Exhibit 99.1
X3 HOLDINGS CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
F-1
X3 HOLDINGS CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalent | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Due from related parties | ||||||||
| Loan receivable, net | ||||||||
| Prepayments, deposits and other current assets, net | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Prepayments, deposits and other assets | ||||||||
| Long term investment | ||||||||
| Goodwill | ||||||||
| Right-of-use assets-operating lease | ||||||||
| Deferred tax assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Short-term bank loans | $ | $ | ||||||
| Accounts payable | ||||||||
| Convertible notes | ||||||||
| Deferred revenue | ||||||||
| Loan from third parties | ||||||||
| Due to a related party | ||||||||
| Operating lease liabilities -current | ||||||||
| Taxes payable | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Operating lease liabilities -non-current | ||||||||
| Deferred tax liabilities | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| EQUITY: | ||||||||
| Class A Common shares, $ | ||||||||
| Class B Common shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Subscription receivable | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total X3 Holdings Co., Ltd.’s Shareholders’ Equity | ||||||||
| Non-controlling interest | ||||||||
| Total Equity | ||||||||
| Total Liabilities and Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
X3 HOLDINGS CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| REVENUES: | ||||||||
| Application development services | $ | $ | ||||||
| Consulting and technical support services | ||||||||
| Subscription services | ||||||||
| Trading revenue | ||||||||
| Others revenue | ||||||||
| Total revenues | ||||||||
| COST OF REVENUES | ||||||||
| Cost of application development services | ||||||||
| Cost of consulting and technical support services | ||||||||
| Cost of subscription services | ||||||||
| Cost of trading revenue | ||||||||
| Cost of others revenue | ||||||||
| Total cost of revenues | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| (Recovery of) provision for credit losses | ( | ) | ||||||
| Research and development | ||||||||
| Share based compensation | ||||||||
| Impairment charges | ||||||||
| Total operating expenses | ||||||||
| OPERATING LOSS | ( | ) | ( | ) | ||||
| OTHER (EXPENSES) INCOME | ||||||||
| Loss from deregistering of a subsidiary | ( | ) | ||||||
| Loss from long term investment | ( | ) | ||||||
| Change in fair value of convertible notes | ||||||||
| Other expenses, net | ( | ) | ( | ) | ||||
| Total other (expenses) income | ( | ) | ||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| INCOME TAX BENEFIT | ( | ) | ( | ) | ||||
| NET LOSS | ( | ) | ( | ) | ||||
| Less: income (loss) attributable to non-controlling interests | ( | ) | ||||||
| NET LOSS ATTRIBUTABLE TO X3 HOLDINGS CO., LTD | ( | ) | ( | ) | ||||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||
| Foreign currency translation adjustment | ( | ) | ||||||
| COMPREHENSIVE LOSS | ( | ) | ( | ) | ||||
| Less: comprehensive loss attributable to non-controlling interest | ( | ) | ( | ) | ||||
| COMPREHENSIVE LOSS ATTRIBUTABLE TO X3 HOLDINGS CO., LTD | $ | ( | ) | $ | ( | ) | ||
| WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES | ||||||||
| Basic and diluted | ||||||||
| LOSS PER SHARE | ||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
X3 HOLDINGS CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| Ordinary shares | Additional Paid-in | Subscription | Accumulated | Accumulated Other Comprehensive | Non-controlling | Total | ||||||||||||||||||||||||||||||||||
| Class A | Amount | Class B | Amount | Capital | Receivable | Deficit | Loss | Interest | Equity | |||||||||||||||||||||||||||||||
| Balance, January 1, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
| Issuance of shares for private placement | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Deemed distribution | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Split shares | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||||
| Restricted shares issued for services | - | |||||||||||||||||||||||||||||||||||||||
| Net loss for the year | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
| Issuance of shares for private placement | - | |||||||||||||||||||||||||||||||||||||||
| Stock dividend | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Issuance of shares for services | - | - | ||||||||||||||||||||||||||||||||||||||
| Deregister a subsidiary | - | - | ||||||||||||||||||||||||||||||||||||||
| Net loss for the year | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
X3 HOLDINGS CO., LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss from operations to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Recovery of (provision for) credit losses | ( | ) | ||||||
| Share based compensation | ||||||||
| Loss from disposal of property and equipment | ||||||||
| Deferred tax benefit | ( | ) | ( | ) | ||||
