GD Culture Group Ltd

GD CULTURE GROUP LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Nature of Business and Organization

GD Culture Group Limited (“GDC” or the “Company”), is a Nevada corporation and a holding company. The Company currently conducts its operations through the Company and its subsidiary, AI Catalysis Corp. (“AI Catalysis”). The Company’s business focused on artificial intelligence-related initiatives using its existing artificial intelligence and virtual content generation technologies. In May and June 2026, the Company purchased two software – Fato and Fictoiv, at a price of $3.0 million each. Fato is an interactive storytelling application that allows users to influence the storyline through in-app choices, resulting in multiple possible narrative outcomes. Fictoiv is an AI-powered visual novel creation tool that enables users to create interactive visual novels with AI-generated content and branching storylines. The platform operates on a bring-your-own-key (BYOK) model, with project data stored locally on users’ devices

Subsidiaries of the Company

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

Liquidity and Capital Resources

As of June 30, 2026, the Company had $7,219,580 in its operating bank accounts and working capital of approximately $36.6 million. The Company has incurred significant losses from operations and had an accumulated deficit of approximately $486 million as of June 30, 2026. The Company has historically financed its operations and liquidity needs primarily through equity financings and other capital-raising activities, including proceeds from its at-the-market offerings and other public offerings.

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

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are of a normal recurring nature and are necessary to fairly present the financial statements for the interim periods. The unaudited interim condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been prepared in accordance with the regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Results for the interim periods are not necessarily indicative of results to be expected for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on March 27, 2026.

On June 29, 2026, the Company effected a 1-for-250 reverse stock split (“Reverse Split”) of its authorized, issued and outstanding shares of preferred stock and common stock. The Reverse Split did not change the par value of the Company’s preferred stock and common stock. All references in these consolidated financial statements to stock, stock prices, exercise prices, and other per share information in all periods have been adjusted, on a retroactive basis, to reflect the Reverse Split (see Note 11, “Stockholders’ Equity and Stock-Based Compensation – Reverse Stock Split”).

Principles of Consolidation

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

Use of Estimates and Assumptions

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

Cash and Cash Equivalents

As of June 30, 2026 and December 31, 2025, the Company did not have any cash equivalents. All cash were unrestricted as to withdrawal and use and were demand deposits placed with commercial banks.

Prepayments

Prepayments are advances paid to outside vendors for services purchases. The Company has legally binding contracts with its vendors. Once the services are received, the amounts are recognized as expenses in the unaudited interim condensed consolidated statements of operations.

Equipment

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

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

Intangible Assets

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

Lease

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

The Company recognizes lease liabilities and corresponding right-of-use assets on the balance sheet for leases. Operating lease right- of-use assets (the “ROU”) are disclosed as non-current assets in the Company’s unaudited interim condensed consolidated balance sheets. Current maturities of operating lease liabilities are classified as operating lease liabilities - current, and operating lease liabilities that will be due in more than one year are disclosed as non-current liabilities on the unaudited interim condensed 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.

The Company’s lease agreements did not include non-lease components. Lease expense for fixed lease payments is recognized on a straight-line basis over the lease term. The Company’s lease agreements do not contain any significant residual value guarantees or restricted covenants.

The Company evaluates the carrying value of ROU assets if there are indicators of impairment and reviews the recoverability of the related asset group.

The Company reassesses of a contract is or contains a leasing arrangement and re-measures ROU assets and lease liabilities upon modification of the contract. The Company will derecognize ROU assets and lease liabilities, with differences recognized in the income statement on the contract termination.

The Company evaluated the subleased office spaces in accordance with the provisions of ASC Topic 842, Leases (“ASC 842”). Since the Company has not been relieved as the primary obligor of the head lease, the Company cannot net the sublease income against its lease payment to calculate the lease liability and right-of-use (“ROU”) asset. The Company records sub-lease income over the term of the subleases on a straight-line basis. The sublease income amounted to $0 and $97,826, respectively, for the three and six months ended June 30, 2026, which was presented as other income on the accompanying unaudited interim condensed consolidated statements of operations and comprehensive loss.

Impairment for Long-lived Assets

The Company’s determination of whether indicators of impairment exist requires significant management judgment with respect to its long-lived assets, including intangible assets and operating right-of-use (“ROU”) assets. The Company’s intangible assets primarily include software copyrights, including AI Box, which was previously used for online live-streaming, Chat Box, which is used for online interactive entertainment scenarios, and Fato and Fictoiv, which were newly acquired during 2026. Management considers both external and internal sources of information, including changes in the intended use of the assets, current and expected operating performance, and changes in the Company’s business strategy, in assessing whether impairment indicators exist.

