Exhibit 99.1
POWERBRIDGE TECHNOLOGIES CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
F-1
POWERBRIDGE TECHNOLOGIES CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalent | $ | $ | ||||||
Accounts receivable, net | ||||||||
Notes receivable | ||||||||
Due from related parties, net | ||||||||
Loan receivable | ||||||||
Prepayments, deposits and other current assets, net | ||||||||
Total Current Assets | ||||||||
Property and equipment, net | ||||||||
Prepayments, deposits and other assets, net | ||||||||
Long term investments | ||||||||
Goodwill | ||||||||
Right of use assets | ||||||||
Deferred tax assets | ||||||||
Total Assets | $ | $ | ||||||
LIABILITIES AND EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Bank loans | $ | $ | ||||||
Accounts payable | ||||||||
Convertible loans | ||||||||
Customer deposits | ||||||||
Deferred revenue | ||||||||
Accrued expenses and other current liabilities | ||||||||
Due to related party | ||||||||
Taxes payable | ||||||||
Lease liabilities | ||||||||
Total Current Liabilities | ||||||||
Lease liabilities - non-current | ||||||||
Financial instrument for shared issued for acquisition -put option liabilities | ||||||||
Total Liabilities | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
EQUITY: | ||||||||
Ordinary shares, | ||||||||
Additional Paid-in Capital | ||||||||
Subscription receivable | ( | ) | ||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Accumulated other comprehensive (loss) income | ( | ) | ( | ) | ||||
Total Powerbridge Technologies Co., Ltd.’s Shareholders’ Equity | ||||||||
Non-controlling interest | ( | ) | ||||||
Total Equity | ||||||||
Total Liabilities and Equity | $ | $ |
* |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
POWERBRIDGE TECHNOLOGIES CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the six months ended June 30, | ||||||||
2023 | 2022 | |||||||
REVENUES: | ||||||||
Application development services | $ | $ | ||||||
Consulting and technical support services | ||||||||
Subscription services | ||||||||
Trading revenue | ||||||||
Others revenue | ||||||||
Total revenues | ||||||||
COST OF REVENUES | ||||||||
Cost of application development services | ||||||||
Cost of consulting and technical support services | ||||||||
Cost of subscription services | ||||||||
Cost of trading revenue | ||||||||
Cost of others revenue | ||||||||
Total cost of revenues | ||||||||
GROSS PROFIT | ||||||||
OPERATING EXPENSES | ||||||||
Sales and marketing | ||||||||
General and administrative | ||||||||
Provision for doubtful accounts | ||||||||
Research and development | ||||||||
Share based compensation | ||||||||
Total operating expenses | ||||||||
OPERATING LOSS | ( | ) | ( | ) | ||||
OTHER INCOME (EXPENSE) | ||||||||
Loss from disposition of a subsidiary | ( | ) | ||||||
Gain from equity investment | ||||||||
Fair value loss on financial instruments and financial assets | ( | ) | ||||||
Change in fair value of convertible debt | ( | ) | ||||||
Fair value change in financial instrument | ( | ) | ||||||
Other expense | ( | ) | ( | ) | ||||
Total other expense | ( | ) | ( | ) | ||||
LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
INCOME TAX BENEFIT | ( | ) | ( | ) | ||||
NET LOSS | ( | ) | ( | ) | ||||
Less: loss attributable to non-controlling interests | ( | ) | ( | ) | ||||
NET LOSS ATTRIBUTABLE TO POWERBRIDGE | ( | ) | ( | ) | ||||
OTHER COMPREHENSIVE LOSS | ||||||||
Foreign currency translation adjustment | ( | ) | ( | ) | ||||
COMPREHENSIVE LOSS | ( | ) | ( | ) | ||||
Less: comprehensive loss attributable to non-controlling interest | ( | ) | ( | ) | ||||
COMPREHENSIVE LOSS ATTRIBUTABLE TO POWERBRIDGE | $ | ( | ) | $ | ( | ) | ||
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES | ||||||||
LOSS PER SHARE | ||||||||
$ | ( | ) | $ | ( | ) |
* | Retroactively restated for one-for-eight reverse split with effective date of September 22, 2023. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
POWERBRIDGE TECHNOLOGIES CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Shares* | Amount | Additional Paid-in Capital | Subscription receivable | Retained Earnings (Accumulated deficit) | Non-controlling interest | Accumulated other comprehensive income (loss) | Total equity | |||||||||||||||||||||||||
Balance, January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||
Conversion of convertible loans | ||||||||||||||||||||||||||||||||
Issuance shares for investments | ||||||||||||||||||||||||||||||||
Issuance of shares for options | ||||||||||||||||||||||||||||||||
Options granted | - | |||||||||||||||||||||||||||||||
Disposition of a subsidiary | - | |||||||||||||||||||||||||||||||
Net loss for the period | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
Balance, January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||
Conversion of convertible loans | ||||||||||||||||||||||||||||||||
Issuance shares for investments | ||||||||||||||||||||||||||||||||
Issuance shares as prepayment for potential acquisition | ||||||||||||||||||||||||||||||||
Issuance of shares for private placement | ( | ) | ||||||||||||||||||||||||||||||
Issuance of shares for services | ||||||||||||||||||||||||||||||||
Split shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
Capital contribution by non-controlling shareholder | - | |||||||||||||||||||||||||||||||
Net loss for the period | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Non-controlling interests recognized from step acquisitions | - | |||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
Balance, June 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ |
* |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
POWERBRIDGE TECHNOLOGIES CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, | ||||||||
2023 | 2022 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss from operations to net cash used in operating activities: | ||||||||
Depreciation and amortization | ||||||||
Provision for doubtful accounts | ||||||||
Share based compensation | ||||||||
Loss from disposal of property and equipment | ||||||||
Deferred tax benefit | ( | ) | ( | ) | ||||
Change in fair value of convertible debt | ( | ) | ||||||
Fair value change in financial instrument | ||||||||
Fair value loss on financial instruments and financial assets | ||||||||
Gain from long term investment | ( | ) | ||||||
Loss from disposition of a subsidiary | ||||||||
Accrued interest of convertible debt | ||||||||
Right of use assets amortization | ||||||||
Changes in assets and liabilities: | ||||||||
Notes receivable | ||||||||
Accounts receivable | ( | ) | ||||||
Prepayments, deposits and other assets | ( | ) | ||||||
Accounts payable | ( | ) | ( | ) | ||||
Accounts payable-related party | ( | ) | ||||||
Accrued expenses and other current liabilities | ( | ) | ( | ) | ||||
Taxes payable | ( | ) | ||||||
Deferred revenue | ( | ) | ||||||
Customer deposits | ||||||||
Lease liabilities | ( | ) | ( | ) | ||||
NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Proceeds (loans to) from third parties | ( | ) | ||||||
Purchases of property and equipment | ( | ) | ( | ) | ||||
Proceeds from disposal of property and equipment | ||||||||
Long -term investment | ( | ) | ||||||
Cash received from acquisition | ||||||||
NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from bank loans | ||||||||
Repayments of bank loans | ( | ) | ( | ) | ||||
Proceeds from private placement and market offering | ||||||||
Split shares | ( | ) | ||||||
Payments to related parties | ( | ) | ( | ) | ||||
NET CASH PROVIDE BY FINANCING ACTIVITIES | ( | ) | ||||||
EFFECT OF EXCHANGE RATE CHANGES | ( | ) | ( | ) | ||||
NET DECREASE IN CASH AND RESTRICTED CASH | ( | ) | ( | ) | ||||
CASH AND RESTRICTED CASH - beginning of period | ||||||||
CASH AND RESTRICTED CASH - end of period | $ | $ | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
Cash paid for: | ||||||||
Interest | $ | $ | ||||||
Income taxes | $ | $ | ||||||
NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES | ||||||||
Right of use assets obtained in exchange of lease liabilities | $ | $ | ||||||
Conversion of convertible loans | $ | $ | ||||||
Issuance shares as prepayment for long term investment | $ | $ | ||||||
Issuance shares as prepayment for potential acquisition | $ | $ | ||||||
Issuance shares for acquisitions | $ | $ | ||||||
Non-controlling interests recognized from step acquisitions | $ | $ | ||||||
Property and equipment transferred from loan receivable | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Nature of business and organization
Powerbridge Technologies Co., Ltd. (“Powerbridge” or the “Company”), is a company that was established under the laws of the Cayman Islands on July 27, 2018 as a holding company. The Company, through its subsidiaries (collectively the “Company”), is a provider of software application and technology services to corporate and government customers engaged in global trade. Mr. Stewart Lor, the Company’s Chairman of the Board and Chief Executive Officer (“CEO”), together with his brother, Mr. Ban Lor, are the ultimate Controlling Shareholders of the Company.
