Exhibit 99.1
BAOSHENG MEDIA GROUP HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollar, except for the number of shares)
| June 30, |
| December 31, | |||
2023 | 2022 | |||||
(unaudited) | ||||||
ASSETS |
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Current Assets |
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Cash and cash equivalents | $ | | $ | | ||
Short-term investments | | | ||||
Accounts receivable, net |
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Prepayments - third parties |
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Prepayments - a related party | | | ||||
Media deposits - third parties |
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Media deposits - a related party | | | ||||
Due from related parties | | | ||||
Other current assets |
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Total Current Assets |
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Long-term investments | | |||||
Property and equipment, net |
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Intangible assets, net |
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Prepayments for licensed copyrights | | | ||||
Total Assets | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current Liabilities |
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Bank borrowings | $ | | $ | | ||
Accounts payable |
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Advance from advertisers |
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Advertiser deposits |
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Income tax payable |
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Due to related parties |
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Warrant liabilities | | | ||||
Accrued expenses and other liabilities |
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Total Liabilities |
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Commitments and Contingencies |
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Shareholders’ Equity |
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Ordinary Share (par value $ |
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Additional paid-in capital |
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Statutory reserve |
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Retained earnings |
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Accumulated other comprehensive loss |
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Total Shareholders’ Equity |
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Total Liabilities and Shareholders’ Equity | $ | | $ | |
* | Retrospectively restated to give effect to a share consolidation at a ratio of one-for-three and one fifth ( |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
BAOSHENG MEDIA GROUP HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in U.S. dollar, except for the number of shares)
For the Six Months Ended | ||||||
June 30, | ||||||
| 2023 | 2022 | ||||
Revenues |
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Cost of revenues |
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Gross profit (loss) |
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Operating Expenses |
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Selling and marketing expenses |
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General and administrative expenses |
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Provision for doubtful accounts | ( | ( | ||||
Total Operating Expenses |
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Loss from Operations |
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Other Income (Expenses) | ||||||
Interest (expense) income, net |
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Changes in fair value of warrant liabilities | | — | ||||
Changes in fair value of short-term investments | | — | ||||
Subsidy income |
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Other income, net |
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Total Other Income, Net | | | ||||
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Loss Before Income Taxes |
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Income tax expenses |
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Net Loss | $ | ( | $ | ( | ||
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Other Comprehensive Loss |
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Foreign currency translation adjustment | ( |
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Comprehensive Loss | $ | ( | $ | ( | ||
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Weighted average number of ordinary share outstanding |
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Basic and Diluted* |
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Loss per share |
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Basic and Diluted* | $ | ( | $ | ( |
* | Retrospectively restated to give effect to a share consolidation at a ratio of one-for-three and one fifth ( |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
BAOSHENG MEDIA GROUP HOLDINGS LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Six Months Ended June 30, 2023 and 2022
(Expressed in U.S. dollar, except for the number of shares)
Accumulated | ||||||||||||||||||||
Additional | Other | |||||||||||||||||||
Ordinary Shares | Paid-in | Statutory | Retained | Comprehensive | Total | |||||||||||||||
| Shares* |
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| Capital |
| Reserve |
| Earnings |
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| Equity | |||||||
Balance as of December 31, 2021 |
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Net loss |
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Foreign currency translation adjustments |
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| – |
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| ( |
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Balance as of June 30, 2022 |
| | $ | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Balance as of December 31, 2022 | | $ | | $ | | $ | | $ | | $ | ( | $ | | |||||||
Net loss | — | — | — | — | ( | — | ( | |||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | ( | ( | |||||||||||||
Balance as of June 30, 2023 | | $ | | $ | | $ | | $ | | $ | ( | $ | |
* | Retrospectively restated to give effect to a share consolidation at a ratio of one-for-three and one fifth ( |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
BAOSHENG MEDIA GROUP HOLDINGS LIMITED
UNAUDITED CONDENED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. dollar, except for the number of shares)
For the Six Months Ended | ||||||
June 30, | ||||||
| 2023 |
| 2022 | |||
Cash Flows from Operating Activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
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Depreciation and amortization expenses | |
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Amortization of right-of-use assets | – |
