Note 3 - Liquidity and Capital Resources

6 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Substantial Doubt about Going Concern [Text Block]

3. Liquidity and Capital Resources

For the six months ended June 30, 2023, the Company incurred a loss from operations of US$2.65 million and a net operating cash outflow of US$0.86 million. As of June 30, 2023, the Company had cash and cash equivalents of US$2.0 million and working capital of US$5.47 million.

Along with the end of the COVID-19 pandemic in May 2023 and the gradual recovery of economy since then, the Company’s business performance started to improve from the second fiscal quarter of 2023. For the three months ended June 30, 2023, the Company narrowed its gross loss incurred and generated positive net cash flow from its core business, i.e., Internet advertising and related data service business. Although there remain uncertainties as to the future development and impact of the COVID-19 pandemic, the Company anticipates a continuous 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 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 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 SaaS services, and revenues from the new SaaS services business and its profitability have not met the Company’s expectations, the Company still expects the new SaaS services business to bring in 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 July 2023, the Company incorporated a new majority-owned subsidiary and commenced to expand its business into the livestream operation industry. The Company anticipates to generate operating profits and additional cash inflow from providing online-content production, distribution and promotion, and live streamer training and management services in the next 12 months.

In addition, to further improve its liquidity, the Company plans to negotiate with its major suppliers for more favorable payment terms, 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.