Exhibit 99.2
GLOBAL MOFY METAVERSE LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars, except for the number of shares)
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Short-term investments | ||||||||
| Accounts receivable, net | ||||||||
| Advance to vendors | ||||||||
| Loans receivable – current | ||||||||
| Prepaid expenses and other current assets, net | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Long-term investment | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Loans receivable – noncurrent | ||||||||
| Advance to vendor – noncurrent | ||||||||
| Other non-current assets, net | ||||||||
| Total non-current assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current Liabilities | ||||||||
| Short-term bank loans | $ | $ | ||||||
| Loans from third parties | ||||||||
| Accounts payable | ||||||||
| Advance from customers | ||||||||
| Tax payable – current | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Operating lease liabilities – current | ||||||||
| Total current liabilities | ||||||||
| Non-current Liabilities | ||||||||
| Operating lease liabilities – noncurrent | ||||||||
| Tax payable – noncurrent | ||||||||
| Warrant liability | ||||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments | ||||||||
| Equity: | ||||||||
| Ordinary shares (US$ | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserves | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive (loss) | ( | ) | ( | ) | ||||
| Total Global Mofy Metaverse Limited shareholders’ equity | ||||||||
| Non-controlling interests | ( | ) | ( | ) | ||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
GLOBAL MOFY METAVERSE LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Expressed in U.S. Dollars, except for the number of shares)
| For the Six Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling expenses | ( | ) | ( | ) | ||||
| General and administrative expenses | ( | ) | ( | ) | ||||
| Research and development expenses | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Income from operations | ||||||||
| Other income (expenses): | ||||||||
| Interest income | ||||||||
| Interest expenses | ( | ) | ( | ) | ||||
| Issuance costs allocated to warrant liability | ( | ) | ||||||
| Change of fair value of warrant liability | ||||||||
| Other income, net | ||||||||
| Total other income, net | ||||||||
| Income before income taxes | ||||||||
| Income tax expense | ( | ) | ( | ) | ||||
| Net income | ||||||||
| Net loss attributable to non-controlling interest | ( | ) | ( | ) | ||||
| Net income attributable to Global Mofy Metaverse Limited | $ | $ | ||||||
| Comprehensive income (loss) | ||||||||
| Net income | $ | $ | ||||||
| Foreign currency translation gain | ||||||||
| Total comprehensive income | ||||||||
| Comprehensive loss attributable to non-controlling interests | ( | ) | ( | ) | ||||
| Comprehensive income attributable to Global Mofy Metaverse Limited | $ | $ | ||||||
| Earnings per common share | ||||||||
| – Basic* | $ | $ | ||||||
| – Diluted* | $ | $ | ||||||
| Weighted average number of common shares outstanding | ||||||||
| – Basic* | ||||||||
| – Diluted* | ||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
GLOBAL MOFY METAVERSE LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Expressed in U.S. Dollars, except for the number of shares)
| Ordinary shares | Additional paid-in | Subscription | Statutory | Accumulated (deficit)/retained | Accumulated other comprehensive | Non- controlling | Total | |||||||||||||||||||||||||||||
| Shares* | Amount* | capital | receivable | reserves | earnings | income | interests | Equity | ||||||||||||||||||||||||||||
| US$ | US$ | US$ | US$ | US$ | US$ | US$ | US$ | |||||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | — | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||
| Capital contribution | ||||||||||||||||||||||||||||||||||||
| Net income for the year | — | ( | ) | |||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | |||||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 (Unaudited) | $ | $ | $ | — | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | — | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Adoption of ASC 326 | — | |||||||||||||||||||||||||||||||||||
| Issuance of shares upon the completion of public offering | ||||||||||||||||||||||||||||||||||||
| Issuance of shares through private placement | ||||||||||||||||||||||||||||||||||||
| Net income for the year | — | ( | ) | |||||||||||||||||||||||||||||||||
| Appropriation to statutory reserve | — | ( | ) | |||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | |||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 (Unaudited) | $ | $ | $ | — | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
GLOBAL MOFY METAVERSE LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
| For the Six Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of operating lease right-of-use assets | ||||||||
| (Recovery of) provision for doubtful accounts | ( | ) | ||||||
| Gains from short-term investment | ( | ) | ||||||
| Interest income | ( | ) | ||||||
| Change in fair value of warrant liability | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ) | ( | ) | |||||
| Accounts receivable – related party | ||||||||
| Advances to vendors | ( | ) | ||||||
| Prepayments and other assets | ( | ) | ) | |||||
| Accounts payable | ||||||||
| Advance from customers | ( | ) | ||||||
| Taxes payable | ||||||||
| Accrued expenses and other liabilities | ( | ) | ( | ) | ||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Purchase of intangible assets | ( | ) | ( | ) | ||||
| Payment for long-term investments | ( | ) | ||||||
| Loans to third parties | ( | ) | ( | ) | ||||
| Collection of loans to third parties | ||||||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Borrowings from third parties | ( | ) | ||||||
| Repayments of third parties | ||||||||
| Proceeds from short-term bank loans | ||||||||
| Repayments of short-term bank loans | ( | ) | ( | ) | ||||
| Deferred offering cost | ( | ) | ||||||
| Net proceeds from issuance of initial public offering | ||||||||
| Net proceeds from issuance of ordinary shares and warrant with a private placement | ||||||||
| Capital contributions | ||||||||
| Net cash provided by (used in) financing activities | ||||||||
| Effect of foreign exchange rate on cash | ( | ) | ||||||
| Net increase in cash | ( | ) | ||||||
| Cash at the beginning of the period | ||||||||
| Cash at the end of the period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION
Global Mofy Metaverse Limited (“Global Mofy
Cayman”) was incorporated on
Global Mofy Cayman owns
Global Mofy HK owns
Global Mofy Cayman, Global Mofy HK, and Global Mofy WFOE are currently not engaging in any active business operations and merely acting as holding companies.