| Change in fair value of convertible notes | ( | ) | ||||||
| Settlement loss on disposition of assets | ||||||||
| Accrued interest for liabilities | ||||||||
| Loss from disposition of a subsidiary | ||||||||
| Impairment charges | ||||||||
| Loss from long term investment | ||||||||
| Amortization of right-of-use assets-operating lease | ||||||||
| Changes in assets and liabilities: | ||||||||
| Notes receivable | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepayments, deposits and other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and other current liabilities | ( | ) | ||||||
| Taxes payable | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Repayment from (loans to) third parties | ( | ) | ||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Purchases of intangible assets | ( | ) | ( | ) | ||||
| Repayment from (loans to) related parties | ( | ) | ||||||
| Net cash arising from business combination | ||||||||
| Payment for long-term investment | ( | ) | ||||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from short-term bank loans | ||||||||
| Repayments of short-term bank loans | ( | ) | ( | ) | ||||
| Proceeds from private placement and market offering | ||||||||
| (Repayment of) proceeds from convertible notes | ( | ) | ||||||
| Proceeds from related parties | ||||||||
| (Repayment to) loan from third party | ( | ) | ||||||
| Payment of deferred financing costs | ( | ) | ||||||
| NET CASH PROVIDE BY FINANCING ACTIVITIES | ||||||||
| EFFECT OF EXCHANGE RATE CHANGES | ( | ) | ||||||
| NET DECREASE IN CASH, CASH EQUIVALENT AND RESTRICTED CASH | ( | ) | ( | ) | ||||
| CASH, CASH EQUIVALENT AND RESTRICTED CASH - beginning of period | ||||||||
| CASH, CASH EQUIVALENT AND RESTRICTED CASH - end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ( | ) | ||||
| NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES | ||||||||
| Right of use assets obtained in exchange of lease liabilities | $ | $ | ||||||
| Prepayments, deposits and other assets as consideration for acquisition | $ | $ | ||||||
| RECONCILIATION TO AMOUNTS ON CONSOLIDATED BALANCE SHEETS: | ||||||||
| Cash and cash equivalent | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalent and restricted cash | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Nature of business and organization
X3 Holdings Co., Ltd. (“X3” or the “Company”) is a company that was established under the laws of the Cayman Islands on July 27, 2018 as a holding company. The Company, through its subsidiaries (collectively the “Group”), is a provider of software application and technology services to corporate and government customers engaged in global trade. Mr. Stewart Lor, the Company’s Chairman of the Board and Co-Chief Executive Officer (“Co-CEO”) is the ultimate Controlling Shareholders of the Company.
Effective January 30, 2024, the Company has undergone a transformation, changing its corporate name from Powerbridge Technologies Co., Ltd. to X3 Holdings Co., Ltd. The Nasdaq stock symbol has also transitioned from PBTS to XTKG. This change reflects the Group’s evolving global expansion strategy and its commitment to broader technological and business horizons.
As of June 30, 2025, the details of the Company’s principal subsidiaries are as follows:
| Major subsidiaries | Percentage of Ownership | Date of Incorporation | Place of Incorporation | Major Operation | ||||
| Powerbridge Holding Limited (“Powerbridge HK”) | ||||||||
| Hong Kong Hongyi Holdings Limited(“Hongyi”) | ||||||||
| Hongding Technology Co., Ltd (“Hongding”) | ||||||||
| Powercrypto Inc | ||||||||
| X3 HOLDINGS PTE. LTD. (“X3 HOLDINGS”) | ||||||||
| Hong Kong Anxin Jieda Co., Limited (“Anxin Jieda”) (1) | ||||||||
| X3 Technologies PTE. LTD. | ||||||||
| Powerbridge Technology Group Co., Ltd. (“Powerbridge Zhuhai”) | Powerbridge HK | |||||||
| Powerstream Supply Chain Co., Ltd. (“Powerstream”) | Powerbridge HK | |||||||
| Powermeta Digital Co., Ltd. (“Powermeta”) | Powerbridge HK | |||||||
| Powerbridge Digital Trade (HK) Co., Limited | Powerbridge HK | |||||||
| SmartConn Co.Limited(“SmartConn”) | Powerbridge HK | |||||||
| Hongxi Data Technology Co., Ltd. | Powerbridge Zhuhai | |||||||
| Zhuhai Hongyang Supply Chain Co., Ltd. (“Zhuhai Hongyang”) | Powerbridge Zhuhai | |||||||
| Ningbo Zhijing Tongfu Technology Co., Ltd. (“Ningbo Zhijing”) | Powerbridge Zhuhai | |||||||
| Metafusion Digital Co., Ltd (“Metafusion”) | Powermeta Digital | |||||||
| Shanghai Stamp Technology Co., Ltd. | ||||||||
| Ascendent Insight Education Co., Ltd. (“Ascendent”) (1) | ||||||||
| Xingtai Ningyao Technology Co., Ltd. (1) | ||||||||
| Shenzhen Hongchuangxin Technology Co., Ltd.(“Hongchuangxin”) |
| (1) |
F-6
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2025 and 2024 are not necessarily indicative of the results that may be expected for the full year. The information included in this interim report should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in the Group’s annual financial statements for the year ended December 31, 2024 filed with the SEC on April 25, 2025.