Major subsidiaries | Percentage of Ownership |
Date of Incorporation |
Place of Incorporation |
Major Operation | |||||
Powerbridge Holding Limited (“Powerbridge HK”) | |||||||||
Boxinrui International Holdings Limited (“Boxinrui”) | |||||||||
Hongding Technology Co., Ltd (“Hongding”) | |||||||||
Powercrypto Holding Pte. Ltd. (“Powercrypto”) | |||||||||
Powercrypto Inc (1) | |||||||||
Powerbridge High Technologies Holding Co., Ltd | |||||||||
Powerbridge Technology Group Co., Ltd. (“Powerbridge Zhuhai”) | |||||||||
Powerstream Supply Chain Co., Ltd. (“Powerstream”) | |||||||||
Powermeta Digital Co., Ltd. (“Powermeta”) | |||||||||
Powerstream Capital Co., Ltd. (“Powerstream Capital”) | |||||||||
Powerbridge Digital Trade (HK) Co., Limited | |||||||||
SmartConn Co.Limited(“SmartConn”) | |||||||||
Hong Kong Anxin Jieda Co., Limited (“Anxin Jieda”) | |||||||||
Shenzhen Hongding Interconnect Technology Co., Ltd. (2) | |||||||||
Shenzhen Honghao Internet Technology Co., Ltd (“Honghao”) | |||||||||
Wuhan Honggang Technology Co., Ltd (“Honggang”) | |||||||||
Hongxi Data Technology Co., Ltd. | |||||||||
Zhuhai Hongyang Supply Chain Co., Ltd. (“Zhuhai Hongyang”) | |||||||||
Ningbo Zhijing Tongfu Technology Co., Ltd. (“Ningbo Zhijing”) | |||||||||
Hunan Powerverse Digital Co., Ltd. | |||||||||
Metafusion Digital Co., Ltd (“Metafusion”) | |||||||||
Shanghai Stamp Technology Co., Ltd. |
|||||||||
Ascendent Insight Education Co., Ltd. (“Ascendent”) | |||||||||
Xingtai Ningyao Technology Co., Ltd. |
(1) |
(2) |
F-6
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2023 and 2022 are not necessarily indicative of the results that may be expected for the full year. The information included in this interim report should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in the Company’s annual financial statements for the year ended December 31, 2022 filed with the SEC on April 28, 2023.
Principles of consolidation
The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All intercompany transactions and balances are eliminated upon consolidation. All significant intercompany transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.
Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.
Non-controlling interest represents the portion of the net assets of a subsidiary attributable to interests that are not owned by the Company. The non-controlling interest is presented in the consolidated balance sheets, separately from equity attributable to the shareholders of the Company. Non-controlling interest’s operating result is presented on the face of the consolidated statements of income and comprehensive income as an allocation of the total income for the year between non-controlling shareholders and the shareholders of the Company.
Liquidity
As of June 30, 2023, the Company
had working capital of approximately $
In assessing its liquidity,
the Company monitors and analyzes its cash on hand, its ability to generate sufficient revenue sources in the future and its operating
and capital expenditure commitments. As of June 30, 2023, the Company had cash of approximately $
On September 1, 2022,
On September 9, 2022,
The Company believes that its cash on hand and financing cash flows will be sufficient to fund its operations over at least the next 12 months from the date of this report. However, the Company may need additional cash resources in the future if the Company experiences changed business conditions or other developments, and may also need additional cash resources in the future if the Company wishes to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If it is determined that the cash requirements exceed the Company’s amounts of cash on hand, the Company may seek to issue debt or equity securities or obtain a credit facility.
F-7
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Use of estimates
The preparation of unaudited condensed consolidated 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 disclosures of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements include but not limited to the useful lives of property and equipment and capitalized development cost, impairment of long-lived assets, valuation of accounts receivables, valuation of convertible loans, loans to third parties, revenue recognition and realization of deferred tax assets and uncertain tax positions. Actual results could differ from these estimates.
Foreign currency translation
The functional currencies of the Company are the local currency of the county in which the subsidiaries operate. The Company’s financial statements are reported using U.S. Dollars. The results of operations and the unaudited condensed consolidated statements of cash flows denominated in foreign currencies are translated at the average rates of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currencies is translated at the historical rates of exchange at the time of capital contributions. Because cash flows are translated based on the average translation rates, amounts related to assets and liabilities reported on the unaudited condensed consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the unaudited condensed consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive income (loss) included in unaudited condensed consolidated statements of changes in equity. Gains and losses from foreign currency transactions are included in the unaudited condensed consolidated statement of operations and comprehensive income (loss).
Fair value measurement
ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are 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, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data. |
● | Level 3 — inputs to the valuation methodology are unobservable. |
Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, notes and accounts receivable, due from related parties, prepayments, deposits and other current assets, notes and accounts payable, customer deposits, salaries and benefits payables, due to related party and taxes payable approximates their recorded values due to their short-term maturities. The fair value of the long-term prepayments, deposits and other assets and loans to third parties approximate their carrying amounts because the deposits were paid in cash.
F-8
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Fair value measurement - continued
Assets and Liabilities Measured or Disclosed at Fair Value on a recurring basis
As of June 30, 2023 | ||||||||||||||||
Fair Value Measurement at the Reporting Date using | ||||||||||||||||
Quoted price in active markets for identical assets Level 1 | Significant other observable inputs Level 2 | Significant unobservable inputs Level 3 | Total | |||||||||||||
Financial liabilities: | ||||||||||||||||
Put option liability from Smartconn acquisition | $ | $ | $ | $ | ||||||||||||
Put option liability from Boxinrui acquisition | ||||||||||||||||
Convertible loan | ||||||||||||||||
Total | $ | $ | $ | $ |
Financial instrument -put option liabilities
(i) Put option liability from Smartconn acquisition
In connection with the Smartconn acquisition, the previous shareholder of Smartconn may be entitled to receive put option shares as follow: Within two years after the Company acquired, if the consideration shares’ price is lower than the payment date price, the previous shareholder will be entitled to receive compensation shares.
Upon
the closing of the Smartconn acquisition, the Company recorded the fair value of the financial instrument resulted from put option liability
and recorded the changes in fair value from January 5, 2023 to June 30, 2023 in earnings. The Company determined the fair value of the
financial instrument using binomial model, which includes significant unobservable inputs that are classified as level 3 in the fair value
hierarchy. A binomial model uses random numbers, together with the assumption of volatility, risk-free rate, expected dividend rate, to
generate individual stock price paths.
