Pop Culture Group Co., Ltd

Pop Culture Group Co., Ltd. operates primarily in mainland China through its Variable Interest Entity (VIE) and its subsidiaries, with a modest presence in Hong Kong and overseas through its offshore entities. The company's core business revolves around promoting Chinese Pop Culture, delivering event experiences, and providing related services to the younger generation. The company's business model is segmented into Live Entertainment, Digital Entertainment, and Other Services. The company is a holding company incorporated in the Cayman Islands and conducts most of its operations through its PRC operating entities, which presents unique risks to investors due to the VIE structure and uncertainties in PRC laws and regulations.

The company's competitive strengths include an extensive portfolio of iconic Chinese Pop Culture events, a deep understanding of the younger generation's preferences, a highly-recognized brand name in the Chinese Pop Culture and street dance industries, a strong and loyal corporate client base, and an experienced management team. The company has developed an extensive portfolio of events such as China Battle Championships, Move It, Cross-Strait Hip-Hop Culture Festival, Hip-Hop Party, Popcity Music Festival, Mini Master, and Super Chinese Pop Culture Dream. From 2007 to June 2025, the company provided event planning and execution and brand promotion services to 442 corporate clients, with 211 being returning clients.

For the fiscal year ended June 30, 2025, Pop Culture Group reported total revenue of $107,632,769 ¹, an increase of 127.2% from $47,381,918 ² in the prior fiscal year. Gross profit for the fiscal year ended June 30, 2025, was $4,319,899 ³, up from $2,880,720 ⁴ in the fiscal year ended June 30, 2024. The gross margin for fiscal year 2025 was 4.0% ⁵, a decrease from 6.1% ⁶ in fiscal year 2024. The company reported a net loss of $6,893,491 ⁷ for the fiscal year ended June 30, 2025, an improvement from a net loss of $12,632,115 ⁸ in the previous fiscal year. Total current assets as of June 30, 2025, were $67,539,837 ⁹, including cash and cash equivalents of $2,605,111 ¹⁰. Total liabilities were $93,271,229 ¹¹ as of June 30, 2025. The company had short-term bank borrowings amounting to $4,778,324 ¹² as of June 30, 2025.

Revenue from Live Entertainment increased by 33.5% ¹³ to $10,000,465 ¹⁴ in fiscal year 2025 from $7,490,861 ¹⁵ in fiscal year 2024, accounting for 9.3% ¹⁶ of total revenue. Digital Entertainment revenue saw a significant increase of 140.6% ¹⁷ to $95,316,211 ¹⁸ in fiscal year 2025 from $39,611,817 ¹⁹ in fiscal year 2024, representing 88.6% ²⁰ of total revenue. Other Services revenue grew by 729.4% ²¹ to $2,316,093 ²² in fiscal year 2025 from $279,240 ²³ in fiscal year 2024, contributing 2.1% ²⁴ to total revenue. The gross margin for Live Entertainment decreased from 13.3% ²⁵ in 2024 to 8.1% ²⁶ in 2025, while Digital Entertainment's gross margin decreased from 4.8% ²⁷ to 3.4% ²⁸.

Significant operational developments during the fiscal year ended June 30, 2025, include the completion of the acquisition of 100% of Yi Caishen (Xiamen) Trading Co., Ltd. on February 5, 2025, and the acquisition of 99% of Xiamen Hand in Hand Network Technology Co., Ltd. on September 8, 2025. The company also conducted a private placement on July 8, 2025, selling 50,000,000 Class A ordinary shares at $0.50 ²⁹ per share and 10,000,000 Class B ordinary shares at $0.55 ³⁰ per share, raising gross proceeds of $30.5 million ³¹. A registered direct offering on September 29, 2025, sold 5,000,000 Class A ordinary shares at $1.20 ³² per share, generating gross proceeds of $6 million ³³. The company also increased its authorized share capital on February 10, 2025, to $2,960,000 ³⁴ divided into 264,400,000 Class A Ordinary Shares, 30,600,000 Class B Ordinary Shares, and 1,000,000 Class C Ordinary Shares.

The company's strategies for future growth are centered on expanding and enhancing its portfolio of concerts and Chinese Pop Culture events, exploiting revenue-generating opportunities for its intellectual property, developing and deepening relationships with corporate clients, attracting and recruiting highly-qualified professionals, and further enhancing its brand recognition. The company intends to enter into performance agreements with artists and music companies with greater influence to attract a larger audience and plans to increase the size and influence of existing Chinese Pop Culture events while developing new intellectual property in-house. In March 2024, the company held a Super Music Hero concert at the Fuzhou Strait Olympic Sports Center Gymnasium with an audience of over 25,000 ³⁵, and in June 2024, another Super Music Hero concert at the Chongqing Olympic Sports Center Gymnasium attracted over 35,000 ³⁶ attendees.