The software copyright of AI Box was impaired during the fourth quarter of 2025. Chat Box continues to be used in the Company’s current business operations and is consistent with the Company’s current business direction. Based on management’s evaluation, the Company did not identify any impairment indicators related to Chat Box, Fato, Fictoiv or its operating ROU assets as of June 30, 2026. Accordingly, the Company did not recognize any impairment losses on its long-lived assets for the three and six months ended June 30, 2026 and 2025.

Digital Assets

The Company holds digital assets primarily for investment and treasury purposes rather than for use in the ordinary course of business. Based on management’s intent and expected holding period, digital assets are classified as either current or non-current assets.

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

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

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

Fair Value Measurement

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash, other receivables, other payables 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:

As of June 30, 2026 and December 31, 2025, the carrying values of cash, other receivables and other payables approximate their fair values due to the short-term nature of the instruments.

General and Administrative Expenses

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

Research and Development Expenses

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

Income Taxes

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

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

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. For the three and six months ended June 30, 2026, the Company recorded $15,901 penalty and interest related to the late filing of fiscal year 2023 and 2024 tax returns, consisting of $5,053 interest and $10,848 penalty. For the three months ended June 30, 2025, the Company recorded $7,428 penalty and interest for failed filing the tax return timely, consisting of $3,341 interest and $4,087 penalty. For the six months ended June 30, 2025, the Company recorded $64,731 penalty and interest for failed filing the tax return timely, consisting of $19,323 interest and $45,408 penalty.

Interest

Interest income is mainly generated from bank deposits and other interest earning financial assets and is recognized on an accrual basis using the effective interest method.

Net Loss per Common Stock

Basic loss per share is computed by dividing loss available to common shareholders of the Company by the weighted average common stocks outstanding during the period. Diluted loss per share takes into account the potential dilution that could occur if securities or other contracts to issue common stocks were exercised and converted into common stocks.

In May 2025, the Company issued and sold pre-funded warrants that are exercisable for shares of common stock at a nominal exercise price. In accordance with ASC 260, these prefunded warrants are considered to be common stock equivalents and are included in the calculation of basic and diluted earnings per share when the inclusion is dilutive. As the exercise price of the prefunded warrants is nominal and substantially all conditions necessary to exercise the warrants have been met, the prefunded warrants are included in the weighted average shares outstanding for both basic and diluted loss per share. As of June 30, 2026,16,108 pre-funded warrants as described were outstanding.

Comprehensive Loss

Comprehensive loss is defined as the changes in equity of the Company during a year/period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Accumulated other comprehensive income of the Company includes the foreign currency translation adjustment.

Recently Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) which requires detailed disclosures in the notes to financial statements disaggregating specific expense categories and certain other disclosures to provide enhanced transparency into the nature and function of expenses. The FASB further clarified the effective date in January 2025 with the issuance of ASU 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The requirements should be applied on a prospective basis while retrospective application is permitted. The Company does not expect to adopt this guidance early and does not expect the adoption of this ASU to have a material impact on its future unaudited interim condensed consolidated financial statements.

In March 2025, the FASB issued ASU 2025-05, Credit Losses (Topic 326): Simplifications to the Accounting for Short-Term Receivables and Contract Assets. The update introduces practical expedients that allow entities to simplify the estimation of expected credit losses for accounts receivable and contract assets by permitting certain assumptions regarding current conditions and expectations of future economic conditions. The amendments are intended to reduce the complexity and cost of applying the current expected credit loss model for short-term financial assets. The amendments in this update are effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance on its unaudited interim condensed consolidated financial statements. The Company does not currently expect the adoption of this guidance to have a material impact on its unaudited interim condensed consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the applicability of interim reporting guidance, consolidates interim disclosure requirements within Topic 270, and establishes a disclosure principle for material events and changes occurring since the end of the most recent fiscal year. The amendments are effective for public business entities for interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments modernize the accounting for internal-use software costs by removing references to software development project stages and introducing new criteria for determining when software development costs should be capitalized, including consideration of significant development uncertainty. The amendments are effective for annual reporting periods beginning after December 15, 2027, including interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and related disclosures.