Principles of consolidation
The unaudited condensed consolidated financial statements include the financial statements of the Group and its subsidiaries. All intercompany transactions and balances are eliminated upon consolidation. All significant intercompany transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.
Subsidiaries are those entities in which the Group, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.
Non-controlling interest represents the portion of the net assets of a subsidiary attributable to interests that are not owned by the Company. The non-controlling interest is presented in the consolidated balance sheets, separately from equity attributable to the shareholders of the Company. Non-controlling interest’s operating result is presented on the face of the consolidated statements of income and comprehensive income as an allocation of the total income for the year between non-controlling shareholders and the shareholders of the Company.
Liquidity
As of June 30, 2025, the Group
had working capital deficit of $
In assessing its liquidity,
the Group monitors and analyzes its cash on hand, its ability to generate sufficient revenue sources in the future and its operating and
capital expenditure commitments. As of June 30, 2025, the Group had cash and cash equivalent of approximately $
On August 13, 2025, the Company
entered into a promissory note agreement with a creditor, pursuant to which the Company issued the creditor an unsecured promissory note
with original principal amount of $
On May 19, 2025, the Company
entered into purchase agreements with thirteen investors. Pursuant to the Purchase Agreement, the Company agreed to sell
On July 11, 2025, the Company
entered into a definitive securities purchase agreement with certain individuals, the Company agreed to sell
The Group believes that its cash on hand and financing cash flows will be sufficient to fund its operations over at least the next 12 months from the date of this report. However, the Group may need additional cash resources in the future if the Group experiences changed business conditions or other developments, and may also need additional cash resources in the future if the Group wishes to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If it is determined that the cash requirements exceed the Group’s amounts of cash on hand, the Group may seek to issue debt or equity securities or obtain a credit facility.
F-7
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Use of estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Group’s unaudited condensed consolidated financial statements include but not limited to the useful lives of property and equipment and intangible assets, impairment of long-lived assets, impairment of goodwill, valuation of accounts receivables, valuation of convertible notes, revenue recognition and realization of deferred tax assets and uncertain tax positions. Actual results could differ from these estimates.
Foreign currency translation
The functional currencies of the Group are the local currency of the country in which the subsidiaries operate. The Group’s financial statements are reported using U.S. Dollars. The results of operations and the consolidated statements of cash flows denominated in foreign currencies are translated at the average rates of exchange during the reporting period. Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated in the functional currencies is translated at the historical rates of exchange at the time of capital contributions. Because cash flows are translated based on the average translation rates, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments arising from the use of different exchange rates from period to period are included as a separate component of accumulated other comprehensive loss included in consolidated statements of changes in equity. Gains and losses from foreign currency transactions are included in the consolidated statement of operations and comprehensive loss.
Fair value measurement
ASC 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| ● | Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data. |
| ● | Level 3 — inputs to the valuation methodology are unobservable. |
Unless otherwise disclosed, the fair value of the Group’s financial instruments including cash, notes and accounts receivable, due from related parties, deposits and other current assets, notes and accounts payable, customer deposits, salaries and benefits payables and due to related party approximates their recorded values due to their short-term maturities. The fair value of the deposits and other assets and loans to third parties approximate their carrying amounts because the deposits were paid in cash.