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Loss from disposal of property and equipment | | | ||||
Provision for doubtful accounts of accounts receivables | |
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Provision for doubtful accounts of prepayments | | | ||||
Provision for doubtful accounts of other current assets | | ( | ||||
Changes in fair value of short-term investments | ( | — | ||||
Changes in fair value of warrant liabilities | ( | — | ||||
Changes in operating assets and liabilities: |
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Accounts receivable | |
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Prepayments - third parties | ( |
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Prepayments - a related party | | ( | ||||
Media deposits - third parties | |
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Media deposits - a related party | ( | — | ||||
Other current assets | |
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Accounts payable | ( |
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Advance from advertisers | |
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Advertiser deposits | ( |
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Income tax payable | — |
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Accrued expenses and other liabilities | ( |
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Operating lease liabilities | — |
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Net Cash Provided by (Used in) Operating Activities | |
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Cash Flows from Investing Activities: |
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Purchases of property and equipment | ( |
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Purchases of intangible assets | ( |
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Purchases of short-term investments | ( | — | ||||
Redemption of short-term investments | | — | ||||
Purchase of long-term investments | ( | — | ||||
Loans made to related parties | ( | ( | ||||
Repayment of loans from related parties | — |
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Net Cash (Used in) Provided by Investing Activities | ( |
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Cash Flows from Financing Activities: |
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Repayment of bank borrowings | ( | ( | ||||
Repayment of borrowings to related parties | — | ( | ||||
Payments of dividends to shareholders | — |
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Net Cash Used in Financing Activities | ( |
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Effect of exchange rate changes on cash and cash equivalents | ( |
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Net decrease in cash and cash equivalents | ( |
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Cash and cash equivalents at beginning of period | |
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Cash and cash equivalents at end of period | $ | | $ | | ||
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Supplemental Cash Flow Information |
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Cash paid for interest expense | $ | — | $ | — | ||
Cash paid for income tax | $ | — | $ | — |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements
BAOSHENG MEDIA GROUP HOLDINGS LIMITED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.ORGANIZATION AND BUSINESS DESCRIPTION
Baosheng Media Group Holdings Limited (“Baosheng Group”) was incorporated on December 4, 2018 under the laws of the Cayman Islands as an exempted company with limited liability.
Baosheng Group owns
Baosheng BVI owns
Beijing Baosheng Technology Company Limited (“Beijing Baosheng”) was established in October 17, 2014 under the laws of the People’s Republic of China (“China” or the “PRC”) with a registered capital of $
On January 21, 2019, Baosheng HK entered into an equity transfer agreement with Beijing Baosheng and the shareholders of Beijing Baosheng. Pursuant to the equity transfer agreement, each of the shareholders of Beijing Baosheng transferred to Baosheng HK their respective equity interests in Beijing Baosheng at a consideration aggregating $
On June 4, 2019, Baosheng Group completed the reorganization of entities under common control of its then existing shareholders, who collectively owned
The consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the consolidated financial statements.
Baosheng Group, Baosheng BVI, Baosheng HK, Beijing Baosheng and its subsidiaries (herein collectively referred to as the “Company”) are engaged in providing online marketing channels to advertisers for them to manage their online marketing activities.
Share consolidation and increase in authorized share capital
On May 11, 2022, the Board of Directors of the Company (the "Board of Directors") resolved to approve a share consolidation at a ratio of one-for-three and one fifth (
On March 6, 2023, the Company effected an increase in its authorized share capital from US$
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The interim unaudited condensed consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States (“US GAAP”).
The unaudited condensed consolidated financial information as of June 30, 2023 and for the six months ended June 30, 2023 and 2022 has been prepared without audit, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and pursuant to Regulation S-X. Certain information and footnote disclosures, which are normally included in annual financial statements prepared in accordance with US GAAP, have been omitted pursuant to those rules and regulations. The unaudited interim financial information should be read in conjunction with the audited financial statements and the notes thereto, included in the Form 20-F for the fiscal year ended December 31, 2022, which was filed with the SEC on May 8, 2023.
In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2022. The results of operations for the six months ended June 30, 2023 and 2022 are not necessarily indicative of the results for the full years.
Short-term investments
Short-term investments consist of US Treasury Bills and investments in trading securities.
US Treasury Bills
The Company purchased US Treasury Bills with variable interest rates during the year of 2022, and sold these US Treasury Bills during the six months ended June 30, 2023.
US Treasury Bills were redeemable within a period of three through six months. In accordance with ASC 825, Financial Instruments, for financial products with variable interest rates referenced to performance of underlying assets, the Company elected the fair value method at the date of initial recognition and carries these investments at fair value with fair value change gains or losses recorded in the investment income in the unaudited condensed consolidated statements of operations and comprehensive loss.
