UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K/A

(Amendment No. 1)

(Mark One)

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

For the fiscal year ended December 31, 2023

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

For the transition period from ____________ to ____________

Commission File Number: 001-13387

Mega Matrix Corp.

(Exact name of Registrant as Specified in Its Charter)

Delaware		94-3263974
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

3000 El Camino Real,

Bldg. 4, Suite 200, Palo Alto, CA 94306

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (650) 340-1888

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

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, par value $0.001 per share		MPU		NYSE American Exchange LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

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

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

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

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

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☐

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

Indicate by check mark whether the registrant has filed all documents and reports required to be fi led by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter (based upon the closing sale price of the registrant’s common stock as of such date, as reported by the NYSE American Exchange) was $33,970,210. Shares of common stock held by the registrant’s officers and directors and beneficial owners of 10% or more of the outstanding shares of the registrant’s common stock have been excluded from the calculation of this amount because such persons may be deemed to be affiliates of the registrant; however, the treatment of these persons as affiliates of the registrant for purposes of this calculation is not, and shall not be considered, a determination as to whether any such person is an affiliate of the registrant for any other purpose.

The number of shares of the registrant’s common stock outstanding as of March 1, 2024 was 35,874,631.

Documents incorporated by reference: None.

EXPLANATORY NOTE

We are filing this Amendment No. 1 on Form 10-K/A (the “Amendment”) to amend our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Original Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on March 18, 2024 (the “Original Filing Date”). We are filing this Amendment to reflect changes made in response to certain comments raised by the staff of the SEC in connection with our wholly owned subsidiary Mega Matrix Inc.’s filing of a Registration Statement on Form F-4 related to our proposed redomicile from Delaware to the Cayman Islands.

As a result of the above, we are filing this Amendment to amend and restate in their entirety the following Items: (i) Part I, Item 1. Business, (ii) Part I, Item 1A. Risk Factors, (iii) Part I, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and (iv) Part IV Item 15. Exhibits, Financial Statements Schedules. In addition, pursuant to Rule 12b-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), this Form 10-K/A also includes as exhibits the certifications of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Except for the foregoing, all other disclosures in the Original Form 10-K remain unchanged. We have not modified or updated disclosures presented in the Original Form 10-K, except as required to reflect the effects of the revisions in this Amendment. Accordingly, this Amendment should be read in conjunction with the Original Form 10-K and does not reflect events occurring after the Original Filing Date of the Original Form 10-K other than as described herein and no attempt has been made in this Amendment to modify or update other disclosures as presented in the Original Form 10-K except as specifically referenced herein. Accordingly, this Amendment and the Original Form 10-K should be read in conjunction with our filings with the SEC subsequent to the filing of the Original Form 10-K.

CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statement in this report other than statements of historical fact may be a forward-looking statement for purposes of these provisions, including any statements of our plans and objectives for future operations, our future financial condition or economic performance (including known or anticipated trends), and the assumptions underlying or related to the foregoing. Statements that include the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “potential,” “projected,” “intends,” “believes,” or “continue,” or the negative thereof, or other comparable terminology, are forward-looking statements.

Forward-looking statements in this report include statements about the following matters, although this list is not exhaustive:

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the possibility that our new lines of businesses do not perform or operate as anticipated

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the impact of certain industry trends on our performance;

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our ability and our customers’ ability to comply with applicable government and regulatory requirements in the numerous jurisdictions in which we and our customers operate;

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our cyber vulnerabilities and the anticipated effects on us if a cybersecurity threat or incident were to materialize;

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general economic, market, political and regulatory conditions, including anticipated changes in these conditions and the impact of such changes on customer demand and other facets of our business;

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the impact of any of the foregoing on the prevailing market price and trading volume of our common stock;

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the ongoing development of our short drama streaming business and our ability to continue development of short drama streaming business model outside of the United States;

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our ability to continue to be in compliance with the development of applicable regulatory regulations in connection with data, intellectual property and short video industry;

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our ability and our film makers’ ability to comply with applicable government and regulatory requirements in the numerous jurisdictions in which we and our film makers operate.

All of our forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those projected or assumed by such forward-looking statements. Among others, the factors that could cause such differences include: our ability to raise debt or equity financing when needed on acceptable terms and in desired amounts, or at all; any noncompliance by our customers, including payment obligations; any economic downturn or other financial crisis; any inability to compete effectively with our better capitalized competitors; limited trading volume in our stock; potential changes in the legislative and regulatory environment; the occurrence of any event, change or other circumstances that could affect our ability to continue successful development of our short drama streaming business; the possibility that we may not succeed in developing our new lines of businesses due to, among other things, changes in the business environment, competition, changes in regulation, or other economic and policy factors; and the possibility that the Company’s new lines of business may be adversely affected by other economic, business, and/or competitive factors. In addition, we operate in a competitive and evolving industry in which new risks emerge from time to time, and it is not possible for us to predict all of the risks it may face, nor can it assess the impact of all factors on its business or the extent to which any factor or combination of factors could cause actual results to differ from expectations. As a result of these and other potential risks and uncertainties, our forward-looking statements should not be relied on or viewed as predictions of future events.

This cautionary statement should be read as qualifying all forward-looking statements included in this report, wherever they appear. We urge you to consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of forward-looking statements. All forward-looking statements and descriptions of risks included in this report are made as of the date hereof based on information available to us as of the date hereof, and except as required by applicable law, we assume no obligation to update any such forward-looking statement or risk for any reason. You should, however, consult the risks and other disclosures described in the reports we file from time to time with the SEC after the date of this report for updated information.

Use of Certain Defined Terms

On March 25, 2022, the Company changed its name from “AeroCentury Corp” to “Mega Matrix Corp.” All references to the “Company,” or “AeroCentury” refers to AeroCentury Corp. together with its consolidated subsidiaries prior to March 25, 2022 and renamed “Mega Matrix Corp.” commencing on March 25, 2022.

Except where the context otherwise requires and for the purposes of this report only, references to:

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the “Company,” “we,” “us,” and “our” refer to the combined business of Mega Matrix Corp., formerly known as AeroCentury Corp, a Delaware corporation and its consolidated subsidiaries (including its majority-owned subsidiary, FunVerse), except where expressly noted otherwise or the context otherwise requires;

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“Exchange Act” refers the Securities Exchange Act of 1934, as amended;

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“digital asset” refers to any computer-generated math-based and/or cryptographic protocol that may, among other things, be used to buy and sell goods or pay for services. Cryptocurrency represent one type of digital asset.

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“FunVerse” refers to the Company’s 60% majority-owned subsidiary FunVerse Holding Limited, a company incorporated under the laws of British Virgin Islands company.

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“JetFleet” refers to the Company’s majority-owned subsidiary JetFleet Management Corp., a California corporation and formerly known as JetFleet Holding corporation.

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“MTP” refers to the Company’s wholly-owned subsidiary Marsprotocol Technologies Pte. Ltd., a Singapore exempt private company limited by shares.

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“SEC” refers to the Securities and Exchange Commission;

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“Securities Act” refers to the Securities Act of 1933, as amended;

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“SDP” refers to the Company’s wholly-owned subsidiary Saving Digital Pte. Ltd., a Singapore exempt private company limited by shares;

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“StaaS” refers to staking as a service; and

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“Yuder” refers to FunVerse wholly-owned subsidiary Yuder Ptd, Ltd. a Company incorporated under the laws of Singapore.

Discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

This annual report on Form 10-K includes our audited consolidated financial statements for the fiscal years ended December 31, 2022 and 2023.

PART I

Item 1. Business.

Overview

We are a holding company located in Palo Alto, California. Since January 2024, we hold 60% of the voting securities of FunVerse Holding Limited, a British Virgin Islands company (“FunVerse”) which directly owns Yuder Pte, Ltd., a Singapore corporation (“Yuder”).. Yuder operates FlexTV, a short drama streaming platform based in Singapore that produces English and Thai dramas that are also translated into different languages for our users that are spread across various parts of the world such as Europe, America, and Southeast Asia. In addition to creating original dramas, Yuder also acquires third party content licenses which it then translates and distributes on its FlexTV platform. To deliver diverse and international content to our users, Yuder’s produces film in various parts of the world, including, but not limited to, the United States, Mexico, Australia, Thailand, and Philippines

Corporate History

Historically, we have provided leasing and financing services to regional airlines worldwide and have been principally engaged in leasing mid-life regional aircraft to customers worldwide under operating leases and finance leases. In addition to leasing activities, we have also sold aircraft from our operating lease portfolio to third parties, including other leasing companies, financial services companies, and airlines. Our operating performance was driven by the composition of its aircraft portfolio, the terms of its leases, and the interest rate of its debt, as well as asset sales. Since September 30, 2021, our former substantially controlled subsidiary, JetFleet Management Corp, a California corporation and formerly known as JetFleet Holding Corporation (“JetFleet”) limited its services to providing aircraft advisory and management service. On August 24, 2023, per the recommendation of JetFleet’s board of directors, we, as a holder of a majority of the voting stock of JetFleet, elected to approve the winding up and dissolution of Jetfleet. As part of the winding up process, Jetfleet ceased providing of aircraft advisory and management services. On December 14, 2023, Jetfleet was formally dissolved.

Our wholly-owned subsidiary, Mega Metaverse Corp. (“Mega”) launched its non-fungible token (NFT) business in December 2021 and released its NFT game “Mano” on March 25, 2022. Mano was a competitive idle role-playing game (RPG) deploying the concept of NFTs based on blockchain technology, with a “Play-to-earn” business model that the players can earn while they play in Mega’s metaverse universe “alSpace”. Due to business reasons, the Company suspended the Mano game and the alSpace platform, and on November 4, 2022, the Company discontinued the Mano game and the alSpace platform. As the game was newly launched and not yet widely adopted by players, the discontinuance of the game did not materially impact on our business activities.

On August 31, 2022, we acquired all of the equity interest in Saving Digital Pte. Ltd., a Singapore exempt private company limited by shares (“SDP”) with no operations and approximately $3,800 in cash, from our chairman Yucheng Hu for a nominal consideration of $10,000. Prior to March 5, 2024, SDP engaged in solo-staking and, prior to July 1, 2023, provided proof-of-staking technology tools. As of the date of this report, SDP has no customers.

On April 25, 2023, SDP, invested $300,000 in MarsLand Global Limited (“MarsLand”), a BVI company and held 30% interest in MarsLand. The other shareholders of MarsLand are non-affiliated. MarsLand will provide staking services to institutional clients such as Bit Digital. On July 1, 2023, MarsLand and SDP entered into a Master Right of Use and Services Agreement for a term of 12 months, pursuant to which MarsLand commits to use commercially reasonable efforts to provide SDP access to the Right of Use, including the use of Node(s) as mutually agreed, exclusively for SDP’s business purposes. In return, SDP will compensate MarsLand with a certain percentage of Net Revenue (as defined in the agreement), which percentage will be mutually agreed upon periodically. Fees could be made in U.S. dollars, USDC, USDT or ETH. Either party has the right to terminate by providing a 30-day advance notice, and on March 5, 2024, the Master Right of Use and Service Agreement was terminated by us. As of March 31, 2024, SPD did not have any amounts payable due to Marsland. Further, SDP has successfully applied for and registered the trademark “MarsProtocol” in Singapore and has entered into a trademark license agreement with MarsLand authorizing MarsLand the right to use the MarsProtocol trademark in connection with its staking as a service (“StaaS”) business. SDP was conducting Ethereum solo-staking in Singaporethe Company decided to focus entirely on its short drama streaming platform business, and as of March 5, 2024, it has ceased its solo-staking activities.

On December 26, 2023, we entered into a Second Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”), amending and restating the original agreement and plan of merger, dated December 7, 2022, as amended, with Mega Matrix Inc., an exempted company incorporated under the laws of the Cayman Islands and our wholly-owned subsidiary (“MPU Cayman”) and MPU Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of MPU Cayman (“MPU Merger Sub”) for the purpose of redomiciling the corporation from Delaware to the Cayman Islands. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, the MPU Merger Sub will merge with and into the Company, with the Company as the surviving entity (“Redomicile Merger”). Following the Redomicile Merger, the Company will become a wholly-owned subsidiary of MPU Cayman, and MPU Cayman, together with its subsidiaries, will own and continue to conduct our business in substantially the same manner as is currently being conducted by us and our subsidiaries. The Merger Agreement has been approved by the Boards of Directors of each of the Company, MPU Merger Sub and MPU Cayman. The completion of the proposed transaction is subject to the required approval of the Company’s stockholders, requisite regulatory approvals, the effectiveness of the registration statement on Form F-4 filed by MPU Cayman related thereto, and other customary closing conditions. Pursuant to the Merger Agreement, the Board of Directors of the Company may exercise its discretion to terminate the Merger Agreement, and therefore abandon the Redomicile Merger contemplated therein, at any time prior to the Effective Time (as defined in Merger Agreement), including after the adoption of the Merger Agreement by the Company’s stockholders. As of the date of this report, the Merger Agreement has not been adopted by our stockholders and we have not yet set a date for a special meeting of stockholders seeking such approval.

On January 7, 2024, we entered into and closed a definitive Share Exchange Agreement with FunVerse, a company incorporated under the laws of the British Virgin Islands and the sole parent company of Yuder Pte, Ltd., and the shareholders of FunVerse. Following the transaction, the Company now owns sixty percent (60%) of capital stock of FunVerse. Yuder operates FlexTV, a short drama streaming platform based in Singapore that produces English and Thai dramas that are also translated into different languages for our users that are spread across various parts of the world such as Europe, America, and Southeast Asia. In addition to creating original dramas, Yuder also acquires third party content licenses which it then translates and distributes on its FlexTV platform. To deliver diverse and international content to our users, Yuder’s produces film in various parts of the world, including, but not limited to, the United States, Mexico, Australia, Thailand, and Philippines.

Recent Events – Subsequent to Year End.

New Direction of the Company-Short Drama Industry

During the past year, the Company expended considerable efforts in conducting research into the short video drama industry that is very popular in Asia, carrying out market research in different geographical areas, and in conducting research into the most efficient means of entering into this market. On January 7, 2024, we entered into and closed a definitive Share Exchange Agreement with FunVerse, a company incorporated under the laws of the British Virgin Islands and the sole parent company of Yuder Pte, Ltd. (“Yuder”), and the shareholders of FunVerse. Following the transaction, the Company now owns sixty percent (60%) of capital stock of FunVerse.

Through Yuder, FunVerse now operates FlexTV, a short drama streaming platform based in Singapore that produces English and Thai dramas that are also translated into different languages for our users that are spread across various parts of the world such as Europe, America, and Southeast Asia. In addition to creating original dramas, Yuder also acquires third party content licenses which it then translates and distributes on is FlexTV platform.

Our focus is to be a leading short drama streaming platform in the global streaming video industry. FlexTV stands out as an innovative force, introducing short dramas as a unique form of storytelling, committed to leading vertical screen entertainment globally.

Short dramas aim to capture the essence of narratives within concise time frames, typically formatted vertically for optimal viewing on mobile phones, ranging from 1 to 3 minutes per episode. Each episode seamlessly integrates into a series, where complete storylines unfold across 40 to over 100 episodes. Short dramas usually offer users a virtual escape, presenting narratives that resonate with emotions, fostering a sense of connection, and serving as a wellspring of comfort or inspiration in the digital realm.

The move from conventional TV streaming to short drama streaming is a worldwide shift, offering users enhanced options and increased flexibility in their entertainment choices. We acknowledge the significant and profound impact of short video platforms on viewer behaviors, characterized by shorter attention spans, vertical screen viewing, and increased multitasking. We leverage the substantial void between the long-form dramas provided by entities like Netflix and the predominantly influencer-created short videos.

The content characteristics of short dramas determine that they can be produced in quick batches and monetized rapidly. Users are used to scrolling through videos, movie narrations and at a faster pace. The threshold for short drama production has lowered, with lower costs, shorter cycles, and higher operational efficiency. Short dramas are more attractive, more direct, faster-paced, and better suited for mobile entertainment.

We recognize the significant impact of short video platforms like Facebook Reels, Instagram Reels, YouTube Shorts, TikTok, and others on user behaviors. Our dedication to innovative short dramas stems from a deep understanding of evolving viewing habits influenced by shorter attention spans and increased multitasking.

We are steadfast in delivering innovative content that connects with diverse audiences worldwide, promoting cultural appreciation and entertainment on a global scale, and bringing joy to the lives of users worldwide. The content characteristics of short dramas determine that they can be produced in quick batches and monetized rapidly.

Our Business Model

FlexTV has already formed a mature content business model that integrates content production, distribution, and operation. Short drama content on the FlexTV platform is divided into two categories: one category consists of dramas in which we participate in production, primarily in English and Thai, and the other category consists of translated dramas, where we purchase the copyrights of completed high-quality short dramas from third parties and then translate them into multiple languages, including but not limited to English, Spanish, Portuguese, Japanese, Korean, and Thai. A typical timeline for launching one short drama product is divided into three stages. The first stage is the script polishing period, which lasts approximately 15-30 days. The second stage is the filming and post-production stage, which lasts around 14-30 days. The third stage is the release stage, primarily lasting within 30-60 days.

To acquire the best scripts, FlexTV pioneered the adoption of studios nurturing and supporting content production partners. We have strict criteria for selecting short drama studios and their scripts. First, we integrate user research in the topic and script stages with internal original production and external procurement. Then, in the matching production studios and evaluation stage, we establish a stable producing process, efficient editing, and a hit production experience. This approach ensures a stable industrialized supply of content.

We generate platform revenue primarily through top-up and membership fees for services related to streaming content to our users and advertisements presented on our streaming service.

We offer a variety of streaming top-up and membership plans, the price of which varies by country and the features of the plan. Users typically can watch about five to ten episodes of each short drama on our platform for free. To continue watching, they will need to become subscription members or top up their account to acquire in-app coins on our platform, which are then used to continue viewing the short dramas. Users can also earn in-app coins to watch short dramas by completing daily and new user tasks, such as watching ads, inviting friends, and sharing FlexTV on Facebook and TikTok. The in-app coins can only be used on our platform and are not transferrable. Users can subscribe to FlexTV memberships on a weekly, monthly, or annual basis, and during the membership subscription period, users will have unlimited access to view any short drama on FlexTV. We measure monetization of our platform by calculating the average revenue per active user (“ARPU”), which we believe represents the inherent value of our business model.

Competitive Strengths

We believe that FlexTV has the following competitive advantages:

Content barrier: We continuously nurture and incubate studios that supply content to our platform, assisting them in establishing industrialized production processes. In the short term, we provide funding for studio content production. FlexTV encourages healthy competition, and we anticipate more studios shifting towards producing short-form content in the future. As the number of studios on the platform increases and their capabilities improve, studios will raise funds independently to produce content. FlexTV provides more traffic and distribution resources for good content, significantly reducing the risk of platform investment in content production.

Network effects: As the platform’s content library accumulates, it attracts more users to watch content for longer durations, generating more revenue for the platform. This, in turn, attracts more studios to create content for the platform, resulting in a positive feedback loop.

Global distribution resources: We own the rights to series, translating them into various languages for global distribution. Through our proprietary advertising placement system, KOL distribution, and media copyright cooperation resources, we can rapidly increase the series’ influence and generate substantial revenue within a short period. Outstanding distribution capabilities are a key reason why studios choose to collaborate with our streaming platform.

User Growth Strengths

Major social media traffic distribution: We achieve user growth by advertising on mainstream social media channels such as Facebook, TikTok, and Google. We edit highlights of our series into clips to attract users to download the FlexTV app.

KOL marketing: We invite Key Opinion Leaders (KOLs) to market our series on their social media accounts. When users download FlexTV and make deposits, KOLs can share in the deposit revenue. Through this way, we attract a large number of KOLs to proactively share content related to our series.

International Markets

FlexTV is available in more than 100 countries. Our production teams film in various locations including, but not limited to, United States, Mexico, Australia, Thailand, and Philippines. We will continue to expand our international markets and collaborate with local partners in each major market.