Prior to the reorganization described below, the
main operating activities of the Company were carried out by Global Mofy (Beijing) Technology Co., Ltd. (“Global Mofy China”)
and its subsidiaries. Global Mofy China was established on November 22, 2017 under the laws of the PRC. Global Mofy China has
three wholly-owned subsidiaries, Kashi Mofy Interactive Digital Technology Co., Ltd. (“Kashi Mofy”), Shanghai Moying Feihuan
Technology Co., Ltd. (“Shanghai Mofy”) and Mofy Filming (Hainan) Co., Ltd. (“Mofy Hainan”), which were established
on July 31, 2019, May 11, 2020 and January 4, 2021 in China, respectively. Global Mofy China acquired
In preparation for listing in a stock market of the United States of America, the Company underwent a reorganization through entering into various contractual arrangements (the “Contractual Arrangements”), which, effective from January 5, 2022, between Global Mofy WFOE, Global Mofy China and their respective equity holders (the “Corporate Reorganization”) due to regulatory restrictions on foreign ownership in the radio and television program production and operation business and value-added telecommunications business in the PRC. In June, 2022, the Company removed the radio and television program production from its business scope and the reason to use the VIE structure was no longer relevant. Historically, the Company did not produce any radio or television program.
On June 28, 2022, Global Mofy WFOE entered into equity transfer agreements with each shareholder of Global Mofy China to purchase all the equity interest in Global Mofy China. On July 8, 2022, Global Mofy WFOE, Global Mofy China and shareholders of Global Mofy China signed a termination agreement of the VIE Agreements. The VIE structure was dissolved. The restructure was completed on July 8, 2022. As a result, Global Mofy China became a wholly owned subsidiary of Global Mofy WFOE. Immediately before this acquisition, Global Mofy China was a foreign-invested joint venture.
5
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION (cont.)
Global Mofy Cayman together with its wholly owned subsidiaries Global Mofy HK, Global Mofy WFOE and Global Mofy China and its subsidiaries were effectively controlled by the same shareholders before and after the reorganization and therefore the Reorganization was considered under common control and included at their historical carrying values. The consolidation of the Company has been prepared on the basis as if the reorganization had become effective as of the beginning of the first period presented in the consolidated financial statements.
Global Mofy Cayman and its subsidiaries (the “Company”), mainly engaged in providing virtual content production and online advertising services. The Company’s headquarters are located in the city of Beijing, China.
| Name of Entity | Date of Incorporation | Place of Incorporation | % of Ownership | Principal Activities | ||||||
| Global Mofy HK Limited (“Global Mofy HK”) | % | |||||||||
| Mofy Metaverse (Beijing) Technology Co., Ltd (“Global Mofy WFOE”) | % | |||||||||
| Zhejiang Mofy Metaverse Technology Co., Ltd (“Zhejiang WFOE”) | % | |||||||||
| Global Mofy (Beijing) Technology Co., Ltd. (“Global Mofy China”) | % | |||||||||
| Kashi Mofy Interactive Digital Technology Co., Ltd. (“Kashi Mofy”) | % | |||||||||
| Shanghai Moying Feihuan Technology Co., Ltd. (“Shanghai Mofy”) | % | |||||||||
| Xi’an Shuzi Yunku Technology Co., Ltd (Xi’an Mofy) | % | |||||||||
| Mofy (Beijing) Filming Technology Co., Ltd. (Beijing Mofy) | % | |||||||||
6
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and have been consistently applied for information pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures necessary for a fair presentation of these interim condensed consolidated financial statements have been included. The results reported in the condensed consolidated financial statements for any interim periods are not necessarily indicative of the results that may be reported for the entire year. The accompanying condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all information and footnotes necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”).
Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in elsewhere in this report.
(b) Principles of consolidation
The unaudited condensed consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. All transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation.
