Financial Performance - As of June 30, 2024, the Group incurred a net loss of approximately $11.2 million and had negative operating cash flow of approximately $1.1 million[23]. - For the six months ended June 30, 2024, total revenues decreased to $4,994,044 from $6,584,729 in the same period of 2023, representing a decline of approximately 24.1%[151]. - Application development services revenue fell to $884,538, down 59.5% from $2,179,167 in the prior year[151]. - Consulting and technical support services revenue increased to $2,383,000, up 61.1% from $1,477,740 in the same period of 2023[151]. - Trading revenue decreased significantly to $1,375,319, down 47.3% from $2,605,970 in the previous year[151]. Cash and Liquidity - The Group had cash and cash equivalents of approximately $1.5 million as of June 30, 2024[24]. - The Group believes its cash on hand and financing cash flows will be sufficient to fund operations for at least the next 12 months, but may require additional cash resources for investments or acquisitions[27]. - As of June 30, 2024, the Group's total cash, cash equivalents, and restricted cash amounted to $2,650,752, a decrease from $4,056,150 as of December 31, 2023[71]. - The total outstanding balance of short-term bank loans decreased to $2,752,092 as of June 30, 2024, from $3,943,718 as of December 31, 2023, representing a reduction of about 30.2%[94]. Revenue Recognition - The Group's revenue sources include application development services, consulting and technical support services, subscription services, trading revenue, and others, with other revenues accounting for 2.7% of total revenue for the six months ended June 30, 2024[58]. - Revenue from consulting and technical support services is recognized over the contract term on a straight-line basis, with contracts typically lasting 12 to 24 months[55]. - Revenue from subscription services is recognized over the contract term, based on actual usage or on a straight-line basis, as customers access the Group's software-as-a-service applications[56]. - The Group started its trading business in 2021, recognizing revenue at the point of product transfer to the customer, which generally occurs upon shipment or delivery[57]. Accounts Receivable and Allowance for Credit Losses - The Group's accounts receivable are recorded net of allowance for credit losses, which are estimated based on historical data and credit risk characteristics[38]. - The Group's accounts receivable, net, was $18,785,714 as of June 30, 2024, down from $21,487,053 as of December 31, 2023[85]. - The allowance for credit losses increased to $10,613,695 as of June 30, 2024, from $7,133,370 as of December 31, 2023, reflecting a provision for credit losses of $3,773,492 during the six months ended June 30, 2024[87]. Acquisitions and Investments - The Group acquired 100% equity interest in Hongchuangxin for a total consideration of $13,854,016 on May 1, 2024, aiming to expand its business scope[81]. - The intangible assets acquired through the Hongchuangxin acquisition are primarily attributable to franchise rights, amortized over 10 years[83]. Taxation - Powerbridge Zhuhai has been approved as a High and New Technology Enterprise (HNTE), reducing its statutory income tax rate to 15% from the standard 25%[109]. - The impact of the preferred tax treatment decreased income taxes by $209,134 for the six months ended June 30, 2024, compared to $223,556 for the same period in 2023[110]. - The Group's effective tax rate for the six months ended June 30, 2024, was 1.0%, significantly lower than the 0.1% effective tax rate for the same period in 2023[111]. - As of June 30, 2024, the Group has approximately $13.8 million in net operating loss (NOL) carryforwards with expirations by 2029[111]. Share Capital and Equity - The authorized share capital of the Company was increased from $200 million to $2 billion, allowing for a total of 5 billion ordinary shares[118]. - The Company had 275,155,450 Class A ordinary shares issued and outstanding as of June 30, 2024, an increase from 259,464,169 shares as of December 31, 2023[120]. - The Company issued 1,260,504 restricted Class A ordinary shares valued at $1,500,000 as compensation for consulting services on December 8, 2023[123]. - The Company raised net proceeds of $4,115,706 from the issuance of 153,646 Class A ordinary shares under a securities purchase agreement with White Lion Capital LLC[133]. - The Company issued 1,544,613 Class A ordinary shares and raised net proceeds of $10,375,969 under a securities purchase agreement with YA II PN, LTD[134]. Operational Efficiency and Challenges - The Group's liquidity is affected by operational efficiency, revenue contract values, and timing of accounts receivable collections[23]. - The Group's subsidiaries in PRC had accumulated deficits, resulting in statutory reserve balances of $nil as of June 30, 2024[148]. - The Group recorded a disputed amount of $1,389,806 (RMB10,100,000) in accounts payable due to a lawsuit filed by a supplier[150]. - The Group has fully paid the disputed amount and related interest by July 10, 2024[150]. Other Financial Metrics - The Group recognized a gain of $1,048,271 from the change in fair value of convertible notes for the six months ended June 30, 2024, compared to a loss of $530,501 for the same period in 2023[102]. - The Group's effective interest rates for the first and second tranches of the YA 2024 Notes were 17.6% and 24.3%, respectively, with total effective interest expense amounting to $104,850 for the six months ended June 30, 2024[106]. - The total future minimum lease payments as of June 30, 2024, amounted to $510,330, with a present value of lease liabilities of $491,987[97].
X3 Holdings(XTKG) - 2024 Q2 - Quarterly Report