As of June 30, 2023 and December 31, 2022, the Company had US Treasury Bills of $
Investments in trading securities
Trading securities are investments in publicly-listed equity securities through various open market transactions. The Company purchased certain publicly-listed equity securities through various open market transactions and accounted for such investments as “short-term investments” and subsequently measure the investments at fair value. For the six months ended June 30, 2023 and 2022, the Company made a gain of $
Accounts receivable, net of provision for doubtful accounts
Accounts receivable are recorded at the gross billing amount less an allowance for any uncollectible accounts due from the advertisers for the acquisition of ad inventory and other advertising services on their behalf. Accounts receivable do not bear interest. Management reviews the adequacy of the allowance for doubtful accounts on an ongoing basis, using historical collection trends and aging of receivables. Management also periodically evaluates individual customer’s financial condition, credit history and the current economic conditions to make adjustments in the allowance when necessary. An allowance for doubtful accounts is made and recorded into general and administrative expenses based on any specifically identified accounts receivable that may become uncollectible. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Prepayments
Prepayments represent amounts advanced to media or their authorized agencies (collectively “publishers”) for running of advertising campaigns of the advertisers. The publishers usually require advance payments when the Company orders advertising campaign services on behalf of its advertisers, and the prepayments will be utilized to offset the Company’s future payments. These amounts are unsecured, non-interest bearing and generally short-term in nature, which are reviewed periodically to determine whether their carrying value has become impaired. As of June 30, 2023 and December 31, 2022, the Company had allowances of doubtful accounts of $
Media deposits
Media deposits represent performance security deposit upon becoming an authorized agency of the relevant media (platforms where online advertisement is delivered) as a guarantee of performance and obligations and deposit associated with committed advertising spend on behalf of selected advertisers as required by certain media before running their advertising campaigns, which are paid to media pursuant to the terms of the framework agreements and contracts.
In the event that the advertisers or their advertising agencies on behalf of their advertising clients (collectively the “advertisers”) commit to spending a guaranteed minimum amount on a particular media with the Company, the Company enters into a back-to-back framework agreement with the relevant publishers committing the same level of guaranteed minimum spend and securing a preferential rebate policy applicable to the advertising spend of that advertiser. With the committed minimum spend, the Company is entitled to enjoy certain rebates and discounts and usually be required to pay a deposit of up to
As of June 30, 2023 and December 31, 2022, the balances of media deposits paid to third parties were $
Long-term investment
As of June 30, 2023, long-term investments represent the Company’s investment in one equity method investee over which the Company has significant influence, and investments in two privately held companies over which the Company neither has control nor significant influence through investments in ordinary shares. As of December 31, 2022, investment security represents the Company’s investment in two privately held companies, over which the Company neither has control nor significant influence through investment in ordinary shares.
Investment in equity method investee
In accordance with ASC 323, Investments - Equity Method and Joint Ventures, the Company accounts for the investment in one privately held company using equity method, because the Company has significant influence but does not own a majority equity interest or otherwise control over the equity investee.
Under the equity method, the Company initially records its investment at cost and prospectively recognizes its proportionate share of each equity investee’s net income or loss into its unaudited condensed consolidated statements of operations. When the Company’s share of losses in the equity investee equals or exceeds its interest in the equity investee, the Company does not recognize further losses, unless the Company has incurred obligations or made payments or guarantees on behalf of the equity investee.
The Company continually reviews its investment in the equity investee to determine whether a decline in fair value below the carrying value is other-than-temporary. The primary factors the Company considers in its determination include the financial condition, operating performance and the prospects of the equity investee; other company specific information such as recent financing rounds; the geographic region, market and industry in which the equity investee operates; and the length of time that the fair value of the investment is below its carrying value. If the decline in fair value is deemed to be other-than-temporary, the carrying value of the equity investee is written down to fair value.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment in the privately held companies
Equity securities not accounted for using the equity method are carried at fair value with unrealized gains and losses recorded in the unaudited condensed consolidated statements of operations, according to ASC 321, Investments - Equity Securities. The Company elected to record the equity investments in privately held companies using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuer.
Equity investments in privately held companies accounted for using the measurement alternative are subject to periodic impairment reviews. The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of these equity securities. In computing realized gains and losses on equity securities, the Company calculates cost based on amounts paid using the average cost method. Dividend income is recognized when the right to receive the payment is established.
Advertiser deposits
The advertiser deposits represented deposits made by the advertisers who undertake a minimum total advertising spend as a condition for enjoying rebates and discounts. The Company generally requires these advertisers to place deposits with the Company at a percentage (usually up to
As of June 30, 2023 and December 31, 2022, the balances of advertiser deposits were $
Revenue recognition
ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. In according with ASC 606, revenues are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.
The Company identified each distinct service, or each series of distinct services that are substantially the same and that have the same pattern of transfer to the customer, as a performance obligation. Transaction price is allocated among different performance obligations identified in one contract, by using expected cost plus margin approach, if the standalone selling price of each performance obligation is not observable.
The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. The Company has no material incremental costs of obtaining contracts with customers that the Company expects the benefit of those costs to be longer than one year, which need to be recognized as assets.
