Part I [Item 3. Key Information](index=12&type=section&id=Item%203.%20Key%20Information) This section outlines principal investment risks for Baosheng Media Group, including business, China operations, and ordinary shares, highlighting advertiser budget cuts, customer concentration, high accounts receivable, evolving Chinese regulations, and Nasdaq listing compliance [Risk Factors](index=12&type=section&id=D.%20Risk%20Factors) The company faces significant business, China-specific, and stock listing risks, including reliance on advertiser spending, high customer concentration and accounts receivable, regulatory uncertainty in China, and Nasdaq listing compliance issues - The company's revenue is highly dependent on advertiser budgets, which are susceptible to macroeconomic conditions, and on media rebate policies, which can change unfavorably[33](index=33&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) Accounts Receivable Status (as of Dec 31) | Year | Gross Accounts Receivable | Bad Debt Allowance | % Over 6 Months Old | | :--- | :--- | :--- | :--- | | 2022 | $49.8 million | $17.7 million | 64.7% | | 2021 | $62.8 million | $6.4 million | 63.4% | | 2020 | $69.9 million | $4.7 million | 38.2% | Top 5 Customer Revenue Concentration | Year | Top 5 Customers' % of Total Revenue | | :--- | :--- | | 2022 | 70.6% (36.8% + 13.3% + 10.7% + 5.1% + 4.7%) | | 2021 | 96.0% (41.8% + 28.1% + 16.5% + 7.6% + 2.0%) | | 2020 | 89.9% (68.9% + 12.8% + 3.5% + 2.4% + 2.3%) | - The company has faced non-compliance with Nasdaq's minimum bid price requirement, leading to share consolidations in May 2022 and March 2023 to regain compliance[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) - The Chinese government's increasing oversight over data security (CAC) and overseas listings (CSRC) could adversely impact business operations and future offerings[122](index=122&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) [Item 4. Information on the Company](index=48&type=section&id=Item%204.%20Information%20on%20the%20Company) This section details the company's history, corporate structure, and online marketing operations in China, highlighting the impact of client loss and evolving PRC regulatory risks [History and Development of the Company](index=48&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Baosheng Media Group, a Cayman Islands holding company operating via PRC subsidiaries, completed its Nasdaq IPO in 2021 and has since undergone share consolidations to maintain listing compliance amid evolving PRC regulatory risks - The company is a holding company incorporated in the Cayman Islands, with all operations conducted through its wholly-owned PRC subsidiaries[215](index=215&type=chunk) - Completed its IPO on the Nasdaq Capital Market on February 8, 2021, raising net proceeds of approximately **$30.2 million**[218](index=218&type=chunk) - To address non-compliance with Nasdaq's minimum bid price rule, the company executed share consolidations in May 2022 (**3.2-to-1**) and March 2023 (**6-to-1**)[220](index=220&type=chunk)[222](index=222&type=chunk) - The company notes that new CSRC rules effective March 31, 2023, will require filings for future overseas offerings, creating uncertainty and compliance requirements[232](index=232&type=chunk) [Business Overview](index=54&type=section&id=B.%20Business%20Overview) Baosheng provides online marketing solutions in China, offering SEM and Non-SEM services, with revenue from media rebates and advertiser fees, but has seen gross billing decline due to COVID-19 and the loss of a major client - The company's business model revolves around serving advertisers by managing online marketing campaigns and serving media by procuring advertisers for their ad inventory[237](index=237&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) Gross Billing by Advertiser Industry (USD) | Industry | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | E-commerce & online service | $23.6M | $19.1M | $24.3M | | Online gaming | $10.6M | $12.4M | $33.6M | | Third-party ad agencies | $4.1M | $4.9M | $64.6M | | **Total Gross Billing** | **$54.6M** | **$54.7M** | **$134.9M** | Revenue Breakdown by Model (USD) | Revenue Model | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Rebates and incentives from publishers | $1.93M | $3.66M | $9.43M | | Net fees from advertisers | $0.48M | $0.25M | $2.48M | | **Total Revenue** | **$2.42M** | **$3.91M** | **$11.91M** | - The company lost its authorized agency status with Sogou, its top customer in 2020 (**68.9% of revenue**), in March 2021, significantly impacting its SEM services revenue[312](index=312&type=chunk) [Organizational Structure](index=97&type=section&id=C.