To maximize the potential of its Chinese Pop Culture related intellectual property portfolio, the company plans to cooperate with third parties to develop a street dance training business and create and monetize derivative works. This includes working with publishers and comics companies to create picture books, comics, and textbooks for teenagers based on the "Hip Hop Master (image)" trademark, and entering into co-branding partnerships with manufacturers of shoes, clothing, food, and beverages. The company aims to leverage its deep understanding of the younger generation to develop cooperation relationships with new corporate clients, focusing on industries such as fast-moving consumer goods, communications, automobile, Internet product, and fashion.

Operationally, the company is focused on cost control and efficiency. Selling and marketing expenses for the fiscal year ended June 30, 2025, decreased by 76.3% ³⁷ to $0.1 million ³⁸ from $0.3 million ³⁹ in the prior fiscal year, primarily due to laying off some employees in the event planning and execution department. General and administrative expenses also decreased by 28.2% ⁴⁰, or $0.8 million ⁴¹, to $2.0 million ⁴² in fiscal year 2025 from $2.7 million ⁴³ in the previous fiscal year, reflecting measures taken to cut down expenses. The company's management is currently evaluating steps to remediate a material weakness in internal control over financial reporting, including hiring more qualified accounting personnel with U.S. GAAP and SEC reporting experience and implementing regular training programs.

Planned capital allocation includes efforts to raise capital from time to time to maintain normal operations. The company believes it has sufficient cash to fund operations for at least the next 12 months from the date of the annual report. The company's non-current assets increased significantly from $1.3 million ⁴⁴ as of June 30, 2024, to $47.3 million ⁴⁵ as of June 30, 2025, mainly due to an increase of operating right-of-use assets of $42.2 million ⁴⁶ from leasing an apartment building, an increase of deferred operating lease income receivable non-current of $1.1 million ⁴⁷, and a goodwill of $2.0 million ⁴⁸ from the acquisition of Hand in Hand.

The company explicitly flagged structural headwinds and execution risks, including uncertainties under the Foreign Investment Law relating to the status of businesses controlled by foreign-invested projects through contractual arrangements, changes in China's economic, political, or social conditions or government policies, and uncertainties in the interpretation and enforcement of PRC laws and regulations. The Chinese government's significant oversight and discretion over business conduct, including potential intervention or influence on operations, and increased control over overseas public offerings by China-based issuers, could significantly limit or hinder the company's ability to offer securities and cause their value to decline. The company also faces risks related to the highly competitive Chinese Pop Culture industry, the ability to retain existing clients, maintain and enhance brand recognition, and protect intellectual property.

The company faces material risks stemming from its corporate structure, particularly the VIE Agreements, which are subject to uncertainties in the interpretation and application of PRC laws and regulations, potentially leading to severe penalties or forced relinquishment of interests if deemed illegal or invalid. There is a risk that the PRC government may intervene or influence the company's operations at any time, or exert control over overseas securities offerings and foreign investment in China-based issuers, which could necessitate material changes to operations, limit the ability to offer securities, and cause their value to decline or become worthless. The company is exposed to uncertainties in the interpretation and enforcement of PRC laws, which can change quickly with little advance notice, potentially limiting legal protection. Furthermore, the company relies on a small number of customers for a substantial portion of its revenue and accounts receivable, with three major customers accounting for approximately 21% ⁴⁹, 20% ⁵⁰, and 12% ⁵¹ of total revenue for the fiscal year ended June 30, 2025, and the top five customers representing approximately 70% ⁵² of accounts receivable balance as of June 30, 2025. Any material business disruption affecting these major customers could result in substantial revenue losses. The company also faces risks related to its dependence on the continued popularity of Chinese Pop Culture events, which are susceptible to changes in fan tastes, competition, and adverse developments or scandals involving industry stakeholders. Operational risks include the inherent susceptibility of live entertainment events to various risks such as security threats, natural catastrophes, and equipment malfunction, as well as dependence on third-party services and relationships with local authorities and government agencies. The company has not made adequate social insurance and housing fund contributions for all employees, which may subject it to penalties, including late fees at a rate of 0.05% ⁵³ per day of the outstanding amount.

Management's message to shareholders emphasizes a strategic shift towards the Live Entertainment and Digital Entertainment businesses, aiming to be a leader in promoting Chinese Pop Culture and creating long-term value for stakeholders. The company plans to continually expand and enhance its portfolio of concerts and Chinese Pop Culture events, exploit revenue-generating opportunities from its intellectual property, and deepen relationships with corporate clients. Management also prioritizes attracting and recruiting highly-qualified professionals and further enhancing brand recognition. The company has completed filing procedures for recent transactions, including the Acquisition of Yi Caishen, the August 2024 PIPE, and an offering under its shelf registration statement on Form F-3. The management of the company will have sole and absolute discretion concerning the use of the proceeds from the Private Placement that closed on July 8, 2025, which received gross proceeds of $30.5 million ³¹. The company's executive officers, directors, and 5% shareholders have agreed to a 90-day ⁵⁴ lock-up period following the final prospectus relating to the September 29, 2025, offering.