January
5, | June
30, | |||||||
Risk-free interest rate | % | % | ||||||
Share price | $ | $ |
(ii) Put option liability from Boxinrui acquisition
In connection with the Boxinrui acquisition, the previous shareholder of Boxinrui may be entitled to receive put option shares as follow: Within two years after the Company acquired, if the consideration shares’ price is lower than the payment date price, the previous shareholder will be entitled to receive compensation shares.
F-9
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Upon the closing of the Boxinrui acquisition, the Company recorded the fair value of the financial instrument resulted from put option liability and recorded the changes in fair value from March 28, 2023 to June 30, 2023 in earnings. The Company determined the fair value of the financial instrument using binomial model, which includes significant unobservable inputs that are classified as level 3 in the fair value hierarchy. A binomial model uses random numbers, together with the assumption of volatility, risk-free rate, expected dividend rate, to generate individual stock price paths. The major assumptions used in the binomial model are as follows:
Fair value measurement - continued
March
28, | June
30, | |||||||
Risk-free interest rate | % | % | ||||||
Share price | $ | $ |
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
Opening balance | $ | $ | ||||||
Issuance of put option liability from Smartconn acquisition | ||||||||
Issuance of put option liability from Boxinrui acquisition | ||||||||
Loss on change in fair value of put options | ||||||||
Total | $ | $ |
Convertible loan
The Company elected the fair value option to account for its convertible loan. The Company engaged an independent valuation firm to perform the valuation. The fair value of the convertible loans is calculated using the binomial tree model. The convertible loans are classified as level 3 instruments as the valuation was determined based on unobservable inputs which are supported by little or no market activity and reflect the Company’s own assumptions in measuring fair value. Significant estimates used in developing the fair value of the convertible loans include time to maturity, risk-free interest rate, straight debt discount rate, probability to convert and expected timing of conversion. Refer to Note 12 for additional information.
As the inputs used in developing the fair value for level 3 instruments are unobservable, and require significant management estimate, a change in these inputs could result in a significant change in the fair value measurement.
The following is a reconciliation of the beginning and ending balances for convertible notes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of June 30, 2023 and December 31, 2022:
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
Opening balance | $ | $ | ||||||
Issuance of convertible note | ||||||||
Loss on change in fair value of convertible notes | ||||||||
Accrued interest | ||||||||
Conversion of convertible notes | ( | ) | ( | ) | ||||
Total | $ | $ |
Cash and cash equivalent
Cash and cash equivalent comprise
cash at banks and on hand, which includes deposits with original maturities of three months or less with commercial banks in PRC. As of
June 30, 2023 and December 31,2022, cash balances were $
F-10
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Accounts receivable and allowance for credit losses
Accounts receivable represents the amounts that the Company has an unconditional right to consideration and is recorded net of allowance for credit losses.
In 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC Topic 326”), which amends previously issued guidance regarding the impairment of financial instruments by creating an impairment model that is based on expected losses rather than incurred losses. The Group has adopted this ASC Topic 326 and several associated ASUs on January 1, 2023 using a modified retrospective approach. The adoption has no material impact to the Company’s unaudited condensed consolidated financial statements. The Group estimated allowance for credit losses to reserve for potentially uncollectible receivable amounts periodically, considering factors in assessing the collectability of its accounts receivable, such as historical distribution of the age of the amounts due, payment history, creditworthiness, forward-looking factor, historical collections data of the customers, to assess the credit risk characteristics. If there is strong evidence indicating that the accounts receivable is likely to be unrecoverable, the Group also makes specific allowance in the period in which a loss is determined to be probable. Accounts receivable are considered impaired and written-off when it is probable that all contractual payments due will not be collected after all collection efforts have been exhausted.
Prepayments, deposits and other assets, net
Prepayment, deposit and other assets, net, primarily consists of advances to suppliers for purchasing goods or services that have not been received or provided; security deposits made to our customers; advances to employees and loan receivables from business partners. Prepayment, deposit and other assets are classified as either current or non-current based on the terms of the respective agreements. These advances are unsecured and are reviewed periodically to determine whether their carrying value has become impaired.
Property and equipment, net
Property and equipment, net, mainly comprise furniture and furniture, vehicles, compute, equipment and buildings are stated at cost less accumulated depreciation and impairment. Property and equipment are depreciated over the estimated useful lives of the assets on a straight-line basis, after considering the estimated residual value.
Useful Life | ||
Office equipment, fixtures and furniture | ||
Automobiles | ||
Capitalized development costs and software acquired | ||
Computer equipment | ||
Buildings |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and the related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is charged to the statement of income and comprehensive income.
F-11
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Capitalized development costs
The Company follows the provisions of Accounting Standards Codification (“ASC”) 985-20, “Costs of Software to be Sold, Leased, or Marketed.” ASC 985-20 provides guidance on capitalization of the costs of software developed or obtained for sold, leased, or marketed. The Company expenses all costs incurred during the preliminary project stage of its development, and capitalizes costs incurred during the application development stage. Costs incurred relating to upgrades and enhancements to the application are capitalized if it is determined that these upgrades or enhancements add additional functionality to the application. The capitalized development cost is amortized on a straight-line basis over the estimated useful life, which is generally five years. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.
Impairment for long-lived assets
Long-lived assets, including property, equipment, furniture and fixtures and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. When these events occur, the Company measures impairment by comparing the carrying values of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amounts of the assets, the Company would recognize an impairment loss based on the excess of the carrying value over the assessed discounted cash flow amount. For the six months ended June 30, 2023 and 2022 the Company recognized $
impairment for the long-lived assets.
Long-term investments
Long-term investments are primarily consisted of equity investments in privately held entities accounted for using the measurement alternative and equity investments accounted for using the equity method. On January 1, 2022, the Company adopted ASU 2016-01 Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. According to the guidance, the Company started to record equity investments at fair value, with gains and losses recorded through net earnings. And the Company elected to measure certain equity investments without readily determinable fair value at cost, less impairments, plus or minus observable price changes and assess for impairment quarterly.
Equity investments without readily determinable fair values
After the adoption of this new accounting standard, the Company elected to record equity investments without readily determinable fair values and not accounted for under the equity method at cost, less impairment, adjusted for subsequent observable price changes on a nonrecurring basis, and report changes in the carrying value of the equity investment in current earnings. Changes in the carrying value of the equity investment are required to be made whenever there are observable price changes in orderly transactions for the identical or similar investment of the same issuer. Reasonable efforts shall be made to identify price changes that are known or that can reasonably be known.
Equity investments with readily determinable fair values
Equity investments with readily determinable fair values are measured and recorded at fair value using the market approach based on the quoted prices in active markets at the reporting date.
F-12
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Long-term investments - continued
Equity investments accounted for using the equity method
The Company accounts for its equity investment over which it has significant influence but does not own a majority equity interest or otherwise control, using the equity method. The Company adjusts the carrying amount of the investment and recognizes investment income or loss for its share of the earnings or loss of the investee after the date of investment. The Company assesses its equity investment for other-than-temporary impairment by considering factors including, but not limited to, current economic and market conditions, operating performance of the entity, including current earnings trends and undiscounted cash flows, and other entity-specific information. The fair value determination, particularly for investments in a privately held entity, requires judgment to determine appropriate estimates and assumptions. Changes in these estimates and assumptions could affect the calculation of the fair value of the investment and determination of whether any identified impairment is other-than-temporary.