Our Industry

The short drama industry experienced explosive growth in 2023. According to China Securities Report, dated November 7, 2023, the total market size of short dramas in China in 2023 was expected to reach $5 billion and monthly active users exceeding 100 million, fully validating the product. In addition, the market size of global short dramas will reach $36 billion in 3 years. With short video platforms like TikTok cultivating user habits for fragmented and concise entertainment videos, the global short drama market is expected to continue growing. The vertical screen era is likely to give birth to emerging streaming media giants, and there are still opportunities for global large-scale streaming platforms similar to Netflix and Roku.

The short drama industry is likely to extensively incorporate the latest AI technologies, with the potential to integrate high-recognition IPs with short dramas. This includes AI-enabled face swapping, voice changing, and scene and content creation using verbal descriptions which could revolutionize content creation by significantly reducing production time and costs, enabling more creative freedom, and potentially democratizing access to high-quality video production for creators worldwide.

Emergence from Chapter 11 Bankruptcy

On March 29, 2021, the Company and its then subsidiaries, JetFleet Holdings Corp., a California corporation (“JHC”), and JetFleet Management Corp. (“JMC” along with JHC, collectively, “Debtors”), filed a voluntary petition for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. On August 16, 2021, in the Bankruptcy Court, the Debtors filed unexecuted drafts of its Plan Sponsor Agreement to be entered into between us, Yucheng Hu, TongTong Ma, Qiang Zhang, Yanhua Li, Yiyi Huang, Hao Yang, Jing Li, Yeh Cheng and Yu Wang, and identifying such individuals, collectively, as “Plan Sponsors” (the “Plan Sponsor Agreement”), and related agreements and documents required thereunder (collectively, with the Plan Sponsor Agreement, the “Plan Sponsor Documents”). The Plan Sponsor Documents were intended to cover the transactions contemplated by an investment term sheet entered into with Yucheng Hu and are part of the Debtors’ plan of reorganization as reflected in the Combined Disclosure Statement and Plan filed with the Bankruptcy Court as amended and supplemented from time to time (the “Plan”). On August 31, 2021, the Bankruptcy Court entered an order, Docket No. 0296 (the “Confirmation Order”), confirming the Plan as set forth in the Combined Plan Statement and Plan Supplement.

On September 30, 2021, we emerged from Chapter 11 and pursuant to the Plan Sponsor Agreement, the Company entered into and consummated the transactions contemplated by a Securities Purchase Agreement with the Plan Sponsor, and Yucheng Hu, in the capacity as the representative for the Plan Sponsor thereunder, pursuant to which the Company issued and sold, and the Plan Sponsor purchased, 14,354,635 (adjusted for the Forward Stock Split) shares of our common stock at $0.77 (adjusted for the Forward Stock Split) for each share of common stock for an aggregate purchase price of approximately $11,053,069.

Also on September 30, 2021, and pursuant to the Plan Sponsor Agreement, the Company entered into and consummated the transactions contemplated by a Series A Preferred Stock Purchase Agreement (the “JHC Series A Agreement”) with JHC, pursuant to which JHC issued and sold, and the Company purchased, 104,082 shares of Series A Preferred Stock, no par value, at $19.2156 per share of JHC Series A Preferred Stock, for an aggregate purchase price of $2 million.

Each share of JHC Series A Preferred Stock shall be entitled to one (1) vote on any matter that is submitted to a vote or for the consent of the shareholders of JHC. The JHC Series A Preferred Stock provides the Company with 74.83% voting control over JHC immediately following its issuance.

On January 1, 2022, JMC, a wholly-owned subsidiary of JHC, was merged with and into JHC, with JHC being the surviving entity. As part of the merger, JHC changed its name to JetFleet Management Corp. On August 24, 2023, per the recommendation of JMC’s board of directors, the Company, as a holder of a majority of the voting stock of JMC, elected to approve the winding up and dissolution of JMC. JMC ceased providing aircraft advisory and management services upon winding up and the Company deconsolidated JMC and its subsidiaries in December 2023. On December 14, 2023, JMC was formally dissolved.

Government Regulation

Yuder’s operations as a Singapore-based company are subject to the regulatory environments of Singapore and each jurisdiction where our services are available. These regulations encompass a wide range of aspects related to our streaming service operations, including but not limited to:

Content regulation and licensing: Compliance with specific licensing requirements in each country such as the Over-the-Top (OTT) Niche Television Service License in Singapore and equivalent regulations in other jurisdictions where our services are available. This includes adherence to content codes for OTT, video on demand, and niche services to align with public interest and decency standards.

Age restriction and content classification: Implementing systems for age verification and content classification in line with local requirements in Singapore and similar mandates globally to restrict access to age-sensitive content.

Digital and cybersecurity regulations: Meeting international standards for data protection, privacy laws, and cybersecurity measures to safeguard user data and ensure the integrity of our platform against unauthorized access and cyber threats.

Consumer protection laws: Adherence to consumer rights and protection laws, ensuring transparency, fairness, and accountability in our service delivery, subscription models, and user data handling practices.

International taxation: Navigation of digital service taxes and VAT obligations relevant to the digital streaming industry, ensuring compliance with fiscal regulations in jurisdictions where our service is offered.

Intellectual Property

The protection of our technology and intellectual property is an important aspect of our business. We currently rely upon a combination of trademarks, trade secrets, copyrights, nondisclosure contractual commitments, and other legal rights to establish and protect our intellectual property.

As of March 9, 2024, we held ten (10) pending trademark applications in the United States, three (3) pending ones in Singapore, two (2) pending ones in Hong Kong, four (4) pending ones in British Virgin Islands, four (4) pending ones in Thailand and three (3) completed trademark applications in Singapore. We will evaluate our development efforts to assess the existence and patentability of new intellectual property. To the extent that it is feasible, we will file new patent applications with respect to our technology and trademark applications with respect to our brands.

Human Capital Resources

As of March 9, 2024, we had 11 full-time employees, including CEO, CFO and COO in Singapore. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good.

Corporate Office

Our headquarters are located at 3000 El Camino Real, Bldg. 4, Suite 200, Palo Alto, CA. Our main telephone number is (650) 340-1888.

Other Information

Our website is located at: https://www.megamatrix.io/. We make available on our website our reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). Other than the information expressly set forth in this annual report, the information contained, or referred to, on our website is not part of this annual report. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically with the SEC.

We use our website, our corporate Facebook page (facebook.com/megamatrixmpu or facebook.com/flextvus), our corporate X (f/k/a Twitter) account (twitter.com/MegaMatrixMPU), our corporate LinkedIn account (linkedin.com/company/megamatrixmpu), our corporate TikTok channel (tiktok.com/@flextv_english), and our YouTube channel (youtube.com/@FlexTV_English) as channels of distribution of material company information. For example, financial and other material information regarding our company is routinely posted on and accessible at www.megamatrix.io. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. The contents of our website and social media channels are not, however, a part of this Annual Report on Form 10-K and are not incorporated by reference herein.

Item 1A. Risk Factors.

An investment in our common stock involves risks. Prior to making a decision about investing in our common stock, you should consider carefully the risks together with all of the other information contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and in our subsequent filings with the SEC. Each of the referenced risks and uncertainties could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment in our securities. Additional risks not known to us or that we believe are immaterial may also adversely affect our business, operating results and financial condition and the value of an investment in our securities.

Risks Related to our Business

Expansion of the Company’s operations into new products, services and technologies, including content categories, is inherently risky and may subject it to additional business, legal, financial and competitive risks.

Historically, the Company’s operations have been focused on third-party management service contracts for aircraft operations, NFT gaming, StaaS and solo-staking, which operations have ceased. Expansion of the Company’s operations and its marketplace into additional products and services, such as short video drama involve numerous risks and challenges, including potential new competition, increased capital requirements and increased marketing spent to achieve customer awareness of these new products and services. Growth into additional content, product and service areas may require changes to the Company’s existing business model and cost structure and modifications to its infrastructure and may expose the Company to new regulatory and legal risks, any of which may require expertise in areas in which the Company has little or no experience. There is no guarantee that the Company will be able to generate sufficient revenue from sales of such products and services to offset the costs of developing, acquiring, managing and monetizing such products and services and the Company’s business may be adversely affected.

If our efforts to attract and retain users are not successful, our business will be adversely affected.

Our future revenue will be derived for subscriber based fees. We must continually add users and convert them to fee-based subscribers both to replace canceled fee-based subscribers and to grow our business beyond our current fee-based subscriber base. The video streaming business is new to us and our ability to penetration and growth our user base have fluctuated and vary across the jurisdictions where we provide our service. Our ability to attract and retain users and convert them to fee-based subscribers will depend in part on our ability to consistently provide our users in countries around the globe with compelling content choices that keep our users engaged with our service, effectively drive conversation around our content and service, as well as provide a quality experience for choosing and enjoying our short video dramas. Furthermore, the relative service levels, content offerings, pricing and related features of competitors to our service may adversely impact our ability to attract and retain users. Competitors include other entertainment video providers, such as linear television, and streaming entertainment providers (including those that provide pirated content), video gaming providers, as well as user-generated content, and more broadly other sources of entertainment that our users could choose in their moments of free time.

Our users and fee-based subscribers cancel our service for many reasons, including a perception that they do not use the service sufficiently, that they need to cut household expenses, dissatisfaction with content, a preference for competitive services and customer service issues that they believe are not satisfactorily resolved. Fee-based subscribers growth is also impacted by adverse macroeconomic conditions, including inflation, may also adversely impact our ability to attract and retain users and fee-based subscribers. If we do not grow as expected or be able to increase our fee-based subscriber revenue, including by adjusting subscription pricing, liquidity and results of operations may be adversely impacted. If we are unable to successfully compete with current and new competitors in providing compelling content, retaining our existing users and attracting new users, our business will be adversely affected.

If we do not continuously provide value to our users, including making improvements to our service in a manner that is favorably received by them, our revenue, results of operations and business will be adversely affected.

If consumers do not perceive our service offering to be of value, including if we introduce new or adjust existing features, adjust pricing or service offerings, or change the mix of content in a manner that is not favorably received by them, we may not be able to attract and retain users and fee-based subscribers, and accordingly, our revenue, including revenue per paying subscribers, and results of operations may be adversely affected. The video streaming business and the production of short video dramas is new to us. If our efforts to develop and offer short video dramas are not valued by our current and future users and fee-paying subscribers, our ability to attract and retain users and fee-paying subscribers may be negatively impacted. We may also seek to extend our business into new products and services to help drive growth. For example, we are expanding our offering of consumer products and live experiences. To the extent we cannot successfully find and develop new products and services to help drive growth, our future results of operations and growth may be adversely impacted.

We may, from time to time, have to adjust our subscription pricing, or our pricing model itself. Any adjustments we make may not be well-received by our users and could negatively impact our ability to attract and retain users and fee-paying subscribers, revenue per fee-paying subscribers, revenue and our results of operations. If our efforts to satisfy our existing users or adjustments to our service are not successful, we may not be able to attract or retain users and fee-paying subscribers, and as a result, our ability to grow our business will be adversely affected.

If we fail to grow and maintain our active user base, our business, financial condition and operating results may be materially and adversely affected.

The size of our active user base with our products are critical to our success. We are a new business and focused on attracting and maintaining an active user base. Our financial performance has been and will continue to be significantly affected by our ability to grow and engage our active user base. In addition, we may fail to maintain or increase our user base or our users’ engagement if, among other things:

	●	we fail to innovate or develop new products and services that provide relevant content and satisfactory experience to, or are favorably received by, our users;

	●	we fail to produce new dramas that are attractive to our users;

●

we fail to respond to or adopt evolving technologies for product development on a timely and cost-effective basis;

●

we fail to successfully market and monetize our existing and new mobile applications throughout their life cycles;

●

we fail to develop products that are compatible with existing or new mobile devices, mobile operating systems or their respective upgrades;

●

we fail to maintain or improve our technology infrastructure and security measures designed to protect our users’ personal privacy and cyber security;

●

we lose users to competing products and services or due to concerns related to personal privacy and cyber security or other reasons;

●

we fail to successfully implement our strategies related to the continued expansion of our global user base; or

●

we are required by existing or new laws, regulations or government policies to implement changes to our products or services that are adverse to our business.

If we are unable to maintain or increase our user base, our advertising services may become less attractive to our advertising customers, which may have a material and adverse impact on our business, financial condition and operating results.

Our advertising offering is new and subject to various risks and uncertainties, which may adversely affect our business.

We have limited experience and operating history offering advertising on our video streaming service, and our advertising revenue may not grow as we expect. Advertisers purchase advertising services either directly from us or through third-party advertising exchanges and advertising agencies. Our advertising customers, including advertisers and advertising exchanges and agencies, typically do not have long-term contractual arrangements with us. They may be dissatisfied with our advertising services or perceive our advertising services as ineffective. Potential new customers may view our advertising services as unproven, and we may need to devote additional time and resources to convince them. In addition, new advertising formats emerge from time to time and customer preferences can change. We may not be able to adapt our products and services to future advertising formats or changing customer preferences on a timely and cost-effective basis, and any such adaption failure could materially and adversely affect our financial conditions, results of operations and prospects.

We compete for advertising customers not only with other providers of digital advertising spaces, but also with other types of platforms and advertising service providers such as newspapers, magazines, billboards, television and radio stations. Some of our competitors have access to considerably greater financial and other resources for expanding their product offerings and present considerable challenges to gaining and maintaining additional market share.

If we fail to deliver advertising services in an effective manner, or if our advertising customers believe that placing advertisements on our platform and in our short dramas do not generate a competitive return when compared to placing advertisements through our competitors’ products, they may not continue to do business with us or they may only be willing to advertise with us at reduced prices. If our existing advertising customers reduce or discontinue their advertising spending with us, or if we fail to attract new advertising customers, our business, financial condition and results of operations could be materially and adversely affected.

We rely on our business collaborations with third parties, including major digital distribution platforms and mobile device manufacturers, to maintain and expand our user base. Our failure to maintain good relationships with these business partners may materially and adversely affect our business and operating results.

We collaborate with various business partners to promote our products and enlarge our user base. We use third-party digital distribution platforms such as Apple App Store and Google Play to distribute our mobile applications to users. We also advertise on third-party platforms, such as Facebook and TikTok to acquire users. The promotion and distribution of our mobile applications are subject to such digital distribution platforms’ standard terms and policies for application developers, which are subject to the interpretation of, and frequent changes by, these platforms. In addition, our applications may be suspended by or removed from such platforms as a result of allegations or claims by third parties regardless of their merits. If we are unable to maintain good relationships with our business partners or the business of our business partners declines, the reach of our products and services may be adversely affected and our ability to maintain and expand our user base may decrease. Most of the agreements with our business partners, including mobile device manufacturers and digital distribution platforms, do not prohibit them from working with our competitors or from offering competing services. If our partner distribution platforms change their standard terms and conditions in a manner that is detrimental to our business, or if our business partners decide not to continue working with us or choose to devote more resources to supporting our competitors or their own competing products, we may not be able to find a substitute on commercially favorable terms, or at all, and our competitive advantages may be diminished.

We may be subject to notices or complaints alleging, among other things, our infringement of copyrights and delivery of illegal or inappropriate content through our products, which could lead to suspension or removal of such products from digital distribution platforms, a decrease of our user base, and a significantly adverse impact on our financial results and our reputation.

We use third-party digital distribution platforms such as Apple App Store and Google Play to distribute our mobile applications to users. In the ordinary course of our business, we and the digital distribution platforms may from time to time receive, notices or complaints from third parties alleging that certain of our contents infringe copyrights, deliver illegal, fraudulent, pornographic, violent, bullying or other inappropriate content, or otherwise fail to comply with applicable policies, rules and regulations. Upon receipt of such notices or complaints, those digital distribution platforms may suspend or remove such products from such platforms. The processes for appealing such suspensions and removals with those platforms could be time-consuming, and we cannot guarantee that our appeals will always prevail or that any such suspended or removed application will be made available again. Such suspensions and removals of our products could lead to a decrease of our user base and, if they occur frequently and/or in a large scale, could significantly adversely affect our reputation, business operation and financial performance. In addition, these digital distribution platforms and third-party platforms may also receive, from time to time, notices or complaints from third parties alleging that certain of our products infringe copyrights, deliver illegal, fraudulent, pornographic, violent, bullying or other inappropriate content, or otherwise fail to comply with applicable policies, rules and regulations, consequently those digital distribution platforms may suspend or remove such products from their platforms and those third-party platforms may terminate their collaboration with us.

We have international operations and plan to continue expanding our operations globally. We may face challenges and risks presented by our growing global operations, which may have a material and adverse impact on our business and operating results.

Yuder is headquartered in Singapore and provide its products and services to a global user base. We intend to continue the international expansion of our business operations and grow our user base globally. We believe the sustainable growth of our business depends on our ability to increase the penetration of our products in both developed and emerging markets. Our continued international operations and global expansion may expose us to a number of challenges and risks, including:

●

challenges in developing successful products and localized adaptions, and implementing effective marketing strategies that respectively target mobile internet users and advertising customers from various countries and with a diverse range of preferences and demands;

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difficulties in managing and overseeing global operations and in affording increased costs associated with doing business in multiple international locations;

●

local competitions;

	●	difficulties in integrating and managing potential foreign acquisitions or investments;

	●	compliance with applicable laws and regulations in various countries worldwide, including, but not limited to, internet content requirements, cyber security and data privacy requirements, intellectual property protection rules, exchange controls, and cash repatriation restrictions;

●

fluctuations in currency exchange rates;

●

political, social or economic instability in markets or regions in which we operate; and

●

compliance with statutory equity requirements and management of tax consequences.

Our business, financial condition and results of operations may be materially and adversely affected by these challenges and risks associated with our global operations.

Our product development and monetization strategies are highly dependent on our technology capabilities and infrastructure. If the amount of user data generated on our products declines, or if we fail to enhance or upgrade our technologies at a competitive pace, the effectiveness of our business model may be harmed and our operating results may be materially and severely affected.

We depend on our technological capabilities and infrastructure to analyze our users’ preferences and needs and to generate valuable user insights. Active users of our products generate a large amount of data across our applications and in a variety of use cases on a daily basis. The data generated by our users lays the foundation for us to build our user profiles. By analyzing such user data with our big data analytics and other relevant technologies, we aim to understand our users’ interests and needs for content in order to develop products that deliver relevant content catering to their interests and needs. Therefore, the effectiveness of our product development and monetization strategies is dependent on our ability to obtain and process data and to refine the algorithms used in processing such data. If we fail to maintain and expand the user base of our products to continually generate large amounts of user data, or if we fail to keep up with the rapid development and upgrade of big data analytics and other relevant technologies on a timely and cost-effective basis, we may not be able to effectively grow and monetize our products, and our business and operating results may be materially and adversely affected.

If we fail to correctly anticipate user preferences and develop and commercialize new products and services, we may fail to attract or retain existing users, the lifecycles of our mobile applications may end prematurely and our operating results may be materially and adversely affected.

Our success depends on our ability to maintain, grow and monetize our user base, which in turn depends on our ability to continually develop and commercialize new mobile applications, introduce new features or functions to our existing mobile applications and provide users with high-quality content and an enjoyable user experience. This is particularly important since the mobile internet industry is characterized by fast and frequent changes, including rapid technological evolution, shifting user demands, frequent introductions of new products and services, and constantly evolving industry standards, operating systems and practices. FlexTV APP was launched in 2023 and over 150 short video drama have been released since October 2023. We intend to continue to produce new short video drama and other contents and services to enlarge our active user base. Our ability to roll out new short video dramas and services depends on a number of factors, including engaging new talents, High-quality contents, as well as correctly analyzing and predicting users’ interests and demands for content using our big data analytical capabilities. If we fail to correctly analyze and predict users’ interests and demands for content, fail to cater to the anticipated needs and preferences of users, or fail to provide a superior user experience, our existing and new mobile applications may suffer from reduced user traffic or be unsuccessful in the market and our user base may decrease, which in turn may impact our fee-based subscription and our ability to earn advertising revenue. There can be no assurance that our new products and services will generate revenues or profits and we may not be able to recoup the investments and expenditure involved in such development. Our quarterly results may also experience significant fluctuations as we continue to invest in the development of new products and services.