The Company has advertising agency revenues from search engine marketing (‘SEM”, a form of online marketing that involves the promotion of websites by increasing their visibility in search engine results pages and search-related products and services) services and non-SEM services, including deployment of in-feed and mobile app ads on other media and social media marketing services in relation to running advertising campaigns on selected social media accounts. The Company acts as an agent between media or their authorized agencies (collectively “publishers”) and advertisers by helping publishers procure advertisers and facilitate ad deployment on their advertising channels, and purchasing ad inventories and advertising services from publishers for advertisers. The Company places orders with publishers as per request from advertisers. Each order is materialized by a contract and explicitly quotes one agency service to arrange for the advertising service to be provided by a third party publisher for a period of ad term. The Company provides advices and services on advertising strategies and ad optimization to advertisers to improve the effectiveness of their ads, all of which are highly interrelated and not separately identifiable. The Company’s overall promise represents a combined output that is a single performance obligation; there is no multiple performance obligations.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company evaluated its advertising agency contracts and determined that it was not acting as principal in these arrangements with publishers and advertisers since it never takes control of the ad inventories at any time. The Company collects the costs of purchasing ad inventories and advertising services from advertisers on behalf of publishers. The Company generates advertising agency revenues either by charging additional fees to advertisers or receiving rebates and incentives offered by publishers. Accordingly, both advertisers and publishers can be identified as customers, depending on the revenue model applicable to the relevant services.
The Company recognizes revenues on a net basis, which equal to: (i) rebates and incentives offered by publishers, netting the rebates to advertises (if any); and (ii) net fees from advertisers.
Rebates and incentives offered by publishers
Rebates and incentives offered by publishers are determined based on the contract terms with publishers and their applicable rebate policies, which typically in the form of across-the-board standard-rate rebates, differential standard-rate rebates and progressive-rate rebates. Rebates and incentives offered by publishers are accounted for as variable consideration. The Company accrues and recognizes revenues in the form of rebates and incentives based on its evaluation as to whether the contractually stipulated thresholds of advertising spend are likely to being reached, or other benchmarks or certain prescribed classification are likely to being qualified (e.g. the number of new advertisers secured, growth in actual advertising spend), and to the extent that a significant reversal of cumulative revenue would not occur in future periods. These evaluations are based on the past experience and regularly monitoring of various performance factors set within the rebate policies (e.g. accumulated advertising spend, number of new advertisers). At the end of each subsequent reporting period, the Company re-evaluates the probability of achieving such advertising spend volume and any related constraint, and if necessary, adjusts the estimate of the amount of rebates and incentives. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. The rebates and incentives are generally ascertained and settled on a quarterly or annual basis. Historically, adjustments to the estimations for the actual amounts have been immaterial. These rebates and incentives take the form of cash which, when paid, are applied to set off accounts payable with the relevant publishers or settled separately; or can be in the form of ad currency units which will be deposited in the account in the back-end platform of the media, and can then be utilized to acquire their ad inventory.
The Company may offer rebates to advertisers on a case by case basis, generally with reference to the rebates and incentives offered by publishers, the advertiser’s committed total spend, and the business relationships with such advertiser. The rebates offered by the Company to advertisers are in the form of cash discounts or ad currency units that can be utilized to acquire ad inventory from relevant media, both of which are account for as a deduction of revenues.
Net fees from advertisers
Net fees from advertisers are the difference between the gross billing amount charged to the advertisers and the costs of purchasing ad inventories and advertising services on their behalf.
The publishers do not receive the benefits from the Company’s facilitation services until the publishers deliver advertising services to the advertisers. The Company recognizes advertising agency revenues when it transfers the control of the facilitation service commitments, i.e., when the publishers deliver advertising services to the advertisers. Under the cost per click (“CPC”) and cost per acquisition (“CPA”) pricing model of media, the Company recognizes revenues at the point of time as the publishers deliver advertising services at the point in time. Under the cost per time (“CPT”) pricing model of media, the publishers deliver advertising services over time when the advertising links are displayed over the contract periods, and therefore the Company recognizes revenue on a straight-line basis over the contracted display period. For the six months ended June 30, 2023 and 2022, revenues from the advertising services under CPT pricing model that the Company arranged are immaterial.
The Company records revenues and costs on a net basis and the related accounts receivable and payable amounts on a gross basis.
The gross billing amounts charged to the advertisers are collected either in advance to provision of services or after the services. Accounts receivable represent the gross billing charged to advertisers that the Company has an unconditional right to consideration (including billed and unbilled amount) when the Company has satisfied its performance obligation. Payment terms and conditions of accounts receivables vary by customers, and terms typically include a requirement for payment within a period from
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The cost of purchasing ad inventories and advertising services are recorded as accounts payable or a deduction against prepayments in cases where prepayments are required by the publishers.