Business combinations
The cost of 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. 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 the cost of the acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest 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 identifiable net assets of the acquiree, the difference is recognized directly in earnings.
The determination and allocation of fair values to the identifiable net assets acquired, liabilities assumed and noncontrolling interest is based on various assumptions and valuation methodologies requiring considerable judgment. 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 determines discount rates to be used based on the risk inherent in the acquiree’s current business model and industry comparisons. Although the Company believes that the assumptions applied in the determination are reasonable based on information available at the date of acquisition, actual results may differ from forecasted amounts and the differences could be material.
Goodwill
Goodwill is the cost of acquired companies in excess of the fair value of identifiable net assets at acquisition date. Goodwill is not subject to amortization, but rather is evaluated for impairment at least annually. The Company evaluates its goodwill for impairment during the fourth quarter of its fiscal year or more frequently if indicators of potential impairment exist, in accordance with ASC 350, Intangibles - Goodwill and Other. Goodwill impairment is determined by comparing the estimated fair value of a reporting unit (generally defined as the businesses for which financial information is available and reviewed regularly by management) with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not deemed to be impaired. However, if the estimated fair value is below carrying value, further analysis is required to determine the amount of the impairment.
In the course of evaluating the potential impairment of goodwill, the Company may perform either a qualitative or a quantitative assessment. The Company’s qualitative assessment of potential impairment may result in the determination that a quantitative impairment analysis is not necessary. Under this elective process, the Company assesses qualitative factors to determine whether the existence of events or circumstances leads the Company to determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If after assessing the totality of events and circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing a quantitative analysis is not required. However, if the Company concludes otherwise, then the Company performs a quantitative impairment analysis.
F-13
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Goodwill - continued
If the Company either chooses not to perform a qualitative assessment, or the Company chooses to perform a qualitative assessment but is unable to qualitatively conclude that no impairment has occurred, then the Company performs a quantitative evaluation. In the case of a quantitative assessment, the Company estimates the fair value of the reporting unit with which the goodwill that is subject to the quantitative analysis is associated and compares it to the carrying value. If the estimated fair value of a reporting unit is less than its carrying value, the excess is recorded as a goodwill impairment, which is limited to the total amount of goodwill allocated to that reporting unit.
For the six months ended June 30, 2023, the Company performed a qualitative assessment for the reporting unit. Based on the requirements of ASC 350-20, the Company evaluated all relevant qualitative and quantitative factors, weighed all factors in their entirety and concluded that it was not more-likely-than-not that the fair value of the reporting unit was less than its carrying amount. Therefore, no goodwill impairment was recognized for the six months ended June 30, 2023.
Revenue recognition
The Company adopted ASC Topic 606 Revenue from Contracts with Customers (“ASC 606”) on January 1, 2019 using the modified retrospective approach. Revenues for the six months ended June 30, 2022 and 2023 were presented under ASC 606. There is no adjustment to the opening balance of retained earnings at January 1, 2019 since there was no change to the timing and pattern of revenue recognition upon adoption of ASC 606. Under ASC 606, revenue is recognized when control of promised goods or services is transferred to the Company’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services and is recorded net of value-added tax (“VAT”). To achieve that core principle, the Company applies the following steps:
Step 1: Identify the contract (s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
The Company derives its revenues from five sources: (1) revenue from application development services, (2) revenue from consulting and technical support services, (3) revenue from subscription services, (4) trading revenue and (5) others revenue. All of the Company’s contracts with customer do not contain cancelable and refund-type provisions.
(1) Revenue from application development service
The Company’s application development service contracts are primarily on a fixed-price basis, which require the Company to perform services including project planning, project design, application development and system integration based on customers’ specific needs. These services also require significant production and customization. Upon delivery of the services, customer acceptance is generally required. In the same contract, the Company is generally required to provide post-contract customer support (“PCS’) for a period from three months to three years (“PCS period”) after the customized application development services are delivered. The type of services for PCS clause is generally not specified in the contracts or as stand-ready services on when-and-if-available basis. The unspecified PCS is stand-ready service on when-and-if-available basis. It grants the customers on line and telephone access to technical support personnel during the term of the service. Specified PCS includes specified service term in the contract such as training.
The Company’s application
development service revenues are generated primarily from contracts with PRC government or related agencies and state-owned enterprises.
The contracts contain negotiated billing terms which generally include multiple payment phases throughout the contract term and a significant
portion (
F-14
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Revenue recognition - continued
The Company sometimes provides a warranty for its application development service contracts. The warranty period is typically 12-36 months upon the completion of the application development service. In accordance with ASC 606-10-25-19, the Company believes the warranty provision in the contracts generally represents service-type warranty, which is a distinct performance obligation and the Company also provides the similar service on standalone basis and customers can benefit from the related service-type warranty service. For the service warranty component, the customer simultaneously receives and consumes the benefits provided by the company performance over the warranty term, therefore, the service warranty is satisfied over time. The revenue allocated to the service warranty is recognized over the warranty period.
The Company assesses that application development service, PCS or specific service and service-type warranty service, if applicable, are distinct performance obligations in the application development service contracts. The Company provides these services on standalone basis and customers are able to benefit from each of the service on its own. In addition, the timing of delivery of these performance obligations can be separately identifiable in the contracts. The transaction price is allocated to these identified performance obligations based on the relative standalone selling prices. The transaction price allocated to PCS or unspecific service and service-type warranty, if applicable, on a straight-line method over the contractual period. Revenue allocated to specified PCS is recognized as the related services are rendered. The transaction price allocated to application development service is recognized over time as the Company’s performance creates or enhances the project controlled by the customer and the control is transferred continuously to our customers. The Company uses an input method based on cost incurred as the Company believes that this method most accurately reflects the Company’s progress toward satisfaction of the performance obligation, which usually takes less than one year. Under this method, the transaction price allocated to application development service is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations.
Incurred costs include all direct material, labor and subcontract costs, and those indirect costs related to application development performance, such as indirect labor, supplies, and tools. Cost-based input method requires the Company to make estimates of revenues and costs to complete the construction. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the application development, including materials, labor, and other system costs. The Company’s estimates are based upon the professional knowledge and experience of our engineers and project managers to assess the contract’s schedule, performance, technical matters. The Company has adequate cost history and estimating experience, and with respect to which management believes it can reasonably estimate total development costs. If the estimated costs are greater than the related revenues, the Company recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Changes in estimates for application development services include but not limited to cost forecast changes and change orders. The cumulative effect of changes in estimates is recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. To date, the Company has not incurred a material loss on any contracts. However, as a policy, provisions for estimated losses on such engagements will be made during the period in which a loss becomes probable and can be reasonably estimated. If contract modifications result in additional goods or services that are distinct from those transferred before the modification, they are accounted for prospectively as if the Company entered into a new contract. If the goods or services in the modification are not distinct from those in the original contract, sales and gross profit are adjusted using the cumulative catch-up method for revisions in estimated total contract costs and contract values.
In certain application development service arrangements, the Company sells and delivers IT equipment on standalone basis prior to the delivery of the services. In these cases, the Company controls the IT equipment before they are transferred to the customer. The Company has the right to direct the suppliers and control the goods or assets transferred to its customers. Thus, the Company considers it should recognize revenue as a principal in the gross amount of consideration to which it is entitled in exchange for the IT equipment delivered. The Company assesses the sale of equipment is separately identifiable from other promises in the contract and it is distinct performance obligation within the context of the contract. Accordingly, the revenue from the related IT equipment based on its relative standalone selling price is recognized upon customer acceptance after delivery.
