Note 4 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Significant Accounting Policies [Text Block]

4. Summary of significant accounting policies

a) Basis of presentation

The unaudited condensed consolidated interim financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The unaudited condensed consolidated interim financial information as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in complete consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited condensed consolidated interim financial information should be read in conjunction with the financial statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, previously filed with the SEC (the “2023 Form 10-K”) on June 28, 2024.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s condensed consolidated financial position as of March 31, 2024, its condensed consolidated results of operations for the three months ended March 31, 2024 and 2023, and its condensed consolidated cash flows for the three months ended March 31, 2024 and 2023, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

b) Principles of consolidation

The unaudited condensed consolidated interim financial statements include the accounts of all the subsidiaries and VIEs of the Company. All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation.

c) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of these consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company continually evaluates these estimates and assumptions based on the most recently available information, historical experience and various other assumptions that the Company believes to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.

d) Foreign currency translation

The exchange rates used to translate amounts in RMB into US$ for the purposes of preparing the condensed consolidated financial statements are as follows:

	March 31, 2024		December 31, 2023
Balance sheet items, except for equity accounts		7.095		7.0827

	Three Months Ended March 31,
	2024		2023
Items in the statements of operations and comprehensive loss		7.1028		6.8476

No representation is made that the RMB amounts could have been, or could be converted into US$ at the above rates.

e) Current expected credit losses

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendments in this ASU require the measurement and recognition of expected credit losses for financial assets held at amortized cost, which replace the existing incurred loss impairment model with an expected loss methodology. The Company, as a SEC smaller reporting company, has adopted the amendments in this ASU from January 1, 2023, using a modified retrospective transition method and did not restate the related accounts in the comparable period. Instead, the Company recognized a cumulative-effect adjustment to increase the opening balance of its accumulated deficit on January 1, 2023 by US$0.19 million, of which US$0.04 million was related to the cumulative-effect adjustment to allowance for credit loss of accounts receivable, and the remaining US$0.15 million was related to the cumulative-effect adjustment to allowance for credit loss of other current assets, which primarily consisted of short-term loans the Company provided to unrelated parties.

The allowance for credit losses reflects the Company's current estimate of credit losses expected to be incurred over the life of the related financial assets. The allowance for credit losses is presented as a valuation account that is deducted from the amortized cost basis of financial asset(s) to present the net amount expected to be collected on the financial asset(s).

The Company considers various factors in establishing, monitoring, and adjusting its allowance for credit losses, including the aging and aging trends, customer/other parties’ creditworthiness and specific exposures related to particular customers/other parties. The Company also monitors other risk factors and forward-looking information, such as country specific risks and economic factors that may affect a customer/other party’s ability to pay in establishing and adjusting its allowance for credit losses. The Company assesses collectability by reviewing the financial assets on a collective basis where similar characteristics exist and on an individual basis when the Company identifies specific customers/other parties with known disputes or collectability issues. Accounts receivable and short-term loans to unrelated parties are written off after all collection efforts have ceased.

The following tables summarized the movements of the Company’s credit losses for the three months ended March 31, 2024 and 2023, respectively:

	Three Months Ended March 31,
	2024			2023
	US$(’000)			US$(’000)
	(Unaudited)			(Unaudited)
Credit loss for accounts receivable:
Balance as of beginning of the period		3,987			3,760
Cumulative-effect adjustment upon adoption of ASU No. 2016-13, Financial Instruments-Credit losses (Topic 326)		-			36
Provision for/(reverse of) credit loss during the period		280			223
Written off during the period		-			-
Exchange translation adjustments		(6	)		51
Balance as of end of the period		4,261			4,070

	Three Months Ended March 31,
	2024		2023
	US$(’000)		US$(’000)
	(Unaudited)		(Unaudited)
Credit loss for other current assets:
Balance as of beginning of the period		1,559		617
Cumulative-effect adjustment upon adoption of ASU No. 2016-13, Financial Instruments-Credit losses (Topic 326)		-		155
Provision for credit loss during the period		21		78
Written off during the period		-		-
Exchange translation adjustments		-		-
Balance as of end of the period		1,580		850

f) Fair value measurement

Liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of March 31, 2024 and December 31, 2023 are as follows:

			Fair value measurement at reporting date using
	As of March 31, 2024		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	US$(’000)		US$(’000)		US$(’000)		US$(’000)
	(Unaudited)
Warrant liabilities (Note 14)		-		-		-		-

			Fair value measurement at reporting date using
	As of December 31, 2023		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	US$(’000)		US$(’000)		US$(’000)		US$(’000)
Warrant liabilities (Note 14)		-		-		-		-

g) Reverse stock split

The Board of Directors of the Company approved a reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.001 per share (the “Common Stock”) at a ratio of 1-for-5 (the “Reverse Stock Split”). The Reverse Stock Split became effective on January 18, 2023 (the “Effective Date”). As a result, the number of shares of the Company’s authorized Common Stock was reduced from 100,000,000 shares to 20,000,000 shares and the issued and outstanding number of shares of the Common Stock was correspondingly decreased. The Reverse Stock Split has no effect on the par value of the Company’s Common Stock or authorized shares of preferred stock.