In addition, as a result of rapidly evolving user preferences, our existing mobile applications may reach the end of their lifecycles prematurely. There can be no assurance that we will be able to correctly predict the lifecycles of our new mobile applications, our estimates regarding the lifecycles of our existing mobile applications may turn out to be incorrect, and our business, financial condition and results of operations may be materially and adversely affected.

We may be held liable for information or content displayed on, distributed by, retrieved from or linked to the mobile applications integrated into our products, which may adversely impact our brand image and materially and adversely affect our business and operating results.

We may display third-party content, such as videos, pictures, books, articles and other works, on our mobile applications without the explicit consent from such third party, and we may further explore market opportunities in the content-related business. Our users may misuse our products to disseminate content that contains inappropriate, fraudulent or illegal information or that infringes the intellectual property rights of third parties. We have implemented control measures and procedures to detect and block inappropriate, fraudulent or illegal content uploaded to or disseminated through our products, particularly those that violate our user agreements or applicable laws and regulations. However, such procedures may not be sufficient to block all such content due to the large volume of third-party content. Despite the procedures and measures we have taken, if the content displayed on our products are found to be fraudulent, illegal or inappropriate, we may suffer a loss of users and damage to our reputation. In response to any allegations of fraudulent, illegal or inappropriate activities conducted through our mobile applications or any negative media coverage about us, government authorities may intervene and hold us liable for non-compliance with laws and regulations concerning the dissemination of information on the internet and subject us to administrative penalties or other sanctions, such as requiring us to restrict or discontinue certain features and services provided by our mobile applications or to temporarily or permanently disable such mobile applications. If any of such events occurs, our reputation and business may suffer and our operating results may be materially and adversely affected.

We may not be able to prevent unauthorized use of our intellectual property, which could harm our business and competitive position.

We regard our patents, copyrights, trademarks, trade secrets, and other intellectual property as critical to our business. Unauthorized use of our intellectual property by third parties may adversely affect our business and reputation. We rely on a combination of intellectual property laws and contractual arrangements to protect our proprietary rights. It is often difficult to register, maintain, and enforce intellectual property rights in countries with less developed regulatory regimes or inconsistent and unreliable enforcement mechanisms. Sometimes laws and regulations are subject to interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. In addition, our contractual agreements may be breached by our counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China and other jurisdictions in which we operate. Detecting and preventing any unauthorized use of our intellectual property is difficult and costly and the steps we have taken may be inadequate to prevent infringement or misappropriation of our intellectual property. In the event that we resort to litigation to enforce or protect our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation.

We may be subject to intellectual property infringement lawsuits which could be expensive to defend and may result in our payment of substantial damages or licensing fees, disruption to our product and service offerings, and reputational harm.

The success of our business relies on the quality of our products, which in turn depends on the underlying software and related technology, such as big data analytics. The protection of such software and related technologies primarily relies on intellectual property rights including patents and trade secrets. Meanwhile, for the purpose of our business expansion, we may from time to time display third-party content, such as videos, pictures, books, articles and other works, on our mobile applications without acquiring the explicit consent from such third party. Third parties, including our competitors, may assert claims against us for alleged infringements of their patents, copyrights, trademarks, trade secrets and internet content.

Intellectual property claims against us, whether meritorious or not, are time consuming and costly to resolve, could divert management attention away from our daily business, could require changes of the way we do business or develop our products, could require us to enter into costly royalty or licensing agreements or to make substantial payments to settle claims or satisfy judgments, and could require us to cease conducting certain operations or offering certain products in certain areas or generally. We do not conduct comprehensive patent searches to determine whether the technologies used in our products infringe upon patents held by others. In addition, product development is inherently uncertain in a rapidly evolving technological environment in which there may be numerous patent applications pending, many of which are confidential when filed, with regard to similar technologies. While we believe that our products do not infringe in any material respect upon any intellectual property rights of third parties, we cannot be certain that this is the case.

In addition, in any potential dispute involving our patents or other intellectual property, our advertising customers and business partners could also become the target of litigation. We have certain contractual obligations to indemnify our advertising customers and the mobile device manufacturers that pre-install our products on their devices for liability that they may incur based on third-party claims of intellectual property infringement for the use of our products or technology. Many of our collaboration contracts with mobile device manufacturers provide for a cap on our indemnity obligations. In addition, in the event of any such claims, our advertising customers or business partners may decide not to use our products in the future, which could harm our financial condition and operating results.

Finally, we may also face infringement claims from the employees, consultants, agents and outside organizations we have engaged to develop our technology. While we have sought to protect ourselves against such claims through contractual means, there can be no assurance that such contractual provisions are adequate, and any of these parties might claim full or partial ownership of the intellectual property in the technology that they were engaged to develop for us.

Yuder, as a Singapore-based company, is subject to laws and regulations of Singapore and each jurisdiction where our services are offered. Our operations require us to apply for specific licenses with Singapore authorities.

Yuder’s operations as a Singapore-based company are subject to the regulatory environments of Singapore and each jurisdiction where our services are available. In Singapore, Yuder is actively assessing the need for specific licenses such as an Over-the-Top (OTT) Niche Television Service License and, for age-restricted content, a Film Exhibition License. Moreover, we may need to comply with the Content Code for OTT, Video on Demand, and Niche Services in Singapore to ensure our content aligns with public interest and decency standards. Additionally, as our service is accessible over the internet to users worldwide, we are subject to a wide array of international laws and regulations, which vary significantly across different jurisdictions.

Our efforts to secure necessary licenses and comply with regulatory standards are facing challenges, including the possibility that licenses may not be granted, or could be revoked or not renewed by regulatory authorities.

The complexity of obtaining necessary licenses and maintaining compliance with regulatory standards presents a risk that licenses may not be granted or could be revoked or not renewed by regulatory authorities. This includes both the specific licenses required for operations in Singapore and potentially different or additional licenses needed in other countries. Such outcomes could prevent us from offering certain services or content, thus significantly impacting our operations and financial condition.

Information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions.

We receive, process, store and use personal information and other customer data. There are numerous federal, state and local laws regarding privacy and the storing, sharing, use, processing, disclosure and protection of personal information and other data. Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to customers or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other player data, may result in governmental enforcement actions, litigation or public statements against us by consumer advocacy groups or others and could cause our customers to lose trust in us which could have an adverse impact on our business. The costs of compliance with these types of laws may increase in the future as a result of changes in interpretation or changes in law. Any failure on our part to comply with these types of laws may subject us to significant liabilities.

Third parties we work with may violate applicable laws or our policies, and such violations may also put our customers’ information at risk and could in turn have an adverse impact on our business. We will also be subject to payment card association rules and obligations under each association’s contracts with payment card processors. Under these rules and obligations, if information is compromised, we could be liable to payment card issuers for the associated expense and penalties. If we fail to follow payment card industry security standards, even if no customer information is compromised, we could incur significant fines or experience a significant increase in payment card transaction costs.

Security breaches, computer malware and computer hacking attacks have become more prevalent. Any security breach caused by hacking which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses could harm our business. Though it is difficult to determine what harm may directly result from any specific interruption or breach, any failure to maintain performance, reliability, security and availability of our network infrastructure to the satisfaction of our players may harm our reputation and our ability to retain existing players and attract new players.

Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems, change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

Our compliance with regulatory requirements demands significant operational and financial resources.

Compliance with regulatory requirements in Singapore and internationally may require significant operational and financial resources. This includes the potential need to furnish security deposits, adhere to content classification requirements, and ensure ongoing compliance with varied regulatory standards across jurisdictions. The financial burden and operational constraints imposed by these regulatory requirements could negatively affect our profitability and operational efficiency.

We face challenges in continuously monitoring and adapting to the varied regulatory environments across the various jurisdictions where we operate.

Navigating the regulatory landscapes of multiple jurisdictions increases the risk of inadvertent non-compliance due to the dynamic nature of laws and regulations governing online streaming services. Continuous adjustments to our operational practices and content offerings may be necessary, requiring substantial resources and potentially leading to penalties, restrictions, or the cessation of our services in certain territories.

We may encounter restrictions or outright bans in certain jurisdictions if we fail to comply with local regulations or content standards.

Given the global accessibility of our service, there is a risk that certain jurisdictions may impose restrictions or outright bans on our operations due to non-compliance with local regulations or content standards. Such actions could limit our market presence and negatively impact our growth prospects and profitability.

Risk Related to Digital Assets

Previously, we held stable coins such as USDC and/or USDT which exposed us to various risks associated with cryptocurrencies, including the following:

Custody Service Risks: We do not use any cryptocurrencies as collateral or have them used by other institutions as collateral because our cryptocurrencies are held in custody on the blockchain and not stored on centralized exchanges. However, despite storing our cryptocurrencies on a decentralized custody chain, there are still risks associated with the custody service provider. These risks may include security, availability, and reliability. We seek to choose a trusted and secure custody service provider to protect our cryptocurrencies.

On-Chain Risks: Storing cryptocurrencies on a custody chain does not eliminate all risks. The underlying blockchain may still face risks related to technology, network security, and potential attacks. Understanding the security measures and vulnerability mitigation capabilities of the underlying blockchain protocol is crucial.

As of May 5, 2024, management decided not to hold ETH and converted all of its remaining 200 ETH into 635,864 USDT through Matrixport. As of May 6, 2024, we have completed the process of converting all of our ETH into USDT, and we currently do not hold any ETH. In March 2024, we started the process of exchanging all of our USDC and USDT into U.S. dollars through Matrixport, and as of June 21, 2024, we have completed the process of converting all of our USDC and USDT into U.S. dollars. From March 2024 through June 2024, the gross proceeds that we received for the conversion of our USDC and USDT into U.S. dollars were $1,498,150 and $12,287,013, respectively. We currently do not own any USDC, USDT or ETH, and we do not anticipate that we will acquire, accept, hold, or use digital assets or cryptocurrencies in the future.

If we hold stable coins, the value of stable coins that we hold may be subject to volatility and risk of loss.

Previously and as of March 31, 2024, we held approximately $3.1 million in USDC issued by Circle Internet Financial Public Limited Company (“Circle”). Stable coins are cryptocurrencies designed to have a stable value over time as compared to typically volatile cryptocurrencies, and are typically marketed as being pegged to a fiat currency, such as the U.S. dollar. For example, stable coins such as USDC are usually backed by the U.S. Dollar and other short-dated U.S. government obligations and are usually pegged to the U.S. dollar. On March 9, 2023, as a result of the bankruptcy of Silicon Valley Bank (“SVB”), Circle announced that $3.3 billion of its roughly $40 billion USDC reserves were held at SVB. As a result, Circle depegged the USDC from its $1.00 peg, trading as low as $0.87. This risk may result in the sell-off of USDC and volatility as to the value of stable coins, which would expose us to risk of potential loss and could have a material adverse effect on our ability to raise new funding and on our business, financial condition, and results of operations and prospects.

Our Board and our management have identified certain material gaps with respect to risk management related to the holding of cryptocurrencies, if any, that if not adequately addressed, could negatively impact our operations and adversely affect the value of our shares.

Our Board and our management have identified the following material gaps with respect to risk management related to the holding of cryptocurrencies:

	●	Inadequate Measures for High Volatility. Cryptocurrencies are known for their high price volatility. If an organization’s risk management strategies are not equipped to handle such fluctuations, this would be a significant gap.

	●	Lack of Preparedness for Regulatory Changes: The regulatory landscape for cryptocurrencies is evolving rapidly. An organization that is not prepared for potential regulatory changes may face compliance risks.

	●	Insufficient Cybersecurity Measures: Given the digital nature of cryptocurrencies, they are particularly susceptible to online frauds, scams, and hacking attempts. Inadequate cybersecurity measures to protect against these threats would be a critical risk management gap.

We have made the following changes to address these gaps:

	●	Revising Investment Strategies: We have diversified our investments, setting more stringent risk limits, or employing hedging strategies to mitigate potential losses.

	●	Enhancing Cybersecurity tools: We included the implementation of advanced security software, regular security audits, and the establishment of robust mechanisms for transaction handling and data protection.

	●	Providing Specialized Training: Offering specialized training to management and staff is essential to improve their understanding and ability to manage crypto-related risks. This training covered the basics of cryptocurrency, blockchain technology, risk management strategies specific to cryptocurrency, and the latest trends and developments in the crypto market.

While we believe that these changes adequately address these gaps, there can be no assurance that these changes will be effective or adequate. If we fail to adequately address these gaps, the value of our cryptocurrencies may go down which could negatively impact or operations and adversely affect the value of our shares.

If we hold stable coins, we will be subject to risks related to holding cryptocurrencies.

Cryptocurrencies are not considered legal tender or backed by any government and have experienced price volatility, technological glitches and various law enforcement and regulatory interventions. The use of cryptocurrency such as Bitcoin has been prohibited or effectively prohibited in some countries. If we fail to comply with any such prohibitions that may be applicable to us, we could face regulatory or other enforcement actions and potential fines and other consequences.

Cryptocurrencies have in the past and may in the future experience periods of extreme volatility. Fluctuations in the value of any cryptocurrencies that we hold may also lead to fluctuations in the value of our common stock. In addition, there is substantial uncertainty regarding the future legal and regulatory requirements relating to cryptocurrency or transactions utilizing cryptocurrency. For instance, governments may in the near future curtail or outlaw the acquisition, use or redemption of cryptocurrencies. In such cases, ownership of, holding or trading in cryptocurrencies may then be considered illegal and subject to sanction. These uncertainties, as well as future accounting and tax developments, or other requirements relating to cryptocurrency, could have a material adverse effect on our business.

Previously, we used hot custodian, Matrix Trust Company Limited (“Matrixport”), a third party to store our cryptocurrencies such as USDC and/or USDT, if any. We selected Matrixport as our custodian due to its strong security measures and risk management practices, crucial for digital asset safety; its commitment to compliance with regulatory standards across various regions within the crypto industry; its diverse range of services, including trading, custody, and OTC transactions for both fiat and digital assets; and its solid market reputation in the crypto space in both the U.S. and Asia. The material terms of our custody agreement with Matrixport are as follows:

(a)

Matrixport will act as the custodian for our digital assets and hold such digital assets in trust in accordance with the agreement. Matrixport does not have the authority to exercise any investment or tax planning discretion regarding our digital assets, and will not act as an advisor, broker or agent when executing our instructions.

(b)

Matrixport is only responsible for the safekeeping of our digital assets which are delivered into its possession and control by us.

(c)

For any transfer of our digital assets from our account, Matrixport will hold such proceeds for transfer until receipt of written disbursement instructions from us.

(d)

To the extent permitted by applicable laws and regulations and Matrixport’s internal policies and procedures, Matrixport shall transfer our digital assets in accordance with our instructions, provided that sufficient digital assets are available to effect the instructions and for paying any outstanding amounts owing to Matrixport.

(e)

Our custody account at Matrixport is not a deposit account and will not accrue interest. Further our custody account is not insured by FDIC.

(f)

Our executive officer has access to our custody account at Matrixport, however, only our chief executive officer and chief financial officer, acting jointly, have the authority to release our digital assets from custody.

Matrixport bought $50 million insurance from OneInfinity by OneDegree, including specie and crime that cover both cold and warm storage. We have no insurance policies covering our digital assets.

We do not anticipate we will acquire or use digital assets or cryptocurrencies in the future.

We may be exposed to various risks associated with the failure to safeguard our cryptocurrencies, such as USDC and/or USDT, if any.

We are exposed to following risks relating to the safeguarding of our cryptocurrencies such as USDC and/or USDT, if any:

	●	Security Breaches: Digital assets are stored in digital wallets or on exchanges, and they are vulnerable to security breaches, hacks, and unauthorized access. If adequate security measures are not in place, digital assets can be stolen or lost, leading to financial losses for the holders.

	●	Third-Party Risks: Entrusting digital assets to third-party service providers, such as custodians or exchanges, introduces additional risks. These providers may face security vulnerabilities, operational risks, or even fraudulent activities, which can result in the loss or compromise of the digital assets held with them.

	●	Regulatory Compliance: Safeguarding digital assets often involves complying with regulatory requirements, such as implementing appropriate know-your-customer (KYC) and anti-money laundering (AML) procedures. Failure to comply with these regulations can lead to legal consequences, fines, reputational damage, and potential disruptions to business operations.

	●	Operational Risks: Inadequate internal controls, poor infrastructure, or human errors can pose operational risks. Mistakes in handling private keys, mismanagement of wallets, or technological failures can result in the loss or inaccessibility of digital assets.

In the event of security breaches or loss of our digital assets, we may face significant financial losses. The value of the lost assets may not be recoverable, and liability for the losses may rest with the business, impacting its financial condition and operations.

In addition, inadequate safeguarding of digital assets can result in legal and regulatory consequences which may lead to fines, penalties, legal disputes, or even the suspension of business operations, affecting our business’s reputation and financial stability.

Also inadequate safeguarding practices may result in increased legal and compliance costs. We may need to invest in legal representation, investigations, audits, or remediation efforts to address any deficiencies, which can strain our financial resources.

Cryptocurrency such as USDC and/or USDT may be stored in hot wallets such as Matrix Trust Company Limited (“Matrixport”), a third party, and may be subject to loss, theft or restriction on access.

Cryptocurrency such as USDC and USDT are stored in and accessed by cryptocurrency sites commonly referred to as “wallets.” A hot wallet refers to any cryptocurrency wallet that is connected to the Internet. Generally, hot wallets are easier to set up and access than wallets in cold storage, but they are also more susceptible to hackers and other technical vulnerabilities. Cold storage refers to any cryptocurrency wallet that is not connected to the Internet. Cold storage is generally more secure than hot storage, but is not ideal for quick or regular transactions. Historically, we keep all of our cryptocurrency in a hot wallet maintained by Matrixport which may be subject to loss, theft or restriction on access. Hackers or malicious actors may launch attacks to steal, compromise or secure cryptocurrencies, such as by attacking Matrixport. As such, cryptocurrencies stored in “hot wallets” may be more susceptible to theft or compromise than cryptocurrencies stored in cold storage. There can be no assurance that our hot wallet will not be compromised.

Potential that, in the event of a bankruptcy filing by a custodian, cryptocurrency held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof.

All of the cryptocurrencies custodied with Matrixport are held in segregated accounts such that they are segregated from the property of Matrixport and the assets of other Matrixport customers. The treatment of cryptocurrencies held by custodians that file for bankruptcy protection is uncharted territory in U.S. Bankruptcy law. We cannot say with certainty whether our cryptocurrencies held in custody by Matrixport, should it declare bankruptcy, would be treated as property of the bankruptcy estate and, accordingly, whether we would be treated as a general unsecured creditor with respect of our cryptocurrencies held in custody by Matrixport. If we are treated as a general unsecured creditor, we may not be able to recover our cryptocurrencies in the event of a Matrixport bankruptcy or a bankruptcy of any other custodian we may use in the future.

Risks Related to our Company

The ownership of our stock is highly concentrated in our chairman, and we have one controlling stockholder.

As of March 1, 2024, our Mr. Yucheng Hu, our chairman and chief executive officer beneficially owned approximately 15.87% of our outstanding common stock. As a result of his ownership, Mr. Yu is able to significantly influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control.

Our filing of bankruptcy may adversely affect our business and relationships.

On August 31, 2021, the Bankruptcy Court entered its Findings of Fact, Conclusions of Law and Order Approving and Confirming the Combined Disclosure Statement and Joint Chapter 11 Plan of AeroCentury Corp., and its Affiliated Debtors. The Effective Date of the Plan occurred on September 30, 2021. Each condition precedent to consummation of the Plan has been satisfied and/or waived.

As a result of our bankruptcy filing:

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suppliers, vendors or other contract counterparties may require additional financial assurances or enhanced performance from us;

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our ability to compete for new business may be adversely affected;

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our ability to attract, motivate and retain key executives and employees may be adversely affected;

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our employees may be distracted from performance of their duties or more easily attracted to other employment opportunities; and

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we may have difficulty obtaining the capital we need to operate and grow our business.

The occurrence of one or more of these events could have a material adverse effect on our business, financial condition, results of operations and reputation.