(c) Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
7
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
(d) Non-controlling interests
Non-controlling interests are recognized to reflect
the portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling shareholder. For the Company’s
consolidated subsidiaries, non-controlling interests represent a minority shareholder’s
Non-controlling interests are presented as a separate line item in the equity section of the Company’s unaudited condensed consolidated balance sheets and have been separately disclosed in the Company’s unaudited condensed consolidated statements of comprehensive income to distinguish the interests from that of the Company.
(e) Use of estimates
In preparing the unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates and assumptions include, but are not limited to, the assessment of the allowance for credit loss, useful lives of property, equipment and intangible assets, the recoverability of long-lived assets, warrant liabilities, uncertain tax position. Actual results could differ from those estimates.
(f) Cash
Cash includes cash on hand and demand deposits placed with commercial banks. The Company maintains most of the bank accounts in mainland China.
8
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(g) Short-term investments
Short-term investments consist of wealth management
products issued by private equity fund. During the year ended September 30, 2023, the Company purchased certain wealth management products
through private equity fund and accounted for such investments as “short-term investments” and measure the investments at
fair value. The Company had unrealized gain of $
(h) Allowance for credit losses
On October 1, 2023, the Company adopted ASC 326,
Credit Losses (“ASC 326”) which replaced previously issued guidance regarding the impairment of financial instruments with
an expected loss methodology that will result in more timely recognition of credit losses. The Company used a modified retrospective approach
and did not restate the comparable prior periods, which resulted in $
Upon adoption of ASC 326, the Company maintains an allowance for credit losses in accordance with ASC 326 and records the allowance for credit losses as an offset to assets such as accounts receivable and advance to vendors, and the estimated credit losses charged to the allowance is classified as “General and administrative expenses”. The Company assesses collectability by reviewing receivables on a collective basis where similar characteristics exist, primarily based on size, nature and on an individual basis when identify specific customers with known disputes or collectability issues. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the receivable balances, credit quality of the Company’s customer or vendor based on ongoing credit evaluations, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. Bad debts are written off as incurred. The Company generally does not require collateral from its customers.
(i) Property and equipment, net
Property and equipment are stated at cost, net
of accumulated depreciation and impairment, if any. Depreciation is computed using the straight-line method over the estimated useful
lives of the assets. Expenditures for repairs and maintenance, which do not materially extend the useful lives of the assets, are expensed
as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. When
assets are retired or disposed of, the cost and accumulated depreciation and amortization are removed from the accounts, and any resulting
gains or losses are included in income in the year of disposition. Depreciation expense was $
| Office equipment | ||
| Leasehold improvement |
9
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(j) Intangible assets, net
Intangible assets are digital assets acquired from third-party suppliers, which mainly includes 3D models with finite lives are carried at cost less accumulated amortization and impairment loss, if any. Intangible assets with finite lives are amortized using the straight-line method over the estimated economic live.
| Category | Estimated useful lives | |
| Licensed digital assets |
(k) Long-term investments
The Company’s long-term investments include equity investments in entities. Equity securities without readily determinable fair values and over which the Company has neither significant influence nor control through investments in common stock or in-substance common stock are measured and recorded using a measurement alternative that measures the securities at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes.
In December 2023, the Company made investment
of $
(l) Impairment of long-lived assets other than goodwill
Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable or that the useful life is shorter than the Company had originally estimated. When such events occur, the Company evaluates the impairment for the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. No impairment charge was recognized for the six months ended March 31, 2024 and 2023.
(m) Fair value of financial instruments
The Company applies ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.
10
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| ● | Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 — Include other inputs that are directly or indirectly observable in the marketplace. |
| ● | Level 3 — Unobservable inputs which are supported by little or no market activity. |
ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, advances to vendors, prepaid expenses and other current assets, short-term bank loans, accounts payable, advance from customers, due to related parties, taxes payable, and accrued expenses and other current liabilities approximate their recorded values due to their short-term maturities. The fair value of longer-term leases approximates their recorded values as their stated interest rates approximate the rates currently available.
The Company’s non-financial assets, such as property and equipment would be measured at fair value only if they were determined to be impaired.
| Level 1 | Level 2 | Level 3 | ||||||||||
| As of September 30, 2023 | ||||||||||||
| Short-term investments | $ | $ | $ | |||||||||
| Warrant liability | ||||||||||||
| Total | $ | $ | $ | |||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| As of September 30, 2023 | ||||||||||||
| Short-term investments | $ | $ | $ | |||||||||
| Total | $ | $ | $ | |||||||||
11
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(n) Leases
The Company accounted for leases in accordance with ASC Topic 842, Leases. The Company determines if an arrangement is a lease at inception. All the Company’s leases are operating leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate (“IBR”) based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and includes initial direct costs incurred. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will
exercise that option. Lease expenses for minimum lease payments are recognized on a straight-line basis over the lease term. All operating lease right-of-use assets are reviewed for impairment annually. There was no impairment for operating lease right-of-use lease assets for the six months ended March 31, 2024 and 2023.