F-8
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Accounts receivable, net
Accounts receivable represents the amounts that the Group has an unconditional right to consideration and is recorded net of allowance for credit losses.
In 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC Topic 326”), which amends previously issued guidance regarding the impairment of financial instruments by creating an impairment model that is based on expected losses rather than incurred losses. The Group has adopted this ASC Topic 326 and several associated ASUs on January 1, 2023 using a modified retrospective approach. The adoption has no material impact to the Group’s unaudited condensed consolidated financial statements. The Group estimated allowance for credit losses to reserve for potentially uncollectible receivable amounts periodically, considering factors in assessing the collectability of its accounts receivable, such as historical distribution of the age of the amounts due, payment history, creditworthiness, forward-looking factor, historical collections data of the customers, to assess the credit risk characteristics. If there is strong evidence indicating that the accounts receivable is likely to be unrecoverable, the Group also makes specific allowance in the period in which a loss is determined to be probable. Accounts receivable is considered impaired and written off when it is probable that all contractual payments due will not be collected after all collection efforts have been exhausted.
Prepayments, deposits and other assets, net
Prepayment, deposit and other assets, net, primarily consists of advances to suppliers for purchasing goods or services that have not been received or provided; security deposits made to our customers; advances to employees prepayment for potential acquisition and antique art pieces obtained in lieu of debt repayment. Prepayment, deposit and other assets are classified as either current or non-current based on the terms of the respective agreements and periods when they are expected to be realized. These advances are unsecured and these advances and antique art pieces are reviewed periodically to determine whether their carrying value has become impaired.
Intangible assets, net
The Group’s intangible
assets mainly include capitalized development costs, purchased software and acquired software from business acquisitions. The Group follows
the provisions of Accounting Standards Codification (“ASC”) 985-20, “Costs of Software to be Sold, Leased, or Marketed.”
ASC 985-20 provides guidance on capitalization of the costs of software developed or obtained for sold, leased, or marketed. The Group
expenses all costs incurred during the preliminary project stage of its development, and capitalizes costs incurred during the application
development stage. Costs incurred relating to upgrades and enhancements to the application are capitalized if it is determined that these
upgrades or enhancements add additional functionality to the application. The capitalized development cost is amortized on a straight-line
basis over the estimated useful life, which is generally five years.
| Useful Life | ||
| Capitalized development costs | ||
| Purchased software | ||
| Software from business combinations |
Impairment for long-lived assets other than goodwill
Long-lived assets, including
property, equipment, furniture and fixtures and intangible assets with finite lives are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying value of an asset may not be recoverable. When these events occur, the Group measures impairment
by comparing the carrying values of the long-lived assets to the estimated undiscounted future cash flows expected to result from the
use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amounts
of the assets, the Group would recognize an impairment loss based on the excess of the carrying value over the assessed discounted cash
flow amount. For the six months ended June 30, 2025, due to slow development of Hongchuangxin, the Group evaluated the recoverability
of long-lived assets by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the
use of the assets and their eventual disposition and determined that the fair value of intangible assets of Hongchuangxin was less than
carrying value. Therefore, the Group impaired the intangible assets acquired from the acquisition of Hongchuangxin of $
F-9
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Business combinations
The cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total of the cost of the acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value of the identifiable net assets of the acquiree, the difference is recognized directly in earnings.
The determination and allocation of fair values to the identifiable net assets acquired, liabilities assumed and noncontrolling interest is based on various assumptions and valuation methodologies requiring considerable judgment. The most significant variables in these valuations are discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. The Group determines discount rates to be used based on the risk inherent in the acquiree’s current business model and industry comparisons. Although the Group believes that the assumptions applied in the determination are reasonable based on information available at the date of acquisition, actual results may differ from forecasted amounts and the differences could be material.
Goodwill
Goodwill is the cost of acquired companies in excess of the fair value of identifiable net assets at acquisition date. Goodwill is not subject to amortization, but rather is evaluated for impairment at least annually. The Group evaluates its goodwill for impairment during the fourth quarter of its fiscal year or more frequently if indicators of potential impairment exist, in accordance with ASC 350, Intangibles - Goodwill and Other. Goodwill impairment is determined by comparing the estimated fair value of a reporting unit (generally defined as the businesses for which financial information is available and reviewed regularly by management) with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not deemed to be impaired. However, if the estimated fair value is below carrying value, further analysis is required to determine the amount of the impairment.