Certain information contained in our historical financial statements are not comparable to the information contained in our financial statements after the adoption of new business.

Upon our emergence from Chapter 11, we adopted fresh start accounting in accordance with ASC Topic 852 and became a new entity for financial reporting purposes. As a result, we revalued our assets and liabilities based on our estimate of our enterprise value and the fair value of each of our assets and liabilities. These estimates, projections and enterprise valuation were prepared solely for the purpose of the bankruptcy proceedings and should not be relied upon by investors for any other purpose. At the time they were prepared, the determination of these values reflected numerous estimates and assumptions, and the fair values recorded based on these estimates may not be fully realized in periods subsequent to our emergence from Chapter 11.

The consolidated financial statements after our emergence from bankruptcy will not be comparable to the consolidated financial statements on or before that date. This will make it difficult for stockholders to assess our performance in relation to prior periods.

We have a limited operating history in new short video drama business, so there is a limited track record on which to judge our business prospects and management.

We are currently focusing on short video streaming platform or producing short video dramas which is very different from our prior staking business, NFT gaming, and aircraft leasing business. As such, our historical financial results should not be considered indicative of our future performance. In addition, we have a limited operating history in providing short video streaming platform or producing short video dramas upon which to base an evaluation of our business and prospects. You must consider the risks and difficulties we face as a small operating company with limited operating history.

User metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics could harm our business, revenue and financial results.

We intend to regularly review our metrics, including the number of our active users, paying users, and other measures to evaluate growth trends, measure our performance and make strategic decisions. These metrics are calculated using internal company data and have not been validated by an independent third party. While these numbers are based on what we currently believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in measuring how our FlexTV platform is used across large populations globally. Our metrics calculations may be inaccurate, and we may not be able to identify those inaccuracies. In addition, from time to time, we may implement new methodologies for calculating these metrics, which may result in the metrics changing or decreasing from prior periods or not being comparable to prior periods. If our metrics provide us with incorrect or incomplete information about our users and their behavior, we may make inaccurate conclusions about our business which could harm our business, revenue and financial results.

We will need to raise additional capital or financing to continue to execute and expand our business.

We will need to raise additional capital to support our new operations and execute on our business plan by issuing equity or convertible debt securities. In the event we are required to obtain additional funds, there is no guarantee that additional funds will be available on a timely basis or on acceptable terms. To the extent that we raise additional funds by issuing equity or convertible debt securities, our shareholders may experience additional dilution and such financing may involve restrictive covenants. Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other convertible securities that will have additional dilutive effects. We cannot assure that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. Further, we may incur substantial costs in pursuing future capital and/or financing. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition and results of operations. Our ability to obtain needed financing may be impaired by such factors as the weakness of capital markets, and the fact that we have not been profitable, which could impact the availability and cost of future financings. If such funds are not available when required, management will be required to curtail investments in additional sales and marketing and product development, which may have a material adverse effect on future cash flows and results of operations.

Our business depends on the continuing efforts of our management. If it loses their services, our business may be severely disrupted.

Our business operations depend on the efforts of our new management, particularly the executive officers named in this document. If one or more of our management were unable or unwilling to continue their employment with us, it might not be able for us to replace them in a timely manner, or at all. We may incur additional expenses to recruit and retain qualified replacements. Our business may be severely disrupted, and our financial condition and results of operations may be materially and adversely affected. In addition, our management may join a competitor or form a competing company. As a result, our business may be negatively affected due to the loss of one or more members of our management.

We may not be able to prevent or timely detect cyber security breaches and may be subject to data, security and/or system breaches which could adversely affect our business operations and financial conditions.

We rely on information technology networks and systems, including the use of third-party communications systems over the Internet, to process, transmit and store electronic information, and to manage or support our business activities. These information technology networks and systems may be subject to security breaches, hacking, phishing, or spoofing attempts by others to gain unauthorized access to our business information and financial accounts. A cyberattack, unauthorized intrusion, or theft of personal, financial or sensitive business information could have a material adverse effect of on our business operations or our clients’ information, and could harm our operations, reputation and financial situation. In addition, due to an increase in the types of cyberattacks, our employees could be victim to such scams designed to trick victims into transferring sensitive company data or funds, that could compromise and/or disrupt our business operations.

We were a victim of a business email compromise scam (BEC) in December 2021. BEC scams involve using social engineering to cause employees to wire funds to the perpetrators in the mistaken belief that the requests were made by a company executive or established vendor. As a result of the BEC scam, we have enhanced BEC awareness within our organization, established additional controls to help detect BEC scams when they occur, and require additional confirmations for large money transactions. In addition, we seek to detect and investigate all cybersecurity incidents and to prevent their recurrence, but in some cases, we might be unaware of an incident or its magnitude, duration, and effects. While we take every effort to train our employees to be cognizant of these types of attacks and to take appropriate precautions, and have taken actions and implemented controls to protect our systems and information, the level of technological sophistication being used by attackers has increased in recent years, and may be insufficient to protect our systems or information. Any successful cyberattack against us could lead to the loss of significant company funds or result in in potential liability, including litigation or other legal actions against us, or the imposition of penalties, which could cause us to incur significant remedial costs. Further, we cannot ensure that our efforts and measures taken will be sufficient to prevent or mitigate any damage caused by a cybersecurity incident, and our networks and systems may be vulnerable to security breaches, hacking, phishing, spoofing, BEC, employee error or manipulation, or other adverse events.

Due to the evolving nature and increased sophistication of these cybersecurity threats, the potential impact of any future incident cannot be predicted with certainty; however, any such incidents could have a material adverse effect on our results of operations and financial condition, especially if we fail to maintain sufficient insurance coverage to cover liabilities incurred or are unable to recover any funds lost in data, security and/or system breaches, and could result in a material adverse effect on our business and results of operations.

We do not maintain commercial insurance to cover loss of digital assets.

We do not carry any insurance that covers the loss of our digital assets held by our custodian and its affiliates. As such, we may not be able to recover any funds lost in data, security and/or system breaches.

We are subject to various laws relating to foreign corrupt practices, the violation of which could adversely affect its operations, reputation, business, prospects, operating results and financial condition.

We are subject to risks associated with doing business outside of the United States, including exposure to complex foreign and U.S. regulations such as the Foreign Corrupt Practices Act (the “FCPA”) and other anti-corruption laws which generally prohibit U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions and other penalties. It may be difficult to oversee the conduct of any contractors, third-party partners, representatives or agents who are not our employees, potentially exposing us to greater risk from their actions. If our employees or agents fail to comply with applicable laws or company policies governing our international operations, we may face legal proceedings and actions which could result in civil penalties, administration actions and criminal sanctions. Any determination that we have violated any anti-corruption laws could have a material adverse impact on our business.

Violations of these laws and regulations could result in significant fines, criminal sanctions against us, our officers or our employees. Additionally, any such violations could materially damage our reputation, brand, international expansion efforts, ability to attract and retain employees and our business, prospects, operating results and financial condition.

Historically, we have dealt with significant amounts of cash in our operations, which have subjected us to various reporting and anti-money laundering regulations. Any violation of anti-money laundering laws or regulations by us could have a material adverse impact on our business.

As of December 31, 2023, our internal control over financial reporting was ineffective, and if we continue to fail to improve such controls and procedures, investors could lose confidence in our financial and other reports, the price of our common stock may decline, and we may be subject to increased risks and liabilities.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and the Sarbanes-Oxley Act of 2002. The Exchange Act requires, among other things, that we file annual reports with respect to our business and financial condition. Section 404 of the Sarbanes-Oxley Act requires, among other things, that we include a report of our management on our internal control over financial reporting. We are also required to include certifications of our management regarding the effectiveness of our disclosure controls and procedures. We previously identified a material weakness in our internal control over financial reporting relating to our tax review control for complex transactions. We are in the process of enhancing our tax review control related to unusual transactions that we may encounter, but that control has not operated for a sufficient time to determine if the control was effective as of December 31, 2023. If we cannot effectively maintain our controls and procedures, we could suffer material misstatements in our financial statements and other information we report which would likely cause investors to lose confidence. This lack of confidence could lead to a decline in the trading price of our common stock.

Compliance with the Sarbanes-Oxley Act of 2002 will require substantial financial and management resources and may increase the time and costs of completing an acquisition.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and report on our system of internal controls and may require us to have such system audited by an independent registered public accounting firm. If we fail to maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties and/or shareholder litigation. Any inability to provide reliable financial reports could harm our business. Furthermore, any failure to implement required new or improved controls, or difficulties encountered in the implementation of adequate controls over our financial processes and reporting in the future, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our securities.

The trading prices of our common stock could be volatile, which could result in substantial losses to our shareholders and investors.

The trading prices of our common stock could be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of other similarly situated companies that have listed their securities in the U.S. in recent years. The securities of some of these companies have experienced significant volatility including, in some cases, substantial price declines in the trading prices of their securities. In addition, securities markets may from time to time experience significant price and volume fluctuations that are not related to our operating performance, such as the large decline in share prices in the United States and other jurisdictions.

In addition to market and industry factors, the price and trading volume for our common stock may be highly volatile for factors specific to our own operations including the following:

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variations in our revenue, earnings and cash flow;

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announcements of new product and service offerings, investments, acquisitions, strategic partnerships, joint ventures, or capital commitments by us or our competitors;

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changes in the performance or market valuation of our company or our competitors;

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changes in financial estimates by securities analysts;

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changes in the number of our users and customers;

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fluctuations in our operating metrics;

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failures on our part to realize monetization opportunities as expected;

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additions or departures of our key management and personnel;

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detrimental negative publicity about us, our competitors or our industry;

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market conditions or regulatory developments affecting us or our industry; and

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potential litigations or regulatory investigations.

Any of these factors may result in large and sudden changes in the trading volume and the price at which our common stock will trade. In the past, shareholders of a public company often brought securities class action suits against the listed company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

If our common stock becomes subject to the SEC’s penny stock rules, broker-dealers may experience difficulty in completing customer transactions, and trading activity in our securities may be adversely affected.

If at any time we have net tangible assets of $5,000,001 or less and our common stock has a market price per share of less than $5.00, transactions in our common stock may be subject to the “penny stock” rules promulgated under the Exchange Act. Under these rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must:

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make a special written suitability determination for the purchaser;

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receive the purchaser’s written agreement to the transaction prior to sale;

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provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies; and

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obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a “penny stock” can be completed.

If our common stock becomes subject to these rules, broker-dealers may find it difficult to effectuate customer transactions and trading activity in our securities may be adversely affected. As a result, the market price of our common stock may be depressed, and you may find it more difficult to sell our common stock.

An active trading market for our common stock may not develop, and you may not be able to easily sell your common stock.

An active trading market for shares of our common stock following our emergence from bankruptcy may never develop or be sustained. If an active trading market does not develop, you may have difficulty selling your shares of common stock or at all. An inactive market may also impair our ability to raise capital by selling our common stock, and it may impair our ability to attract and motivate our employees through equity incentive awards and our ability to acquire other companies by using our common stock as consideration.

If we do not continue to satisfy the NYSE American continued listing requirements, our common stock could be delisted.

The listing of our common stock on NYSE American is contingent on our compliance with the NYSE American’s conditions for continued listing.

Should we fail to meet the NYSE American’s continuing listing requirements, we may be subject to delisting by the NYSE America. In the event our common stock is no longer listed for trading on the NYSE American, our trading volume and share price may decrease and we may experience difficulties in raising capital which could materially affect our operations and financial results. Further, delisting from the NYSE American could also have other negative effects, including potential loss of confidence by partners, lenders, suppliers and employees. Finally, delisting could make it harder for us to raise capital and sell securities.

Sales of a significant number of our common stock in the public market, or the perception that such sales could occur, could depress the market price of our common stock.

On October 7, 2022, we registered 2,397,305 shares of the Company’s common stock for resale by selling stockholder. The sales of those shares of common stock in the public market could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our common stock would have on the market price of our common stock.

If we acquire digital assets that are securities, even unintentionally, we may violate the Investment Company Act of 1940 and incur potential third-party liabilities.

As of December 31, 2023, we held approximately $0.6 million in USDT, $0.2 million in USDC, and $7.1 million in ETH. The Company intends to comply with the Investment Company Act of 1940 (the “1940 Act”) in all respects. To that end, if holdings of cryptocurrencies are determined to constitute investment securities of a kind that subject the Company to registration and reporting under the 1940 Act, the Company will limit its holdings to less than 40% of its assets. Section 3(a)(1)(C) of the 1940 Act defines “investment company” to mean any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of Government securities and cash items) on an unconsolidated basis. Section 3(a)(2) of the 1940 Act defines “investment securities” to include all securities except (A) Government securities, (B) securities issued by employees’ securities companies, and (C) securities issued by majority-owned subsidiaries which (i) are not investment companies and (ii) are not relying on the exception from the definition of investment company in section 3(c)(1) or 3(c)(7) of the 1940 Act. As noted above, the SEC has not stated whether stablecoins such as USDC and USDT and other cryptocurrency such as ETH is an investment security, as defined in the 1940 Act.

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

The following discussion and analysis should be read together with the Company’s audited consolidated financial statements and the related notes included in this report. This discussion and analysis contains forward-looking statements. Please see the cautionary note regarding these statements at the beginning of this report.

Historically, we have provided leasing and financing services to regional airlines worldwide and have been principally engaged in leasing mid-life regional aircraft to customers worldwide under operating leases and finance leases. In addition to leasing activities, we have also sold aircraft from our operating lease portfolio to third parties, including other leasing companies, financial services companies, and airlines. Our operating performance was driven by the composition of its aircraft portfolio, the terms of its leases, and the interest rate of its debt, as well as asset sales. Since September 30, 2021, our former substantially controlled subsidiary, JetFleet Management Corp, a California corporation and formerly known as JetFleet Holding Corporation (“JetFleet”) limited its services to providing aircraft advisory and management service. On August 24, 2023, per the recommendation of JetFleet’s board of directors, we, as a holder of a majority of the voting stock of JetFleet, elected to approve the winding up and dissolution of Jetfleet. As part of the winding up process, Jetfleet ceased providing aircraft advisory and management services. On December 14, 2023, Jetfleet was formally dissolved.

Since January 7, 2024, through Yuder, we operate FlexTV, a short drama streaming platform based in Singapore that produces English and Thai dramas that are also translated into different languages for our users that are spread across various parts of the world such as Europe, America, and Southeast Asia. In addition to creating original dramas, Yuder also acquires third party content licenses which it then translates and distributes on its FlexTV platform. To deliver diverse and international content to our users, Yuder’s produces film in various parts of the world, including, but not limited to, the United States, Mexico, Australia, Thailand, and Philippines

Prior to FlexTV, we, through our wholly-owned subsidiary, Savings Digital Pte. Ltd, a Singapore corporation (“SDP”), conducted solo-staking of our own cryptocurrency. The management has made the strategic decision to terminate the solo-staking business and focus on short drama streaming platform development. In March 2024, we started the process of exchanging all of our USDC and USDT into U.S. dollars through Matrixport, and as of June 21, 2024, we have completed the process of converting all of our USDC and USDT into U.S. dollars. From March 2024 through June 2024, the gross proceeds that we received for the conversion of our USDC and USDT into U.S. dollars were $1,498,150 and $12,287,013, respectively. As of May 6, 2024, we have completed the process of converting all of our ETH into USDT, and we currently do not hold any ETH. As of June 21, 2024, we do not own any USDC, USDT or ETH, and we do not anticipate that we will acquire, accept, hold, or use digital assets or cryptocurrencies in the future.

Corporate Developments

On October 20, 2021, the Company set up Mega Metaverse Corp. (“Mega”), a wholly owned subsidiary incorporated in California. In December 2021, the Company launched the NFT business in the metaverse ecosystem through Mega, and released the first NFT game “Mano” on March 25, 2022. Mano is a competitive idle role-playing game (RPG) deploying the concept of NFTs based on blockchain technology, with a “Play-to-earn” business model that the players can earn while they play in Mega’s metaverse universe “alSpace”.

For the year ended December 31, 2022, the Company received $326,800 of BNB in revenue for the services. Due to business reasons, the Company decided to suspend the Mano game and the alSpace platform, and on November 4, 2022, the Company discontinued the Mano game and the alSpace platform. As the game was newly launched and not yet widely adopted by players, the discontinuance of the game did not materially impact on our business activities.

On August 31, 2022, the Company acquired all of the equity interest in Saving Digital Pte. Ltd., a Singapore exempt private company limited by shares (“SDP”) with no operations and approximately $3,800 in cash, from the chairman Yucheng Hu for a nominal consideration of $10,000. Through SDP, we have engaged in Ethereum solo-staking utilizing the Marsland staking platform.

For the period from September 19, 2022 through December 31, 2023, through SDP, the Company purchased 3,102.40 Ether (ETH) on Matrixport Cactus Custody, our principal market for ETH, at an aggregated cost of approximately $5.41 million, for the purpose of exploring Ethereum staking opportunities following the transition by Ethereum on September 15, 2022 from proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism referred to as the “Merge.” Prior to the Merge, Ethereum utilized a PoW validation method for digital asset transactions. Following the Merge, Ethereum shifted to a PoS validation system where validators stake their ETH into a smart contract on Ethereum to serve as collateral that can be destroyed if the validator behaves dishonestly or lazily. The validator (selected randomly) is then responsible for processing the blockchain transactions, storing data and adding new blocks to the blockchain. Validators receive transaction fee on their staked coins in ETH as a reward for their active participation in the network. To become a validator on Ethereum, a participant must stake 32 ETH. As of December 31, 2023, SDP explored the Solo-Staking by staking 1600 ETH to become fifty (50) validators to Ethereum to earn ETH rewards and yield. Solo-Staking enables SDP to utilize its ETH treasury to stake on the Ethereum beacon chain and to earn ETH-denominated rewards directly from the Ethereum protocol. For the year ended December 31, 2023, the Company earned 19.5 ETH from solo-staking services and 1.9 ETH from provision of staking technology tools.

The Company recognized revenues from solo-staking, in the form of ETH, on a daily basis. The Company recognized the revenue by reference to the number of ETH we earned and the closing price published by Matrixport Cactus Custody. The staked ETH cannot also be used and allocated. The Company’s staking expenses are primarily service fees charged by Matrixport Cactus Custody (“cactus fees”). The Company recognized the expenses on a daily basis, referring to the number of ETH charged by Matrixport Cactus and the closing price of the day. For the years ended December 31, 2023 and 2022, we recognized cactus fees of approximately $17,200 and $17,400, respectively.

On September 29, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors named in the Purchase Agreement (collectively, the “Purchasers”), pursuant to which the Company agreed to sell an aggregate of 4,400,000 shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”) at a purchase price of $1.00 per share (the “Private Placement”). The gross proceeds of the Private Placement were $4.4 million, before deducting offering expenses payable by the Company. The Purchase Agreement contains customary representations, warranties and covenants of the parties, and the closing is subject to customary closing conditions. The closing of the Private Placement occurred on October 18, 2022. As of September 30, 2022, the Company received advanced subscription fees of $2.2 million from certain Purchasers, among which $2.2 million were in cash and $0.75 million were in USDC. The closing of the Private Placement occurred on October 18, 2022.

On December 23, 2022, the Company entered into another Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors named in the Purchase Agreement (collectively, the “Purchasers”), pursuant to which the Company agreed to sell up to an aggregate of 5,280,000 shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”) at a purchase price of $1.30 per share, or $6.9 million (the “Private Placement”). On January 20, 2023, the Company completed an initial sale of 4,314,615 shares of Common Stock pursuant to the Private Placement to certain Purchasers for an aggregate purchase price of $5.6 million, or $1.30 per share. On February 15, 2023, the Company completed the final sale of 765,384 shares of Common Stock pursuant to the Private Placement to a Purchaser for an aggregate purchase price of $1.0 million, or $1.30 per share, for combined total issuance of 5,079,999 shares of Common Stock for gross proceeds of approximately $6.6 million to the Company under the Private Placement, before deducting estimated offering expenses payable by the Company.