When the Reverse Stock Split became effective, each five shares of issued and outstanding Common Stock were converted into one newly issued and outstanding share of Common Stock. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares of Common Stock that would have otherwise resulted from the Reverse Stock Split were rounded up to the nearest full share. No cash or other consideration was paid in connection with any fractional shares that would otherwise have resulted from the Reverse Stock Split.

As a result of the Reverse Stock Split, 35,827,677 shares of Common Stock that were issued and outstanding at January 18, 2023 was reduced to 7,174,506 shares of Common Stock (taking into account the rounding of fractional shares).

Except where otherwise specified, all number of shares, number of warrants, share prices, exercise prices and per share data in the condensed consolidated financial statements and notes to the condensed consolidated financial statements have been retroactively restated as if the Reverse Stock Split occurred at the beginning of the periods presented.

h) Revenue recognition

The following table present the Company’s revenues disaggregated by products and services and timing of revenue recognition:

	Three Months Ended March 31,
	2024		2023
	US$(’000)		US$(’000)
	(Unaudited)		(Unaudited)
Internet advertising and related services
--distribution of the right to use search engine marketing service		3,531		6,161
--online advertising placements		-		130
Blockchain-based SaaS services		-		25
Total revenues	$	3,531	$	6,316

	Three Months Ended March 31,
	2024		2023
	US$(’000)		US$(’000)
	(Unaudited)		(Unaudited)
Revenue recognized over time		3,531		6,316
Revenue recognized at a point in time		-		-
Total revenues	$	3,531	$	6,316

Contract balances

The table below summarized the movement of the Company’s contract liabilities for the three months ended March 31, 2024:

	Contract liabilities
	US$(’000)
Balance as of January 1, 2024		843
Exchange translation adjustment		(1	)
Revenue recognized from beginning contract liability balances		(372	)
Advances received from customers related to unsatisfied performance obligations		957
Balance as of March 31, 2024(Unaudited)		1,427

Advance from customers related to unsatisfied performance obligations are generally refundable. Refund of advance from customers were insignificant for the three months ended March 31, 2024 and 2023.

For the three months ended March 31, 2024 and 2023, there were no revenue recognized from performance obligations that were satisfied in prior periods.

i) Business combination

We account for our business combinations using the acquisition method in accordance with ASC Topic 805, Business Combinations. The acquisition method requires that the consideration transferred to be allocated to the assets, including separately identifiable assets and liabilities we acquired, based on their estimated fair values. The consideration transferred in an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations as of the acquisition date. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total of cost of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interests in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in earnings.

Acquisition of Yi En (Beijing) Technology Co., Ltd.

In order to further diversify the channels of the Company’s internet advertising services and improve profitability, the Company acquired a 51% equity interest in Beijing Yi En for a cash consideration of RMB1.

The acquisition was using the acquisition method of accounting. Accordingly, the acquired assets and liabilities were recorded at their fair value at the date of acquisition. The purchase price allocation was based on a valuation analysis that utilized and considered generally accepted valuation methodologies such as the income and cost approach. The Group engaged a third-party valuation firm to assist with the valuation of assets acquired and liabilities assumed in this business combination. The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed are based on various assumptions and valuation methodologies requiring considerable judgment from management. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. The Company determine discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons. Terminal values are based on the expected life of assets, forecasted life cycle and forecasted cash flows over that period.

The table below presented the allocation of purchase price to the major classes of assets and liabilities acquired as of March 26, 2024 (the acquisition date of Beijing Yi En):

	Fair Value			Amortization Period
	US$(’000)			(Years)
	(Unaudited)
Cash and cash equivalents		9
Prepayment to suppliers		54
Other current liabilities		(147	)
Goodwill		78
Acquired intangible assets
Customer Relationship		15			5
Related deferred tax liability		(4	)
Total Value	$	5
Purchase Price		-
Fair value of non-controlling interest		5
Total amount to be allocated		5

j) Lease

As of March 31, 2024, there were no operating lease right-of-use assets and total operating lease liabilities recognized.

Operating lease expenses:

	Three Months Ended March 31,
	2024		2023
	US$(’000)		US$(’000)
	(Unaudited)		(Unaudited)
Long-term operating lease contracts		22		133
Short-term operating lease contracts		12		6
Total	$	34	$	139

Supplemental information related to operating leases:

	Three Months Ended March 31,
	2024		2023
	US$(’000)		US$(’000)
	(Unaudited)		(Unaudited)
Operating cash flows used for operating leases (US$’000)		25		122
Weighted-average remaining lease term (years)		-		5.62
Weighted-average discount rate		-		6	%