The Company elected not to record assets and liabilities on its consolidated balance sheet for lease arrangements with terms of 12 months or less. The Company recognizes lease expenses for such lease on a straight-line basis over the lease term.
(o) Revenue recognition
The Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective approach for the year ended September 30, 2020 and has elected to apply it retrospectively for the year ended September 30, 2019. In accordance with ASC 606, revenues from contracts with customers are recognized when control of the promised goods or services are transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company determines revenue recognition through the following steps: (i) identify the contracts with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when, or as the entity satisfies a performance obligation.
The Company’s revenues are derived principally from virtual technology service, digital marketing and digital asset development and others. Value added taxes (“VAT”) are presented as a reduction of revenues.
Revenue from virtual technology service
The Company engages in virtual content production for visual effect in movies, television series, animations, games, advertisement, tourism, and augmented reality (“AR”) and virtual reality (“VR”) technology etc. The virtual content production contracts are primarily on a fixed price basis, which require the Company to perform services for visual effect design, content development, production and integration based on customers’ specific needs. The required production period is generally less than one year.
The virtual content production services are considered as a single performance obligation because the Company provides a significant service of integrating different services underlying each contract, which are highly interdependent and interrelated with one another. The Company currently does not have any modification of contract and the contracts currently do not have any variable consideration.
12
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The customer of the virtual content production contract can only obtain control of the produced virtual content after the project is completed. The Company satisfy its performance obligation at a point in time only when it transfers the developed content to the customer. The virtual content are assets when they are developed by the Company. The Company can direct the use of the product and obtain substantially all of the remaining benefits of the asset. The customer can direct the use and obtain benefits of the assets only after the development completed and control transfer occurred from the Company upon acceptance by the customer. The customer does not simultaneously receive or consume the benefits provided by the Company’s performance as the Company performs. The customer can only benefit from the final output of the virtual content as delivered by the Company. The customer does not have control over the content as it is developed. The developed virtual content may be sold as digital assets by the Company and the payment collected in advance based on the contract upon each milestone would be refundable if the Company does not meet the customer’s needs or there is other default. Hence, none of the criteria of ASC 606-10-25-27 is met. Revenue from virtual content production is recognized at a point in time when the Company satisfies the performance obligation by transferring promised virtual content product upon acceptance by customers.
Revenue from digital marketing
The Company enters into two types of digital marketing contracts directly with customers. For one type of contracts, pursuant to which the Company provides advertisement production and promotion services to customers. The advertisements are in different format, including but not limited to short video, landing pages and static materials. The Company considers that both of the advertisement production and promotion services are highly interrelated and not separately identifiable. The Company’s overall promise represents a combined output that is a single performance obligation; there is no multiple performance obligations. The Company engages third-party advising distributor while providing the promotion services. The Company considers itself as principal of the services as it has control of the specified services at any time before it is transferred to the customers which is evidenced by (i) the Company is primarily responsible for the production of content for advertisements and (ii) having latitude in select third party distributors for promotion and establish pricing. Therefore, the Company acts as the principal of these arrangements and reports revenue earned and costs incurred related to these transactions on a gross basis.
Under a framework contract, the Company receives separate purchase orders from customers. Accordingly, each purchase order is identified as a separate performance obligation, containing a bundle of advertisements that are substantially the same and that have the same pattern of transfer to the customer. Where collectability is reasonably assured, revenue is recognized over the service period of the purchase order, which is based on specific action (i.e. cost per mille “CPM”) for online display.
The amount of the revenue is the gross billing charged to the customers. Revenue is recognized on a CPM basis as impressions or clicks are delivered through the Group’s display of the advertisements in accordance with the revenue contracts.
The Company entered into another type of contracts with advertisers during the fiscal year 2022. Pursuant to which, the Company earns net fees from advertisers by acting as an agent to purchase advertisement inventories and advertise services on behalf of the advertisers. The Company recognizes revenues over the contracted service period. The Company is not a principal in these arrangements as it does not obtain control of ad inventories or advertising services, and therefore recorded net revenues at the difference between the gross billing amount charged to the advertisers and the costs of purchasing ad inventories and advertising services.
13
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Revenue from digital asset development and others
The Company enters into copyright licensing contracts to authorize production rights, adaption rights, sublicense rights of licensed copyrights and digital assets with entertainment production companies. The licensing provides customers the right to use the Company’s IP as it exists since neither the criteria as stated in ASC 610-10-55-62 is met. The specific licensed copyrights and digital assets authorized to customers are all developed IP, which are unique and do not require ongoing maintenance or effort from the Company to assure the usefulness of the license. The Company is entitled to receive the license fee under the licensing arrangements and does not have any future obligation once it has provided the underlying IP content to the licensee. The Company may use such authorized assets as a base model to produce new digital assets, however, these customers will not be contractually or practically required to use them. The revenue is recognized at a point in time when the licensed copyright and digital asset is made available for the customer’s use and benefit.