In the course of evaluating the potential impairment of goodwill, the Group may perform either a qualitative or a quantitative assessment. The Group’s qualitative assessment of potential impairment may result in the determination that a quantitative impairment analysis is not necessary. Under this elective process, the Group assesses qualitative factors to determine whether the existence of events or circumstances leads the Group to determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If after assessing the totality of events and circumstances, the Group determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing a quantitative analysis is not required. However, if the Group concludes otherwise, then the Group performs a quantitative impairment analysis.
If the Group either chooses not to perform a qualitative assessment, or the Group chooses to perform a qualitative assessment but is unable to qualitatively conclude that no impairment has occurred, then the Group performs a quantitative evaluation. In the case of a quantitative assessment, the Group estimates the fair value of the reporting unit with which the goodwill that is subject to the quantitative analysis is associated and compares it to the carrying value. If the estimated fair value of a reporting unit is less than its carrying value, the excess is recorded as a goodwill impairment, which is limited to the total amount of goodwill allocated to that reporting unit.
For the six months ended June
30, 2025, the Group performed the impairment test and determined that the fair value of goodwill acquired from the acquisition of Hongchuangxin
was less than carrying value. The Group impaired the goodwill acquired from the acquisition of Hongchuangxin of $
For the six months ended June 30,2024, the Group performed a qualitative assessment for the reporting unit. Based on the requirements of ASC 350-20, the Group evaluated all relevant qualitative and quantitative factors, weighed all factors in their entirety and concluded that it was not more-likely-than-not that the fair value of the reporting unit was less than its carrying amount. Therefore, no goodwill impairment was recognized for the six months ended June 30, 2024.
F-10
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Revenue recognition
The Group adopted ASC Topic 606. Under ASC 606, revenue is recognized when control of promised goods or services is transferred to the Group’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services and is recorded net of value-added tax (“VAT”). To achieve that core principle, the Group applies the following steps:
Step 1: Identify the contract (s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
The Group derives its revenues from four sources: (1) application development services, (2) consulting and technical support services, (3) subscription services, (4) trading and (5) others. All of the Group’s contracts with customer do not contain cancelable and refund-type provisions.
(1) Revenue from application development service
The Group’s application development service contracts are primarily on a fixed-price basis, which require the Group to perform services including project planning, project design, application development and system integration based on customers’ specific needs. These services also require significant production and customization. Upon delivery of the services, customer acceptance is generally required. In the same contract, the Group is generally required to provide post-contract customer support (“PCS’) for a period from three months to three years (“PCS period”) after the customized application development services are delivered. The type of services for PCS clause is generally not specified in the contracts or as stand-ready services on when-and-if-available basis. The unspecified PCS is stand-ready service on when-and-if-available basis. It grants the customers on line and telephone access to technical support personnel during the term of the service. Specified PCS includes specified service term in the contract such as training.
The Group’s application
development service revenues are generated primarily from contracts with PRC government or related agencies and state-owned enterprises.
The contracts contain negotiated billing terms which generally include multiple payment phases throughout the contract term and a significant
portion (
The Group sometimes provides a warranty for its application development service contracts. The warranty period is typically 12-36 months upon the completion of the application development service. In accordance with ASC 606-10-25-19, the Group believes the warranty provision in the contracts generally represents service-type warranty, which is a distinct performance obligation and the Group also provides the similar service on standalone basis and customers can benefit from the related service-type warranty service. For the service warranty component, the customer simultaneously receives and consumes the benefits provided by the Group performance over the warranty term, therefore, the service warranty is satisfied over time. The revenue allocated to the service warranty is recognized over the warranty period.