On August 4, 2023, Bit Digital exited its investment in MTP and withdrew its capital contribution of SGD$120,000 from MTP. As a result of the transaction, SDP owns all outstanding ordinary shares of MTP. As of July 2023, MTP ceased providing non-custodial staking tools to third parties. MTP no longer provides non-custodial staking tools to third parties from July 2023.

On August 24, 2023, per the recommendation of the board of directors of JetFleet Management Corp.(“JMC”), the Company, as a holder of a majority of the voting stock of JMC, elected to approve the winding up and dissolution of JMC. In December 2023, JMC ceased providing aircraft advisory and management services upon winding up and the Company deconsolidated JMC and its subsidiaries.

On January 7, 2024, the Company entered into and closed a definitive Share Exchange Agreement (“Exchange Agreement”) with FunVerse Holding Limited (“FunVerse”), a company incorporated under the laws of the British Virgin Islands and the sole parent company of Yuder, and the shareholders of FunVerse (collectively, “Sellers”). Before the closing of the Exchange Agreement, the Sellers held 85,625,000 ordinary shares of FunVerse, $0.0001 par value per share, which represents all of the issued and outstanding shares of FunVerse. Under the Exchange Agreement, Sellers will exchange 51,375,000 of their FunVerse’s shares for 1,500,000 shares of common stock of the Company, par value $0.001 (“Common Stock”), as per terms and conditions set forth in the Exchange Agreement (the “Share Exchange”), free and clear of all liens (other than potential restrictions on resale under applicable securities laws), which the parties agreed is valued at $2,175,000, or $1.45 per share of Common Stock. Following the Share Exchange, the Company owned sixty percent (60%) of capital stock of FunVerse.

On January 12, 2024, the Company entered into a Unit Subscription Agreement (the “Agreement”) with certain investors (collectively the “Subscribers”), pursuant to which the Subscribers agreed, subject to certain terms and conditions of the Agreement, to purchase an aggregate of 2,490,000 units (the “Units”) for an aggregate purchase price of $3,735,000, or $1.50 per unit (the “Offering Purchase Price”). Each Unit consists of one (1) share of common stock of the Company, $0.001 par value, and one (1) warrant (the “Warrant”), with each Warrant entitling the holder to purchase one share of common stock at an exercise price of $1.50 per share at any time for a period of up to five (5) years starting six (6) months from the issuance date at which time the Warrant will expire (“Offering”). The Agreement contains customary representations, warranties and covenants of the parties, and the closing is subject to customary closing conditions. The closing of the Offering occurred on January 17, 2024.

Ethereum Rewards

During the year ended December 31, 2023, we earned an aggregate of 19.5 ETH as rewards from our solo-staking and 1.9 ETH in fees generated from our proof-of-stake technology tools for digital assets through the staking platform “MarsProtocol”. The Company early adopted ASU 2023-08 on January 1, 2023, to measure digital assets using fair value. The new guidance requires entities to subsequently measure certain cryptocurrency at fair value, with changes in fair value recorded in net income in each reporting period. Retrospective restatement would not be required or allowed for prior periods. The following table presents our ETH activities for the year ended December 31, 2023:

	Number of ETH			Amount ⁽¹⁾

Balance at December 31, 2022		334.2		$	369,200
Cumulative-effect adjustment of opening balance due to adoption of fair value measurement		-			30,600
Addition of ETH staking reward and other services		21.4			41,000
Purchases of ETH from exchange of USDC		1,567.6			2,894,400
Purchases of ETH from exchange of USDT		1,234.1			2,119,500
Return of ETH to a third party		(32.0	)		(48,500	)
Payment of ETH for other services		(2.8	)		(4,800	)
Changes in fair value of ETH		-			1,721,900
Balance at December 31, 2023		3,122.5		$	7,123,300

(1)	Receipt of digital assets from staking reward are the product of the number of ETH received multiplied by the ETH price obtained from Matrixport Cactus Custody, calculated on a daily basis. Sales of digital assets are the actual amount received from sales.

The Company believes that the ETH and other digital assets that the Company hold are not securities is a risk-based assessment and not a legal standard or binding on the SEC, courts or any other regulators. If USDC, USDT, or ETH are deemed to be securities under the laws of any U.S. federal, state, or foreign jurisdiction, or in a proceeding in a court of law or otherwise, it may have adverse consequences for such digital asset. See “Risk Factors – Risks Related to our Business – A particular digital asset’s status, such as an ETH, as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if a regulator disagrees with our characterization of the ETH and other stablecoins, the Company may be subject to regulatory scrutiny, investigation, fines and penalties, which may adversely affect our business, operating results and financial condition. A determination that an ETH or stablecoin is a “security” may adversely affect the value of those ETH, stablecoins and our business.”

For the year ended December 31, 2023 and 2022, the Company purchased USDC of approximately $734,900 and $nil, respectively, in cash or USDT. For the same period, the Company also purchased USDT of approximately $3,146,600 and $nil, respectively, in cash. The Company records unit price of US$1.0 for acquisition of each unit of USDC or USDT. For the year ended December 31, 2023 and 2022, all of the Company’s digital assets are stored in hot custodian, Matrix Trust Company Limited (“Matrixport”), a third party. The material terms of its custody agreement with Matrixport are as follows:

(a) Matrixport will act as the custodian for the Company’s digital assets and hold such digital assets in trust in accordance with the agreement. Matrixport does not have the authority to exercise any investment or tax planning discretion regarding the Company’s digital assets, and will not act as an advisor, broker or agent when executing our instructions.

(b) Matrixport is only responsible for the safekeeping of the Company’s digital assets which are delivered into its possession and control by the Company.

(c) For any transfer of the Company’s digital assets from its account, Matrixport will hold such proceeds for transfer until receipt of written disbursement instructions from the Company.

(d) To the extent permitted by applicable laws and regulations and Matrixport’s internal policies and procedures, Matrixport shall transfer our digital assets in accordance with our instructions, provided that sufficient digital assets are available to effect the instructions and for paying any outstanding amounts owing to Matrixport.

(e) The Company’s custody account at Matrixport is not a deposit account and will not accrue interest. Further the Company’s custody account is not insured by FDIC.

(f) The Company’s executive officer has access to the Company’s custody account at Matrixport, however, only the Company’s chief executive officer and chief financial officer, acting jointly, have the authority to release the Company’s digital assets from custody.

The Company currently does not have insurance covering our loss of digital assets. As such, no insurance providers have inspection rights.

As of the date of this report, we did not and have no plans to collateralize any of these digital assets for any loan, margin, rehypothecation, or other similar activities to which we or our affiliates are a party. In addition, we have not issued any digital assets or held any digital assets on behalf of third parties. We have not experienced any excessive redemption or withdrawals, or have suspended redemptions or withdrawals, of digital assets.

Segment and Related Information

Due to business reasons, the Company, on November 4, 2022, discontinued the Mano game and the alSpace platform. In December 2023, JMC, which operated the leasing of regional aircraft to foreign and domestic regional airlines, closed its dissolution. Accordingly as of December 31, 2023, the Company had one business segment, which was the ETH staking business. However, as of the date of this report, the Company has stopped ETH solo-staking and will focus on operating FlexTV, a leading short drama streaming platform based in Singapore, and producer of English and Thai dramas that are also translated into different languages for our users that are spread across various parts of the world such as Europe, America, and Southeast Asia. In addition to creating original dramas, Yuder also acquires third party content licenses which it then translates and distributes on its FlexTV platform.

For the year ended December 31, 2023, the Company had two business segments which were comprised of 1) the ETH staking business, and 2) the leasing of regional aircraft to foreign and domestic regional airlines.

For the year ended December 31, 2022, the Company had three business segments which were comprised of 1) the ETH staking business, 2) the GameFi business, and 3) the leasing of regional aircraft to foreign and domestic regional airlines.

The following tables present summary information of operations by segment for the years ended December 31, 2023 and 2022.

	For the Year Ended December 31, 2023
	Staking			Leasing
	Business			Business			Total
Revenue	$	47,800		$	-		$	47,800
Gross loss	$	(233,300	)	$	-		$	(233,300	)
Total operating expenses	$	(1,972,100	)	$	(1,289,800	)	$	(3,261,900	)
Loss before income tax provision	$	(3,313,500	)	$	(1,279,600	)	$	(4,593,100	)
Net loss	$	(3,315,100	)	$	(1,365,100	)	$	(4,680,200	)

	For the Year Ended December 31, 2022 (As Restated)
	Staking			GameFi			Leasing
	Business			Business			Business			Total
Revenue	$	1,800		$	326,800		$	120,000		$	448,600
Gross (loss) profit	$	(219,700	)	$	(234,300	)	$	120,000		$	(334,000	)
Total operating expenses	$	(1,455,600	)	$	(2,407,100	)	$	(6,629,200	)	$	(10,491,900	)
Loss before income tax provision	$	(1,675,300	)	$	(2,641,400	)	$	(5,030,400	)	$	(9,347,100	)
Net loss	$	(1,675,700	)	$	(2,642,600	)	$	(4,979,900	)	$	(9,298,200	)

Results of Operations

The following table represents our consolidated statement of operations for the years ended December 31, 2023 and 2022.

	For the Years Ended December 31,
	2023			2022
Revenues	$	47,800		$	448,600
Cost of revenues		(281,100	)		(782,600	)
Gross loss		(233,300	)		(334,000	)

Operating expenses (income):
Professional fees, general and administrative and other		3,087,900			2,179,200
Salaries and employee benefits		1,509,700			2,027,500
Insurance		345,700			371,800
Marketing expenses		28,000			-
IT expenses		12,500			431,000
Impairment of digital assets		-			78,900
Changes in fair value of digital assets		(1,721,900	)		-
Interest		-			120,000
Other taxes		-			6,000
Impairment of intangible assets		-			888,900
Impairment of goodwill		-			4,688,600
Reversal of bad debt expense		-			(300,000	)
Total operating expenses		3,261,900			10,491,900

Loss from operations		(3,495,200	)		(10,825,900	)

Other income (expenses):
Share of equity loss in an equity method investee		(75,200	)		-
Other income		10,400			1,478,800
Loss from dissolution of subsidiaries		(1,033,100	)		-
Total other (expenses) income, net		(1,097,900	)		1,478,800

Loss from operations before income tax		(4,593,100	)		(9,347,100	)
Income tax (expenses) benefits		(87,100	)		48,900
Net loss and comprehensive loss	$	(4,680,200	)	$	(9,298,200	)

Revenues

For the year ended December 31, 2023, the Company generated revenue of $37,800 from solo-staking and revenues of $10,000 from provision of staking technology tools. Both solo-staking services and provision of staking technology tools were just launched in the fourth quarter of 2022. Effective July 1, 2023, we do not provide non-custodial staking tools to third parties.

For the year ended December 31, 2022, the Company generated revenues of $326,800 from GameFi business and revenues of $120,000 from operating lease business. However, we discontinued our Mano game and the alSpace platform in November 2022 due to business reasons. As the game was newly launched and not yet widely adopted by players, the discontinuance of the game did not impact on our business activities. The Company did not generate revenues from operating lease business for the year ended December 31, 2023. Accordingly the board approved dissolution of the subsidiaries which operated operating lease business in August 2023, and these subsidiaries closed dissolution in December 2023.

Cost of Sales

Cost of revenues decreased by $501,500, or 64%, from $782,600 for the year ended December 31, 2022 to $281,100 for the year ended December 31, 2023.

For the year ended December 31, 2023, the cost of revenues primarily consisted of IT expenses which were incurred to support our solo staking business. While for the year ended December 31, 2022, the cost of revenue primarily consisted of expenses which were incurred to design and develop our Mano game and the alSpace platform.

Gross Loss

Gross loss for the year ended December 31, 2023 decreased by $100,700 or 30%, to $233,300 compared to gross loss of $334,000 for the year ended December 31, 2022 as a result of changes in our operating business from operating Mano game to staking services.

Total Operating Expenses

Total operating expenses for the year ended December 31, 2023 decreased by $7,230,000 or 69%, to $3,261,900 from $10,491,900 for the year ended December 31, 2022. The changes in expenses were primarily caused by impairment of goodwill, impairment of intangible assets, changes in fair value of digital assets, salary and employee benefits and professional fees and other general and administrative expenses.

Impairment of goodwill. For the year ended December 31, 2022, the Company provided full impairment against goodwill arising from fresh accounting because of the underperformance of the aircraft leasing business.

Impairment of intangible assets. For the year ended December 31, 2022, we recognized full impairment of $888,900 against intangible assets as we have discontinued the Mano game and the alSpace platform, and we abandoned the related software in November 2022.

Changes in fair value of digital assets. Effective on January 1, 2023, the Company early adopted ASU 2023-08 to measure digital assets at fair value. The Company refers to the daily closing price published by Matrixport Cactus Custody as fair value. For the year ended December 31, 2023, the Company recorded an increase of fair value of $1,721,900 in digital assets.

Professional fees, general and administrative and other expenses. The breakdown of Professional fees, general and administrative and other expenses was as the following table:

	For the Years Ended December 31,
	2023		2022
Consulting expenses	$	1,547,400	$	560,400
Legal expenses		351,800		777,800
Audit fee		220,400		220,800
Rent		94,000		147,600
Travel expenses		205,800		188,600
Others		668,500		284,000
Professional fees, general and administrative and other	$	3,087,900	$	2,179,200

Professional fees, general and administrative and other expenses increased by $908,700, or 42% to $3,087,900 in the year ended December 31, 2023 from $2,179,200 in the year ended December 31, 2022. The increase was primarily caused by (i) an increase of consulting expenses of $987,000 to support the solo-staking service which was launched in the fourth quarter of 2022, and (ii) a decrease in legal expenses because the Company incurred higher legal expenses in the year of 2022 for launch and discontinue of Mano game and the alSpace platform.

Salaries and employee benefits. Salary and employee benefits decreased by $517,800, or 26% to $1,509,700 in the year ended December 31, 2023 from $2,027,500 in the year ended December 31, 2022. The decrease was primarily caused by resignation of management in aircraft operating lease business which did not generate revenues in the year of 2023.

Other income

For the year ended December 31, 2022, we reported other income of $1,478,800 from reversal of accounts and other payable, which the Company expected it would not make payments. We reported minimal other income of $10,400 for the same period ended December 31, 2023.

Loss from dissolution of subsidiaries

On August 24, 2023, per the recommendation of JMC’s board of directors, the Company, as a holder of a majority of the voting stock of JMC, elected to approve the winding up and dissolution of JMC. JMC ceased providing aircraft advisory and management services upon winding up and the Company deconsolidated JMC and its subsidiaries in December 2023. On December 14, 2023, JMC was formally dissolved. The Company recorded a loss from dissolution of subsidiaries of $1,033,100 from deconsolidation of the subsidiaries.

Income tax (expenses) benefits

The Company recorded income tax expenses of $87,100 in the year ended December 31, 2023, or negative 1.90% of pre-tax loss, compared to income tax benefits of $48,900, or 0.52% of pre-tax loss in the year ended December 31, 2022. The difference in the effective federal income tax rate from the normal statutory rate in the year ended December 31, 2023 was primarily because the decrease in foreign income tax receivable, the uncertain tax benefit reserve release due to the expiration of Statute of Limitations, and the full valuation allowance on its deferred tax assets.

In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or availability to carry back the losses to taxable income during periods in which those temporary differences become deductible. The Company considered several factors when analyzing the need for a valuation allowance including the Company’s current three-year cumulative loss through December 31, 2023, the current year operation forecast, the Company’s recent filing for protection under Chapter 11 of the bankruptcy code, the operation uncertainty of the Company’s new business. Based on this analysis, the Company has concluded that a valuation allowance is necessary for its U.S. and foreign deferred tax assets not supported by either future taxable income or availability of future reversals of existing taxable temporary differences and has recorded a full valuation allowance on its deferred tax assets.

In addition, the Company has closely monitored the development of Pillar Two – Global Minimum Tax- introduced by the Organization for Economic Co-operation and Development (“OECD”) and the impact on the Company’s effective tax rate. As of December 31, 2023, the Company expects no impact from the Pillar Two as the Company’s worldwide revenue is below the revenue threshold.

Net Loss

As a result of the foregoing, net loss for the year ended December 31, 2023 decreased by $4,618,000 or 50%, to $4,680,200 from $9,298,200 for the year ended December 31, 2022.

Liquidity and Capital Resources

To date, we have financed our operating and investing activities primarily through cash generated from operating activities and equity financing through private placements. As of December 31, 2023, the Company held cash of approximately $3.1 million, stable coins of approximately $0.3 million and digital assets of approximately $7.7 million, which were easily convertible into cash over the market.

On October 18, 2022, the Company closed a private placement by offering 4,400,000 shares of common stock, at per share price of $1.0. The Company received gross proceeds of $4.4 million from the private placement.

On January 20, 2023 and February 15, 2023, the Company closed private placements by offering 4,314,615 shares of common stock and 765,384 shares of common stock, respectively. The per share price was $1.30. The received gross proceeds aggregating $6.6 million.

For the year ended December 31, 2023 and 2022, the Company reported net losses of approximately $4.7 million and $9.3 million, respectively, and cash flows of approximately $3.0 million and $5.9 million used in operating activities. In addition, the Company had accumulated deficits of approximately $17.5 million and $13.4 million as of December 31, 2023 and 2022, respectively. These conditions raised substantial doubt about the Company’s ability to continue as a going concern.

The Company’s liquidity is based on its ability to generate cash from operating activities and obtain financing from investors to fund its general operations and capital expansion needs. The Company’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan, which includes increasing revenue while controlling operating cost and expenses to generate positive operating cash flows and obtain financing from outside sources.

As of December 31, 2023, the Company had working capital of approximately $8.6 million, which is expected to support our operating and investing activities for the next 12 months.

Given the financial condition of the Company and its operating performance, the Company assesses current working capital is sufficient to meet its obligations for the next 12 months from the issuance date of this report. Accordingly, management continues to prepare the Company’s consolidated financial statements on going concern basis.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the financial statements, (ii) the disclosure of contingent assets and liabilities, and (iii) the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. Estimates and judgments are used when accounting for the application of current value of the Company’s assets held for sale, the amount and timing of future cash flows associated with each asset that are used to evaluate whether assets are impaired, accounting for income taxes, and the amounts recorded as allowances for doubtful accounts.

Cash Flow

The following table sets forth a summary of our cash flows for the years ended December 31, 2023 and 2022 presented:

	For the Years Ended December 31,
	2023			2022
Net cash used in operating activities	$	(3,001,400	)	$	(5,855,600	)
Net cash used in investing activities		(4,832,500	)		(52,500	)
Net cash provided by financing activities		3,700,100			5,791,000
Net decrease in cash and cash equivalents		(4,133,800	)		(117,100	)
Cash, cash equivalents, beginning of year		7,263,600			7,380,700
Cash, cash equivalents, end of year	$	3,129,800		$	7,263,600

Operating activities

Net cash used in operating activities for the year ended December 31, 2023 was $3,001,400, primarily attributable to net loss of $4,680,200, adjusted for (a) non-cash items including an increase in fair value of $1,721,900 in digital assets, loss of $1,033,100 from dissolution of subsidiaries and share-based compensation expenses to one non-employee of $237,700, and (b) changes in operating assets and liabilities including (i) a decrease of tax receivable of $1,095,600 as the Company received tax refund from tax authorities, and (ii) a decrease of prepaid expenses and other current assets because of amortization of directors’ and officers’ insurance.

Net cash used in operating activities for the year ended December 31, 2022 was $5,855,600, primarily attributable to net loss of $9,298,200, adjusted for (a) non-cash items including impairment of digital assets of $4,688,600, impairment of intangible assets of $888,900, and gain of $1,478,800 from reversal of accounts and other payables, and (b) changes in operating assets and liabilities including (i) a decrease of stable coins of $821,000, and (ii) a decrease of accounts and accrued expenses of $1,391,100.

Investing activities

For the year ended December 31, 2023, the cash flow used in investing activities was $4,832,500, which was primarily attributable to purchase of digital assets of $3,146,600, purchase of stablecoins of $139,900, and investment in equity investees of $1,546,000.

