Note 3 - Liquidity and Capital Resource and Going Concern Evaluation

12 Months Ended

Dec. 31, 2023

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, 2023 and 2022, the Company incurred a loss from operations of US$6.01 million and US$11.12 million, respectively. Net operating cash outflow for the years ended December 31, 2023 and 2022 was US$2.01 million and US$3.19 million, respectively. As of December 31, 2023, the Company had cash and cash equivalents of US$0.82 million and working capital of US$4.11 million.

The Company experienced increased 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, 2023. The increase in revenue was primarily attributable to the recovery of the general economy from the lifting of COVID-19 related restrictions. This in turn improved the advertising investment budgets and advertising service demands of our SME clients when compared to 2022.

However, our business and results of operations are still materially and adversely effected by the challenging macroeconomic environment in the PRC which adversely 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 and our ability to negotiate favorable operating margins. As a result, the Company has been relying on proceeds generated from prior financing activities for its liquidity in fiscal 2023. In 2024, the Chinese Government implemented various stimulus programs to boost the Chinese economy through improving industrial output, increasing consumer spending and supporting the property sector. Although there remain uncertainties as to the future macroeconomic environment in the PRC, the Company anticipates a slow recovery of performance and improvement of cash flow status of its core business beginning in the second half of 2024.

In order to improve operation performance, the Company continues 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 economic downturn in the PRC 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.