Disaggregation of revenue
| For the Six Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Category of Revenue | ||||||||
| Virtual technology service | $ | $ | ||||||
| Digital marketing | ||||||||
| Digital asset development and others | ||||||||
| $ | $ | |||||||
| Timing of Revenue Recognition | ||||||||
| Services transferred at a point in time | $ | $ | ||||||
| Services transferred over time | ||||||||
| $ | $ | |||||||
14
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Contract balance
The Company recognizes accounts receivable in
its unaudited condensed consolidated balance sheets when it performs a service in advance of receiving consideration and it has the unconditional
right to receive consideration. Payments received from its customers are based on the payment terms established in its contracts. Such
payments are initially recorded to advance from customers and are recognized into revenue as the Company satisfies its performance obligations.
As of March 31, 2024 and September 30, 2023, the balance of advance from customers amounted to $
(p) Cost of revenue
Cost of revenues consists primarily of outsourcing content production cost, amortization cost of intangible assets, payroll and related costs for employees involved with the Company’s operations and product support, such as rental and depreciation expenses. These costs are charged to the unaudited condensed consolidated statement of comprehensive income as incurred.
(q) Selling expenses
Selling expenses consist primarily of promotion and advertising expenses, staff costs and other daily expenses which are related to the selling and marketing departments. These expenses are charged to the unaudited condensed consolidated statement of comprehensive income as incurred.
(r) General and administrative expenses
General and administrative expenses consist primarily of salaries and welfare expenses and related expenses for employees involved in general corporate functions, including accounting, legal and human resources; and costs associated with use by these functions of facilities and equipment, such as traveling and general expenses, professional service fees and other related expenses. These expenses are charged to the unaudited condensed consolidated statement of comprehensive income as incurred.
(s) Research and development expenses
Research and development expenses consist primarily of employee salaries and benefits for research and development personnel, allocated overhead and outsourced development expenses. Cost incurred for the internally developed IP of virtual content, scripts and digital assets to be licensed or sold during the planning and designing stage are expensed when incurred and are included in the research and development expenses. Costs incurred in the development phase subsequent to establishing technological feasibility of such IP are capitalized. During the six months ended March 31, 2024 and 2023, as no such costs qualified for capitalization, all of the cost incurred for the internally developed IP of virtual content, scripts and digital assets to be licensed or sold are expensed.
15
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(t) Income taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or future deductibility is uncertain. The Company’s subsidiaries in the PRC and Hong Kong are subject to the income tax laws of the PRC and Hong Kong. No taxable income was generated outside the PRC for the six months ended March 31, 2024 and 2023.
The provisions of ASC 740-10-25, “Accounting
for Uncertainty in Income Taxes”, prescribe a more-likely-than-not threshold for financial statement recognition and measurement
of a tax position taken (or expected to be taken) in a tax return. Tax positions that meet the “more likely than not” recognition
threshold are measured, using a cumulative probability approach, at the largest amount of tax benefit that has a greater than
(u) Value added tax (“VAT”)
The Company’s PRC subsidiaries are subject
to value added tax (“VAT”) and related surcharges based on gross sales or service price depending on the type of services
provided in the PRC (“output VAT”), and the VAT may be offset by VAT paid by the Company on service purchases (“input
VAT”). The applicable rate of output VAT or input VAT for the Company is
16
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(v) Warrant Liabilities
The Company accounts for the warrants issued in connection with ordinary shares (see note 12) in 2023 in accordance with the guidance contained in Accounting Standards Codification (“ASC”) 815-40 Derivatives and Hedging - Contracts in Entity’s Own Equity (“ASC 815”) under which the warrants do not meet the criteria for equity treatment and will be recorded as liabilities. Accordingly at initial recognition, the Company classifies such warrants as liabilities at their fair value. This warrant liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the consolidated statements of operations.
(w) Earnings (loss) per share
The Company computes earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS are computed by dividing net income (loss) available to ordinary shareholders of the Company by the weighted average ordinary shares outstanding during the period.
Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised and converted into ordinary shares. Potential ordinary share that has an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted earnings per share. The Company had warrant which could potentially dilute basic income per ordinary share in the future. To calculate the number of shares for diluted income per ordinary shares, the effect of the warrant is computed using the treasury stock method.
(x) Foreign currency translation and transactions
The reporting currency of the Company is U.S. dollars (“US$”) and the accompanying consolidated financial statements have been expressed in US$. The Company’s principal country of operations is the PRC. The financial position and results of its operations are determined using the Chinese Yuan (“RMB”), the local currency, as the functional currency. The Company’s consolidated financial statements have been translated into the reporting currency, US$. The results of operations and the consolidated statements of cash flows denominated in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income (loss) included in consolidated statements of changes in equity (deficit). Gains and losses from foreign currency transactions and balances are included in the results of operations.