F-15
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Revenue recognition - continued
(2) Revenue from consulting and technical support services
Revenue from consulting and technical support services is primarily comprised of fixed-fee contracts, which require the Company to provide professional consulting and technical support services over contract terms beginning on the commencement date of each contract, which is the date its service is made available to customers. Billings to the customers are generally on a monthly or quarterly basis over the contract term, which is typically 12 to 24 months. The consulting and technical support services contracts typically include a single performance obligation. The revenue from consulting and technical support services is recognized over the contract term on a straight-line basis as customers receive and consume benefits of such services.
(3) Revenue from subscription services
Revenue from subscription services is comprised of subscription fees from customers accessing the Company’s software-as-a-service applications for a subscribed period. The Company’s monthly or quarterly billing to customer is on the basis of number of uses or the actual usage by the customers. The subscription arrangements are considered service contracts because customers do not have the right to take possession of the software and can only benefit from the software when provided the right to access the software. Accordingly, the subscription services contracts typically include a single performance obligation. The revenue from subscription services is recognized over the contract term on a straight-line basis or based on the actual usage as customers receive and consume benefits of such services.
(4) Trading revenue
The Company started trading business for the year ended December 31, 2021 and recognized revenue at a point in time when control of such products transfers to the customer, which generally occurs upon shipment or delivery depending on the terms of the contracts with the customer. Product sale contracts typically include a single performance obligation and there are no rights of return. The transaction price is based on the fixed contractual price with the customer. Billings to the customer for the sale of products occur at the time the products are transferred to the customer.
(5) Others revenue
In April 2023, the Company
started regional authorization membership program to engage independent merchant to assist in developing specified geographical regions.
The program grants non-exclusive geographical territory business development to the authorized distributors within that defined territory.
The Company’s services under regional cooperation agreements include marketing support to advertise as well as utilization of the
Company’s trademark and copyrights for business promotion purpose. The term of cooperation agreements is typically one to two years.
The Company charges a fixed amount authorization fee which is non-refundable and to be paid upon execution of an authorization agreement.
For all the Company’s cooperation agreements, the amount of fee is fixed or determinable and no right of return provision indicated
in the agreement. Since the Company provides no financing to authorized distributors and offers no guarantees on their behalf. The services
provided by the Company are highly interrelated with the cooperation agreements and as such are considered to represent a single performance
obligation. The agreement price is fully allocated to the single performance obligation. The total authorization fees are recognized ratably
on a straight-line basis over the term of the cooperation agreements. Other revenues accounted for
Revenue includes reimbursements
of travel and out-of-pocket expense, with equivalent amounts of expense recorded in cost of revenue. The Company reports revenues net
of value added tax (“VAT”). The Company’s subsidiaries in PRC are subject to a
F-16
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Revenue recognition - continued
Practical Expedient and Exemptions
The Company does not disclose the value of unsatisfied performance obligations within one year by applying the right to invoice practical expedient provided by ASC 606-10-55-18.
Contract balance
The accounts receivable includes
both unbilled accounts receivable and billed accounts receivable. The Company records unbilled accounts receivable for revenue that has
been recognized in advance of billing the customer, which is common for application development service contracts. The unbilled accounts
receivable represents the Company’s right to consideration in exchange for the service that the Company has performed to the customer
before payment is due and the unbilled account receivable will be reclassified into billed accounts receivable when the Company has the
right to invoice. Contract liabilities are presented as customer deposits and deferred revenue on the consolidated balance sheet. Contract
liabilities relate to payments received in advance of completion of performance obligations under a contract. Contract liabilities are
recognized as revenue upon the completion of performance obligations. As of June 30, 2023 and December 31, 2022, the balance of customer
deposits amounted to $
Operating leases
The Company adopted Topic 842 on January 1, 2022 using the modified retrospective transition approach. The Company has lease contracts for factory and office space under operating leases. The Company determines whether an arrangement constitutes a lease and records lease liabilities and right-of-use assets on its consolidated balance sheets at lease commencement. The Company measures its lease liabilities based on the present value of the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or its incremental borrowing rate, which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. The Company estimates its incremental borrowing rate based on an analysis of weighted average interest rate of its own bank loans. The Company measures right-of-use assets based on the corresponding lease liability adjusted for payments made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Company begins recognizing lease expense when the lessor makes the underlying asset available to the Company.
For leases with lease term less than one year (short-term leases), the Company records operating lease expense in its unaudited condensed consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred.
F-17
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Income taxes
The Company accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the unaudited condensed consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An uncertain tax position
is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination.
The amount recognized is the largest amount of tax benefit that is greater than
Value added tax
Revenue represents the invoiced
value of service, net of VAT. The VAT is based on gross sales price and VAT rates range up to
Employee defined contribution plan
Full time employees of the Company in the PRC participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require that the Company make contributions to the government for these benefits based on a certain percentage of the employee’s salaries. The Company has no legal obligation for the benefits beyond the contributions. The total amount was expensed as incurred.
Loss per share
The Company computes (loss) earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common share outstanding for the period. Diluted EPS presents the dilutive effect on a per share basis of the potential Ordinary Shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential Ordinary Shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the six months ended June 30, 2023and 2022, since the company had a loss, basic and dilutive loss per share is the same.
F-18
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Share-Based compensation
The Company accounts for share-based awards to employees and nonemployees directors and consultants in accordance with the provisions of ASC 718, Compensation—Stock Compensation, and under the recently issued guidance following FASB’s pronouncement, ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under ASC 718, and applicable updates adopted, for employee stock-based awards, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire award. For the non-employee stock-based awards, the fair value of the awards to non-employees are measured every reporting period based on the value of the Company’s common stock.
Comprehensive income (loss)
Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses that under U.S. GAAP are recorded as an element of shareholders’ equity but are excluded from net income. Other comprehensive income (loss) consists of a foreign currency translation adjustment resulting from the Company not using the U.S. dollar as its functional currencies.
Statement of Cash Flows
In accordance with ASC 230, “Statement of Cash Flows,” cash flows from the Company’s operations are formulated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
Commitments and Contingencies
In the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and the specific facts and circumstances of each matter.
Segment reporting
The Company’s chief operating decision maker (“CODM”) has been identified as its CEO, who reviews the consolidated results when making decisions about allocating resources and assessing performance of the Company as a whole and hence, the Company has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal reporting. The Company’s long-lived assets are substantially all located in the PRC and all of the Company’s revenues are derived from the PRC. Therefore, no geographical segments are presented.
F-19
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Concentrations of Risks
(a) Concentration of credit risk
Assets that potentially subject
the Company to significant concentration of credit risk primarily consist of cash, restricted cash, accounts receivable and other current
assets. The maximum exposure of such assets to credit risk is their carrying amounts as at the balance sheet dates. As of June 30, 2023
and December 31, 2022, the aggregate amount of cash and restricted cash of $
(b) Foreign currency risk
A majority of the Company’s expense transactions are denominated in RMB and a significant portion of the Company and its subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.
The Company’s functional
currency is the RMB, and the Company’s financial statements are presented in U.S. dollars. The RMB deprecation by
(c) Significant customers
For the six months ended June
30, 2023, one customer accounted for
(d) Significant suppliers
For the six months ended June
30, 2023, one supplier accounted for
F-20
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Recently issued accounting pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (“the JOBS Act”), the Company meets the definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In October 2021, the FASB issued ASU No. 2021-08, “‘Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”). This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The amendments are effective for the Company beginning after December 15, 2023, and are applied prospectively to business combinations that occur after the effective date. The Company does not expect the adoption of ASU 2021-04 will have a material effect on the unaudited condensed consolidated financial statements.
Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have a material impact on the consolidated financial position, statements of operations and cash flows.
Note 3 — Acquisition
The Company accounted the following acquisitions as business combinations in accordance with ASC 805. Acquisition-related costs incurred for the acquisitions are not material.
Smartconn Acquisition
On January 5, 2023, the Company
completed an equity acquisition with a shareholder of Smartconn. Prior to the acquisition, the Company held
The objective of the acquisition is to support the Company’s software application and technology service. The acquisition was closed on January 5, 2023.
F-21
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 — Acquisition (continued)
Smartconn Acquisition - continued
Amount | ||||
Total consideration for step acquisition | $ | |||
Assets acquired and liabilities assumed: | ||||
Cash acquired | ||||
Property and equipment, net | ||||
Intangible assets, net | ||||
Current liabilities | ( | ) | ||
Total net assets acquired | ||||
Previous held | ( | ) | ||
( | ) | |||
Goodwill | $ |
The intangible assets are mainly
attributable to software acquired through the acquisition, which are amortized over
Boxinrui Acquisition
On March 28, 2023, the
Company completed an equity acquisition with fifteen individual shareholders (the “Relevant Shareholders”) of Boxinrui, pursuant
to which the Company further acquired
The objective of the acquisition is to expand the Company’s business scope. The acquisition was closed on March 28, 2023.
Amount | ||||
Total consideration for step acquisition | $ | |||
Assets acquired and liabilities assumed: | ||||
Cash acquired | ||||
Other current assets | ||||
Property and equipment, net | ||||
Intangible assets, net | ||||
Current liabilities | ( | ) | ||
Total net assets acquired | ||||
Previous held | ( | ) | ||
( | ) | |||
Goodwill | $ |
The intangible assets are
mainly attributable to software acquired through the acquisition, which are amortized over
F-22
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 — Accounts receivable, net
June
30, | December
31, | |||||||
Accounts receivable | $ | $ | ||||||
Less: Allowance for doubtful accounts | ( | ) | ( | ) | ||||
Total accounts receivable, net | $ | $ |
Unbilled accounts receivable
included in accounts receivable above amounted to $
As of December 5, 2023, approximately
$
Six Months Ended June 30, 2023 | Year
Ended | |||||||
Beginning balance | $ | $ | ||||||
Provision for doubtful accounts | ||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | ||||
Ending balance | $ | $ |
Note 5 — Prepayments, deposits and other assets, net
June
30, | December 31, 2022 | |||||||
Security deposits (1) | $ | $ | ||||||
Advances to suppliers | ||||||||
Advances to employees | ||||||||
Prepaid expense | ||||||||
Prepayment for potential acquisition (2) | ||||||||
Others | ||||||||
Less: Long term portion | ( | ) | ( | ) | ||||
Allowance for doubtful accounts -advances to suppliers | ( | ) | ( | ) | ||||
Prepayments, deposits and other assets – current portion | $ | $ |
(1) | |
(2) |
F-23
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 — Prepayments, deposits and other assets, net (continued)
Six
Months | Year
Ended | |||||||
Beginning balance | $ | $ | ||||||
Provision for doubtful accounts | ||||||||
Foreign currency translation adjustments | ( | ) | ||||||
Ending balance | $ | $ |
Note 6 — Loans to third parties
June
30, | December 31, 2022 | |||||||
Unsecured loan receivable from third parties (1) | $ | $ | ||||||
Guaranteed loan receivable from media business (2) | ||||||||
Less: Long term portion | ||||||||
Prepayments, deposits and other assets – current portion | $ | $ |
(1) |
(2) |
On January 5, 2023, the Company, Kezhi, the guarantor and the guarantor’s senior management Mr. Su Haoqing, entered into a debt extinguish agreement. Pursuant to the agreement, Mr. Su Haoqing settled the remaining $ |
F-24
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 7 — Long term investment
Equity investments accounted for using the equity method(ii) | Cost method investments without readily determinable fair value(i) | Total | ||||||||||
Balance as of January 1, 2023 | $ | $ | $ | |||||||||
Share of gain in equity method investee | ||||||||||||
Decrease due to acquired | ( | ) | ( | ) | ( | ) | ||||||
Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||
Balance as of June 30, 2023 | $ | $ | $ |
(i) | During the year ended December 31, 2022, the Company invested $
On January 20, 2022, the Company invested issued
On November 1, 2022, the Company invested issued
On January 1, 2022, the Company gained
|
(ii) | On June 28, 2022, the Company invested issued
On March 28, 2023, the Company entered into an equity transfer agreement with fifteen individual shareholders of Boxinrui, pursuant to which the Company agreed to further acquire |
F-25
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 8 — Property and equipment, net
June
30, | December 31, 2022 | |||||||
Computer equipment | $ | $ | ||||||
Office equipment, fixtures and furniture | ||||||||
Capitalized development cost and software acquired | ||||||||
Automobiles | ||||||||
Buildings | ||||||||
Subtotal | ||||||||
Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
Total | $ | $ |
Depreciation and amortization
expense for the six months ended June 30, 2023 and 2022 amounted to $
Twelve months ending June 30, | Estimated amortization expense | |||
2024 | $ | |||
2025 | ||||
2026 | ||||
2027 | ||||
2028 | ||||
Thereafter | ||||
Total | $ |
Note 9 — Related party balances and transactions
Name of Related Party | Relationship to the Company | |
Guangzhou Jiatu Culture Media Co., Ltd. (formerly as Guangzhou Powerbridge Blockchain Co., Ltd.) | ||
Ban Lor | ||
Stewart Lor | ||
Yuxia Xu | ||
Hong Yu | ||
Shanghai Stamp Technology Co., Ltd. | ||
Xuzhi Zhou | ||
Jing Deng | ||
Xiaoyan Liu | ||
Zhongchuan Dadi (Beijing) Technology Co., LTD | ||
Shanghai Yue See cultural development Co., LTD |
F-26
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9 — Related party balances and transactions (continued)
a |
June
30, | December
31, | |||||||
Shanghai Stamp Technology Co., Ltd. (1) | $ | $ | ||||||
Ban Lor (2) | ||||||||
Stewart Lor (2) | ||||||||
Yuxia Xu (2) | ||||||||
Xuzhi Zhou (2) | ||||||||
Jing Deng (2) | ||||||||
Xiaoyan Liu (2) | ||||||||
Due from related parties, net | $ | $ |
(1) |
(2) |
b |
June
30, | December
31, | |||||||
Hong Yu (1) | $ | $ | ||||||
Shanghai Yue See cultural development Co., LTD | ||||||||
Zhongchuan Dadi (Beijing) Technology Co., LTD | ||||||||
Subtotal | $ | $ |
(1) |
c |
Six months ended June 30, 2023 | Six months ended June 30, 2022 | |||||||||
Guangzhou Jiatu Culture Media Co., Ltd. (2) | Service fees | $ | $ | |||||||
Stewart Lor | Interest income | $ | $ | |||||||
Yuxia Xu | Interest income | $ | $ | |||||||
Shanghai Yue See cultural development Co., LTD | Service revenue | $ | $ |
(1) |
F-27
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 — Bank loans
June 30, 2023 | December 31, 2022 | |||||||
Loan from Bank of Communication | $ | $ | ||||||
Loan from Bank of China | ||||||||
Loan from SPD Bank | ||||||||
$ | $ |
On January 28, 2022, Powerbridge
Zhuhai entered into a loan agreement with Bank of Communication to obtain a loan of $
On December 16, 2022, Powerbridge
Zhuhai entered into a loan agreement with Bank of Communication to obtain a loan of $
On
January 16, 2023, Powerbridge Zhuhai entered into a loan agreement with Bank of Communication to obtain a loan of $
On
January 19, 2023, Powerbridge Zhuhai entered into a loan agreement with Bank of Communication to obtain a loan of $
On
March 14, 2023, Powerbridge Zhuhai entered into a loan agreement with Bank of Communication to obtain a loan of $
On June 10, 2022, Powerbridge
Zhuhai entered into a loan agreement with Bank of China to obtain a loan of $
On July 15, 2022, Powerbridge
Zhuhai entered into a loan agreement with Bank of China to obtain a loan of $
On June 28, 2023, Powerbridge
Zhuhai entered into a loan agreement with Shanghai Pudong Development Bank obtain a loan of $
For the six months ended June
30, 2023 and 2022, interest expense was $
F-28
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 — Lease
The Company has several operating leases for offices. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Effective January 1, 2022, the Company adopted the new lease accounting standard using a modified retrospective transition method which allowed the Company not to recast comparative periods presented in its unaudited condensed consolidated financial statements. In addition, the Company elected the package of practical expedients, which allowed the Company to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as operating or finance leases, and to not reassess initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The Company combines the lease and non-lease components in determining the ROU assets and related lease obligation. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities as disclosed below and had no impact on accumulated deficit as of January 1, 2022. ROU assets and related lease obligations are recognized at commencement date based on the present value of remaining lease payments over the lease term.