For the year ended December 31, 2022, the cash flow used in investing activities was $52,500, which was primarily attributable to purchase of digital assets of $46,300 and acquisition of a subsidiary at cost of $10,000.

Financing activities

For the year ended December 31, 2023, the cash flow provided by financing activities was $3,700,100, which was primarily attributable to proceeds of $1,420,000 collected from investors for subscription for the private placement that closed in February 2023, and proceeds of $2,280,100 advanced from investors for subscription for the private placement closed in January 2024.

For the year ended December 31, 2022, the cash flow provided by financing activities was $5,791,000, which was primarily attributable to proceeds of $2,350,000 collected from investors for subscription for the private placement that closed in October 2022, and proceeds of $3,441,000 advanced from investors for subscription for the private placement closed in January and February 2023.

Critical Accounting Policies, Judgments and Estimates

We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.

Our expectations regarding the future are based on available information and assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. When reading our consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. Out of our significant accounting policies, which are described in Note 2—Summary of Significant Accounting Policies of our consolidated financial statements included elsewhere in this Form F-4, certain accounting policies are deemed “critical”, as they require management’s highest degree of judgment, estimates and assumptions, including (i) digital assets, (ii) revenue recognition, and (iii) income tax.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

We believe the following accounting estimates involve the most significant judgments used in the preparation of our financial statements.

Valuation allowance for deferred tax assets

We account for income taxes using the liability method in accordance with ASC 740, Income Taxes (“ASC 740”). Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect when the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in earnings. Deferred tax assets are reduced by a valuation allowance through a charge to income tax expense when, in the opinion of management, it is more-likely-than-not that a portion of or all of the deferred tax assets will not be realized.

The valuation allowance is considered on an individual entity basis. As of December 31, 2023 and 2022, valuation allowances on deferred tax assets are provided because we believe that it is more-likely-than-not that certain of the subsidiaries will not be able to generate sufficient taxable income in the near future, to realize the deferred tax assets carried-forwards.

As of December 31, 2023 and 2022, the total valuation allowance for deferred tax assets was approximately $12.2 million and $10.9 million, respectively.

PART IV

Item 15. Exhibits, Financial Statements Schedules.

(a) The following documents are filed as part of this annual report on Form 10-K:

(1) Financial Statements

The following financial statements of the Company, and the Reports of Independent Registered Public Accounting Firms, are included at the end of this report beginning on page F-1:

		Page
Report of Independent Registered Public Accounting Firm (Audit Alliance LLP; Singapore, Singapore; PCAOB ID#3487)		F-2
Consolidated Balance Sheets as of December 31, 2023 and 2022		F-3
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2023 and 2022		F-4
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2023 and 2022		F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022		F-6
Notes to the Consolidated Financial Statements		F-7

(2) Financial Statement Schedules

All schedules have been omitted because the required information is included in the financial statements or notes thereto or because they are not required.

(3) Exhibits

The exhibits required by Item 601 of Regulation S-K are listed in subparagraph (b) below.

(b) Exhibits:

The following exhibits are filed as part of this report:

Exhibit No.		Description
2.1		Joint Chapter 11 Plan of Reorganization of AeroCentury Corp. and Its Debtor Affiliates. (Incorporated by reference to Exhibit A of the Order of the Bankruptcy Court, as incorporated herein by reference to Exhibit 2.1 to the registrant’s Report on Form 8-K filed with the SEC on August 31, 2021).
2.2		Agreement and Plan of Merger by and between Mega Matrix Corp. and MarsProtocol Inc., dated December 7, 2022 (Incorporated by reference to Exhibit 2.1 to the registrant’s Report on Form 8-K filed with the SEC on December 7, 2022).
2.3		Amended and Restated Agreement and Plan of Merger by and between Mega Matrix Corp. and MarsProtocol Inc., dated April 14, 2023 (Incorporated by reference to Exhibit 2.1 to the registrant’s Report on Form 8-K filed with the SEC on April 17, 2023).
2.4		Second Amended and Restated Agreement and Plan of Merger by and between Mega Matrix Corp., Mega Matrix Inc. and MPU Merger Sub, Inc., dated December 26, 2023 (Incorporated by reference to Exhibit 2.1 to the registrant’s Report on Form 8-K filed with the SEC on December 27, 2023).
3.1.1		Second Amended and Restated Certificate of Incorporation of AeroCentury Corp (Incorporated herein by reference to Exhibit 3.1 to the registrant’s Report on Form 8-K filed with the SEC on October 1, 2021).
3.1.2		Certificate of Amendment to the Certificate of Incorporation of AeroCentury Corp. (Incorporated herein by reference to Exhibit 3.1 to the registrant’s Report on Form 8-K filed with the SEC on December 29, 2021).
3.1.3		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of AeroCentury Corp. (Incorporated herein by reference to Exhibit 3.1 to the registrant’s Report on Form 8-K filed with the SEC on March 25, 2022)
3.2		Third Amended and Restated Bylaws of AeroCentury Corp (Incorporated herein by reference to Exhibit 3.2 to the registrant’s Report on Form 8-K filed with the SEC on March 25, 2022).
3.3		Fourth Amended and Restated Bylaws of Mega Matrix Corp. (Incorporated herein by reference to Exhibit 3.1 to the registrant’s Report on Form 8-K filed with the SEC on December 18, 2023).
4(vi)		Description of Securities (Incorporated by reference to Exhibit 4(vi) to the registrant’s Report on Form 10-K filed with the SEC on March 30, 2022).
4.1		Form of Warrant Certificate (Incorporated herein by reference to Exhibit 4.1 to the registrant’s Report on Form 8-K filed with the SEC on January 18, 2024).
10.1§		Plan Sponsor Agreement, dated as of August 16, 2021, by and among AeroCentury Corp., JetFleet Holding Corp., and JetFleet Management Corp. and Yucheng Hu, Hao Yang, Jing Li, Yeh Cheng, Yu Wang, TongTong Ma, Qiang Zhang, Yanhua Li, and Yiyi Huang. (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Report on Form 8-K filed with the SEC on October 1, 2021).
10.2§		Securities Purchase Agreement, dated as of September 30, 2021, by and among AeroCentury Corp, the Plan Sponsor, and Yucheng Hu, in the capacity as the representative for the Plan Sponsor. (Incorporated herein by reference to Exhibit 10.2 to the registrant’s Report on Form 8-K filed with the SEC on October 1, 2021).
10.3§		Series A Preferred Stock Purchase Agreement, dated as of September 30, 2021, by and between JetFleet Holding Corp. and AeroCentury Corp. (Incorporated herein by reference to Exhibit 10.3 to the registrant’s Report on Form 8-K filed with the SEC on October 1, 2021).
10.4		Form of Independent Director Agreement (Incorporated herein by reference to Exhibit 10.4 to the registrant’s Report on Form 8-K filed with the SEC on October 1, 2021).
10.5+		Form of Employment Agreement (Incorporated herein by reference to Exhibit 10.5 to the registrant’s Report on Form 8-K filed with the SEC on October 1, 2021).

10.6+		Employment Agreement by and between AeroCentury Corp and Florence Ng, dated as of October 1, 2021 (Incorporated herein by reference to Exhibit 10.6 to the registrant’s Report on Form 8-K filed with the SEC on October 1, 2021).
10.7†		Alspace Metaverse Project Entrusted Development Agreement between Feng Yue Technology Limited and AeroCentury Corp., dated as of October 1, 2021 (Incorporated herein by reference to Exhibit 10.10 to the registrant’s Report on Form 10-K filed with the SEC on March 30, 2022).
10.8+		Amendment to Employment Agreement by and between AeroCentury Corp. and Florence Ng, dated as of November 1, 2021 (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Report on Form 8-K filed with the SEC on November 4, 2021).
10.9+		Amendment to Employment Agreement by and between AeroCentury Corp and Yucheng Hu, dated as of December 16, 2021 (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Report on Form 8-K filed with the SEC on December 17, 2021).
10.10		2021 Equity Incentive Plan (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Report on Form 8-K filed with the SEC on January 3, 2022).
10.11+		Second Amendment to Employment Agreement by and between AeroCentury Corp. and Florence Ng, dated as of March 25, 2022 (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Report on Form 8-K filed with the SEC on March 25, 2022).
10.15+		Termination Agreement by and between Mega Matrix Corp. and Florence Ng, dated September 16, 2022 (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Report on Form 8-K filed with the SEC on September 21, 2022).
10.16		Consulting Agreement by and between Mega Matrix Corp. and Florence Ng, dated September 16, 2022 (Incorporated herein by reference to Exhibit 10.2 to the registrant’s Report on Form 8-K filed with the SEC on September 21, 2022).
10.17		Consulting Agreement by and between Mega Matrix Corp. and FNC Advisory Limited, dated September 16, 2022 (Incorporated herein by reference to Exhibit 10.3 to the registrant’s Report on Form 8-K filed with the SEC on September 21, 2022).
10.18		Form of Securities Purchase Agreement, dated September 29, 2022 (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Report on Form 8-K filed with the SEC on September 30, 2022).
10.19		Form of Securities Purchase Agreement, dated December 23, 2022 (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Report on Form 8-K filed with the SEC on December 27, 2022).
10.20		Shareholders Agreement dated March 1, 2023 (Incorporated herein by reference to Exhibit 10.1 to the registrant’s Report on Form 8-K filed with the SEC on March 7, 2023).
10.21		Termination Agreement between Bit Digital Singapore Pte Ltd., Saving Digital Pte Ltd., and Marsprotocol Technologies Pte Ltd. (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on August 9, 2023).
10.22		Share Exchange Agreement dated January 7, 2024 (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on January 8, 2024).
10.23		Shareholders Agreement dated January 7, 2024 (Incorporated by reference to Exhibit 10.2 to Form 8-K filed on January 8, 2024).
10.24		Form of Unit Subscription Agreement (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on January 18, 2024).
10.25+		Termination Agreement between the Company and Yunheng (Brad) Zhang, dated as of January 15, 2024 (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on January 19, 2024).
10.26+		Form of Restricted Stock Unit Award Agreement under the 2021 Amended and Restated Equity Incentive Plan (Incorporated by reference to Exhibit 10.3 to Form 8-K filed on January 19, 2024).
21.1		Subsidiaries of Mega Matrix Corp. (Incorporated by reference to Exhibit 21.1 to Form 10-K originally filed on March 18, 2024 with the SEC).
23.1		Consent of Audit Alliance LLP, Independent Registered Public Accounting Firm
31.1		Certification of Yucheng Hu, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Qin (Carol) Wang, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Yucheng Hu, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Qin (Carol) Wang, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97		Clawback Policy (Incorporated by reference to Exhibit 97 to Form 10-K originally filed on March 18, 2024 with the SEC).
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	These certificates are furnished to, but shall not be deemed to be filed with, the SEC.

§	Schedules and other similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K promulgated by the SEC. The signatory hereby undertakes to furnish supplemental copies of any of the omitted schedules and attachments upon request by the SEC.

+	Management contract or compensatory plan or arrangement.

†

In accordance with Item 601 of Regulation S-K, certain portions of this exhibit will be omitted because they are not material and would likely cause competitive harm to the registrant if disclosed. The registrant agrees to provide an unredacted copy of the exhibit on a supplemental basis to the SEC or its staff upon request.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Mega Matrix Corp.

Dated: August 19, 2024	By:	/s/ Yucheng Hu
		Yucheng Hu
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Qin (Carol) Wang
		Qin (Carol) Wang
		Chief Financial Officer
		(Principal Financial Officer)

INDEX TO FINANCIAL STATEMENTS

AUDITED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

		Page
Report of Independent Registered Public Accounting Firm (Audit Alliance LLP; Singapore, Singapore; PCAOB ID#3487)		F-2
Consolidated Balance Sheets as of December 31, 2023 and 2022		F-3
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2023 and 2022		F-4
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2023 and 2022		F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022		F-6
Notes to the Consolidated Financial Statements		F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Mega Matrix Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Mega Matrix Corp. and its subsidiaries (collectively, the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Restatements of Previously Issued Financial Statements

As discussed in Note 2 to the consolidated financial statements, the Company has restated its consolidated financial statements as of December 2022 and for the year ended December 31, 2022 to correct certain classifications.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ Audit Alliance LLP

Audit Alliance LLP (PCAOB ID 3487)

Singapore, March 18, 2024

We have served as the Company’s auditor since 2021.

F-2

MEGA MATRIX CORP.

CONSOLIDATED BALANCE SHEETS

(Rounded to the Nearest Hundred US Dollar, except for share and per share data, unless otherwise stated)

	December 31,			December 31,
	2023			2022
				As Restated
ASSETS
Current Assets:
Cash and cash equivalents	$	3,129,800		$	7,263,600
Stable coins		254,400			2,972,000
Digital assets		7,696,700			459,300
Taxes receivable		-			1,095,600
Prepaid expenses and other assets		489,700			761,300
Total current assets		11,570,600			12,551,800

Non-current Assets:
Long-term investments		1,770,800			-
Total non-current assets		1,770,800			-

Total assets	$	13,341,400		$	12,551,800

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	185,400		$	254,700
Accrued payroll		-			132,700
Income taxes payable		1,100			18,500
Subscription advanced from the shareholders		2,755,100			5,184,000
Total liabilities		2,941,600			5,589,900

Commitments and contingencies (Note 11)

Equity:
Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares issued and outstanding		-			-
Common stock, $0.001 par value, 40,000,000 and 40,000,000 shares authorized, 31,724,631 and 26,484,055 shares outstanding at December 31, 2023 and 2022, respectively		31,800			26,500
Paid-in capital		27,822,200			21,372,100
Accumulated deficit		(17,454,200	)		(13,420,400	)
Total Mega Matrix Corp. Stockholders’ Equity		10,399,800			7,978,200
Non-controlling interests		-			(1,016,300	)
Total equity		10,399,800			6,961,900
Total liabilities and equity	$	13,341,400		$	12,551,800

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

F-3

MEGA MATRIX CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Rounded to the Nearest Hundred US Dollar, except for share and per share data, unless otherwise stated)

	For the Years Ended December 31,
	2023			2022
				As Restated
Revenues:
Revenue from solo staking	$	37,800		$	1,800
Revenue from provision of staking technology tools		10,000			-
Gamefi revenue		-			326,800
Operating lease revenue		-			120,000
		47,800			448,600
Cost of revenues		(281,100	)		(782,600	)
Gross loss		(233,300	)		(334,000	)

Operating expenses (income):
Professional fees, general and administrative and other		3,087,900			2,179,200
Salaries and employee benefits		1,509,700			2,027,500
Insurance		345,700			371,800
Marketing expenses		28,000			-
IT expenses		12,500			431,000
Impairment of digital assets		-			78,900
Changes in fair value of digital assets		(1,721,900	)		-
Interest		-			120,000
Other taxes		-			6,000
Impairment of intangible assets		-			888,900
Impairment of goodwill		-			4,688,600
Reversal of bad debt expense		-			(300,000	)
Total operating expenses		3,261,900			10,491,900

Loss from operations		(3,495,200	)		(10,825,900	)

Other income (expenses):
Share of equity loss in an equity method investee		(75,200	)		-
Other income		10,400			1,478,800
Loss from dissolution of subsidiaries		(1,033,100	)		-
Total other (expenses) income, net		(1,097,900	)		1,478,800

Loss from operations before income tax		(4,593,100	)		(9,347,100	)

Income tax (expenses) benefits		(87,100	)		48,900
Net loss and comprehensive loss	$	(4,680,200	)	$	(9,298,200	)
Less: Net loss and comprehensive loss attributable to non-controlling interests		615,800			832,200
Net loss and comprehensive loss attributable to Mega Matrix Corp.’s shareholders	$	(4,064,400	)	$	(8,466,000	)
Loss per share:
Basic	$	(0.13	)	$	(0.37	)
Diluted	$	(0.13	)	$	(0.37	)

Weighted average shares used in loss per share computations:
Basic		31,323,124			22,988,165
Diluted		31,323,124			22,988,165

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

F-4

MEGA MATRIX CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

	Mega Matrix Corp. Stockholder’s Equity
	Common Stock										Non-
	Number of Stocks		Amount		Paid-in Capital			Accumulated Deficits			Controlling Interests			Total
Balance, December 31, 2021		22,084,055	$	22,100	$	16,982,700		$	(4,954,400	)	$	(237,100	)	$	11,813,300
Issuance of common stocks pursuant to private placement		4,400,000		4,400		4,395,600			-			-			4,400,000
Share based compensation		-		-		-			-			53,000			53,000
Acquisition of a subsidiary under common control		-		-		(6,200	)		-			-			(6,200	)
Net loss		-		-		-			(8,466,000	)		(832,200	)		(9,298,200	)
Balance, December 31, 2022		26,484,055	$	26,500	$	21,372,100		$	(13,420,400	)	$	(1,016,300	)	$	6,961,900
Cumulative-effect adjustment of opening balance due to adoption of fair value measurement of digital assets		-		-		-			30,600			-			30,600
Issuance of common stocks pursuant to private placement		5,079,999		5,100		6,598,900			-			-			6,604,000
Issuance of common stocks to a service provider		160,577		200		237,500			-			-			237,700
Capital injection from a non-controlling shareholder		-		-		-			-			88,900			88,900
Withdrawal of capital by a non-controlling shareholder		-		-		-			-			(88,900	)		(88,900	)
Dissolution of subsidiaries		-		-		(386,300	)		-			1,632,100			1,245,800
Net loss		-		-		-			(4,064,400	)		(615,800	)		(4,680,200	)
Balance, December 31, 2023		31,724,631	$	31,800	$	27,822,200		$	(17,454,200	)	$	-		$	10,399,800

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

F-5

MEGA MATRIX CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Rounded to the Nearest Hundred US Dollar, unless otherwise stated)

	For the Years Ended December 31,
	2023			2022
				As Restated
Operating activities:
Net loss	$	(4,680,200	)	$	(9,298,200	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation for employees		-			53,000
Share-based compensation for a non-employee		237,700			-
Gain of digital assets from revenues		(47,800	)		(328,600	)
Gain from exchange of digital assets		900			-
Changes in fair value of digital assets		(1,721,900	)		-
Share of equity loss in an equity method investee		75,200			-
Loss from dissolution of subsidiaries		1,033,100			-
Depreciation and amortization		-			111,100
Impairment of intangible assets		-			888,900
Impairment of digital assets		-			78,900
Impairment of goodwill		-			4,688,600
Gain from reversal of accounts and other payables		-			(1,478,800	)
Changes in operating assets and liabilities:
Stable coins		-			821,000
Prepaid expenses and other current assets		324,400			(116,200	)
Taxes receivable		1,095,600			139,600
Accounts payable and accrued expenses		659,900			(1,391,100	)
Accrued payroll		(102,500	)		(28,600	)
Income taxes payable		124,200			4,800
Net cash used in operating activities		(3,001,400	)		(5,855,600	)

Investing activities:
Purchases of digital assets		(3,146,600	)		(46,300	)
Purchases of stable coins		(139,900	)		-
Investment in equity investees		(1,546,000	)		-
Proceeds paid to acquire a subsidiary under common control		-			(10,000	)
Acquisition of net assets of a subsidiary		-			3,800
Net cash used in investing activities		(4,832,500	)		(52,500	)

Financing activities:
Subscription fee advanced from investors		2,280,100			3,441,000
Proceeds from issuance of common stocks pursuant to private placements		1,420,000			2,350,000
Capital injection from a non-controlling shareholder		88,900			-
Capital withdrawal by a non-controlling shareholder		(88,900	)		-
Net cash provided by financing activities		3,700,100			5,791,000
Net decrease in cash and cash equivalents		(4,133,800	)		(117,100	)
Cash, cash equivalents, beginning of year		7,263,600			7,380,700
Cash, cash equivalents, end of year	$	3,129,800		$	7,263,600

Supplemental Cash Flow Information
Payment of interest expenses	$	-		$	120,000
Payment of income tax expenses	$	-		$	-

Non-cash Investing and Financing activities
Subscription fee advanced from investors in the form of USDC	$	475,000		$	1,743,000
Proceeds from private placements in the form of USDC	$	-		$	2,050,000
Issuance of common stocks to settle subscription fee advanced from investors	$	6,604,000		$	-

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

F-6

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Mega Matrix Corp. (the “Company”, formerly “AeroCentury Corp.” and “ACY”) is a Delaware corporation incorporated in 1997. Through the Company’s emergence from bankruptcy on September 30, 2021, and new investors and management, the Company became a holding company located in Palo Alto, California, with two subsidiaries: Mega Metaverse Corp., a California corporation (“Mega”) and JetFleet Holdings Corp., a California corporation (“JHC”). On January 1, 2022, JetFleet Management Corp. (“JMC”), a wholly-owned subsidiary of JHC, was merged with and into JHC, with JHC being the surviving entity. As part of the merger, JHC changed its name to JetFleet Management Corp.