17
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
The value of RMB against US$ and other currencies
may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation
of RMB may materially affect the Company’s financial condition in terms of US$ reporting.
| March 31, 2024 | September 30, 2023 | |||||||
| Period-end spot rate | ||||||||
| For the Six Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Average rate | ||||||||
(y) Segment reporting
ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and the types of customers to help users of financial statements to better understand the Company’s performance, assess its prospects for future cash net cash flow and make more informed judgements about the Company in a whole.
The Company uses the management approach to determine reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”) for making decisions, allocating resources and assessing performance. The Company’s CODM has been identified as the CEO, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company.
Based on the management’s assessment, the Company determined that it has only one operating segment and therefore one reportable segment as defined by ASC 280. The Company’s assets are substantially all located in the PRC and substantially all of the Company’s revenue and expense are derived in the PRC. Therefore, no geographical segments are presented.
(z) Significant risks and uncertainties
Currency convertibility risk
Substantially all of the Company’s operating activities are settled in RMB, which is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other Company foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.
18
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Concentration and credit risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable.
The Company maintains certain bank accounts in
the PRC, Hong Kong and Cayman. As of March 31, 2024 and September 30, 2023, cash balances in the PRC are $
Accounts receivables are typically unsecured and derived from services rendered to customers that are located in China, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of customers’ creditworthiness and its ongoing monitoring of outstanding balances. The Company has a concentration of its accounts receivable with specific customers.
Major Customers
For the six months ended March 31, 2024,
two customers accounted for approximately
As
of March 31, 2024, the balance due from three customers accounted for approximately
19
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Major Suppliers
For the six months ended March 31, 2024,
three suppliers accounted for approximately
As
of March 31, 2024, three suppliers accounted for approximately
Interest rate risk
Fluctuations in market interest rates may negatively affect the Company’s financial condition and results of operations. The Company is exposed to floating interest rate risk on cash deposit and floating rate borrowings, and the risks due to changes in interest rates is not material. The Company has not used any derivative financial instruments to manage the Company’s interest risk exposure.
(aa) Recent accounting pronouncements
In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280)”. The amendment in this Update is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments also require a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources. For public entity with single reportable segment, the Update requires the entity to provide all the disclosures required by the amendments in the ASU and all existing segment disclosures in Topic 280. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company will adopt this ASU on October 1, 2024 and expects that the adoption will not have a material impact on the Company’s consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The Update requires that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate). The ASU is effective for public business entities for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. The Company will adopt this ASU on October 1, 2025. The Company does not expect the adoption will have a material impact on the Company’s 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 consolidated financial position, statements of comprehensive income and cash flows.
20
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 — ACCOUNTS RECEIVABLE, NET
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Balance at beginning of the year | $ | $ | ||||||
| Adoption of ASC 326 | ( | ) | ||||||
| Addition | ||||||||
| Write-off | ||||||||
| Foreign exchange translation | ( | ) | ||||||
| Balance at end of the year | $ | $ | ||||||
NOTE 4 — ADVANCE TO VENDORS
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Prepayments for virtual technology services | $ | $ | ||||||
| Prepayments for digital assets development | ||||||||
| Subtotal | ||||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Less: advance to vendors - noncurrent | ||||||||
| Advance to vendors – current | $ | $ | ||||||
Advance to vendors primarily consisted of prepayments
for virtual technology services, digital marketing and digital assets development outsourced to third party vendors. As of March 31, 2024
and September 30, 2023, allowance recorded of $
21
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 — LOANS RECEIVABLE, NET
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Wuyuan Yangyang Culture Media Studio (“Yangyang”)(a) | $ | $ | ||||||
| Hanning Jin(c) | ||||||||
| DXPROMISING HOLDING CO., LTD(d) | ||||||||
| Moxing Shangxing (Beijing) Technology Co., Ltd(e) | ||||||||
| SHH Holding (Hong Kong) Limited(f) | ||||||||
| Less: allowance for doubtful accounts | ||||||||
| Total loans receivable, net – current | $ | $ | ||||||
| Pingnan Motian Culture Media Studio (“Pingnan”)(b) | $ | $ | ||||||
| Hanning Jin(c) | ||||||||
| $ | $ | |||||||
| Less: allowance for doubtful accounts | ||||||||
| Total loans receivable, net – noncurrent | $ | $ | ||||||
| Total loans receivable, net | $ | $ | ||||||
| (a) |
| (b) |
| (c) |
22
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 — LOANS RECEIVABLE, NET (cont.)
