Revenue Performance - Total revenue for fiscal year 2022 was $32.28 million, a 26% increase from $25.53 million in fiscal year 2021[1] - Revenue from brand promotion surged by 1,064% to $8.73 million, up from $0.75 million in fiscal year 2021[5] - Total revenue for 2022 was $32,281,543, representing a 26.8% increase from $25,526,557 in 2021[27] Profitability - Net income decreased to $0.69 million in fiscal year 2022, compared to $4.27 million in fiscal year 2021[2] - Gross profit fell by 14% to $6.25 million, with a gross margin of 19% compared to 28% in fiscal year 2021[11] - Gross profit decreased to $6,245,532 in 2022, down 13.5% from $7,224,063 in 2021[27] - Net income attributable to shareholders for 2022 was $787,958, a significant decline from $4,267,542 in 2021[27] - The company reported a comprehensive loss of $185,915 in 2022, contrasting with a comprehensive income of $5,603,299 in 2021[27] - Basic and diluted net income per share for 2022 was $0.04, down from $0.25 in 2021[27] - Net income for 2022 was $687,888, a significant decrease from $4,267,542 in 2021[30] Expenses - The cost of revenue increased by 42% to $26.04 million, up from $18.30 million in fiscal year 2021[8] - Operating expenses rose by 247% to $4.83 million, from $1.39 million in fiscal year 2021[13] - Operating expenses rose to $4,829,065 in 2022, up 3.5 times from $1,392,137 in 2021[27] - Total depreciation and amortization expenses increased to $310,343 in 2022 from $243,905 in 2021[30] - The company paid $398,370 in income tax for 2022, compared to $34,765 in 2021[30] - Interest expense paid was reported at $56,733, a decrease from $235,361 in the previous year[30] Cash and Assets - As of June 30, 2022, cash and cash equivalents were $14.40 million, significantly up from $1.32 million a year earlier[20] - Total current assets increased to $50,831,524 in 2022, up 56.9% from $32,410,117 in 2021[25] - Cash reserves surged to $14,396,032 in 2022, compared to $1,319,977 in 2021, marking a 1,087.5% increase[25] - The company reported a cash balance of $14,396,032 at the end of the year, up from $1,319,977 at the beginning of the year[30] Liabilities and Equity - Total liabilities decreased to $11,595,616 in 2022, down 23.3% from $15,101,230 in 2021[25] - Total shareholders' equity increased to $52,772,352 in 2022, up from $19,328,105 in 2021, reflecting a growth of 173.5%[25] Operational Highlights - The company served 21 clients in 56 events for event planning and execution during the fiscal year[2] - The company aims to enhance its SaaS platform, which had over 60,000 students using it as of June 30, 2022[3] - The company plans to invest in metaverse-related business to provide a comprehensive hip-hop experience to users[3] Cash Flow - Cash flows from operating activities showed a net cash outflow of $19,365,046 in 2022, compared to an outflow of $4,037,332 in 2021[30] - Cash used in investing activities totaled $802,733, with a significant purchase of intangible assets at $720,000[30] - The effect of exchange rate changes contributed an increase of $184,902 to cash flows[30] - Proceeds from the issuance of shares amounted to $33,630,162 in 2022, a notable increase compared to previous years[30] - The company incurred a loss from the disposal of property and equipment amounting to $1,237 in 2022[30]

VIE Structure and Regulatory Risks - The company operates as a holding entity incorporated in the Cayman Islands, controlling its operations through a Variable Interest Entity (VIE) structure in China, which poses unique risks to investors [10]. - The VIE Agreements allow the company to consolidate the financial results of the VIE and its subsidiaries under U.S. GAAP, despite not holding direct equity interests [15]. - The company faces risks related to the interpretation and application of PRC laws, which could impact the validity and enforcement of the VIE Agreements [29]. - The VIE Agreements may not provide the same level of operational control as direct ownership, leading to potential breaches by Xiamen Pop Culture or its shareholders [31]. - The VIE Agreements are governed by PRC laws, which may limit the company's ability to enforce rights and consolidate financial results of Xiamen Pop Culture [70]. - If Xiamen Pop Culture is no longer considered a VIE, the company may not be able to consolidate its financial results, adversely affecting operating results and financial condition [72]. - The company operates through a Variable Interest Entity (VIE) structure, which is subject to regulatory risks in China, potentially impacting its ability to consolidate financial results [62]. - The VIE Agreements may not provide effective control over the operations of Xiamen Pop Culture, posing risks to the company's operational stability [67]. Financial Performance - Total consolidated revenue for the fiscal year ended June 30, 2022, was $32,281,543, an increase from $25,526,557 in 2021 [52]. - Net income for the fiscal year ended June 30, 2022, was $687,888, compared to a net loss of $330,734 in 2021 [52]. - Gross profit for the fiscal year ended June 30, 2022, was $6,245,532, up from $7,224,063 in 2021 [52]. - The company incurred a net loss of $1,583,761 for the fiscal year ended June 30, 2022, compared to a loss of $318,634 in 2020 [52]. - Total current assets increased to $50,831,524, up from $32,410,117, representing a growth of approximately 56.9% year-over-year [56]. - Total assets reached $64,367,968, compared to $34,429,335, indicating a significant increase of about 87.1% [56]. - Total liabilities amounted to $11,595,616, a slight increase from $15,101,230, reflecting a decrease of approximately 23.5% [56]. - Total shareholders' equity rose to $52,772,352, up from $19,328,105, marking an increase of around 173.5% [56]. Cash Flow and Dividends - Cash transfers between the company and its subsidiaries included approximately $7.08 million transferred in July 2021 from the company to Pop Culture HK, which then transferred approximately $7.05 million to Heliheng [41]. - No dividends or distributions have been made to shareholders, and the company intends to retain future earnings for business expansion [42]. - The company has not distributed any earnings or settled amounts owed under the VIE Agreements as of the date of the annual report [38]. - The company’s ability to distribute dividends may be limited by debt instruments governing its PRC subsidiaries [46]. - The company’s cash dividends, if any, will be paid in U.S. dollars and may be subject to PRC withholding tax [45]. Regulatory Environment - The Chinese government has strengthened anti-monopoly supervision, establishing the National Anti-Monopoly Bureau and revising the Anti-Monopoly Law effective August 1, 2022 [34]. - The company has successfully obtained all requisite licenses and approvals to operate in the PRC, including business licenses and Internet Content Provider Licenses [35]. - The company has not received any permissions or approvals denied by Chinese authorities for issuing securities to foreign investors [35]. - The company has not engaged in monopolistic behaviors that would be subject to recent anti-monopoly regulatory actions [34]. - The company is required to maintain various approvals, licenses, and permits to operate its business in China, and failure to do so could adversely affect operations [132]. Tax and Currency Risks - The PRC government imposes controls on the convertibility of Renminbi into foreign currencies, which may restrict the company's ability to pay dividends [45]. - The company may be classified as a PRC "resident enterprise," subjecting it to a 25% enterprise income tax on worldwide income, which could reduce net income [150]. - Indirect transfers of equity interests in PRC resident enterprises by non-PRC holding companies are subject to specific tax regulations, potentially leading to tax liabilities [154]. - Non-resident enterprises must declare tax payable on indirect transfers, with penalties for non-compliance, impacting financial planning [156]. - The withholding tax rate for profits distributed to offshore subsidiaries is generally 10%, but may be reduced to 5% under certain conditions related to the Double Tax Avoidance Arrangement [162]. - Fluctuations in the RMB against the U.S. dollar could materially impact the company's financial results and cash flows [146]. Operational Challenges - The company faces uncertainties regarding the interpretation and application of current or future PRC laws and regulations, which could affect its business operations [64]. - Changes in China's economic, political, or social conditions could materially affect the business and operations of the PRC operating entities [86]. - The PRC operating entities face risks related to live events, including logistical challenges and potential disruptions from external factors, which could impact profitability and event success [191]. - The PRC operating entities' business is highly dependent on the popularity of hip-hop events, and any decline in this popularity could adversely affect sponsorship revenue and overall business performance [186]. - The PRC operating entities face significant challenges in attracting new sponsors, clients, and fans, which are influenced by their marketing effectiveness and brand recognition [199]. Customer and Revenue Concentration - For the fiscal year ended June 30, 2022, three major customers accounted for approximately 48% of the PRC operating entities' total revenue, with Fujian Maibo Culture Communication Co., Ltd. at 29%, Guangzhou Taiji Advertising Co., Ltd. at 12%, and Heng'an (China) Paper Industry Co., Ltd. at 7% [179]. - As of June 30, 2022, the top five customers represented approximately 72% of the net accounts receivable balance, indicating a high concentration of revenue dependency [179]. Compliance and Legal Risks - The company may face substantial costs and resource diversion due to administrative and court proceedings in the PRC, which may be protracted and unpredictable [92]. - The legal environment in the PRC is less developed than in the U.S., which may complicate the enforcement of legal rights and increase operational risks [89]. - The company must navigate complex procedures for mergers and acquisitions, which could hinder its ability to expand through strategic acquisitions [173]. - The approval of the CSRC may be required for offerings, and failure to obtain such approval could result in sanctions and operational limitations [169]. Brand and Market Competition - Maintaining brand recognition is critical for the PRC operating entities to expand their network of sponsors and clients, as brand awareness significantly contributes to business success [198]. - The PRC operating entities operate in a highly competitive market, facing competition from major companies like Alibaba, Tencent, and Baidu, which are investing in similar services [209]. - The inability to maintain or acquire clients could limit business growth and lead to reduced profitability due to competitive pricing pressures [209]. - Negative publicity can adversely affect brand recognition and may stem from various issues, including alleged misconduct and security breaches [200].