Baosheng(BAOS) - 2023 Q2 - Quarterly Report

Unaudited Condensed Consolidated Financial Statements The company's financial position as of June 30, 2023, shows decreased assets and liabilities, while operations improved significantly with a narrowed net loss and positive operating cash flow Unaudited Condensed Consolidated Balance Sheets As of June 30, 2023, total assets decreased to $53.57 million, liabilities to $10.28 million, and shareholders' equity to $43.29 million, primarily due to reduced cash and increased comprehensive loss Key Balance Sheet Items (in USD) | Balance Sheet Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $41,530,910 | $50,139,482 | | Total Assets | $53,565,586 | $58,046,415 | | Total Liabilities | $10,280,457 | $12,609,790 | | Total Shareholders' Equity | $43,285,129 | $45,436,625 | - Cash and cash equivalents decreased significantly from $6.68 million at the end of 2022 to $3.72 million as of June 30, 2023[2] - Long-term investments increased substantially from $2.26 million to $6.84 million during the first six months of 2023[2] Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss For the six months ended June 30, 2023, revenues increased to $1.47 million, shifting to a gross profit of $1.18 million and significantly narrowing the net loss to $4,079 Key Operational Results (Six Months Ended June 30) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Revenues | $1,470,439 | $428,150 | | Gross Profit (Loss) | $1,175,844 | $(1,062,518) | | Loss from Operations | $(636,805) | $(6,536,807) | | Net Loss | $(4,079) | $(6,310,346) | | Comprehensive Loss | $(2,151,496) | $(9,827,579) | | Loss per Share (Basic & Diluted) | $(0.00) | $(4.11) | - The significant reduction in net loss was driven by higher revenues, a shift to gross profit, and lower operating expenses, particularly a large decrease in the provision for doubtful accounts from $3.51 million in 2022 to $0.56 million in 2023[5] Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity decreased to $43.29 million by June 30, 2023, mainly due to a $2.15 million foreign currency translation loss, partially offset by a minimal net loss Reconciliation of Shareholders' Equity (Six Months Ended June 30, 2023) | Description | Amount (in USD) | | :--- | :--- | | Balance as of December 31, 2022 | $45,436,625 | | Net loss | $(4,079) | | Foreign currency translation adjustments | $(2,147,417) | | Balance as of June 30, 2023 | $43,285,129 | Unaudited Condensed Consolidated Statements of Cash Flows Operating activities generated $2.64 million in cash, while investing activities used $5.41 million, resulting in a $2.96 million net decrease in cash and cash equivalents Summary of Cash Flows (Six Months Ended June 30) | Cash Flow Category | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | $2,639,003 | $(4,000,579) | | Net Cash (Used in) Provided by Investing Activities | $(5,405,550) | $1,702,834 | | Net Cash Used in Financing Activities | $(26,635) | $(1,285,912) | | Net decrease in cash and cash equivalents | $(2,962,145) | $(3,775,452) | - The primary use of cash in the period was a $4.91 million purchase of long-term investments[11] - The improvement in operating cash flow was mainly driven by positive changes in working capital, including a significant decrease in prepayments to a related party[11] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed information on the company's organization, accounting policies, going concern status, investments, warrant liabilities, contingencies, and subsequent events Note 1: Organization and Business Description Baosheng Media Group, a Cayman Islands company, provides online marketing services in the PRC, with share consolidations retroactively applied to financial data - The company is engaged in providing online marketing channels for advertisers to manage their online marketing activities[17] - A one-for-six share consolidation was effected on March 21, 2023, following an increase in authorized share capital. This, along with a 2022 consolidation, has been retroactively restated in the financial statements[18] - As of June 30, 2023, the company had 6,250,000 authorized shares with a par value of $0.0096, of which 1,534,487 were issued and outstanding[18] Note 2: Summary of Significant Accounting Policies The company follows U.S. GAAP, recognizing advertising revenue on a net basis, and faces significant concentration risk with two publishers accounting for over 96% of revenue Revenue Recognition Revenue is recognized on a net basis as the company acts as an agent, comprising rebates from publishers and net fees from advertisers - The company acts as an agent and does not take control of ad inventories, thus recognizing revenue on a net basis[39] Disaggregation of Revenue (Six Months Ended June 30) | Revenue Source | 2023 | 2022 | | :--- | :--- | :--- | | By Nature: | | | | Rebates and incentives from publishers | $84,372 | $373,508 | | Net fees from advertisers | $1,386,067 | $54,642 | | By Category: | | | | SEM services | $72,510 | $50,380 | | Non-SEM services | $1,397,929 | $377,770 | | Total Revenue | $1,470,439 | $428,150 | Concentration and Credit Risk The company faces significant concentration risk with two publishers generating 96.1% of revenue and four advertisers holding 56.3% of accounts receivable - For the six months ended June 30, 2023, two publishers accounted for approximately 78.7% and 17.4% of total revenue, respectively[54] - As of June 30, 2023, four advertisers accounted for 18.3%, 14.6%, 13.4%, and 10.0% of accounts receivable, respectively[54] - As of June 30, 2023, $3.0 million of the company's cash was on deposit at financial institutions in the PRC, where there is no deposit insurance[53] Note 3: Going Concern Historical net losses raise substantial doubt about the company's going concern ability, though management expects sufficient working capital for the next 12 months - Historical net losses, including $6.3 million for the six months ended June 30, 2022, raise substantial doubt about the company's ability to continue as a going concern[56] - Management's plan to continue as a going concern relies on positive operating cash flow (achieved in H1 2023), renewing bank loans, and potential shareholder support[57] Note 11: Long-Term Investments Long-term investments increased to $6.84 million, including a 42.85% equity interest in Beijing Shanxingzhe accounted for using the equity method Composition of Long-Term Investments (in USD) | Investment | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Beijing Xinrong Fanxing | $1,379,063 | $1,449,863 | | Beijing Qucheng | $1,323,901 | $811,924 | | Beijing Shanxingzhe | $4,137,189 | $— | | Total | $6,840,153 | $2,261,787 | - In June 2023, the company invested $4.33 million for a 42.85% equity interest in the newly formed Beijing Shanxingzhe, which is accounted for using the equity method[79] Note 12: Warrant Liabilities Warrant liabilities, classified as derivative liabilities, decreased to $2 by June 30, 2023, resulting in an $830 gain from fair value remeasurement - Warrants issued in a 2021 private placement are classified as a liability and remeasured at fair value each period, with changes recorded in the income statement[84] Change in Fair Value of Warrant Liabilities (in USD) | Period | Value | | :--- | :--- | | Estimated fair value as of December 31, 2022 | $832 | | Changes in estimated fair value | $(830) | | Estimated fair value as of June 30, 2023 | $2 | Note 17: Contingencies The company is involved in legal proceedings, including an appeal against a RMB 171,478 judgment and a past $1.7 million dispute fully reimbursed by a former chairperson - In a lawsuit with Shenzhen Pusi, a court ruled against the company's subsidiary, Baosheng Network, for RMB 171,478. The case was appealed on July 13, 2023, and is still in progress[113] - A major past litigation with Ms. Chen Chen was resolved in February 2022. The judgment amount of approximately $1.7 million was paid by the company and fully reimbursed by the former Chairperson, Ms. Wenxiu Zhong, as per a guarantee letter[115] Note 18: Subsequent Events The Board proposed a significant increase in authorized share capital from 6.25 million to 1 billion shares, pending shareholder approval, effective September 29, 2023 - The company has proposed to increase its authorized share capital from US$60,000 (6,250,000 shares) to US$9,600,000 (1,000,000,000 shares), pending shareholder approval[117]