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, | |||
2024 | 2023 | |||||
(unaudited) | ||||||
ASSETS |
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Current Assets |
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Cash and cash equivalents | $ | | $ | | ||
Short-term investments | | | ||||
Accounts receivable, net – third parties |
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Accounts receivable, net – related parties | | — | ||||
Prepayments - third parties |
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Prepayments - a related party | — | | ||||
Media deposits - third parties |
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Deposit due from a third party | | | ||||
Other current assets |
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Total Current Assets |
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Long-term investment | | |||||
Property and equipment, net |
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Intangible assets, net |
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Total Assets | $ | | $ | | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current Liabilities |
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Short-term 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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Accrued expenses and other liabilities |
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Total Current Liabilities | | | ||||
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 | $ | | $ | |
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, | ||||||
| 2024 | 2023 | ||||
Revenues |
| $ | |
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Cost of revenues |
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Gross 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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Reversal of provision for expected credit losses, net | | | ||||
Total Operating Expenses |
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Loss from Operations |
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Other Income (Expenses) | ||||||
Interest expense, 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 (Expenses) 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 an increase in the Company’s share capital from $ |
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, 2024 and 2023
(Expressed in U.S. dollar, except for the number of shares)
Accumulated | ||||||||||||||||||||
Additional | Other | |||||||||||||||||||
Ordinary Shares | Paid-in | Statutory | Retained | Comprehensive | Total | |||||||||||||||
| Shares* |
| Amount |
| Capital |
| Reserve |
| Earnings |
| Loss |
| Equity | |||||||
Balance as of December 31, 2022 |
| | $ | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Net loss |
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| ( |
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Foreign currency translation adjustments |
| — |
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| — |
| — |
| — |
| ( |
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Balance as of June 30, 2023 |
| | $ | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Balance as of December 31, 2023 | | $ | | $ | | $ | | $ | | $ | ( | $ | | |||||||
Net loss | — | — | — | — | ( | — | ( | |||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | ( | ( | |||||||||||||
Balance as of June 30, 2024 | | $ | | $ | | $ | | $ | | $ | ( | $ | |
* | 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, | ||||||
| 2024 |
| 2023 | |||
Cash Flows from Operating Activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
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Depreciation and amortization expenses | |
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Loss from disposal of property and equipment | — | | ||||
(Reversal of provision)/provision for expected credit losses of accounts receivable | ( | | ||||
Provision for doubtful accounts of prepayments | |
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Provision for expected credit losses of other current assets | | | ||||
Changes in fair value of short-term investments | ( | ( | ||||
Changes in fair value of warrant liabilities | — | ( | ||||
Share of equity loss in one equity investee | | — | ||||
Impairment of long-term investments | | — | ||||
Changes in operating assets and liabilities: |
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Accounts receivable – third parties | ( |
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Accounts receivable – a related party | ( |
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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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Due to related parties | ( |
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Net Cash (Used in) Provided by 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 Provided by (Used in) Investing Activities | |
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Cash Flows from Financing Activities: |
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Repayment of bank borrowings | — | ( | ||||
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 on 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 Company’s 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, 2024 and for the six months ended June 30, 2024 and 2023 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, 2023, which was filed with the SEC on May 15, 2024.
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, 2023. The results of operations for the six months ended June 30, 2024 and 2023 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.
For the six months ended June 30, 2023, the Company recorded unrealized gain of $
The Company did not purchase or sell US Treasury Bills for the six months ended June 30, 2024. The Company did not record the balance of US Treasury Bills as of June 30, 2024, or record realized or unrealized gain on the unaudited condensed consolidated statements of operations and comprehensive loss.
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, 2024 and 2023, 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 expected credit losses from the accounts due from the advertisers for the acquisition of ad inventory and other advertising services on their behalf. Accounts receivable do not bear interest.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), using the modified retrospective transition method. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. Upon adoption, the Company changed the impairment model to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost and receivables resulting from the application of ASC 606, including contract assets. Upon the adoption of the guidance, the Company reversed allowance for expected credit losses of $
After the adoption of ASU 2016-13, the Company maintains an allowance for credit losses and records the allowance for credit losses as an offset to accounts receivable and the estimated credit losses charged to the allowance is classified as “provision for doubtful accounts” in the consolidated statements of loss and comprehensive loss. The Company assesses collectability by reviewing accounts receivable on aging schedules because the accounts receivable were primarily consisted of accounts due from the advertisers for the acquisition of ad inventory and other advertising services on their behalf. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status, the age of the balances, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. Delinquent account balances are written-off against the allowance for expected credit loss after management has determined that the likelihood of collection is not probable.