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

Note 3 – Fair Value of Financial Instruments

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

As of June 30, 2026, the Company held 7,500 units of Bitcoin, at cost of $842 million, which were classified as non-current assets. These Bitcoins were originally held by Pallas and continued to be held following the Company’s acquisition of Pallas. During the six months ended June 30, 2026, the Company acquired approximately 1.08 units of Bitcoin, at cost of $100,000 for short-term trading purposes. During the same period, the Company disposed of all such Bitcoin for cash proceeds of US$71,201, recognized a realized loss of US$28,799 on the sale, and held no Bitcoin acquired for short-term trading purposes as of June 30, 2026.

In accordance with ASU 2023-08, Intangibles—Goodwill and Other—Crypto Assets, the Company accounts for its crypto assets as indefinite-lived intangible assets measured at fair value, with changes in fair value recognized in net income in each reporting period.

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

As of June 30, 2026, the fair value of the Company’s Bitcoin holdings was approximately $451 million. For the three and six months ended June 30, 2026, the Company recognized a net loss of approximately $49 million and $212 million, respectively, in the unaudited interim condensed consolidated statements of operations related to changes in the fair value of its Bitcoin holdings. For the six months ended June 30, 2025, the Company did not recognize any net loss in the unaudited interim condensed consolidated statements of operations related to changes in the fair value of its Bitcoin holdings.

Note 4 – Other receivables, net

Other receivables, net consisted of the following as of June 30, 2026 and December 31, 2025:

Note 5 – Prepayments

Prepayments consisted of the following as of June 30, 2026 and December 31, 2025:

As of June 30, 2026, the Company had $6.0 million in prepayments for maintenance, upgrades and development services related to Fictoiv, which are being amortized over the 12-month service period ending June 2027. The Company also had $3.0 million in prepayments for digital marketing services, which are being amortized over the service period from May through December 2026. Themarketing services primarily consist of promotional content development, online advertising and marketing, and market research and analysis.

Note 6 – Equipment, net

Equipment, net consisted of the following as of June 30, 2026 and December 31, 2025:

Depreciation expense for the three months ended June 30, 2026 and 2025 amounted to $1,095 and $1,075, respectively. Depreciation expense for the six months ended June 30, 2026 and 2025 amounted to $2,701 and $2,152, respectively.

Note 7 – Intangible Assets, net

Intangible assets consisted of the following as of June 30, 2026 and December 31, 2025:

Amortization expense for the three months ended June 30, 2026 and 2025 was $449,430 and $361,827, respectively. Amortization expense for the six months ended June 30, 2026 and 2025 was $748,860 and $424,227, respectively.

As of June 30, 2026, the net book value of software copyrights was $10,341,378, after deducting accumulated amortization of $2,933,263 and accumulated impairment of $3,603,974. No impairment losses were recorded for the three and six months ended June 30, 2026 and 2025.

Future amortization of intangible assets is as follows:

Note 8 – Other Payables and Accrued Liabilities

Other payables and accrued liabilities consisted of the following as of June 30, 2026 and December 31, 2025:

Note 9 – Related Party Balances and Transactions

Other payables – related parties:

Related Party Transaction

In January 2026, Mr. Xiaojian Wang, the Chief Executive Officer of the Company (“CEO”), made advances of $310,000 to the Company through a loan agreement, these advances are non-interest bearing and due on demand. In May and June 2026, the Company fully repaid such advances, and there wasno outstanding as of June 30, 2026.

As of June 30, 2026 and December 31, 2025, the balance of other payables - related parties were $16,746 and $165,016, respectively, mainly consisted of accrued compensation of the Company’s officers, interest - free advances received from the Company’s officers and operating related fees paid by the Company’s officer on behalf of the Company.

For the three months ended June 30, 2026 and 2025, the Company recorded compensation expenses to its officers amounted to $37,500 and $32,036, respectively, for their services provided to the Company. For the six months ended June 30, 2026 and 2025, the Company recorded compensation expenses to its officers amounted to $75,000 and $52,036, respectively, for their services provided to the Company.

Note 10 – Leases

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

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

Future lease payments under operating leases as of June 30, 2026 were as follows:

Lease expense for all the Company’s operating leases for the three months ended June 30, 2026 and 2025 were $97,827 and $118,524, respectively. Lease payments for all the Company’s operating leases for the three months ended June 30, 2026 and 2025 were $97,827 and $155,461, respectively. Lease expense for all the Company’s operating leases for the six months ended June 30, 2026 and 2025 were $188,766 and $242,016, respectively. Lease payments for all the Company’s operating leases for the six months ended June 30, 2026 and 2025 were $97,827 and $320,117, respectively.

