Note 3 - Liquidity and Capital Resource and Going Concern Evaluation

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Liquidity and Management’s Plan, Policy [Policy Text Block]

3. Liquidity and capital resource and going concern evaluation

For the years ended December 31, 2022 and 2021, the Company incurred a loss from operations of US$11.12 million and US$13.59 million, respectively. Net operating cash outflow for the years ended December 31, 2022 and 2021 was US$3.19 million and US$8.84 million, respectively. As of December 31, 2022, the Company had cash and cash equivalents of US$4.39 million and working capital of US$6.61 million.

The Company experienced temporary decreases in revenues, incurred a gross loss, and did not generate a positive net cash flow from its existing core business, i.e., Internet advertising and related data service business for the year ended December 31, 2022. This was primarily attributable to the repeated severe COVID-19 cases rebound in many provinces in China during fiscal 2022, and the strict zero-COVID policy adopted by the Chinese government to constrain the spread of the virus. The COVID-19 pandemic in China during fiscal 2022 resulted in regional large-scale quarantine and business shutdown, and further resulted in pandemic fears and in return severely affected the SMEs owners’ confidence to further expand their businesses, and thus adversely affected the SMEs owners’ demands on the Company’s online advertising and marketing services. As a result, the Company has been relying on proceeds generated from financing activities for its liquidity in fiscal 2022. In December 2022, after a severe lockdown in most parts of mainland China, the Chinese government ended its three-year zero-COVID policy, most of the travel restrictions and quarantine requirements were lifted accordingly. Although there remain uncertainties as to the future development and impact of the COVID-19 pandemic, the Company anticipates a slow recovery of performance and improvement of cash flow status of its core business in the next 12 months.

In order to improve operation performance, from early 2022, the Company started to introduce its new SaaS services to customers. The Company’s SaaS services are provided based on technologies of its self-developed Blockchain Integrated Framework (“BIF”) platform. The subscriptions of the Company’s BIF platform would enable its clients to utilize the BIF platform as an enterprise management software to record, share and storage operating data on-chain, and/or to generate unique designed Non-fungible Token (“NFTs”) for their IPs and certificates. Although the unexpected long-time quarantine and business shutdown measures for COVID-19 epidemic control incurred throughout fiscal 2022 adversely affected the Company’s promotion of the new SaaS services, and revenues from the new SaaS services business and its profitability have not met the Company’s expectations, it is still expected to bring the Company positive cash flow and help to improve liquidity, as these services are provided based on technologies of the Company’s self-developed software platform, which does not need any further material cash outflow to other third-party service providers.

In addition, to further improve its liquidity, the Company plans to negotiate with its major suppliers for more favorable payment terms, collect short-term loan principals provided to unrelated parties and the related interest income, when they become due, reduce its operating costs through optimizing the personnel structure among different offices, and reduce its office leasing spaces, if needed. The Company also intends to obtain revolving credit facilities to supplement its short-term working capital, as needed, from the commercial banks in the PRC. The Company has not experienced any difficulties in obtaining such credit facility before.

Based on the above discussion, the Company believes that its current cash and cash equivalents, its anticipated new cash flows from operations and from investing and financing activities, and other liquidity improving measures will ensure the Company has sufficient cash to meet its obligations as they become due with the next 12 months from the date hereof.