Cash and Liquidity - As of June 30, 2023, the company had cash of approximately $12.2 million, indicating a negative cash flow from operations for the six months ended[29]. - The company believes its current cash will be sufficient to meet working capital needs for at least the next 12 months[29]. - The company’s liquidity is influenced by the level of operations, sales contracts, execution progress on customer contracts, and timing of accounts receivable collections[29]. Revenue Generation - The company’s revenues are primarily derived from providing a wide range of educational services and programs, reported net of all value-added taxes[50]. - The Company generates revenue from Sino-foreign Jointly-Managed Academic Programs, receiving 30% to 50% of student tuitions based on partnerships with Chinese universities[51]. - The Company has developed and sold over 16 English textbooks and course materials, recognizing revenue upon delivery[52]. - Overseas Study Consulting Services were discontinued in January 2023, with 90% of fees collected being non-refundable and recognized ratably over the service period[53]. - Technological consulting services utilize advanced IT solutions to improve operational efficiency for Chinese universities, with contracts primarily on a fixed-price basis[55]. - Revenue from course fees for the six months ended June 30, 2023, was $7,664,887, while there was no revenue reported for the same period in 2022[131]. - Revenue from tailored job readiness training services increased to $944,944 in the first half of 2023, compared to $93,483 in the same period of 2022[131]. Financial Condition and Assets - The company has not recorded any allowance for advances to suppliers, considering all advances to be fully realizable as of June 30, 2023[32]. - The company’s financial condition may be negatively impacted by risks related to political, economic, and legal environments in China[26]. - The company has not experienced losses from regulatory actions in China but acknowledges potential future impacts on business operations[26]. - The company’s right-of-use assets and lease liabilities are recognized based on the present value of future minimum lease payments[33]. - The company assesses goodwill for impairment annually and more frequently if events indicate potential impairment[42]. - The company’s financial instruments' fair value as of June 30, 2023, approximates its carrying value due to the short-term nature of assets and liabilities[36]. - The company recorded a total provisional goodwill of $73.7 million from two acquisitions completed in 2022, which is expected to enhance business expansion and synergies[92]. - Property and equipment, net, decreased to $8,762,072 as of June 30, 2023, from $10,194,930 at the end of 2022, representing a decline of approximately 13.9%[94]. - The total prepaid expenses and other current assets, net, as of June 30, 2023, were $423,284, a significant decrease from $3,475,714 at the end of 2022, indicating a reduction of about 87.8%[88]. Liabilities and Debt - The Company reported contract liabilities of $7.8 million as of June 30, 2023, primarily consisting of deferred revenue from course fees and job readiness training services[62]. - The Company’s technological consulting contracts may include significant financing components, affecting revenue recognition and cash flow[56]. - As of June 30, 2023, the total short-term bank loan increased to $31.519 million from $20.784 million as of December 31, 2022, reflecting a growth of approximately 51.5%[102]. - The effective interest rate for the unsecured short-term bank loan decreased to 3.8% as of June 30, 2023, down from 4.7% as of December 31, 2022[103]. - Loans from third parties had a weighted average annual effective interest rate of 16.4% as of June 30, 2023, compared to 8.7% as of December 31, 2022[106]. - The company has contingent consideration of $19.3 million related to the acquisition of Wanwang, dependent on performance conditions[107]. Taxation - Total taxes payable as of June 30, 2023, amounted to $1.346 million, slightly decreasing from $1.355 million as of December 31, 2022[105]. - The effective tax rate for the six months ended June 30, 2023, was 0.5%, compared to 0.0% for the same period in 2022[117]. - The company’s corporate income taxes for the six months ended June 30, 2023, included a current tax provision of $1,966, compared to $42 for the same period in 2022[115]. Shareholder Information - The company issued a total of 18 million ordinary shares at $0.50 per share in September 2023, raising net proceeds of $8.9 million[123]. - The company’s total ordinary shares issued and outstanding remained at 31,598,333 as of June 30, 2023, consistent with December 31, 2022[123]. Operational Segments - The Company operates four segments: course fees, Sino-foreign Jointly Managed Academic Programs, Overseas Study Consulting Services, and Technological Consulting Services for Smart Campus Solutions[129]. - The majority of the Company's revenues for the six months ended June 30, 2023, were generated in the PRC[130]. Regulatory and Compliance - The VAT rates applicable to the Company's PRC subsidiaries range from 3% to 6%[67]. - Appropriations to the statutory surplus reserve are required to be at least 10% of after-tax net income until the reserve equals 50% of the entity's registered capital[125]. - The statutory reserve may be applied against prior year losses and used for general business expansion but is not distributable as cash dividends[125]. - Management has not identified any subsequent events that require accrual or disclosure as of the date the consolidated financial statements were issued[132].
China Liberal(CLEU) - 2023 Q2 - Quarterly Report