%20Organizational%20Structure) The company operates under a multi-layered holding structure with the parent in the Cayman Islands, intermediary subsidiaries in BVI and Hong Kong, and operating entities in the PRC, including significant pre-IPO investors - The company operates under a multi-layered holding structure with the parent company in the Cayman Islands, intermediary subsidiaries in BVI and Hong Kong, and the main operating entities located in the PRC[400](index=400&type=chunk)[401](index=401&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=98&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section analyzes the company's financial performance, highlighting a significant net loss in FY2022 driven by revenue decline and increased doubtful account provisions, which raises substantial doubt about its going concern ability [Operating Results](index=98&type=section&id=A.%20Operating%20Results) The company's operating results significantly deteriorated in FY2022, with total revenues falling **38.3%** to **$2.4 million** and net loss widening to **$23.7 million**, primarily due to a sharp increase in doubtful account provisions and loss of a major client Consolidated Results of Operations (USD) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenues | $2,415,098 | $3,911,560 | $11,911,229 | | Gross (Loss) Profit | $(31,843) | $1,834,044 | $10,654,876 | | Provision for doubtful accounts | $(20,460,667) | $(6,880,008) | $(1,960,604) | | Loss from operations | $(24,067,983) | $(9,423,709) | $5,643,175 (Income) | | Net (Loss) Income | $(23,738,837) | $(6,747,453) | $6,944,691 | - Revenue from SEM services plummeted by **86.9%** in 2022 to **$0.3 million** from **$2.4 million** in 2021, primarily due to the absence of revenue from the former top client, Sogou[435](index=435&type=chunk) - The provision for doubtful accounts receivable surged by **363.9%** to **$19.3 million** in 2022, as advertisers in the mobile app, education, and gaming industries faced financial difficulties and delayed payments[447](index=447&type=chunk) [Liquidity and Capital Resources](index=115&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company's financial condition raises substantial doubt about its going concern ability due to a **$22.5 million** net loss in 2022 and historical cash outflows, despite positive operating cash flow of **$1.6 million** in 2022 - The company's net loss and historical operating cash outflows raise substantial doubt about its ability to continue as a going concern[483](index=483&type=chunk)[688](index=688&type=chunk)[774](index=774&type=chunk) Summary of Cash Flows (USD) | Cash Flow | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | $1,601,481 | $(31,213,199) | $(3,393,204) | | Net Cash from Investing Activities | $(3,777,782) | $(6,414,339) | $1,244,612 | | Net Cash from Financing Activities | $295,765 | $36,085,744 | $772,373 | - Accounts receivable turnover days remained high at **369** in 2022 and **442** in 2021, compared to **167** in 2020, indicating persistent issues with customer payments[493](index=493&type=chunk) [Item 6. Directors, Senior Management and Employees](index=120&type=section&id=Item%206.%20Directors,%20Senior%20Management%20and%20Employees) This section details the company's leadership, compensation, board structure, and employee base, noting a decrease in workforce and identifying principal shareholders - Shasha Mi has served as the CEO and Chairperson of the Board since July 2022[514](index=514&type=chunk) Employee Headcount by Function (as of Dec 31, 2022) | Function | Number of Employees | % of Total | | :--- | :--- | :--- | | Ad optimization | 33 | 56% | | Sales and marketing | 10 | 17% | | Management and administration | 9 | 15% | | Advertiser services | 4 | 7% | | Media relationships | 3 | 5% | | **Total** | **59** | **100%** | Principal Shareholders' Ownership (as of April 18, 2023) | Shareholder | % of Ordinary Shares | | :--- | :--- | | An Rui Tai BVI | 22.40% | | PBCY Investment | 20.37% | | Deng Guan BVI | 15.61% | | EJAM BVI | 6.82% | [Item 7. Major Shareholders and Related Party Transactions](index=127&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section details major shareholders and related party transactions, including **$4.5 million** in services purchased from an EJAM Group-controlled entity and the settlement of a **$1.73 million** receivable from a former chairperson - In 2022, the company purchased services worth **$4,464,919** from Horgos Zhijiantiancheng, an entity controlled by shareholder EJAM Group[547](index=547&type=chunk) - A receivable of **$1.73 million** due from former Chairperson Ms. Wenxiu Zhong, related to a litigation guarantee, was recorded as of Dec 31, 2021, and was fully settled by March 7, 2022[550](index=550&type=chunk)[841](index=841&type=chunk) [Item 8. Financial Information](index=128&type=section&id=Item%208.