Financial Performance - As of June 30, 2023, the company reported a working capital of approximately $1.8 million and incurred a net loss of approximately $57.6 million with negative operating cash flow of approximately $7.0 million[24]. - The company had cash on hand of approximately $6.1 million as of June 30, 2023, down from $9.4 million as of December 31, 2022[25][42]. - Total revenues for the six months ended June 30, 2023, were $6,584,729, a decrease of 6.2% from $7,017,827 in the same period of 2022[195]. - Application development services revenue increased to $2,179,167, up 20.6% from $1,806,690 in 2022[195]. - Trading revenue decreased significantly to $2,605,970, down 25.0% from $3,466,954 in 2022[195]. - Subscription services revenue decreased to $294,528, down 31.2% from $428,087 in 2022[195]. - Consulting and technical support services revenue increased to $1,477,740, up 12.3% from $1,316,096 in 2022[195]. Financing Activities - The company entered into a securities purchase agreement with White Lion Capital LLC to purchase up to $15 million of ordinary shares, resulting in net proceeds of approximately $0.1 million from the issuance of 37,500 shares after June 30, 2023[26]. - A separate agreement with YA II PN, LTD. allows for the purchase of up to $30 million of ordinary shares, with net proceeds of approximately $2.9 million from the issuance of 1,300,173 shares after June 30, 2023[27]. - The company issued 5,000,000 ordinary shares during the six months ended June 30, 2023, resulting in net proceeds of $491,180 from a private placement with White Lion Capital LLC[174]. - The company issued 41,406,784 ordinary shares during the six months ended June 30, 2023, generating net proceeds of $3,945,066 from YA II PN, LTD[175]. - The company issued 11,836,592 ordinary shares during the six months ended June 30, 2023, with net proceeds of $499,063 from TBS Capital LP[176]. - The company issued 276,448,625 ordinary shares to acquire a 65% equity interest in Boxinrui, with a fair value of $24,078,675[186]. - The company issued 55,506,750 ordinary shares for a 19% equity interest in DTI, with a fair value of $9,058,701[188]. Assets and Liabilities - The company recorded put option liabilities from acquisitions totaling approximately $45.1 million as of June 30, 2023, with significant losses on changes in fair value[39]. - The fair value of the convertible loans was approximately $6.6 million as of June 30, 2023, reflecting a loss on change in fair value of $530,501 during the period[41]. - As of June 30, 2023, total accounts receivable was $22,272,752, with a net amount of $15,069,001 after accounting for an allowance for doubtful accounts of $7,203,751[104]. - The company reported a provision for doubtful accounts of $483,137 for the six months ended June 30, 2023, increasing the allowance to $7,203,751[106]. - As of June 30, 2023, loans to third parties amounted to $2,174,034, representing unsecured loans for working capital needs at an interest rate of 4%-5% per annum[110]. - The company has a prepayment of $15,906,187 for a potential acquisition of 32% equity in DTI Group Limited, which is expected to enhance its business scope[107]. - The company has lease liabilities and right-of-use assets recorded on its balance sheet as per Topic 842[75]. Investments and Acquisitions - The company completed the acquisition of Smartconn on January 5, 2023, increasing its ownership from 19.99% to 50.99% for a total consideration of $12,640,062, which was paid in newly issued shares[98]. - The fair value of identifiable assets acquired from Smartconn included cash of $49,496, intangible assets of $19,226,106, and total net assets of $19,019,168, resulting in goodwill of $21,105,559[100]. - The company acquired 65% equity interest in Boxinrui on March 28, 2023, for a consideration of $24,078,675, bringing total ownership to 100%[101]. - The fair value of identifiable assets acquired from Boxinrui included cash of $10,258, intangible assets of $17,984,093, and total net assets of $18,828,576, resulting in goodwill of $23,612,151[103]. - The Company has not incurred a material loss on any contracts to date, with provisions for estimated losses made when probable[66]. Shareholder Equity and Capital Structure - The authorized share capital was increased to $16,666,700, divided into 10,000,000,000 shares, following a shareholder meeting on December 5, 2022[153]. - On May 30, 2023, the Company approved a share consolidation of thirty ordinary shares into one share, increasing the authorized share capital to $50,000,000[154]. - The Company approved a share consolidation of every eight ordinary shares into one share with a par value of US$0.40[155]. - The authorized share capital increased from US$200,000,000 to US$2,000,000,000, allowing for 5,000,000,000 shares[156]. - The Company re-designated 18,000,000 shares as Class B ordinary shares and 4,482,000,000 shares as Class A ordinary shares[156]. Expenses and Costs - The Company recorded a consulting fee expense of $1,396,470 for the six months ended June 30, 2023, compared to $429,284 for the same period in 2022[165]. - The fair value of restricted share units (RSUs) issued for consulting services was assessed at $13,080,000[167]. - The Company had unrecognized share-based compensation expense related to RSUs amounting to $8,901,667 as of June 30, 2023[167]. - The Company recorded modification expenses totaling $2,139,555 due to amendments in the exercise price of stock options[171]. - Total share-based compensation expenses for share options were $nil for the six months ended June 30, 2023, compared to $2,630,758 for the same period in 2022[173]. Currency and Economic Factors - The RMB depreciated by 8.2% in fiscal year 2022 and further by 5.1% during the six months ended June 30, 2023[91]. - The preferential tax treatment in the PRC reduced income taxes by $223,556 for the six months ended June 30, 2023[146]. - The Company has approximately $9.7 million in net operating loss carryforwards expiring by 2027[148]. Subsidiaries and Business Expansion - The company established a new subsidiary, Agro Digital Fintech Co., Ltd., in China with a 51% equity interest to explore digital finance business[198]. - A new subsidiary, X3 HOLDINGS PTE. LTD., was established in Singapore with 100% equity interest to explore overseas business[198].
X3 Holdings(XTKG) - 2023 Q2 - Quarterly Report