For the three months ended June 30, 2026 and 2025, the Company incurred $17,092 and $120,885 short-term lease expenses and the short-term lease payments were $7,875 and $273,740, respectively. For the six months ended June 30, 2026 and 2025, the Company incurred $119,050 and $167,622 short-term lease expenses and the short-term lease payments were $10,500 and $336,056, respectively.

Effective from December 1, 2025, the Company subleased partial of the lease office space to a third party for the remaining of the head lease term. Since the Company has not been relieved as the primary obligor of the head lease, the Company cannot net the sublease income against its lease payment to calculate the lease liability and right-of-use (“ROU”) asset. The Company records sub-lease income over the term of the subleases on a straight-line basis.

During the three months ended March 31, 2026, the Company recognized sublease income in accordance with the terms of the sublease agreement. Subsequent to the filing of the Company’s Quarterly Report for the three months ended March 31, 2026, the sublease agreement was terminated in April 2026. Following the termination of the sublease, the Company resumed making rental payments directly to the landlord under the head lease for the remainder of the lease term.

For the three and six months ended June 30, 2026, the Company recorded sublease income of $0 and $97,826, respectively, as other income on the accompanying unaudited interim condensed consolidated statements of operations and comprehensive loss. For the three and six months ended June 30, 2025, the Company did no have any sublease income.

Note 11 – Equity

At the Company’s annual shareholder meeting held on December 31, 2025, the Company’s shareholders approved a reverse stock split of the authorized and unauthorized capital stock of the Company, at a ratio ranging between 1-for-2 and 1-for-250, with the exact ratio to be determined by the board of directors of the Company (the “Board”) in its sole discretion, to be effected at any time prior to the one-year anniversary of the date of such stockholders’ approval.

On June 16, 2026, The Board approved effecting a 1-for-250 reverse stock split and authorized the filing of a Certificate of Change with the Secretary of State of Nevada. The Reverse Split became effective in accordance with the terms of the Certificate of Change on June 29, 2026. The Certificate of Change did not change the par value of common stock. As a result of the Reverse Split, the reduction in the aggregate par value of the Company’s issued and outstanding common stock was reclassified from common stock to additional paid-in capital. All references in these financial statements to shares, share prices, exercise prices, and other per share information in all periods have been adjusted, on a retroactive basis, to reflect the Reverse Split. The Reverse Split had no impact on the Company’s total stockholders’ equity.

In connection with the Reverse Split, the Company’s outstanding warrants were proportionately adjusted on a 1-for-250 basis. Accordingly, the number of shares of common stock underlying the warrants and the related exercise prices were adjusted to reflect the Reverse Split. Following such adjustments, each warrant continues to be exercisable for one share of the Company’s common stock.

Common Stock

On March 4, 2025, the Company entered into a securities purchase agreement (the “March 2025 Securities Purchase Agreement”) with certain investors for the sale of 4,462 shares of common stock at $224.09 per share (the “March 2025 Offering”), generating net proceeds in the amount of $910,000, after deducting underwriter’s fees of $70,000, equal to seven percent (7%) of the aggregate gross proceeds raised in this Offering and reimbursement of $20,000 for the underwriter’s legal counsel and due diligence analysis expense. The Company used the proceeds from the offering for working capital purposes.

On May 2, 2025, the Company entered into a securities purchase agreement (the “May 2025 Securities Purchase Agreement”) with certain investors for the sale of 4,462 shares of common stock at approximately $131 per share and 37,523 pre-funded warrants (the “May 2025 Pre-Funded Warrants”) at approximately $130.75 per warrant (the “May 2025 Offering”). As of June 30, 2026, the Company received gross proceeds of approximately $4.5 million for subscription of 4,462 shares of its common stock and 29,875 pre-funded warrants. The offering remains ongoing and has not yet been fully completed. Transaction costs incurred through June 30, 2026 included underwriter’s fees of $314,343 and a $20,000 reimbursement for the underwriter’s legal counsel and due diligence expenses. The Company used the proceeds from the offering for working capital purposes.

On April 28, 2025, the Company entered into a software purchase agreement (the “Agreement”) with Gongzheng Xu and Qing Wang, who are unaffiliated with the Company at the time (collectively, the “GXQW”). Pursuant to the Agreement, the Company agreed to purchase and the GXQW agreed to sell all of GXQW’s right, title, and interest in and to the certain software (the “Chat Box”). The purchase price of the software shall be payable in the form of issuance of 9,777 shares of the Company’s common stock. On April 28, 2025, the Company issued 9,777 shares of its common stock to GXQW and the transaction was completed. The Company used the software to develop its AI business.