Total lease expense for the
six months ended June 30, 2023 and 2022 amounted to $
June 30, 2023 | ||||
Right-of-use assets, net | $ | |||
Operating lease liabilities - current | ||||
Operating lease liabilities - non-current | ||||
Total operating lease liabilities | $ |
Remaining lease term and discount rate: | ||||
Weighted average remaining lease term (years) | ||||
Weighted average discount rate | % |
Twelve months ending June 30, | Amount | |||
2024 | $ | |||
2025 | ||||
Total future minimum lease payments | ||||
Less: imputed interest | ( | ) | ||
Present value of lease liabilities | $ |
F-29
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 12 — Convertible Notes
On August 7, 2021, the Company
entered into an amendment (the “Closing Statement”) to the securities purchase agreement initially entered into with YA on
April 9, 2021 (the “Purchase Agreement”). Pursuant to the Purchase Agreement, YA agreed to purchase convertible notes (the
“Notes”) in the aggregate principal amount of US$
On September 1, 2022, the
Company entered into a securities purchase agreement with Streeterville Capital, LLC (“Streeterville”), pursuant to which
the Company issued the Investor an unsecured promissory note on September 1, 2022 in the original principal amount of $
Conversion of convertible notes
For the year ended December
31, 2022, YA delivered conversion notice for convertible notes in an aggregate of principle of $
The Company has elected to
recognize the convertible note at fair value and therefore there was no further evaluation of embedded features for bifurcation. The Company
engaged third party valuation firm to perform the valuation of convertible note.
February 9, 2022-May 25, 2022 | ||||
Risk-free interest rate | % | |||
Expected life | ||||
Discount rate | % | |||
Expected volatility | % | |||
Expected dividend yield | % | |||
Fair value | $ |
F-30
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 12 — Convertible Notes (continued)
For the year ended December
31, 2022, Streeterville delivered conversion notice for convertible notes in an aggregate of principle of $
November 8, 2022-December 24, 2022 | ||||
Risk-free interest rate | % | |||
Expected life | ||||
Discount rate | % | |||
Expected volatility | % | |||
Expected dividend yield | % | |||
Fair value | $ |
For the six months ended June 30, 2023, Streeterville
delivered conversion notice for convertible notes in an aggregate of principle of $
January 10, 2023-February 3, 2023 | ||||
Risk-free interest rate | % | |||
Expected life | ||||
Discount rate | % | |||
Expected volatility | % | |||
Expected dividend yield | % | |||
Fair value | $ |
The convertible notes are classified as level 3 instruments as the valuation was determined based on unobservable inputs which are supported by little or no market activity and reflect the Company’s own assumptions in measuring fair value. Significant inputs used in developing the fair value of the convertible notes include time to maturity, risk-free interest rate, straight debt discount rate, probability to convert and expected timing of conversion.
For the six months ended June
30, 2023 and 2022, the Company recognized a loss of change in fair value of convertible note of $
F-31
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 13 — Taxes
(a) Income tax
Cayman Islands
Powerbridge was incorporated in the Cayman Islands and is not subject to tax on income or capital gains under the laws of Cayman Islands. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.
Hong Kong
Powerbridge HK is established in Hong Kong. Under the Hong Kong tax laws, Powerbridge HK is exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.
PRC
Powerbridge Zhuhai is governed
by the Enterprise Income Tax (“EIT”) laws of PRC. Under EIT laws of PRC, domestic enterprises and Foreign Investment Enterprises
(the “FIE”) are usually subject to a unified
The impact of the preferred
tax treatment noted above decreased income taxes by $
For the six months ended June 30, | ||||||||
2023 | 2022 | |||||||
Current | $ | $ | ||||||
Deferred | ( | ) | ( | ) | ||||
Total income tax benefit | $ | ( | ) | $ | ( | ) |
For the six months ended June 30, | ||||||||
2023 | 2022 | |||||||
PRC statutory rates | % | % | ||||||
Preferential tax rates | ( | )% | ( | )% | ||||
R&D credits | % | % | ||||||
Change in valuation allowance and others | ( | )% | ( | )% | ||||
Effective tax rate | % | % |
F-32
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 13 — Taxes (continued)
(a) Income tax - continued
Deferred income taxes reflect
the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
June 30, 2023 | December 31, 2022 | |||||||
Deferred tax assets: | ||||||||
Provision for doubtful accounts | $ | $ | ||||||
Depreciation and amortization | ||||||||
Net operating loss carryforward | ||||||||
Valuation allowance | ( | ) | ( | ) | ||||
Total deferred tax assets | $ | $ |
As of June 30, 2023, the Company
has approximately $
(b) Value added tax
Enterprises who sell goods
in the PRC are subject to a value added tax in accordance with PRC laws. VAT standard rates are
(c) Tax payable
June 30, 2023 | December 31, 2022 | |||||||
Income taxes payable | $ | $ | ||||||
VAT and other tax payable | ||||||||
Total | $ | $ |
F-33
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 13 — Taxes (continued)
(c) Tax payable - continued
Uncertain tax positions
The Company may be subject
to challenges from various PRC taxing authorities regarding the amounts of taxes due, although the Company’s management believes
the Company has paid or accrued for all taxes owed by the Company. As of December 31, 2022, the Company had accrued (before adjustment)
total income tax liabilities of $
The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of June 30, 2023 and December 31, 2022, the Company did not have any significant unrecognized uncertain tax positions. The Company did not incur any interest and penalties related to potential underpaid income tax expenses for the six months ended June 30, 2023 and 2022. The Company also does not anticipate any significant increases or decreases in unrecognized tax benefits in the next 12 months from June 30, 2023.
Note 14 — Equity
Ordinary Shares
On December 5, 2022, the Company
held its 2022 special general meeting of shareholders. At the Meeting, the Company’s shareholders approved an amendment to the Company’s
amended and restated Memorandum and Articles of Association (“A&R M&A”) to increase the authorized share capital.