On March 25, 2022, the Company changed its name from “AeroCentury Corp” to “Mega Matrix Corp.” (“Name Change”) to better reflect its expansion into Metaverse and GameFi business. In connection with the Name Change, the Company changed its ticker symbol from “ACY” to “MTMT” on the NYSE American, effective on March 28, 2022. All references to the “Company,” or “AeroCentury” refers to AeroCentury Corp. together with its consolidated subsidiaries prior to March 25, 2022 and renamed “Mega Matrix Corp.” commencing on March 25, 2022. Effective on February 6, 2023, the Company changed its ticker symbol from “MTMT” to “MPU” on the NYSE American.

On August 31, 2022, we acquired all of the equity interest in Saving Digital Pte, Ltd., a Singapore corporation (“SDP”) with no operations and approximately $3,800 in cash, from our chairman Yucheng Hu for a nominal consideration of $10,000. On September 19, 2022, through SDP, we purchased 37 Ethereum (ETH) for the purpose of exploring Ethereum staking opportunities following the transition by Ethereum on September 15, 2022 from proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism referred to as the “Merge.” Prior to the Merge, Ethereum utilized a PoW validation method for digital asset transactions. Following the Merge, Ethereum shifted to a PoS validation system where validators stake their ETH into a smart contract on Ethereum to serve as collateral that can be destroyed if the validator behaves dishonestly or lazily. The validator (selected randomly) is then responsible for processing the blockchain transactions, storing data and adding new blocks to the blockchain. Validators receives a transaction fee on their staked coins in ETH as a reward for their active participation in the network. To become a validator on Ethereum, a participant must stake 32 ETH. As of December 31, 2023, SDP staked 1,600 ETH to become fifty (50) validators to Ethereum to earn ETH rewards and yield. Solo-Staking enables SDP to utilize its ETH treasury to stake on the Ethereum beacon chain and to earn ETH-denominated rewards directly from the Ethereum protocol.

On March 1, 2023, SDP and Bit Digital Singapore Pte. Ltd. (“Bit Digital”), entered into a shareholders’ agreement (the “Shareholders Agreement”) with Marsprotocol Technologies Pte. Ltd. (“MTP”), to provide proof-of-stake technology tools for digital assets through the staking platform “MarsProtocol”, an institutional grade non-custodial staking technology. Pursuant to the Shareholders Agreement, SDP will own 60% and Bit Digital will own 40% of MTP. Through the MarsProtocol platform, MTP planned to provide non-custodial staking tools. On April 25, 2023, we, through our 100% controlled Singapore subsidiary SDP, invested $300,000 in MarsLand Global Limited (“MarsLand”), a BVI company and held 30% interest in MarsLand. The other shareholders of MarsLand are non-affiliated. MarsLand provides staking services to institutional clients, including us and Bit Digital. Further, Saving Digital is applying for the trademark “MarsProtocol”. After the successful application, Saving Digital will authorize MarsLand to use the trademark MarsProtocol to conduct MarsLand’s staking as a service (“StaaS”) business. MarsLand will provide StaaS business of which we may utilize their services. SDP was conducting Ethereum solo-staking in Singapore, but as discussed, the Company decided to focus entirely on its short drama streaming platform business, and as of March 5, 2024, it has ceased its solo-staking activities.

From the end of April to the end of June 2023, which was a transition period, we terminated cooperation with an outsourced third-party IT company to develop and maintain our MarsProtocol staking platform. There are no penalties or contingencies arising from the termination of cooperation. As a result, effective July 1, 2023, we will not provide non-custodial staking tools to third parties. On August 4, 2023, Bit Digital exited its investment in MTP and withdrew its capital contribution of SGD$120,000 from MTP. As a result of the transaction, SDP owns all outstanding ordinary shares of MTP.

F-7

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

On April 14, 2023, we entered into an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”) with MarsProtocol Inc., an exempted company incorporated under the laws of the Cayman Islands and a wholly-owned subsidiary of the Company (“MPU Cayman”), amending and restating the Agreement and Plan of Merger, dated December 7, 2022. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, the Company will merge with and into MPU Cayman (the “Redomicile Merger”), with MPU Cayman being the surviving company in the Redomicile Merger. Upon the effectiveness of the Redomicile Merger, (i) MPU Cayman will change its name from MarsProtocol Inc. to Mega Matrix Inc., and (ii) MPU Cayman, together with its subsidiaries, will own and continue to conduct the Company’s business in substantially the same manner as is currently being conducted by the Company and its subsidiaries. The consent of the holders of a majority of the outstanding shares of the Company’s common stock entitled to vote is required to approve and adopt the Merger Agreement.

On January 7, 2024, we entered into and closed a definitive Share Exchange Agreement with FunVerse Holding Limited, a British Virgin Islands company (“FunVerse”), a company incorporated under the laws of the British Virgin Islands and the sole parent company of Yuder Pte, Ltd. (“Yuder”), and the shareholders of FunVerse. Following the transaction, the Company now owns sixty percent (60%) of capital stock of FunVerse. Through Yuder, FunVerse now operates FlexTV, a short drama streaming platform based in Singapore that produces English and Thai dramas that are also translated into different languages for our users that are spread across various parts of the world such as Europe, America, and Southeast Asia. In addition to creating original dramas, Yuder also acquires third party content licenses which it then translates and distributes on its FlexTV platform. To deliver diverse and international content to our users, Yuder produces film in various parts of the world, including, but not limited to, the United States, Mexico, Australia, Thailand, and Philippines

Upon the deconsolidation of JMC and its subsidiaries, the Company would focus on its short drama streaming platform business. We have ceased our staking activities and decided to dispose all of our Ethereum holdings. The management believed the deconsolidation does not represent a strategic shift, in both operating and financing aspects, because it is not changing the way it is running its business. The Company has not shifted the nature of its operations or the major geographic market area. The management believed the deconsolidation of does not represent a strategic shift that has (or will have) a major effect on the Company’s operations and financial results. The deconsolidation is not accounted as discontinued operations in accordance with ASC 205-20.

2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

The Company has noted the following errors in relation to its consolidated financial statements for the year ended December 31, 2022 that had been filed on March 31, 2023. The errors related to the reclassification digital assets and stable coins, and reclassification of other income and impairment of goodwill.

a.	Reclassification of digital assets and stable coins

As Tether reserves the right under its user agreement to redeem USDT by in-kind redemptions of other assets it holds in its reserves and as Tether has held precious metals and other non-financial assets in its reserves, it does not appear that USDT meets the definition of a financial instrument under ASC 825-10-20. The Company reclassified USDT, amounting $90,100 as of December 31, 2022, from stable coins to digital assets. The reclassification had no impact on net assets as of December 31, 2022, and revenues and net loss for the year ended December 31, 2022.

b.	Reclassification of other income

For the year ended December 31, 2022, the other income of $1,478,800, resulted from results from the reversal of accounts and other payables which is not an income generated from the Company’s primary operations of the business. The Company reclassified the other income under the line of “loss from operations” on the consolidated statements of operations and comprehensive loss. The reclassification had no impact on total assets and net assets as of December 31, 2022.

c.	Reclassification of impairment of goodwill

For the year ended December 31, 2022, the Company provided impairment of goodwill of $4,688,600 arising from fresh start adjustment, which should be presented above the line of “loss from operations”. The Company reclassified the impairment of goodwill from below the line of “loss from operations” to above the line. The reclassification had no impact on total assets and net assets as of December 31, 2022.

F-8

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED)

The following tables present the effects of correcting this error on the Company’s financial statements as of December 31, 2022, and for the year ended December 31, 2022:

	December 31, 2022
Consolidated balance sheet	As previously reported		Adjustments			As Restated
Stable coins		3,062,100		(90,100	)		2,972,000
Digital assets		369,200		90,100			459,300

	For the year ended December 31, 2022
Consolidated statements of operations	As previously reported			Adjustments			As Restated

Other income		1,478,800			(1,478,800	)		-
Gross (loss) profit		1,144,800			(1,478,800	)		(334,000	)
Impairment of goodwill		-			4,688,600			4,688,600
Total operating expenses		5,803,300			4,688,600			10,491,900
Loss from operations		(4,658,500	)		(6,167,400	)		(10,825,900	)
Impairment of digital assets		(4,688,600	)		4,688,600			-
Other income		-			1,478,800			1,478,800

	For the year ended December 31, 2022
Consolidated statements of cash flows	As previously reported			Adjustments			As Restated

Changes in operating assets and liabilities:
Stable coins		730,900			90,100			821,000
Accounts payable and accrued expenses		(1,301,000	)		(90,100	)		(1,391,100	)

F-9

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

Basis of presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America (“US GAAP”).

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to generate cash flows from operations, and the Company’s ability to arrange adequate financing arrangements to support its working capital requirements.

Non-controlling interests

Non-controlling interests represent the equity interests of MTP and JMC that are not attributable, either directly or indirectly, to the Company. In the July 2023, the non-controlling equity holder exited its investment in MTP. In December 2023, JMC closed dissolution.

As of December 31, 2023 and 2022, non-controlling equity holders held nil and 45.81% equity interest in JMC, respectively.

Going concern

As of December 31, 2023, the Company had working capital of approximately $8.6 million, among which the Company held cash of approximately $3.1 million, stable coins of approximately $0.3 million and digital assets of approximately $7.7 million, which were easily convertible into cash over the market.

F-10

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Use of Estimates

The Company’s consolidated financial statements have been prepared in accordance with GAAP. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable for making judgments that are not readily apparent from other sources.

The most significant estimates with regard to these consolidated financial statements are accounting for the application of the amount and timing of future cash flows associated with each asset that are used to evaluate whether assets are impaired, accounting for income taxes, and the amounts recorded as allowances for doubtful accounts.

Cash and Cash Equivalents

The Company considers highly liquid investments readily convertible into known amounts of cash, with original maturities of 90 days or less from the date of acquisition, as cash equivalents.

Stable coins

The Company’s stable coins primarily consist of USD Coin (“USDC”). USDC is issued by Circle Internet Financial Public Limited Company (“Circle”) that is backed by dollar denominated assets held by the issuer in segregated accounts with U.S. regulated financial institutions. The Company generally redeem one USDC for one U.S. dollar from Matrixport Cactus Custody, its principal market for ETH. Pursuant to definition of financial assets in ASC Master Glossary, USDC is accounted for as a financial instrument because it conveys to the Company a right to receive cash. Because one USDC is pegged to one U.S. dollar, the Company recognized and measured USDC at unit price of US$1.00.

F-11

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Digital assets

Digital assets (including Ethereum (ETH) and Tether USD (USDT)) are included in current assets in the accompanying consolidated balance sheets. Digital assets purchased are recorded at cost and digital assets awarded to the Company through its GameFi and Solo-Staking business are accounted for in connection with the Company’s revenue recognition policy disclosed below.

On December 13, 2023, the FASB issued ASU 2023-08, which addresses the accounting and disclosure requirements for certain cryptocurrencies. The new guidance requires entities to subsequently measure certain cryptocurrencies at fair value, with changes in fair value recorded in net income in each reporting period. Retrospective restatement would not be required or allowed for prior periods. The amendments are effective for all entities for fiscal years beginning after December 15, 2024, including interim periods within those years. Early adoption is permitted. The Company early adopted ASU 2023-08 on January 1, 2023.

ASC 820 defines “principal market” as the market with the greatest volume and level of activity for the asset or liability. The determination of the principal market (and, as a result, the market participants in the principal market) is made from the perspective of the reporting entity. The Company determines Matrixport Cactus Custody as its principal market, as it is one of the earliest and the most trusted sources by users, institutions, and media for comparing thousands of digital assets.

The Company measures the fair value of digital assets on a daily basis, and refers to the daily closing prices published by Matrixport Cactus Custody as the fair value. Gains or losses on exchange of digital assets were computed at the difference of fair value of digital assets on exchange dates and payable due to vendors. For the year ended December 31, 2023, the Company recorded an increase in fair value of digital assets of $1,721,900. As of January 1, 2023, the Company recorded a cumulative-effect adjustment of $30,600 to accumulated deficits. The Company tracks its cost basis of digital assets in accordance with the first-in-first-out (“FIFO”) method of accounting. Refer to Note 5 – Digital Assets, for further information regarding the Company’s impact of the adoption of ASU 2023-08.

Before adoption of ASU 2023-08, digital assets were classified as an intangible asset. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Digital assets are measured on a first-in-first-out (“FIFO”) basis and measured for impairment whenever indicators of impairment are identified based on the intraday low quoted price of digital assets. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the digital assets. Subsequent reversal of impairment losses is not permitted. Digital assets are classified on our balance sheet as a current asset because the Company reasonably assesses that it would sell or exchange digital assets within one year. Impairment of $78,900 of digital assets was recognized for the year ended December 31, 2022.

Purchases of digital assets by the Company, if any, will be included within investing activities in the accompanying consolidated statements of cash flows, while digital assets awarded to the Company through its GameFi and Solo-staking business are non-cash operating activities on the accompanying consolidated statements of cash flows. The sales of digital assets are included within investing activities in the accompanying consolidated statements of cash flows and any realized gains or losses from such sales are included in “realized gain (loss) on exchange of digital assets” in the consolidated statements of operations and comprehensive loss. The Company accounts for its gains or losses in accordance with the first-in first-out method of accounting. As of December 31, 2023 and 2022, the Company did not sell its digital assets for cash.

F-12

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Long-term investments

As of December 31, 2023, long-term investments represent the Company’s investment in one equity method investee over which the Company has significant influence, and investment in two privately held companies over which the Company neither has control nor significant influence through investments in ordinary shares.

Investment in equity method investee

In accordance with ASC 323, Investments - Equity Method and Joint Ventures, the Company accounts for the investment in privately held companies using equity method, because the Company has significant influence but does not own a majority equity interest or otherwise control over the equity investees.

Under the equity method, the Company initially records its investment at cost and prospectively recognizes its proportionate share of each equity investee’s net income or loss into its consolidated statements of operations. When the Company’s share of losses in the equity investee equals or exceeds its interest in the equity investee, the Company does not recognize further losses, unless the Company has incurred obligations or made payments or guarantees on behalf of the equity investee.

The Company continually reviews its investment in the equity investee to determine whether a decline in fair value below the carrying value is other-than-temporary. The primary factors the Company considers in its determination include the financial condition, operating performance and the prospects of the equity investee; other company specific information such as recent financing rounds; the geographic region, market and industry in which the equity investee operates; and the length of time that the fair value of the investment is below its carrying value. If the decline in fair value is deemed to be other-than-temporary, the carrying value of the equity investee is written down to fair value.

Investment in privately held companies

Equity investments not accounted for using the equity method are carried at fair value with unrealized gains and losses recorded in the consolidated statements of operations, according to ASC 321, Investments - Equity Securities. The Company elected to record the equity investments in privately held companies using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuer.

Equity investments in privately held companies accounted for using the measurement alternative are subject to periodic impairment reviews. The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of these equity securities, including consideration of the impact of the COVID-19 pandemic. In computing realized gains and losses on equity securities, the Company calculates cost based on amounts paid using the average cost method. Dividend income is recognized when the right to receive the payment is established.

Intangible assets

Purchased intangible assets primarily consist of software, which are recognized and measured at fair value upon acquisition. Separately identifiable intangible assets that have determinable lives continue to be amortized over their estimated useful lives using the straight-line method based on their estimated useful lives.

F-13

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Impairment of Long-lived Assets

The Company reviews assets for impairment when there has been an event or a change in circumstances indicating that the carrying amount of a long-lived asset may not be recoverable. In addition, the Company routinely reviews all long-lived assets for impairment semi-annually. Recoverability of an asset is measured by comparison of its carrying amount to the future estimated undiscounted cash flows (without interest charges) that the asset is expected to generate. Estimates are based on currently available market data and independent appraisals and are subject to fluctuation from time to time. If these estimated future cash flows are less than the carrying value of an asset at the time of evaluation, any impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Fair value is determined by reference to independent appraisals and other factors considered relevant by management. Significant management judgment is required in the forecasting of future operating results that are used in the preparation of estimated future undiscounted cash flows and, if different conditions prevail in the future, material write-downs may occur.

The Company recorded impairment losses of approximately $0.9 million in 2022, as a result of the Company’s determination that the carrying value for intangible assets were not recoverable.

Revenue Recognition

Revenue from Solo-Staking business

The Company generates revenue through staking rewards.

The Company staked its own digital assets validating nodes on the Ethereum chain. Through the contracts with Ethereum chain, the Company provides Ethereum (“ETH”) to stake on a node for the purpose of validating transactions and adding blocks to a respective blockchain network. The Company’s enforceable right to compensation begins when, and lasts for as long as, the Company provides staking services to the ETH chain; the Company’s performance obligation extends over the contract term given its continuous provision of staking services. This period of time corresponds with the period of service for which the ETH chain determines compensation due to us. Given cancellation terms of the contract, and the Company’s customary business practice, the contract effectively provides the option to renew for successive contract terms daily.

The Company is entitled to terminate its contract with ETH chain at any time at its own discretion. In exchange for staking the ETH and validating transactions on blockchain networks, the Company is entitled to all of the fixed ETH award for running the Company’s own node, for successfully validating or adding a block to the blockchain.

The provision of validating blockchain transactions is an output of the Company’s ordinary activities. Each separate block creation or validation under a smart contract with a network represents a performance obligation. The transaction consideration the Company receives ETH awards is a non-cash consideration, which the Company measures at fair value on the date received. The fair value of the ETH award received is determined using the quoted price of the related cryptocurrency at the time of receipt. The satisfaction of the performance obligation for transaction verification services occurs at a point in time when confirmation is received from the network indicating that the validation is complete, and the awards are available for transfer. At that point, revenue is recognized. As of March 5, 2024, the Company has ceased its solo-staking activities.

F-14

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (continued)

Revenue from provision of staking technology tools

The Company charged its customers at a fixed fee rate on each unit of digital assets earned from staking business. The Company identified one performance obligation from the staking services. Because the customers simultaneously receive and consumes the services provided by the Company, the Company recognized the revenue over period using output method as measurement.

Commencing in March 2023, the Company, through MTP, provides its customers with proof-of-stake technology tools for digital assets through the staking platform “MarsProtocol”

Revenue from GameFi business

In late March 2022, the Company released its first NFT game “Mano” in the Mega’s metaverse universe platform “alSpace”. Mano is a competitive idle role-playing game (RPG) deploying the concept of GameFi in the innovative application of NFTs (non-fungible token) based on blockchain technology, with a “Play-to-earn” business model that the players can earn while they play in the alSpace.

The Company earns transaction fees from players based on a fixed number of Binance Coin (BNB) of each transaction when they want to upgrade or reset their NFT in Mano. When a player executes a game transaction through Binance Smart Chain (“BSC”), transaction fee is recognized upon the completion of this game transaction. Only a single performance obligation is identified for each game transaction, and the performance obligation is satisfied on the trade date because that is when the underlying game service is identified, the pricing of transaction fee is agreed upon and the promised services are delivered to customers. All of the Company’s revenue from contracts with customers are recognized at a point in time. The game service could not be cancelled once it’s executed and is not refundable, so returns and allowances are not applicable. The Company recognizes revenues on a gross basis as the Company is determined to be the primary obligor in fulfilling the trade order initiated by the player.