For the six months ended June 30, 2024, the Company reversed allowance for expected credit losses of $
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. For the six months ended June 30, 2024 and 2023, the Company accrued 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, 2024 and December 31, 2023, the balances of media deposits paid to third parties were $
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 2024 and December 31, 2023, the balances of advertiser deposits were $
Revenue recognition
The Company early adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) on January 1, 2018, using the modified retrospective approach for contracts that were not completed as of December 31, 2017. 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 advice 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.
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.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. During the six months ended June 30, 2024 and 2023, 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 is 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, 2024 and 2023, respectively.
For the Six Months Ended | ||||||
June 30, | ||||||
| 2024 |
| 2023 | |||
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, | |
| 2024 |
| 2023 | |
Year-end spot rate |
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For the Six Months Ended June 30, | ||||
| 2024 |
| 2023 | |
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, 2024 and December 31, 2023, $
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, 2024,
For the six months ended June 30, 2024,
As of June 30, 2024,
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, 2024, 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 – THIRD PARTIES
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, | |||
| 2024 |
| 2023 | |||
Accounts receivable | $ | | $ | | ||
Less: allowance for expected credit losses |
| ( |
| ( | ||
Accounts receivable, net | $ | | $ | |
The Company reversed provision for expected credit losses of $
| June 30, |
| June 30, | |||
| 2024 |
| 2023 | |||
Balance at beginning of the period | $ | | $ | | ||
(Reversal of charge) charge to expenses |
| ( |
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Foreign exchange income |
| ( |
| ( | ||
Balance at end of the period | $ | | $ | |
5.PREPAYMENTS – THIRD PARTIES
Prepayments – third parties consist of the following:
| June 30, |
| December 31, | |||
| 2024 |
| 2023 | |||
Prepayments to third party medias | $ | | $ | | ||
Less: provision for doubtful accounts |
| ( |
| ( | ||
$ | | $ | |
Provision for doubtful accounts of prepayments was $
| June 30, |
| June 30, | |||
2024 | 2023 | |||||
Balance at beginning of the period | $ | | $ | | ||
Charge to expenses |
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Writing off prepayments |
| — |
| ( | ||
Foreign exchange income |
| ( |
| ( | ||
Balance at end of the period | $ | | $ | |
6.OTHER CURRENT ASSETS
Other current assets consist of the following:
| June 30, |
| December 31, | |||
| 2024 |
| 2023 | |||
Recoverable value-added taxes | $ | | $ | | ||
Others |
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Less: provision for doubtful accounts |
| ( |
| ( | ||
$ | | $ | |
For the six months ended June 30, 2024 and 2023, provision for expected credit losses of other current assets was $
| June 30, |
| June 30, | |||
2024 | 2023 | |||||
Balance at beginning of the period | $ | | $ | | ||
Charge to expenses |
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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, | |||
| 2024 |
| 2023 | |||
Property | $ | | $ | | ||
Leasehold improvement |
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Office equipment |
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Vehicles | | | ||||
Electronic equipment |
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Less: accumulated depreciation |
| ( |
| ( | ||
$ | | $ | |
Depreciation expense was $
8.INTANGIBLE ASSETS, NET
Intangible assets consisted of the following:
| June 30, |
| December 31, | |||
| 2024 |
| 2023 | |||
Copyrights | $ | | $ | | ||
Software | | | ||||
Less: accumulated amortization |
| ( |
| ( | ||
$ | | $ | |
For the six months ended June 30, 2024 and 2023, the Company purchased software of $
Amortization expense was $
9.DEPOSITS DUE FROM A THIRD PARTY
In November 2023, Baosheng Network and Nanjing Yunbei E-commerce Co., Ltd. entered into an Asset Merger Margin Custodian Agreement, pursuant to which the Company deposited RMB
10.LONG-TERM INVESTMENTS
As of June 30, 2024 and December 31, 2023, long-term investments consisted of the following:
June 30, | December 31, | |||||
| 2024 |
| 2023 | |||
Equity investment without readily determinable fair value measured at Measurement Alternative (a) | $ | | $ | | ||
Equity investment accounted for using the equity method (b) |
| |
| | ||
$ | | $ | |
(a) As of June 30, 2024 and December 31, 2023, the movement of equity investment without readily determinable fair value measured at Measurement Alternative consisted of the following:
| June 30, |
| December 31, | |||