The following table identifies the disaggregation of our revenue for the six months ended June 30, 2023 and 2022, respectively.
For the Six Months Ended | ||||||
June 30, | ||||||
| 2023 |
| 2022 | |||
Nature of Revenue: |
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Rebates and incentives offered by publishers | $ | | $ | | ||
Net fees from advertisers |
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Total | $ | | $ | | ||
Category of Revenue: |
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SEM services | $ | | $ | | ||
Non-SEM services |
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Total | $ | | $ | |
Foreign currency translation
The reporting currency of the Company is U.S. dollars (“US$” or “$”) and the accompanying unaudited condensed consolidated financial statements have been expressed in US$. Since the Company operates in the PRC, the Company’s functional currency is the Chinese Yuan (“RMB”). The Company’s unaudited condensed consolidated financial statements have been translated into the reporting currency U.S. Dollars. Assets and liabilities of the Company are translated at the exchange rate at each reporting period end date. Equity is translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. The resulting translation adjustments are reported under other comprehensive loss. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the results of operations.
The following table outlines the currency exchange rates that were used in creating the unaudited condensed consolidated financial statements in this report:
| June 30, |
| December 31, | |
| 2023 |
| 2022 | |
Year-end spot rate |
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For the Six Months Ended June 30, | ||||
| 2023 |
| 2022 | |
Average rate |
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Concentration and credit risk
Substantially all of the Company’s operating activities are transacted into RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions require submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.
The Company maintains certain bank accounts in the PRC, Hong Kong and the Cayman Islands, which are not insured by Federal Deposit Insurance Corporation (“FDIC”) insurance or other insurance. As of June 30, 2023 and December 31, 2022, $
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounts receivable are typically unsecured and derived from services rendered to advertisers that are located primarily in China, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of advertisers’ creditworthiness and its ongoing monitoring of outstanding balances. The Company has a concentration of its receivables with specific advertisers. As of June 30, 2023,
For the six months ended June 30, 2023,
As of June 30, 2023,
3.GOING CONCERN
As reflected in the Company’s unaudited condensed consolidated financial statements, the Company had a net loss of $
As of June 30, 2023, the Company had cash and cash equivalent of $
However, future financing requirements will depend on many factors, including the scale and pace of the expansion of the Company’s advertising business, the expansion of the Company’s sales and marketing activities, and potential investments in, or acquisitions of, businesses or technologies. Inability to obtain credit terms from medias or access to financing on favorable terms in a timely manner or at all would materially and adversely affect the Company’s business, results of operations, financial condition, and growth prospects.
4.ACCOUNTS RECEIVABLE, NET
The Company records revenues and costs on a net basis and the related accounts receivable and payable amounts on a gross basis. Accounts receivable, net of provision for doubtful accounts consist of the following:
| June 30, |
| December 31, | |||
| 2023 |
| 2022 | |||
Accounts receivable | $ | | $ | | ||
Less: provision for doubtful accounts |
| ( |
| ( | ||
Accounts receivable, net of provision for doubtful accounts | $ | | $ | |
Provisions for doubtful accounts of accounts receivable were $
| June 30, |
| June 30, | |||
| 2023 |
| 2022 | |||
Balance at beginning of the period | $ | | $ | | ||
Charge to expenses |
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Foreign exchange (income) loss |
| ( |
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Balance at end of the period | $ | | $ | |
5.PREPAYMENTS – THIRD PARTIES
Prepayments – third parties consist of the following:
| June 30, |
| December 31, | |||
| 2023 |
| 2022 | |||
Prepayments to third party medias | $ | | $ | | ||
Less: provision for doubtful accounts |
| ( |
| ( | ||
$ | | $ | |
Provision for doubtful accounts of prepayments was $
| June 30, |
| June 30, | |||
2023 | 2022 | |||||
Balance at beginning of the period | $ | | $ | | ||
Charge to expenses |
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Writing off prepayments |
| ( |
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Foreign exchange income |
| ( |
| ( | ||
Balance at end of the period | $ | | $ | |
6.OTHER CURRENT ASSETS
Other current assets consist of the following:
| June 30, |
| December 31, | |||
| 2023 |
| 2022 | |||
Recoverable value-added taxes | $ | | $ | | ||
Others |
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Less: provision for doubtful accounts |
| ( |
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$ | | $ | |
For the six months ended June 30, 2023, provision for doubtful accounts of other current assets was $
| June 30, |
| June 30, | |||
2023 | 2022 | |||||
Balance at beginning of the period | $ | | $ | | ||
Charge to expenses |
| |
| — | ||
Reversal of charge to other receivable |
| — |
| ( | ||
Foreign exchange income |
| ( |
| ( | ||
Balance at end of the period | $ | | $ | |
7.PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following:
| June 30, |
| December 31, | |||
| 2023 |
| 2022 | |||
Property | $ | | $ | | ||
Leasehold improvement |
| |
| | ||
Office equipment |
| |
| | ||
Vehicles | | | ||||
Electronic equipment |
| |
| | ||
Less: accumulated depreciation |
| ( |
| ( | ||
$ | | $ | |
Depreciation expense was $
8.INTANGIBLE ASSETS, NET
Intangible assets consisted of the following:
| June 30, |
| December 31, | |||
| 2023 |
| 2022 | |||
Copyrights | $ | | $ | | ||
Software | | | ||||
Less: accumulated amortization |
| ( |
| ( | ||
$ | | $ | |
For the six months ended June 30, 2023 and 2022, the Company purchased software of $
Amortization expense was $
9.PREPAYMENTS FOR LICENSED COPYRIGHTS
Prepayments for licensed copyrights consisted of the following:
June 30, | December 31, | |||||
| 2023 |
| 2022 | |||
Prepayments for licensed copyrights | $ | | $ | |
During the year ended December 31, 2021, the Company entered into
As of June 30, 2023 and December 31, 2022, the change in balance of prepayments for licensed copyrights was caused by change in spot rates as of reporting dates.