%20Financial%20Information) This section presents consolidated financial statements, details ongoing legal proceedings primarily for unpaid fees, and states the company's policy of retaining earnings rather than paying cash dividends - The company is a party to multiple ongoing legal proceedings, mostly as a plaintiff in breach of contract cases seeking to recover payments from advertisers[552](index=552&type=chunk)[560](index=560&type=chunk)[561](index=561&type=chunk) - The company does not have a current plan to pay dividends and intends to retain future earnings to fund operations and growth[564](index=564&type=chunk) [Item 10. Additional Information](index=132&type=section&id=Item%2010.%20Additional%20Information) This section provides supplementary details on share capital, corporate governance under Cayman Islands law, exchange controls, and taxation, including the company's assessment of not being a Passive Foreign Investment Company (PFIC) - The company's authorized share capital is **US$60,000** divided into **6,250,000** Ordinary Shares with a par value of **$0.0096** per share, following share consolidations[569](index=569&type=chunk) - The company is an exempted company under Cayman Islands law, which provides for different corporate governance and shareholder rights compared to U.S. corporations[598](index=598&type=chunk) - For U.S. federal income tax purposes, the company states that based on its current operations and asset composition, it does not expect to be treated as a Passive Foreign Investment Company (PFIC)[631](index=631&type=chunk) [Item 11. Quantitative and Qualitative Disclosures About Market Risk](index=148&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks including interest rate, liquidity, and foreign exchange fluctuations, with operations in RMB and reporting in USD, and also experiences business seasonality - The company faces foreign exchange risk as its revenues and expenses are denominated in RMB, while its reporting currency is the U.S. dollar[649](index=649&type=chunk) - The business is subject to seasonality, with advertising spend and revenues tending to rise during holiday seasons and towards the end of the year[651](index=651&type=chunk) Part II [Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds](index=149&type=section&id=Item%2014.%20Material%20Modifications%20to%20the%20Rights%20of%20Security%20Holders%20and%20Use%20of%20Proceeds) This section details the use of proceeds from financing activities, including **$30.2 million** from the February 2021 IPO and **$9.9 million** from a March 2021 private placement, primarily for working capital - The company received net proceeds of approximately **$30.2 million** from its February 2021 IPO and has used about **$28.3 million** for working capital and general corporate purposes[653](index=653&type=chunk) - A private placement in March 2021 raised an additional **$9.9 million**, which has been fully utilized for working capital[654](index=654&type=chunk) [Item 15. Controls and Procedures](index=149&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concluded that as of December 31, 2022, disclosure controls and procedures were ineffective due to material weaknesses in accounting personnel expertise and the absence of a comprehensive policies manual - Management concluded that as of December 31, 2022, the company's disclosure controls and procedures were not effective[656](index=656&type=chunk) - Two material weaknesses were identified in internal control over financial reporting: 1) Lack of sufficient personnel with U.S. GAAP and SEC reporting knowledge. 2) Lack of a comprehensive accounting policies and procedures manual[660](index=660&type=chunk) [Item 16. Corporate Governance and Other Information](index=151&type=section&id=Item%2016) This section covers corporate governance, including the audit committee financial expert, code of ethics, principal accountant change from Friedman LLP to YCM CPA INC., and the company's use of home country governance practices - On July 20, 2022, the company terminated its independent auditor, Friedman LLP, and appointed YCM CPA INC. The change was not due to any disagreement on accounting principles or practices[670](index=670&type=chunk) - The company, as a foreign private issuer, follows certain Cayman Islands corporate governance practices in lieu of Nasdaq listing standards[675](index=675&type=chunk)[676](index=676&type=chunk) Part III [Item 18. Financial Statements](index=154&type=section&id=Item%2018.