2024 | 2023 | |||||
Opening balance | $ | | $ | | ||
Investment in Beijing Qucheng Technology Co., Ltd. (“Qucheng”) |
| — |
| | ||
Impairment against investment in Qucheng |
| ( |
| ( | ||
Foreign exchange adjustments |
| ( |
| ( | ||
Ending balance | $ | | $ | |
In January 2023, Beijing Baosheng closed an acquisition of
The Company accounted for the transaction as an investment in privately held investment 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. As of June 30, 2024 and December 31, 2023, the Company did not identify orderly transactions for similar investments of the investees and the Company did not record upward or downward adjustments. As of June 30, 2024 and December 31, 2023, the Company reviewed the financial position and financial performance of Qucheng, and assessed that the Company’s share of fair value was below the investment. For the six months ended June 30, 2024 and 2023, the Company provided impairment of $
10.LONG-TERM INVESTMENTS (CONTINUED)
In February 2021, the Company acquired
(b)As of June 30, 2024 and December 31, 2023, the movement of equity investment accounted for using the equity method consisted of the following:
| June 30, |
| December 31, | |||
2024 | 2023 | |||||
Opening balance | $ | | $ | — | ||
Investment in Guangzhou Shanxingzhe Technology Investment LLP (“Shanxingzhe”) |
| — |
| | ||
Share of equity loss |
| ( |
| ( | ||
Foreign exchange adjustments |
| ( |
| ( | ||
Ending balance | $ | | $ | |
In June 2023, Beijing Xunhuo closed the acquisition of
Shanxingzhe is primarily engaged in investment in advertisement entities. The investment in Shanxingzhe is to diversify the Company’s advertising business. Beijing Xunhuo is able to exercise significant influence over Shanxingzhe, and accounted for the equity investment using equity method. For the six months ended June 30, 2024 and 2023, equity investment loss of $
11.BANK BORROWINGS
June 30, | December 31, | |||||
| 2024 |
| 2023 | |||
Bank borrowings | $ | | $ | |
In December 2023, Baosheng Network entered into a bank loan agreement with Bank of Beijing under which under which Baosheng Network borrowed a one-year loan of RMB
In July 2023, Beijing Baosheng entered into a bank loan agreement with Bank of Communication under which under which Beijing Baosheng borrowed a one-year loan of RMB
For the six months ended June 30, 2024 and 2023, interest expense arising from the bank borrowings amounted to $
12. | WARRANT LIABILITIES |
In connection with the private placement on March 18, 2021 (Note 16), 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 consolidated statements of loss and comprehensive loss.
As of June 30, 2024 and December 31, 2023, the Company had
Estimated fair value as of December 31, 2023 |
| $ | — |
Changes in estimated fair value |
| — | |
Estimated fair value as of June 30, 2024 | $ | — | |
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 ordinary shares 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 June 30, | As of March 18, |
| |||||
| 2024 |
| 2023 |
| 2023 |
| 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
For the six months ended June 30, 2024 and 2023, the Company did not record current income tax expenses or deferred income tax expenses.
13.INCOME TAXES (CONTINUED)
Deferred tax assets as of June 30, 2024 and December 31, 2023 consist of the following:
| June 30, |
| December 31, | |||
| 2024 |
| 2023 | |||
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, 2024 and December 31, 2023, 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 ordinary share for the six months ended June 30, 2024 and 2023, respectively:
For the Six Months Ended | ||||||
June 30, | ||||||
| 2024 |
| 2023 | |||
Net Loss | $ | ( | $ | ( | ||
Weighted average number of ordinary share outstanding |
|
| ||||
Basic and Diluted |
| |
| | ||
Loss per share |
|
| ||||
Basic and Diluted | $ | ( | $ | ( |
For the six months ended June 30, 2024 and 2023, the Company had
15.EQUITY
Ordinary shares
Effective on September 29, 2023, the Company increased the authorized share capital of the Company from US$
On March 6, 2023, the Company effected an increase in authorized share capital from US$
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, 2024 and December 31, 2023, the Company’s PRC profit generating subsidiaries accrued statutory reserve funds of $
As of June 30, 2024 and December 31, 2023, 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 holder of | ||
Anruitai Investment Limited (“Anruitai”) |
16.RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)
2)Transactions with related parties
For the Six Months Ended | ||||||
June 30, | ||||||
| 2024 |
| 2023 | |||
Horgos Zhijiantiancheng | $ | | $ | |
For the six months ended June 30, 2024, the Company received the media deposits of $
3)Balances with related parties
As of June 30, 2024 and December 31, 2023, the balances due from related parties were as follows:
| June 30, |
| December 31, | |||
| 2024 |
| 2023 | |||
Accounts receivable | ||||||