The revenue is in the form of BNB, which is a cryptocurrency that is primarily used in payment of transactions and trading fees through BSC. BNB is convertible to cash or other digital assets. Due to business reasons, the Company decided to suspend the Mano game and the alSpace platform, and on November 4, 2022, the Company discontinued the Mano game and the alSpace platform.

Revenue from leasing of aircraft assets

Revenue from leasing of aircraft assets pursuant to operating leases is recognized on a straight-line basis over the terms of the applicable lease agreements. Deferred payments are recorded as accrued rent when the cash rent received is lower than the straight-line revenue recognized. Such receivables decrease over the term of the applicable leases. Interest income is recognized on finance leases based on the interest rate implicit in the lease and the outstanding balance of the lease receivable. Maintenance reserves retained by the Company at lease-end are recognized as maintenance reserves revenue.

In instances where collectability is not reasonably assured, the Company recognizes revenue as cash payments are received. The Company estimates and charges to income a provision for bad debts based on its experience with each specific customer, the amount and length of payment arrearages, and its analysis of the lessee’s overall financial condition. If the financial condition of any of the Company’s customers deteriorates, it could result in actual losses exceeding any estimated allowances.

F-15

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

3. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

Taxes

As part of the process of preparing the Company’s consolidated financial statements, management estimates income taxes in each of the jurisdictions in which the Company operates. This process involves estimating the Company’s current tax exposure under the most recent tax laws and assessing both permanent and temporary differences resulting from differing treatment of items for tax and US GAAP purposes. The temporary differences result in deferred tax assets and liabilities, which are included in the balance sheet. In assessing the valuation of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income or availability to carry back the losses to taxable income during periods in which those temporary differences become deductible. The Company considered several factors when analyzing the need for a valuation allowance including the Company’s three-year book cumulative loss through December 31, 2023, the financial forecast, the Company’s recent filing for protection under Chapter 11 of the bankruptcy code and the operation uncertainty of the Company’s new business. Based on this analysis, the Company has concluded that a valuation allowance is necessary for its U.S. and foreign deferred tax assets not supported by either future taxable income or availability of future reversals of existing taxable temporary differences and has recorded a full valuation allowance on its deferred tax assets.

Fair value Measurement

The Company applies ASC Topic 820, Fair Value Measurements and Disclosures which defines fair value, establishes a framework for measuring fair value and expands financial statement disclosure requirements for fair value measurements.

ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability (an exit price) on the measurement date in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability.

ASC Topic 820 specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:

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

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

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value. Unobservable inputs are valuation technique inputs that reflect the Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Management of the Company considers the carrying amount of cash and cash equivalents, stable coins, taxes receivables, other receivables, other payables and other taxes payable based on the short-term maturity of these instruments to approximate their fair values because of their short-term nature.

Digital assets are classified as level 1 financial assets because the fair value of digital assets is quoted priced in active markets.

Recent accounting pronouncements

On December 13, 2023, the FASB issued ASU 2023-08 “Accounting for and Disclosure of Crypto Assets”, which addresses the accounting and disclosure requirements for certain cryptocurrencies. The new guidance requires entities to subsequently measure certain cryptocurrencies at fair value, with changes in fair value recorded in net income in each reporting period. In addition, entities are required to provide additional disclosures about the holdings of certain cryptocurrencies. When adopting the final standard, entities are required to record a cumulative-effect adjustment to retained earnings (or other appropriate components of equity or net assets) as of the beginning of the annual period of adoption. Retrospective restatement would not be required or allowed for prior periods. For all entities, the ASU’s amendments are effective for fiscal years beginning after December 15, 2024, including interim periods within those years. Early adoption is permitted. If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. The Company early adopted ASU 2023-08 on January 1, 2023. As of January 1, 2023, the Company recorded a cumulative-effect adjustment of $30,600 to accumulated deficits.

F-16

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

4. STABLE COINS

Stable coins were comprised of the following:

	December 31, 2023		December 31, 2022
			As Restated
USDC	$	254,400	$	2,972,000

As of December 31, 2023 and 2022, the Company held 254,400 and 2,972,000 USDC, respectively. The fair value of USDC were kept at $1.00 because one USDC is pegged to one U.S. dollar.

The following table presents additional information about USDC for the years ended December 31, 2023 and 2022:

	For the Years Ended December 31,
	2023			2022
					As Restated
Opening balance	$	2,972,000		$	-
Collection of USDC from subscription fee from investors		300,000			3,093,000
Collection of USDC from other services		6,800			-
Purchases of USDC		139,900			-
Collection of USDC from exchange of USDT		595,000			-
Collection of USDC from exchange of ETH and BNB		-			446,600
Investment in an equity-method investee in USDC		(300,000	)		-
Exchange of USDC into ETH		(2,894,400	)		-
Payment of service fees and other expenses		(564,900	)		(567,600	)
Ending balance	$	254,400		$	2,972,000

5. DIGITAL ASSETS

Digital asset holdings were comprised of the following:

	For the Years Ended December 31,
	2023		2022
				As Restated
ETH	$	7,123,300	$	369,200
USDT		573,400		90,100
	$	7,696,700	$	459,300

The following table presents the Company’s ETH and USTD holdings as of December 31, 2023:

	Quantity		Cost Basis		Fair Value
ETH		3,122.48	$	5,978,300	$	7,123,300
USDT		573,400	$	573,400	$	573,400

As of December 31, 2023, the Company held 3,122.48 ETH, with fair value price of $2,281.32 per unit. For the year ended December 31, 2023, the Company recognized an increase in fair value of ETH of $1,721,900. As of December 31, 2022, the Company held 334.13 ETH, with fair value price of $1,196.77 per unit. As of January 1, 2023, the Company recorded a cumulative-effect adjustment of $30,600 to accumulated effective.

For the year ended December 31, 2022, the Company recognized impairment loss of $70,600 on ETH.

As of December 31, 2023 and 2022, the Company held 573,400 and 90,100 USDT, respectively. The fair value of USDT were kept at $1.00 because one USDT is pegged to one U.S. dollar.

F-17

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

5. DIGITAL ASSETS (CONTINUED)

Additional information about digital assets

The following table presents additional information about ETH for the years ended December 31, 2023 and 2022:

	For the Years Ended December 31,
	2023			2022
Opening balance	$	369,200		$	-
Cumulative-effect adjustment of opening balance due to adoption of fair value measurement		30,600
Addition of ETH staking reward and other services		41,000			1,800
Purchases of ETH in cash		-			46,300
Purchases of ETH from exchange of USDC		2,894,400			-
Purchases of ETH from exchange of USDT		2,119,500			350,200
Borrowings of ETH from a third party		-			41,600
Return of ETH to a third party		(48,500	)		-
Payment of ETH for other services		(4,800	)		(100	)
Changes in fair value of ETH		1,721,900			-
Impairment of ETH		-			(70,600	)
Ending balance	$	7,123,300		$	369,200

The following table presents additional information about USDT for the years ended December 31, 2023 and 2022:

	For the Years Ended December 31,
	2023			2022
					As Restated
Opening balance	$	90,100		$	-
Purchase of USDT in cash		3,146,600			-
Collection of USDC from subscription advance from investors		175,000			700,000
Exchange of USDT into ETH		(2,119,500	)		(350,200	)
Exchange of USDT into USDC		(595,900	)		(149,000	)
Collection of USDT from exchange of BNB		-			10,200
Payment of service fees		(122,900	)		(120,900	)
Ending balance	$	573,400		$	90,100

F-18

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

6. LONG-TERM INVESTMENTS

Long-term investments were comprised of the following:

	December 31, 2023		December 31, 2022
Investment in MarsLand Global Limited (“MarsLand”) (a)	$	224,800		-
Investment in Quleduo Technology Co., (“Quleduo”) (b)		1,000,000		-
Investment in DaoMax Technology Co., Ltd, (“DaoMax”) (c)		546,000		-
Total	$	1,770,800		-

(a) Investment in MarsLand

MarsLand is a privately held company. In May 2023, the Company, through Saving Digital Pte. Ltd. (“Saving Digital”), its wholly owned subsidiary, invested consideration of $300,000 in USDC, which represents 30% of equity interest in MarsLand. The Company used equity method to measure the investment in MarsLand. For the year ended December 31, 2023, the Company recorded a share equity loss of $75,200 for its share of the results of MarsLand. As of December 31, 2023, the Company did not recognize impairment against the investment in MarsLand.

(b) Investment in Quleduo

Quleduo is a privately held company which is engaged in software design and development. In May and September 2023, the Company made a total cash consideration of $1,000,000 in two instalments to acquire 18.2% of equity interest in Quleduo. Quleduo is a privately held company, over which the Company neither has control nor significant influence through investment in ordinary shares. The Company accounted for the investment in Quleduo using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuer.

Quleduo just commenced its operations in July 2023, and incurred minimal losses for the year of 2023. For the year ended December 31, 2023, the Company did not record upward adjustments or downward adjustments on the investment. The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of the equity security. As of December 31, 2023, the Company did not recognize impairment against the investment security.

(c) Investment in DaoMax

In June 2023, October 2023 and December 2023, the Company, through Saving Digital, invested an aggregated cash consideration of $546,000 in DaoMax in exchange for a total of 7.6% equity interest in the investee. DaoMax is a privately held company, over which the Company neither has control nor significant influence through investment in ordinary shares. The Company accounted for the investment in DaoMax using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuer.

DaoMax just commenced its operations in October 2023, and incurred minimal losses for the year of 2023. For the year ended December 31, 2023, 2023, the Company did not record upward adjustments or downward adjustments on the investment. The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of the equity security. As of December 31, 2023, the Company did not recognize impairment against the investment security.

F-19

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

7. OPERATING LEASES

As of December 31, 2023 and 2022, the Company leases office spaces in the United States and Singapore under non-cancelable operating leases, with terms ranging within 12 months. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right of use assets and lease liabilities. Lease expense for lease payment is recognized on a straight-line basis over the lease term.

The Company determines whether a contract is or contain a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. For operating leases that include rent holidays and rent escalation clauses, the Company recognizes lease expense on a straight-line basis over the lease term from the date it takes possession of the leased property. The Company records the straight-line lease expense and any contingent rent, if applicable, in the account of “professional fees, general and administrative and other expenses” on the consolidated statements of operations and comprehensive losses.

The lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company applied practical expedient to account for short-term leases with a lease term within 12 months. The Company records operating lease expense in its consolidated statements of operations and comprehensive loss on a straight-line basis over the lease term and record variable lease payments as incurred. For the years ended December 31, 2023 and 2022, the Company recorded rent expenses of $94,000 and $147,600, respectively.

8. COMMON STOCK

As of December 31, 2022, the Company authorized 40,000,000 shares of common stocks, and had 26,484,055 shares issued and outstanding.

On December 23, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors named in the Purchase Agreement (collectively, the “Purchasers”), pursuant to which the Company agreed to sell up to an aggregate of 5,280,000 shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”) at a purchase price of $1.30 per share, or $6.9 million (the “Private Placement”).

On January 20, 2023, the Company completed an initial sale of 4,314,615 shares of Common Stock pursuant to the Private Placement to certain Purchasers for an aggregate purchase price of $5.6 million, or $1.30 per share.

On February 15, 2023, the Company completed the final sale of 765,384 shares of Common Stock pursuant to the Private Placement to a Purchaser for an aggregate purchase price of $1.0 million, or $1.30 per share, for combined total issuance of 5,079,999 shares of Common Stock for gross proceeds of approximately $6.6 million to the Company under the Private Placement, before deducting estimated offering expenses payable by the Company.

On June 5, 2023, the Company issued 160,577 Common Stock to a third-party provider which provided network security services to the Company. The service fee was agreed at $237,500.

As of December 31, 2023, the Company authorized 40,000,000 shares of common stocks, and had 31,724,631 shares issued and outstanding.

F-20

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

9. INCOME TAXES

Income tax provision (benefit) were comprised of the following:

	For the Years Ended December 31,
	2023			2022
Current income tax provision (benefits)
Federal	$	-		$	-
State		4,000			4,800
Foreign		83,100			(53,700	)
		87,100			(48,900	)
Deferred income tax provision (benefits)
Federal		(1,155,800	)		1,692,300
State		27,100			(283,800	)
Valuation allowance		1,128,700			(1,408,400	)
		-			-
Income tax provision (benefits)	$	87,100		$	(48,900	)

Total income tax provision (benefit) differs from the amount that would be provided by applying the statutory federal income tax rate to pretax earnings as illustrated below:

	For the Years Ended December 31,
	2023			2022
Income tax benefits at statutory federal income tax rate	$	(976,100	)	$	(1,290,800	)
State tax expense, net of federal benefit		4,000			4,800
Foreign tax expenses (benefit)		54,700			(38,900	)
Impairment of intangible assets		-			13,300
Non-taxable income		(284,600	)		(35,100	)
Other non-deductible expenses		2,900			-
Global intangible low tax income		173,700			-
Valuation allowance		1,112,500			1,297,800
Income tax provision (benefits)	$	87,100		$	(48,900	)

F-21

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

9. INCOME TAXES (CONTINUED)

Temporary differences and carry-forwards that give rise to a significant portion of deferred tax assets and liabilities as of December 31, 2023 and 2022 were as follows:

	December 31, 2023			December 31, 2022
Deferred tax assets:
Current and prior year tax losses	$	7,125,100			6,169,300
Deferred interest expense		3,991,300			3,991,300
Foreign tax credit		-			705,600
Basis in deductible goodwill		853,300			-
Deferred maintenance, bad debt allowance and other		210,000			-
Accrued vacation and others		-			28,500
		12,179,700			10,894,700
Valuation allowance		(12,179,700	)		(10,889,000	)
Deferred tax assets, net of valuation allowance	$	-		$	5,700
Deferred tax liabilities:
Others		-			(5,700	)
Deferred tax liabilities		-			(5,700	)
Deferred tax assets, net of valuation allowance and deferred tax liabilities	$	-		$	-

Reported as:

	December 31, 2023			December 31, 2022
Deferred tax assets	$	12,179,700			10,894,700
Deferred tax liabilities		-			(5,700	)
Valuation allowance		(12,179,700	)		(10,889,000	)
Net deferred tax assets	$	-		$	-

Consolidated deferred federal income taxes arise from temporary differences between the valuation of assets and liabilities as determined for financial reporting purposes and federal income tax purposes and are measured at enacted tax rates. The Company’s deferred tax items are measured at an effective tax rate (federal and state blended rate net of federal benefit) of 21.00% and 21.05% respectively as of December 31, 2023 and 2022.

F-22

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

9. INCOME TAXES (CONTINUED)

The current year federal operating loss carryovers of approximately $2.5 million will be available to offset 80% of annual taxable income in future years. Approximately $3.2 million of federal net operating loss carryovers may be carried forward through 2037 and the remaining $23.7 million federal net operating loss carryovers may be carried forward indefinitely. The current year California operating loss carryovers of approximately $0.4 million will be available to offset taxable income in future years through 2042. As discussed below, the Company does not expect to utilize the net operating loss carryovers remaining at December 31, 2023 in future years.

During the year ended December 31, 2023, the Company had pre-tax loss from domestic sources of approximately $5.6million and pre-tax loss from foreign sources of approximately $0.7 million. The Company had pre-tax loss from domestic sources of approximately $8.9 million and pre-tax loss from foreign sources of approximately $0.4 million for the year ended December 31, 2022. The year-over-year decrease in profit before taxes is mostly driven by the reduction in the Company’s restructuring costs and employee salaries.

As of December 31, 2023, the Company has a full valuation allowance of approximately $12.2 million against its net deferred tax assets not supported by either future taxable income or availability of future reversals of existing taxable temporary differences, for which realization cannot be considered more likely than not at this time. In assessing the need for a valuation allowance, the Company considered all positive and negative evidence, including taxable loss occurred in recent years, scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance. Recent negative operating result has caused the Company to be in a cumulative loss position as of December 31, 2023.

As of December 31, 2022, the Company had a valuation allowance of approximately $10.9 million, which fully offsets its net deferred tax assets.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2017. At December 31, 2023 and 2022, the Company had a balance of accrued tax, penalties and interest totaling $44,600 and $56,100 related to unrecognized tax benefits on its non-U.S. operations included in the Company’s accounts and taxes payable. The Company anticipates decreases of approximately $14,100 to the unrecognized tax benefits within twelve months of this reporting date. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	December 31, 2023			December 31, 2022
Balance at January 1	$	56,100			66,200
Additions for prior years’ tax positions		2,700			2,700
Reductions from expiration of statute of limitations		(14,200	)		(12,800	)
Balance at December 31	$	44,600		$	56,100

The Company accounts for interest related to uncertain tax positions as interest expense, and for income tax penalties as tax expense.

F-23

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

10. OPERATING SEGMENTS

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 major customers in financial statements for details on the Company’s business segments. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operation results by the revenue of different services.

The following tables present summary information of operations by segment for the years ended December 31, 2023 and 2022.

	For the Year Ended December 31, 2023
	Staking			Leasing
	Business			Business			Total
Revenue	$	47,800		$	-		$	47,800
Gross loss	$	(233,300	)	$	-		$	(233,300	)
Total operating expenses	$	(1,972,100	)	$	(1,289,800	)	$	(3,261,900	)
Loss before income tax provision	$	(3,313,500	)	$	(1,279,600	)	$	(4,593,100	)
Net loss	$	(3,315,100	)	$	(1,365,100	)	$	(4,680,200	)

	For the Year Ended December 31, 2022 (As Restated)
	Staking			GameFi			Leasing
	Business			Business			Business			Total
Revenue	$	1,800		$	326,800		$	120,000		$	448,600
Gross (loss) profit	$	(219,700	)	$	(234,300	)	$	120,000		$	(334,000	)
Total operating expenses	$	(1,455,600	)	$	(2,407,100	)	$	(6,629,200	)	$	(10,491,900	)
Loss before income tax provision	$	(1,675,300	)	$	(2,641,400	)	$	(5,030,400	)	$	(9,347,100	)
Net loss	$	(1,675,700	)	$	(2,642,600	)	$	(4,979,900	)	$	(9,298,200	)

F-24

MEGA MATRIX CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Rounded to the Nearest Hundred US Dollar, except for share data, unless otherwise stated)

10. OPERATING SEGMENTS (CONTINUED)

The following tables present total assets by segment as of December 31, 2023 and 2022:

	December 31,		December 31,
	2023		2022
ETH Staking Business	$	13,341,400	$	11,120,100
Lease Business		-		1,431,700
	$	13,341,400	$	12,551,800

11. COMMITMENTS AND CONTINGENCIES

In the ordinary course of the Company’s business, the Company may be subject to lawsuits, arbitrations and administrative proceedings from time to time. The Company believes that the outcome of any existing or known threatened proceedings, even if determined adversely, should not have a material adverse effect on the Company’s business, financial condition, liquidity or results of operations.

12. SUBSEQUENT EVENTS

On November 15, 2023, the Company entered into a non-binding letter of intent to acquire sixty percent (60%) of the voting capital stock of Yuder Pte, Ltd. (“Yuder”), a company that operates FlexTV, a streaming platform specializing in short dramas, in exchange for 1,500,000 shares of the Company’s common stock, par value $0.001.

On January 7, 2024, the Company entered into and closed a definitive Share Exchange Agreement (“Exchange Agreement”) with FunVerse Holding Limited (“FunVerse”), a company incorporated under the laws of the British Virgin Islands and the sole parent company of Yuder, and the shareholders of FunVerse (collectively, “Sellers”). Before the closing of the Exchange Agreement, the Sellers held 85,625,000 ordinary shares of FunVerse, $0.0001 par value per share, which represents all of the issued and outstanding shares of FunVerse. Under the exchange Agreement, Sellers will exchange 51,375,000 of their FunVerse’s shares for 1,500,000 shares of common stock of the Company, par value $0.001 (“Common Stock”), as per terms and conditions set forth in the Exchange Agreement (the “Share Exchange”), free and clear of all liens (other than potential restrictions on resale under applicable securities laws), which the parties agreed is valued at $2,175,000, or $1.45 per share of Common Stock. Following the Share Exchange, the Company owned sixty percent (60%) of capital stock of FunVerse.

F-25

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Mega Matrix Corp. 10-K/A