As a result, the Company’s authorized share capital is $
On May 30, 2023, the Company
held an extraordinary general shareholders meeting. At the Meeting, the Company’s shareholders approved (i) a share consolidation
of thirty (30) issued and unissued ordinary shares with par value of US$
On September 5, 2023, the
Company held its 2023 special general meeting of shareholder. At the Meeting, the Company’s shareholders approved
F-34
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14 — Equity (continued)
Ordinary Shares - continued
On December 1, 2023, the Company
held an extraordinary general meeting. At the Meeting, the Company’s shareholders approved:
The Company had
On June 21, 2023, the Company
paid cash to certain minor shareholders and cancelled
Public Offering Warrants
In connection with the initial
public offering (“IPO”) on April 4, 2019,
F-35
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14 — Equity (continued)
Ordinary shares issued for consulting services
On September 30, 2019, the
Company entered into a marketing development service agreement with an external consultant for service term of three years and agreed
to
On September 26, 2020, the
Company signed a consulting agreement with a third-party consultant. Pursuant to the agreement, the Company agreed to pay a total of
On September 23, 2021, the
Company signed a consulting agreement with a third-party consultant. Pursuant to the agreement, the Company agreed to pay a total of
On May 18, 2022, the Company
issued
For the six months ended June
30, 2023 and 2022, the Company recorded a consulting fee expense of $
F-36
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14 — Equity (continued)
Restricted share units (“RSUs”) issued for consulting services
On June 16, 2022, the board of directors proposed to modify the Company’s Amended 2018 Stock Option Plan), by supplementing various clauses in relation to the grant of Restricted Shares and Restricted Share Units to the employees, Directors and consultants of the Company.
On July 15, 2022 the Company
signed six consulting agreements with six third-party consultants with term of three years. Pursuant to the agreements, the Company agreed
to pay total of
2018 Stock option plan
On August 18, 2018 and further
amended on February 10, 2019, the Board of Directors (“Board”) approved an amended the 2018 Stock Option Plan (the “2018
Plan”). The Plan provides for discretionary grants of stock options to key employees, directors and consultants of the Company.
The purpose of the Plan is to attract and retain the best available personnel and to promote the success of the Company’s business.
On April 4, 2019,
F-37
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14 — Equity (continued)
2018 Stock option plan - continued
On May 26, 2021, the Board
approved to issue
The fair value of stock options
was determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option model requires management to
make various estimates and assumptions, including expected term, expected volatility, risk-free rate, and dividend yield. The expected
term represents the period of time that stock-based compensation awards granted are expected to be outstanding and is estimated based
on considerations including the vesting period, contractual term and anticipated employee exercise patterns. Expected volatility is based
on the historical volatility of the Company’s stock. The risk-free rate is based on the U.S. Treasury yield curve in relation to
the contractual life of stock-based compensation instruments.
Options granted in May 2021 | Options Amended in January, 2022 | Options Amended in May, | Options Amended in December, | |||||||||||||
Risk-free interest rate | % | % | % | % | ||||||||||||
Expected life of the options | ||||||||||||||||
Expected volatility | % | % | % | % | ||||||||||||
Expected dividend yield | % | % | % | % | ||||||||||||
Fair value | $ | $ | $ | $ |
Number of Share Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
$ | Year | $ | ||||||||||||||
Outstanding as of December 31, 2021 | ||||||||||||||||
Granted | - | |||||||||||||||
Cancelled | ( | ) | - | |||||||||||||
Outstanding as of December 31, 2022 | ||||||||||||||||
Granted | - | - | - | |||||||||||||
Cancelled | - | - | ||||||||||||||
Outstanding as of June 30, 2023 | ||||||||||||||||
Exercisable as of June 30, 2023 |
F-38
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14 — Equity (continued)
2018 Stock option plan - continued
For the six months ended June
30, 2023 and 2022, total share-based compensation expenses recognized for the share options granted were $
Private placement
On September 1, 2022, the
Company entered into a securities purchase agreement with White Lion Capital LLC (“White Lion”). Pursuant to the agreement,
White Lion shall purchase up to $
On September 9, 2022, the
Company entered into a securities purchase agreement with YA II PN, LTD. Pursuant to the agreement, YA II PN, LTD. shall purchase up to
$
On December 29, 2022, the
Company entered into a securities purchase agreement with TBS Capital LP, (“TBS”). Pursuant to the agreement, TBS shall purchase
up to $
On May 17, 2023, the Company
entered into a securities purchase agreement with Spring Field Fund SPC.
Conversion of convertible notes
On May 25, 2022, the Company
issued an aggregate of
On December 12, 2022, the
Company issued an aggregate of
On February 3, 2023, the Company
issued an aggregate of
F-39
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14 — Equity (continued)
Shares issued for reserve
On August 5, 2021, the Company
issued
At the market (“ATM”) offering
On February 23, 2021, the
Company entered into a Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners, as sales agent (the “Agent”),
pursuant to which the Company may offer and sell, from time to time, through or to the Agent, as sales agent and/or principal (the “Offering”)
up to $
Shares issued for long-term investments/acquisitions
In connection of the long-term
investment of Smartconn, on January 20, 2022, the Company issued
On January 5, 2023, the Company
entered into an equity transfer agreement with a shareholder of Smartconn which the Company agrees to purchase
In connection of the long-term
investment of Boxinrui on June 28, 2022, the Company issued
On
March 28, 2023, the Company entered into an equity transfer agreement with fifteen individual shareholders of Boxinrui, pursuant to which
the Company agreed to pre-issue
In connection of the long-term
investment of Chenbao, on August 24, 2022, the Company issued
In connection of the long-term
investment of DTI, on November 1, 2022, the Company issued
F-40
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14 — Equity (continued)
Shares issued for long-term investments/acquisitions - continued
On March 24, 2023, the Company
entered into an equity transfer agreement with a shareholder of DTI which the Company agrees to prepaid
Additional paid-in capital
As of June 30, 2023 and December 31, 2022, additional paid-in capital in the unaudited condensed consolidated balance sheet represented the combined contributed capital of the Company’s subsidiaries.
Statutory reserve
Under PRC law, the Company’s
subsidiary located in the PRC (collectively referred as the (“PRC entities”) are required to provide for certain statutory
reserves. The PRC entities are required to allocate at least
The Company’s subsidiaries in PRC had accumulated deficits as of June 30, 2023 and December 31, 2022, as a result, the statutory reserve balances were $
as of June 30, 2023 and December 31,2022.
Note 15 — Commitments and contingencies
In the ordinary course of the
business, the Company subject to periodic legal or administrative proceedings. The Company accrues liability when the loss is probable
and reasonably estimable. On April 28, 2022, Shengfeng Zeng (a former employee) filed a lawsuit against the Company for a debt dispute
of $
Note 16 — Segment reporting
For the six months ended June
30, 2023 and 2022, the Company’s CODM reviewed the financial information of the business carried out by the Company on a consolidated
basis. Therefore, the Company has
The following table presents revenues by the service lines: | For the six months ended June 30, | |||||||
2023 | 2022 | |||||||
REVENUES: | ||||||||
Application development services* | $ | $ | ||||||
Consulting and technical support services | ||||||||
Subscription services | ||||||||
Trading revenue | ||||||||
Other revenue | ||||||||
Total revenues | $ | $ |
* |
F-41
POWERBRIDGE TECHNOLOGIES CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 17 — Subsequent events
Convertible loan
From July 2023 to December
2023, the Company repaid
Equity financing
The Company issued
The Company issued
New subsidiary
To explore digital finance
business, the Company established one new subsidiary in China. Agro Digital Fintech Co., Ltd. was established on July 6, 2023 and the
Company has
To explore oversea business,
the Company established one new subsidiary in Singapore. X3 HOLDINGS PTE. LTD. was established on November 8, 2023 and the Company has
F-42