10.BANK BORROWING
June 30, | December 31, | |||||
| 2023 |
| 2022 | |||
Bank borrowing | $ | | $ | |
On December 22, 2022, Baosheng Network entered into a bank loan agreement with Bank of Beijing under which under which Beijing Baosheng borrowed a one-year loan of RMB
For the six months ended June 30, 2023 and 2022, interest expense arising from the bank borrowing amounted to $
11.LONG-TERM INVESTMENTS
Long-term investments consisted of the following:
June 30, | December 31, | |||||
| 2023 |
| 2022 | |||
Investment in Beijing Xinrong Fanxing Technology Co., Ltd. (“Xinrong Fanxing”) | $ | | $ | | ||
Investment in Beijing Qucheng Technology Technology Co., Ltd. (“Beijing Qucheng”) |
| |
| | ||
Investment in Beijing Shanxingzhe Technology Investment LLP (“Beijing Shanxingzhe”) |
| |
| — | ||
$ | | $ | |
(a)Investment in Xinrong Fanxing
Xinrong Fanxing is a privately held company, over which the Company neither has control nor significant influence through investment in ordinary shares. The Company accounted for the investment in Xingrong Fanxing using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuer.
For the six months ended June 30, 2023 and 2022, the Company did not record upward adjustments or downward adjustments on the investment. The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of the equity security. As of June 30, 2023 and December 31, 2022, the Company did not recognize impairment against the investment.
(b)Investment in Beijing Qucheng
In October 2022, November 2022 and January 2023, the Company made investment of $
Beijing Qucheng is a privately held company, over which the Company neither has control nor significant influence through investment in ordinary shares. The Company accounted for the investment in Beijing Qucheng using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuer.
For the six months ended June 30, 2023 and 2022, the Company did not record upward adjustments or downward adjustments on the investment. The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of the equity security. As of June 30, 2023 and December 31, 2022, the Company did not recognize impairment against the investment.
(c)Investment in Shanxingzhe
In June 2023, Beijing Xunhuo entered into a limited partnership agreement with Beijing Shanxingzhe, which was newly set up in June 2023.
The Company invested $
12. | WARRANT LIABILITIES |
In connection with the private placement on March 18, 2021, the Company sold an aggregate of
The holders of warrants are granted with registration rights. If at any time after the six month anniversary of March 18, 2021, there is no effective registration statement registering, or no current prospectus available for the issuance of the warrant shares to the holder and the resale of the warrant shares, then this warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise”. The warrants are subject to adjustments in the event of 1) stock dividends and splits, 2) subsequent right offerings, 3) pro rata dilutions and 4) fundamental transactions. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the warrants.
In the event of a fundamental transaction, the Company or any successor entity shall, at the holder’s option, purchase this warrant from the holder by paying to the holder an amount of cash equal to the value of the remaining unexercised portion of the warrant, using Black-Scholes model, on the date of the consummation of such fundamental transaction; provided, however, that, if the fundamental transaction is not within the Company’s control, including not approved by the Company’s Board of Directors, holder shall only be entitled to receive from the Company or any successor entity the same type or form of consideration (and in the same proportion), at the value of the unexercised portion of the warrant, that is being offered and paid to the holders of ordinary shares of the Company in connection with the fundamental transaction, whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of ordinary shares are given the choice to receive from among alternative forms of consideration in connection with the fundamental transaction.