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, the Company provided services to Horgos Zhijiantiancheng and paid media deposits with Horgos Zhijiantiancheng. For the six months ended June 30, 2024, the Company received the media deposits of $ |
As of June 30, 2024 and December 31, 2023, the balances due to related parties were as follows:
| June 30, |
| December 31, | |||
2024 | 2023 | |||||
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 April 6, 2023, the Longhua District People’s Court of Shenzhen City, Guangdong Province accepted a case filed by Shenzhen Pusi Technology Co., Ltd (“Shenzhen Pusi”), as the complainant, and Beijing Baosheng, as the defendant. In this case, Shenzhen Pusi sought recovery of outstanding service fee RMB
17.CONTINGENCIES (CONTINUED)
In March 2022, Beijing Baosheng brought a breach of contract claim against Beijing Aipu New Media Technology Co., Ltd. (“Aipu”) in the Beijing Haidian District People’s Court and sought recovery of RMB
On January 30, 2024, Beijing Arbitration Committee accepted a contract dispute arbitration case filed by Beijing Baosheng against Tianjin Hongen Wanmei Future Education Technology Co., Ltd (“Tianjin Hongen”) for recovery of RMB
On March 1, 2024, the Company was served a complaint regarding a lawsuit brought by three institutional investors (the “Plaintiffs”) against the Company and certain other parties, filed with the United States District Court of the Southern District of New York, alleging that the Company violated Section 11 and Section 12 of the Securities Act of 1933, as amended, by including untrue statements of material facts and omitting to state material facts required to make the statements therein not misleading, in its registration statement on Form F-1, as amended (File No. 333-239800), which was declared effective by the SEC on February 5, 2021. On March 17, 2021, two institutional investors, which are also two of the Plaintiffs, purchased
On April 10, 2024, the Company was served with a copy of the winding up petition (the “Petition”), filed by Orient Plus International Limited (the “Petitioner”) with the Grand Court of the Cayman Islands, seeking an order that the Company be wound up pursuant to Section 92(e) of the Cayman Islands Companies Act (2023 Revision), claiming that the management of the Company have acted unfairly and/or oppressively towards the Petitioner and other minority shareholders, and/or the affairs of the Company have been conducted with a lack of probity, and the Petitioner and the other investors have justifiably lost confidence in the management of the Company. On March 17, 2021, two institutional investors, one of which is the Petitioner, purchased
On November 17, 2023, the Company entered into a securities purchase agreement (the “Karboom Securities Purchase Agreement”) with Kaboom Technology Limited (“Kaboom”). Pursuant to the Karboom Securities Purchase Agreement, the Company agreed to issue to the Investor senior convertible promissory notes, in an original principal amount of not more than US$
Affected by the lawsuit filed by three institutional investors on March 1, 2024 and by legal proceedings filed by the Petitioner on April 10, 2024, Both Kaboom and VG Master Fund terminated agreements with the Company.
On May 31, 2024, Karboom sent the Company a notice of agreement termination (the “Karboom Termination Notice”) regarding the Karboom Securities Purchase Agreement and all related agreements contemplated thereunder (collectively, the “Karboom Agreements”), due to the legal proceedings that the Company was involved at that time. Immediately prior to the termination of the Karboom Agreements, the Company had not issued any Note to Karboom under the Karboom Securities Purchase Agreement. Upon the termination of the Karboom Agreements, effective on the date of the Karboom Termination Notice, the Karboom Agreements became null and void and of no further force and effect, and all investment activities between Karboom and the Company ceased immediately.
17.CONTINGENCIES (CONTINUED)
On June 4, 2024, VG Master Fund sent the Company a notice of agreement termination (the “VG Termination Notice”) regarding the VG Securities Purchase Agreement and all related agreements contemplated thereunder (collectively, the “VG Agreements”), due to the legal proceedings that the Company was involved at that time. Immediately prior to the termination of the VG Agreements, there had been no ordinary shares sold by the Company to VG Master Fund under the VG Agreements. Upon the termination of the VG Agreements, effective on the date of the VG Termination Notice, the VG Agreements became null and void and of no further force and effect, and all investment activities between VG Master Fund and the Company ceased immediately.
As of the date 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
In August 2024, Beijing Baosheng entered into a bank loan agreement with Bank of Communication under which under which Beijing Baosheng borrowed a one-year loan of RMB
These unaudited condensed consolidated financial statements were approved by management and available for issuance on September [X], and the Company has evaluated subsequent events through this date.