| (d) |
| (e) |
| (f) |
For the six months ended March 31, 2024
and 2023, interest income related to the above loans amounted to $
NOTE 6 — INTANGIBLE ASSETS, NET
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Licensed digital assets: | ||||||||
| Gross carrying amount | $ | $ | ||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
| Aggregate Amortization expenses: | ||||
| For six months ended 3/31/2024 | $ | |||
| Estimated Amortization Expenses: | ||||
| For year ended 3/31/2025 | $ | |||
| For year ended 3/31/2026 | $ | |||
| For year ended 3/31/2027 | $ | |||
| For year ended 3/31/2028 | $ | |||
| For year ended 3/31/2029 | $ | |||
23
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — INTANGIBLE ASSETS, NET (cont.)
| As of March 31, 2024 | ||||||||
| Gross Carrying Amount | Accumulated Amortization | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Balance at beginning of the year | $ | $ | ||||||
| Additions(a) | ||||||||
| Disposal | ||||||||
| Foreign exchange translation | ||||||||
| Balance at end of the year | $ | $ | ||||||
| (a) |
Amortization expense was $
NOTE 7 — LEASES
The Company’s leasing activities primarily
consist of eight operating leases for offices and vehicles. ASC 842 requires leases to recognize right-of-use assets and lease liabilities
on the balance sheet.
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Operating lease liabilities – current | $ | $ | ||||||
| Operating lease liabilities – noncurrent | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
24
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 — LEASES (cont.)
| March 31, 2024 | September 30, 2023 | |||||||
| Weighted-average remaining lease term (years) | ||||||||
| Weighted-average discount rate | % | % | ||||||
During the six months ended March 31,
2024 and 2023, the Company incurred total operating lease expenses of $
| 12 months ending March 31, | Operating | |||
| US$ | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total lease liabilities | $ | |||
NOTE 8 — SHORT-TERM BANK LOANS
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Bank of China(1) | $ | $ | ||||||
| Bank of Nanjing(2) | ||||||||
| Bank of Huaxia(3) | ||||||||
| Bank of Hangzhou(4) | ||||||||
| Deferred financing costs(5) | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
25
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — SHORT-TERM BANK LOANS (cont.)
| (1) |
| (2) | On July 29, 2022, Global Mofy China entered into a loan
agreement with Bank of Nanjing to obtain a loan of $ |
On March 31, 2022, Global Mofy
China and Bank of Nanjing entered into a loan agreement to borrow $
On March 17, 2023, Global Mofy China
and Bank of Nanjing entered into a loan agreement to borrow $
On September 20, 2023, Global Mofy
China and Bank of Nanjing entered into a loan agreement to borrow $
Mr. Haogang, Yang, the Chairman of the Company’s board of directors and CEO, together with his wife, Ms. Dong Mingxing, guaranteed the repayment of these loans.
| (3) | On July 27, 2022, Global Mofy China and Huaxia Bank
entered into a loan agreement to borrow $ |
On March 17, 2023, Global Mofy
China and Huaxia Bank entered into a loan agreement to borrow $
On August 30, 2023, Global Mofy China
and Huaxia Bank entered into a loan agreement to borrow $
Beijing Zhongguancun Technology Financing Guarantee Limited guaranteed the repayment of these loans.
26
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — SHORT-TERM BANK LOANS (cont.)
| (4) | On February 13, 2023, Global Mofy China entered into a loan agreement with Bank of Hangzhou to obtain a loan of $ |
On March 30, 2023, Global Mofy
China entered into a loan agreement with Bank of Hangzhou to obtain a loan of $
| (5) |
For the six months ended March 31, 2024
and 2023, the weighted average annual interest rate for the bank loans was approximately
NOTE 9 — ACCOUNTS PAYABLE
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Payable for digital assets | $ | $ | ||||||
| Payable for virtual technology services | ||||||||
| Total accounts payable | $ | $ | ||||||
27
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 — TAXES
Corporation Income Tax (“CIT”)
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.
Hong Kong
Global Mofy HK is incorporated in Hong Kong
and is 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 for the first HKD$
PRC
Under the Enterprise Income Tax (“EIT”)
Law of the PRC, domestic enterprises and Foreign Investment Enterprises (the “FIE”) are usually subject to a unified
Kashi Mofy is subject to a five- year income
tax holiday since generating revenues, as it is incorporated in the Kashi Economic District, Xinjiang province. The five-year income tax
holiday of Kashi Mofy will end on December 31, 2023. Starting from January 1, 2024, Kashi Mofy is eligible for a preferential tax
rate of
28
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 — TAXES (cont.)
In accordance with the implementation rules of
EIT Laws, a qualified “High and New Technology Enterprise” (“HNTE”) is eligible for a preferential tax rate of
| For the Six Months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Current income tax expense | $ | $ | ||||||
| Uncertain tax provisions | ||||||||
| Deferred income tax expense | ( | ) | ||||||
| Income tax provision | $ | $ | ||||||
| For the Six Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| PRC statutory tax rate | % | % | ||||||
| Effect of preferential tax rate(a) | % | ( | )% | |||||
| Additional deduction for R&D expenses | ( | )% | % | |||||
| Non-deductible expenses | % | % | ||||||
| Effect of change in valuation allowance | ( | )% | ( | )% | ||||
| Effect of different tax rates in a foreign jurisdiction | ( | )% | % | |||||
| Effective tax rate | % | % | ||||||
| (a) |
29
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 — TAXES (cont.)