If the Company fails for any reason to deliver to the holders the warrant shares subject to a notice of exercise by the warrant share delivery date, the Company shall pay to the holder, in cash, as liquidated damages and not as a penalty, for each $
The above mentioned cash-settled make-whole provisions led the warrants classified as a derivative warrant liability. The derivative warrant liability was initially recorded at fair value on the closing date of the private placement, and were subsequently remeasured at fair value at each reporting dates. The changes in the fair value of derivative warrant liability were charged to the account of “Changes in fair value of warrant liabilities” in the unaudited condensed consolidated statements of operations and comprehensive income (loss).
As of December 31, 2021, the Company had
Estimated fair value as of December 31, 2021 |
| $ | |
Changes in estimated fair value |
| ( | |
Estimated fair value as of June 30, 2022 | $ | | |
Estimated fair value as of December 31, 2022 | $ | | |
Changes in estimated fair value | ( | ||
Estimated fair value as of June 30, 2023 | $ | |
The fair value of the warrant liabilities was estimated using Black-Scholes model. Inherent in these valuations are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock based on historical and implied volatilities of selected peer companies as well as its own that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
12.WARRANT LIABILITIES (CONTINUED)
The following table provides quantitative information regarding Level 3 fair value measurements inputs for the Company’s warrants at their measurement dates:
As of June 30, | As of December 31, | As of March 18, |
| ||||
| 2023 |
| 2022 | 2021 |
| ||
Volatility |
| | % | | % | | % |
Stock price |
| |
| | | ||
Expected life of the warrants to convert |
| |
| | | ||
Risk free rate |
| | % | | % | | % |
Dividend yield |
| % | % | % |
13.INCOME TAXES
Cayman Islands
Under the current and applicable laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.
British Virgin Islands
Under the current and applicable laws of BVI, Baosheng BVI is not subject to tax on income or capital gains.
Hong Kong
Baosheng HK is incorporated in Hong Kong and is subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate for the first HKD$
PRC
Beijing Baosheng, Horgos Baosheng, Kashi Baosheng, Baosheng Technology, Baosheng Network and Beijing Xunhuo were incorporated in the PRC and are subject to PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with the relevant PRC income tax laws. On March 16, 2007, the National People’s Congress enacted a new enterprise income tax law, which took effect on January 1, 2008. The law applies a uniform
Horgos Baosheng, Kashi Baosheng, and Baosheng Technology are subject to a preferential
In addition, each of Beijing Baosheng and Horgos Baosheng has a branch in Beijing. The two branches are subject to
For the six months ended June 30, 2023 and 2022, the Company recorded current income tax expenses of $
13.INCOME TAXES (CONTINUED)
Deferred tax assets as of June 30, 2023 and December 31, 2022 consist of the following:
| June 30, |
| December 31, | |||
| 2023 |
| 2022 | |||
Deferred tax assets: |
|
|
|
| ||
Net operating losses carryforwards | $ | | $ | | ||
Allowance for doubtful accounts of accounts receivable |
| |
| | ||
Allowance for doubtful accounts of prepayments |
| |
| | ||
Allowance for doubtful accounts of other current assets |
| |
| | ||
Less: allowance on deferred tax assets |
| ( |
| ( | ||
$ | — | $ | — |
The Company evaluates its valuation allowance requirements at end of each reporting period by reviewing all available evidence, both positive and negative, and considering whether, based on the weight of that evidence, a valuation allowance is needed. When circumstances cause a change in management’s judgement about the realizability of deferred tax assets, the impact of the change on the valuation allowance is generally reflected in income from operations. The future realization of the tax benefit of an existing deductible temporary difference ultimately depends on the existence of sufficient taxable income of the appropriate character within the carryforward period available under applicable tax law.
As of June 30, 2023 and December 31, 2022, due to uncertainties surrounding future utilization on Beijing Baosheng, Baosheng Network, the Beijing branch of Horgos Baosheng and Baosheng HK, the Company accrued full valuation allowance of $
14.LOSS PER SHARE
The following table sets forth the computation of basic and diluted loss per common share for the six months ended June 30, 2023 and 2022, respectively:
For the Six Months Ended | ||||||
June 30, | ||||||
| 2023 |
| 2022 | |||
Net Loss | $ | ( | $ | ( | ||
| ||||||
Weighted average number of ordinary share outstanding |
|
|
| |||
Basic and Diluted* |
| |
| | ||
| ||||||
Loss per share |
|
|
| |||
Basic and Diluted* | $ | ( | $ | ( |
*Retrospectively restated to give effect to a share consolidation at a ratio of one-for-three and one fifth (
For the six months ended June 30, 2023 and 2022, the Company had
15.EQUITY
Ordinary shares
The Company’s authorized share capital is
On May 11, 2022, the Board of Directors resolved to approve a share consolidation at a ratio of one-for-three and one fifth (
On March 6, 2023, the Company effected an increase in authorized share capital from US$
Cash dividends
For the six months ended June 30, 2023 and 2022, the Company paid dividends of $
Restricted net assets
The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by the Company’s PRC subsidiaries only out of their respective retained earnings, if any, as determined in accordance with PRC accounting standards and regulations and after they have met the PRC requirements for appropriation to statutory reserves. Paid in capital of the PRC subsidiaries included in the Company’s consolidated net assets are also non-distributable for dividend purposes. The results of operations reflected in the accompanying consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company’s PRC subsidiaries. The Company is required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, the Company may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends.
