a three (3) day advance written notice to absorb all of losses of Highlight Media. Accordingly, under U.S. GAAP, WFOE will treat Highlight Media as a consolidated affiliated entity and will consolidate the financial results and balance sheet of Highlight Media in the consolidated financial statements under U.S. GAAP.Beijing Hehe.

~~On September 29, 2022.~~As of the ~~Shares were issued to~~date of this report, the ~~Highlight Media Shareholders. The Acquisition was completed.~~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.

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).

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.

	~~CODE CHAIN NEW CONTINENT~~GD CULTURE GROUP LIMITED

Date: November ~~14, 2022~~20, 2023	By:	/s/ ~~Hongxiang Yu~~Xiaojian Wang
	Name:	~~Hongxiang Yu~~Xiaojian Wang
	Title:	Chief Executive Officer, President and
		Chairman of the Board


Date: November ~~14, 2022~~20, 2023	By:	/s/ ~~Yi Li~~Zihao Zhao
	Name:	~~Yi Li~~Zihao Zhao
	Title:	Chief Financial Officer and Secretary
		(Principal Financial Officer and Principal Accounting Officer)

0001641398 us-gaap:CommonStockMember 2022-09-30 iso4217:USD xbrli:shares

		Page
PART I.	FINANCIAL INFORMATION	1

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	1

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF ~~OPERATIONS~~O PERATIONS	2634

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3845

ITEM 4.	CONTROLS AND PROCEDURES	3846

PART II.	OTHER INFORMATION	3947

ITEM 1.	LEGAL PROCEEDINGS	3947

ITEM 1A.	RISK FACTORS	3947

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3947

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	3947

ITEM 4.	MINE SAFETY DISCLOSURES	3947

ITEM 5.	OTHER INFORMATION	3947

ITEM 6.	~~EXHIBITS~~	39EXHIBITS	48

	For the Nine Months Ended September 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(23,474,249	)	$	(32,192,831	)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation of plant and equipment		33,192			1,237,480
Amortization of intangible assets		98			151
Impairment of prepayments		12,949,329			-
Issuance of common stock for employee compensation		-			16,923,850
Issuance of common stock for Bonus		-			2,563,618
Disposal of the company		4,027,930			11,218,835
Goodwill impairments		6,590,339
Bitcoin revenue		-			(2,366,518	)
Change in operating assets and liabilities

Accounts receivables		-			(419,509	)
Other receivables		757			439,725
Other receivable - related party		192,863			(273,570	)
Inventories		(3,001	)		(599,768	)
Prepayments		(68,962	)		(21,217,981	)
Accounts payable		196,417			(420,377	)
Other payables and accrued liabilities		(99,892	)		145,934
Customer deposits		(2,156,462	)		10,094,951
Lease liabilities		(493	)		3,227
Taxes payable		845,389			263,930
Net cash used in operating activities		(966,745	)		(14,598,852	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in cash from acquisition of Highlight Media		47,498
Net decrease in cash from disposal of discontinued operations		(12,316,416	)		(271,099	)
Purchase of Intangible assets		-			463,679

Purchase of equipment		(6,689	)		(287,821	)
Net cash used in investing activities		(12,275,607	)		(95,241	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		-			22,539,996
Proceeds from short-term loans - bank		-			255,023
Net cash provided by financing activities		-			22,795,019

EFFECT OF EXCHANGE RATE ON CASH		(1,095,699	)		(25,129	)

NET (DECREASE)/INCREASE IN CASH		(14,338,051	)		8,075,796
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		14,588,330			308,110
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	250,279		$	8,383,906

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income tax	$	-		$	-
Cash paid for interest	$	935		$	7,708

NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for Bonus	$	-		$	2,563,618
Issuance of common stock for purchase Bitcoin mining machines		-			6,160,000
Issuance of common stock for purchase digital currency mining machines		-			16,442,111
Issuance of common stock for employee compensation		-			16,923,850
Issuance of common stock for acquisition Yuan Ma		7,680,000			-
Issuance of common stock for Highlight Media		2,250,000			-
The cancellation of the common stock		32,844,710			1,615,939
Bitcoin revenue		-			2,366,518

	September 30, 2022		December 31, 2021
Raw materialsc	$	-	$	-
Finished Goods		-		3,714
Total inventories	$	-	$	3,714

			Exercisable Into		Weighted Average		Average Remaining
	Warrants		Number of		Exercise		Contractual
	Outstanding		Shares		Price		Life
December 31, 2021		4,539,674		151,323	$	172.5		2.13
Granted/Acquired		-		-	$	-		-
Forfeited		-		-	$	-		-
Exercised		-		-		-		-
September 30, 2022		4,539,674		151,323	$	172.5		0.36