%20Financial%20Statements) This section presents the company's audited consolidated financial statements, revealing a significant deterioration in financial health with a **$23.7 million** net loss in 2022 and an auditor's 'Going Concern' opinion - The auditor's report expresses substantial doubt about the Company's ability to continue as a going concern due to a net loss of **$23.7 million** for the year ended December 31, 2022[688](index=688&type=chunk)[774](index=774&type=chunk) Consolidated Balance Sheet Highlights (USD) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $6,679,077 | $4,751,538 | | Accounts receivable, net | $32,101,818 | $56,363,183 | | Total Assets | $58,046,415 | $94,080,133 | | Total Liabilities | $12,609,790 | $20,018,844 | | Total Shareholders' Equity | $45,436,625 | $74,061,289 | Consolidated Income Statement Highlights (USD) | Account | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenues | $2,415,098 | $3,911,560 | $11,911,229 | | Gross (Loss) Profit | $(31,843) | $1,834,044 | $10,654,876 | | Net (Loss) Income | $(23,738,837) | $(6,747,453) | $6,944,691 | | (Loss) Earnings Per Share | $(15.47) | $(4.62) | $6.54 |

Baosheng Media Group H1 2022 Financial Results [Management Commentary](index=1&type=section&id=Management%20Commentary) Management discusses challenging H1 2022 due to COVID-19 and budget cuts, highlighting service recognition and future digital economy opportunities - The company faced significant pressure in H1 2022 as clients reduced advertising budgets due to the COVID-19 pandemic resurgence[2](index=2&type=chunk) - Despite challenges, the company received multiple awards from Alibaba, including the 2022 Super Huichuan Excellent Service Provider Award, demonstrating high recognition of its service capabilities[2](index=2&type=chunk) - Future strategy involves seizing new opportunities in digital technology, cooperating with existing customers, investing in innovative industries, and improving the industrial chain to enhance business resilience[2](index=2&type=chunk) [Financial Highlights](index=1&type=section&id=Financial%20Highlights%20for%20the%20First%20Half%20of%202022) H1 2022 saw severe downturn: revenue plummeted 82.3%, gross profit became a $1.1M loss, net loss expanded to $6.3M Financial Highlights for the First Half of 2022 vs 2021 | Metric | H1 2022 ($) | H1 2021 ($) | % Change | | :--- | :--- | :--- | :--- | | Revenues | 428,150 | 2,415,352 | -82.3% | | Gross (Loss) Profit | (1,062,518) | 1,444,334 | -173.6% | | Gross Margin | -248.2% | 59.8% | -515.0% | | Loss from Operations | (6,536,807) | (2,242,820) | 191.5% | | Net Loss | (6,310,346) | (271,671) | 2,222.8% | | Loss per Share | (0.22) | (0.01) | 2,100.0% | [Detailed Financial Results](index=2&type=section&id=Detailed%20Financial%20Results) Detailed H1 2022 results reveal significant revenue decline, increased costs, and higher operating expenses from doubtful accounts, culminating in a substantial net loss [Revenues](index=2&type=section&id=Revenues) Total revenue decreased 82.3% to $0.4M, driven by an 84.1% drop in publisher rebates from Sogou contract termination, while non-SEM services surged 538.6% Revenue Breakdown by Source (H1 2022 vs H1 2021) | Revenue Source | H1 2022 ($) | H1 2021 ($) | % Change | | :--- | :--- | :--- | :--- | | Rebates and incentives from publishers | 373,508 | 2,355,036 | -84.1% | | Net fees from advertisers | 54,642 | 60,316 | -9.4% | | **Total Revenues** | **428,150** | **2,415,352** | **-82.3%** | - The decline in rebates was mainly due to a **$2.0 million** decrease in revenue from Sogou after their agency agreement ended in March 2021, and reduced ad budgets from major publishers due to the COVID-19 pandemic[7](index=7&type=chunk) Revenue Breakdown by Service Type (H1 2022 vs H1 2021) | Service Type | H1 2022 ($) | H1 2021 ($) | % Change | | :--- | :--- | :--- | :--- | | SEM services | 50,380 | 2,356,200 | -97.9% | | Non-SEM services | 377,770 | 59,152 | 538.6% | | **Total Revenues** | **428,150** | **2,415,352** | **-82.3%** | - The company focused on the short video feeds advertising business in H1 2022, driving the significant increase in non-SEM service revenues[10](index=10&type=chunk) [Cost of Revenues and Gross Profit](index=3&type=section&id=Cost%20of%20Revenues%20and%20Gross%20Profit) Cost of revenues increased 53.5% to $1.5M due to staff costs, leading to a $1.0M gross loss and -248.2% gross margin - Cost of revenues increased by **53.5%** to **$1.5 million**, mainly due to a **$0.5 million** increase in staff costs from hiring 33 new employees for the short video feeds advertising business[11](index=11&type=chunk) - The company recorded a gross loss of **$1.0 million** in H1 2022, compared to a gross profit of **$1.4 million** in H1 2021, with gross margin falling to **-248.2%** from **59.8%**[12](index=12&type=chunk) [Operating Expenses](index=3&type=section&id=Operating%20Expenses) Operating expenses rose 48.5% to $5.5M, driven by a 135.8% surge in doubtful accounts provision, despite decreased selling and marketing expenses - Selling and marketing expenses decreased by **32.9%** to **$0.3 million** due to lower entertainment expenses for marketing activities, reflecting decreased gross billings[13](index=13&type=chunk) - General and administrative expenses remained stable at approximately **$1.6 million**[14](index=14&type=chunk) - Provision for doubtful accounts surged **135.8%** to **$3.5 million** as advertisers in financial, education, and gaming industries faced pandemic and regulatory impacts, leading to slower payments[15](index=15&type=chunk) [Net Loss](index=4&type=section&id=Net%20Loss) Net loss significantly widened to $6.3M in H1 2022, with loss per share at $0.22, compared to $0.3M loss and $0.01 per share in H1 2021 - The H1 2021 result included a **$1.9 million** net remeasurement gain from the change in fair value of warrant liabilities, which was not present in H1 2022[16](index=16&type=chunk) Net Loss and Loss Per Share | Metric | H1 2022 ($) | H1 2021 ($) | | :--- | :--- | :--- | | Net Loss | (6,310,346) | (271,671) | | Basic and Diluted Loss per Share | (0.22) | (0.01) | [Financial Condition and Cash Flow](index=4&type=section&id=Financial%20Condition%20and%20Cash%20Flow) As of June 30, 2022, cash was $5.0M; operating cash flow improved to $4.0M used, investing provided $1.7M, and financing used $1.3M for dividends - As of June 30, 2022, cash and cash equivalents were **$5.0 million**, compared to **$4.8 million** as of December 31, 2021[18](index=18&type=chunk) Net Cash Flow by Activity (H1 2022 vs H1 2021) | Cash Flow Activity | H1 2022 ($) | H1 2021 ($) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (4.0 million) | (27.8 million) | | Net Cash Provided by (Used in) Investing Activities | 1.7 million | (5.7 million) | | Net Cash (Used in) Provided by Financing Activities | (1.3 million) | 38.5 million | - The improvement in operating cash flow in H1 2022 was mainly due to a smaller net loss after non-cash adjustments and favorable changes in working capital, including decreases in prepayments and accounts payable[18](index=18&type=chunk) - Cash used in financing activities in H1 2022 was mainly for a **$1.2 million** dividend payment, whereas cash provided in H1 2021 was from net proceeds from the IPO (**$30.2 million**) and a private placement (**$9.9 million**)[21](index=21&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Operations, and Cash Flows for H1 2022 and 2021 [Unaudited Condensed Consolidated Balance Sheets](index=6&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Total assets decreased from $94.1M to $77.8M, driven by reduced accounts receivable and prepayments, while total liabilities and shareholders' equity also declined Selected Balance Sheet Data (As of June 30, 2022 vs Dec 31, 2021) | Account | June 30, 2022 ($) | Dec 31, 2021 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | 5,031,813 | 4,751,538 | | Accounts receivable, net | 51,036,740 | 56,363,183 | | Total Assets | 77,832,446 | 94,080,133 | | Total Liabilities | 13,598,736 | 20,018,844 | | Total Shareholders' Equity | 64,233,710 | 74,061,289 | [Unaudited Condensed Consolidated Statements of Operations](index=7&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20%28LOSS%29%20INCOME) The statement of operations details a significant H1 2022 decline, with revenues dropping to $0.4M, a $1.1M gross loss, and net loss expanding to $6.3M Consolidated Statement of Operations (H1 2022 vs H1 2021) | Metric | For the Six Months Ended June 30, 2022 ($) | For the Six Months Ended June 30, 2021 ($) | | :--- | :--- | :--- | | Revenues | 428,150 | 2,415,352 | | Gross (Loss) Profit | (1,062,518) | 1,444,334 | | Loss from Operations | (6,536,807) | (2,242,820) | | Net Loss | (6,310,346) | (271,671) | | Loss per Share | (0.22) | (0.01) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) The cash flow statement shows $4.0M net cash used in operations, $1.7M provided by investing, and $1.3M used in financing, resulting in a $3.8M decrease in cash Consolidated Statement of Cash Flows (H1 2022 vs H1 2021) | Cash Flow Activity | For the Six Months Ended June 30, 2022 ($) | For the Six Months Ended June 30, 2021 ($) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (4,000,579) | (27,756,592) | | Net Cash Provided by (Used in) Investing Activities | 1,702,834 | (5,718,715) | | Net Cash (Used in) Provided by Financing Activities | (1,285,912) | 38,486,717 | | Net (decrease) increase in cash | (3,775,452) | 5,739,709 |