As of June 30, 2023 and December 31, 2022, the Company’s PRC profit generating subsidiaries accrued statutory reserve funds of $
As of June 30, 2023 and December 31, 2022, the Company had net assets restricted in the aggregate, which include paid-in capital and statutory reserve of the Company’s PRC subsidiaries of $
16.RELATED PARTY TRANSACTIONS AND BALANCES
1)Nature of relationships with related parties
Name |
| Relationship with the Company |
|
EJAM GROUP Co., Ltd. (“EJAM Group”) | Indirectly hold a | ||
Pubang Landscape Architecture (HK) Company Limited (“Pubang Hong Kong”) | Indirectly hold a | ||
Horgos Zhijiantiancheng | Controlled by EJAM Group | ||
Guangzhou Yijiantiancheng Technology Co., Ltd. (“Guangzhou Yijiantiancheng”) | Controlled by EJAM Group | ||
Horgos Meitui Network Technology Co., Ltd. (“Horgos Meitui”) | Controlled by EJAM Group, and was disposed of by EJAM Group on March 24, 2020 | ||
Ms. Wenxiu Zhong | Former Chairperson of the Board of Directors, CEO and indirect equity shareholder of the Company | ||
Anruitai Investment Limited (“Anruitai”) |
2)Transactions with related parties
For the Six Months Ended | ||||||
June 30, | ||||||
| 2023 |
| 2022 | |||
Horgos Zhijiantiancheng | $ | | $ | |
3)Balances with related parties
As of June 30, 2023 and December 31, 2022, the balances due from related parties were as follows:
| June 30, |
| December 31, | |||
| 2023 |
| 2022 | |||
Media deposits | ||||||
Horgos Zhijiantiancheng (a) | $ | | $ | | ||
|
|
| ||||
Prepayments |
|
| ||||
Horgos Zhijiantiancheng (a) | $ | | $ | | ||
Due from related parties | ||||||
Anruitai Investment Limited | $ | | $ | | ||
$ | | $ | |
(a) | Horgos Zhijiantiancheng is both a media and advertiser with the Company. For six months ended June 30, 2023 and 2022, the Company provided services to Horgos Zhijiantiancheng and paid media deposits with Horgos Zhijiantiancheng. |
As of June 30, 2023 and December 31, 2022, the balances due to related parties were as follows:
| June 30, |
| December 31, | |||
2023 | 2022 | |||||
Other payable |
|
|
|
| ||
Wenxiu Zhong | $ | | $ | | ||
$ | | $ | |
17.CONTINGENCIES
In the normal course of business, the Company is subject to loss contingencies, such as certain legal proceedings, claims and disputes. The Company records a liability for such loss contingencies when the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated.
On March 14, 2023, Shenzhen Pusi Technology Co., Ltd. (“Shenzhen Pusi”) filed a lawsuit in a court in Shenzhen, Guangdong against Baosheng Network, requesting to be repaid service fee of $
In November 2022, Beijing Baosheng brought a breach of contract claim against Shanghai Yituo Information Technology Co., Ltd (“Yituo”) in the Shanghai Jinshan District People’s Court and sought recovery of RMB
In June 2019, Ms. Chen Chen filed another lawsuit in a court in Beijing against Beijing Baosheng (the “Contractual Dispute”), seeking to terminate the Equity Ownership Agreement compensation in the amount of RMB
With the final judgement was enforced by the Court on February 8, 2022, the Freezing Order (including the freezing of Beijing Baosheng’s equity interests in Horgos Baosheng and Kashi Baosheng) was reversed and all of the impacted assets will be unfrozen, accordingly. As of December 31, 2022, all of Beijing Baosheng’s frozen accounts, together with Beijing Baosheng’s equity interests in Horgos Baosheng and Kashi Baosheng had been unfrozen.
As of this report, there is no other legal proceedings, claims and disputes that might cause the Company to be subject to loss contingencies.
18.SUBSEQUENT EVENTS
The management of the Company proposed to increase the authorized share capital of the Company from US$