Deferred tax assets and liabilities
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Provision for doubtful debt | $ | $ | ||||||
| Tax loss carry forwards | ||||||||
| Operating lease liabilities | ||||||||
| Total deferred tax assets | ||||||||
| Less: Valuation allowance | ( | ) | ( | ) | ||||
| Total deferred tax assets, net of valuation allowance | $ | $ | ||||||
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Right of use assets | $ | $ | ||||||
| Total deferred tax liabilities | ||||||||
| Total deferred tax assets, net | $ | $ | ||||||
As of March 31, 2024, the Company has total of
net operating loss carry forward of approximately $
Uncertain Tax Position
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| Balance as of beginning of year | $ | $ | ||||||
| Increase related to prior year tax positions | ||||||||
| Increase related to current year tax positions | ||||||||
| Foreign exchange translation | ||||||||
| Balance as of end of year | $ | $ | ||||||
30
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 — TAXES (cont.)
As of March 31, 2024 and September 30, 2023, there
were $
In general, the PRC tax authority has up to five years to contact examinations of the Company’s tax filings. As of March 31, 2024, tax years ended December 31, 2019 through December 31, 2023 for the Company’s PRC subsidiaries remain open for statutory examination by PRC tax authorities.
Tax payable
| March 31, 2024 | September 30, 2023 | |||||||
| (Unaudited) | ||||||||
| VAT payable | $ | $ | ||||||
| Uncertain tax provision | ||||||||
| Other tax | ||||||||
| Tax payable, current | $ | $ | ||||||
| Uncertain tax provision | $ | $ | ||||||
| Tax payable, noncurrent | $ | $ | ||||||
NOTE 11 — EQUITY
Ordinary shares
The Company was established under the laws of
the Cayman Islands on September 29, 2021. The authorized number of ordinary shares upon incorporation of the Company was
On January 15, 2022, the Company issued
On September 16, 2022, the
Company’s shareholders and Board of Directors approved a 1-to-5 share split, following which the authorized share capital of
$
31
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 — EQUITY (cont.)
On November 15, 2022, all existing
shareholders surrendered in an aggregative of
On February 10, 2023, the Company entered
into a share purchase agreement with Anguo Jijian Enterprise Management Co., Ltd (“Anguo”), Anjiu Jiheng Enterprise Management
Co., Ltd (“Anjiu”), and Anling Management Co., Ltd (“Anling”), pursuant to which the Company issued
In October 2023, the Company completed initial public offering, issued
and sold
On
December 29, 2023, the Company reach agreement to sell
As a result, there were
Warrants (“The Warrant”)
On the Issuance Date, the investors were issued warrants to purchase
up to
32
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 — EQUITY (cont.)
On the Issuance Date, Sabby Volatility Warrant
Master Fund, Ltd. was issued warrants to purchase up to
As of March 31, 2024, there were
The fair value of the
warrants liability as at March 31, 2024, was $
| January 3, 2024 | March 31, 2024 | |||||||
| Share price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Expected dividend yield | ||||||||
| Risk free interest rate | % | % | ||||||
| Expected life | ||||||||
| Expected volatility | $ | % | $ | % | ||||
Statutory reserve
In accordance with the PRC Company Laws, the Company’s
subsidiaries in the PRC are required to provide for statutory reserves, which are appropriated from net profit as reported in the Company’s
PRC statutory accounts. They are required to allocate
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 the Company’s PRC subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company’s subsidiaries.
33
GLOBAL MOFY METAVERSE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 — EQUITY (cont.)
Foreign exchange and other regulations in the
PRC may further restrict the Company’s subsidiaries from transferring funds to the Company in the form of dividends, loans and advances.
Amounts restricted include paid-in capital and statutory reserves of the Company’s PRC subsidiaries as determined pursuant to PRC
generally accepted accounting principles. As of March 31, 2024 and September 30, 2023, restricted net assets of the Company’s
PRC subsidiaries were $
NOTE 12 — EARNINGS PER SHARE
| For the Six Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Numerator: | ||||||||
| Net income attributable to Global Mofy Metaverse Limited | $ | $ | ||||||
| Denominator: | ||||||||
| Denominator for basic earnings per share: | ||||||||
| Weighted average number of ordinary shares outstanding | ||||||||
| —basic | ||||||||
| Diluted effect of outstanding warrants | ||||||||
| Denominator for diluted earnings per share | ||||||||
| —diluted | ||||||||
| Basic earnings per share | $ | $ | ||||||
| Diluted earnings per share | $ | $ | ||||||
NOTE 13 — SUBSEQUENT EVENTS
On July 5, 2024 and July 9, 2024,
holders of the Warrants exercised the
34