On September 8, 2025, the Company, Pallas and the Sellers executed the Share Exchange Agreement, pursuant to which, the Sellers wish to sell to the Acquirer, and the Acquirer wishes to purchase from the Sellers,100% interest in and to the Target Shares. On September 29, 2025, in exchange for the Target Shares, the Company issued an aggregate of 156,757 shares of the Company’s common stock to such Sellers.

On October 24, 2025, the Company entered into securities purchase agreements (the “October 2025 Securities Purchase Agreement”) with certain accredited investor, pursuant to which the Company agreed to issue and sell, in a private placement (the “October 2025 Private Placement”), an aggregate of 5,333 shares of the Company’s common stock at a purchase price of $525 per share, for gross proceeds in the amount of $2,800,000. The Company received net proceeds of approximately $2.5 million after deducting underwriter’s fees of $196,000 and other offering costs of $60,000. The Company used the proceeds from the offering for working capital purposes.

On April 28, 2026, the Company entered into an At-The-Market Issuance Sales Agreement (the “April 2026 Sales Agreement”) with the underwriter, under which the Company may issue and sell from time to time, shares of its common stock, having an aggregate offering price of not more than $300,000,000 through the underwriter (the “April 2026 At-the-Market Offering”). From May to June, 2026, the Company sold 2,882,249 shares of common stock in the April 2026 At-the-Market Offering, at the average offering price of approximately $15.6 per share, for aggregated net proceeds of approximately $42 million, after deducting placement agent fees and the estimated offering expenses payable by the Company. As of June 30, 2026, the Company received approximately $20.2 million under the April 2026 At-the-Market Offering, with the remaining of approximately $21.5 million held in a brokerage account of the underwriter. Immediately subsequent to June 30, 2026, the Company received the $21.5 million proceeds in full from the brokerage account.

On June 24, 2026, the Company entered into a securities purchase agreement (the “June 2026 Purchase Agreement”) with certain institutional investors named thereto (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “June 2026 Offering”) of an aggregate of 1,037,206 shares of the Company’s common stock, at a purchase price of $5.25 per share, for gross proceeds in the amount of approximately $5.45 million. The Company expects to receive net proceeds of approximately $4.9 million after deducting underwriter’s fees of $381,173 and other offering costs of $130,000. The Company used the proceeds from the offering for working capital purposes. As of June 30, 2026, the Company fully received the $4.9 million under the June 2026 Offering.

As of June 30, 2026 and December 31, 2025, the total outstanding shares of the Company’s common stock were 4,162,500 and 229,278, respectively.

Warrants

Prefunded Warrants

In connection with the May 2025 Offering, the Company issued 29,875 shares of pre-funded warrants, which is exercisable immediately.

In January 2026, holders of 13,767 May 2025 Pre-Funded Warrants, exercised their options to purchase 13,767 shares of the Company’s common stock.

As of June 30, 2026 and December 31, 2025,16,108 and 29,875 prefunded warrants were outstanding, respectively.

The summary of warrant activities for the six months ended June 30, 2026 were as follows:

The summary of warrant activities for the six months ended June 30, 2025 were as follows:

Note 12 – 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 13 – Segment Reporting

The Company operates and manages its business as a single segment and hasone operating and reportable segment, Virtual Content Production. The Company’s Chief Executive Officer is the chief operating decision-maker (“CODM”). When making decisions about allocating resources and assessing the performance of the Company as a whole, CODM reviews operating metrics and unaudited interim condensed consolidated financial statements.

The Company concluded that consolidated net income (loss) reported in the unaudited interim condensed consolidated statements of operations and comprehensive income (loss) is the measure of segment profitability, and consolidated total assets reported in the unaudited interim condensed consolidated balance sheets is the measure of segment assets. The CODM refers to consolidated operating results and financial condition when addressing strategic and operational matters and allocating resources. Significant expense categories regularly provided to and reviewed by the CODM are those presented in the unaudited interim condensed consolidated statements of operations and comprehensive income (loss). As substantially all of the Company’s long-lived assets are located in the United States, and substantially all of the Company’s expenses are incurred within the United States, no geographical segments are presented.

Note 14 – Subsequent events

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to August 14, 2026, which is the date that the unaudited interim condensed consolidated financial statements were available to be issued. Based on this review, other than described below, the Company did not identify any subsequent event that would have required adjustment or disclosure in the unaudited interim condensed consolidated financial statements.