F-11
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
The Group assesses that application development service, PCS or specific service and service-type warranty, if applicable, are distinct performance obligations in the application development service contracts. The Group provides these services on standalone basis and customers are able to benefit from each of the service on its own. In addition, the timing of delivery of these performance obligations can be separately identifiable in the contracts. The transaction price is allocated to these identified performance obligations based on the relative standalone selling prices. The transaction price allocated to PCS or unspecific service and service-type warranty, if applicable, on a straight-line method over the contractual period. Revenue allocated to specified PCS is recognized as the related services are rendered. The transaction price allocated to application development service is recognized over time as the Group’s performance creates or enhances the project controlled by the customer and the control is transferred continuously to our customers. The Group uses an input method based on cost incurred as the Group believes that this method most accurately reflects the Group’s progress toward satisfaction of the performance obligation, which usually takes less than one year. Under this method, the transaction price allocated to application development service is recognized as work is performed based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligations.
Incurred costs include all direct material, labor and subcontract costs, and those indirect costs related to application development performance, such as indirect labor, supplies, and tools. Cost-based input method requires the Group to make estimates of revenues and costs to complete the construction. In making such estimates, significant judgment is required to evaluate assumptions related to the costs to complete the application development, including materials, labor, and other system costs. The Group’s estimates are based upon the professional knowledge and experience of our engineers and project managers to assess the contract’s schedule, performance, technical matters. The Group has adequate cost history and estimating experience, and with respect to which management believes it can reasonably estimate total development costs. If the estimated costs are greater than the related revenues, the Group recognizes the entire estimated loss in the period the loss becomes known and can be reasonably estimated. Changes in estimates for application development services include but not limited to cost forecast changes and change orders. The cumulative effect of changes in estimates is recorded in the period in which the revisions to estimates are identified and the amounts can be reasonably estimated. To date, the Group has not incurred a material loss on any contracts. However, as a policy, provisions for estimated losses on such engagements will be made during the period in which a loss becomes probable and can be reasonably estimated. If contract modifications result in additional goods or services that are distinct from those transferred before the modification, they are accounted for prospectively as if the Group entered into a new contract. If the goods or services in the modification are not distinct from those in the original contract, sales and gross profit are adjusted using the cumulative catch-up method for revisions in estimated total contract costs and contract values.
In certain application development service arrangements, the Group sells and delivers IT equipment on standalone basis prior to the delivery of the services. In these cases, the Group controls the IT equipment before they are transferred to the customer. The Group has the right to direct the suppliers and control the goods or assets transferred to its customers. Thus, the Group considers it should recognize revenue as a principal in the gross amount of consideration to which it is entitled in exchange for the IT equipment delivered. The Group assesses the sale of equipment is separately identifiable from other promises in the contract and it is distinct performance obligation within the context of the contract. Accordingly, the revenue from the related IT equipment based on its relative standalone selling price is recognized upon customer acceptance after delivery.
F-12
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
(2) Revenue from consulting and technical support services
Revenue from consulting and technical support services is primarily comprised of fixed-fee contracts, which require the Group to provide professional consulting and technical support services over contract terms beginning on the commencement date of each contract, which is the date its service is made available to customers. Billings to the customers are generally on a monthly or quarterly basis over the contract term, which is typically 12 to 24 months. The consulting and technical support services contracts typically include a single performance obligation. The revenue from consulting and technical support services is recognized over the contract term on a straight-line basis as customers receive and consume benefits of such services.
(3) Revenue from subscription services
Revenue from subscription services is comprised of subscription fees from customers accessing the Group’s software-as-a-service applications for a subscribed period. The Group’s monthly or quarterly billing to customer is on the basis of number of uses or the actual usage by the customers. The subscription arrangements are considered service contracts because customers do not have the right to take possession of the software and can only benefit from the software when provided the right to access the software. Accordingly, the subscription services contracts typically include a single performance obligation. The revenue from subscription services is recognized over the contract term on a straight-line basis or based on the actual usage as customers receive and consume benefits of such services.
(4) Trading revenue
The Group started trading business for the year ended December 31, 2021 and recognized revenue at a point in time when control of such products transfers to the customer, which generally occurs upon shipment or delivery depending on the terms of the contracts with the customer. Product sale contracts typically include a single performance obligation and there are no rights of return. The transaction price is based on the fixed contractual price with the customer. Billings to the customer for the sale of products occur at the time the products are transferred to the customer.
(5) Others revenue
In April 2023, the Group started regional authorization membership program to engage independent merchant to assist in developing specified geographical regions. The program grants non-exclusive geographical territory business development to the authorized distributors within that defined territory. The Group’s services under regional cooperation agreements include marketing support to advertise as well as utilization of the Group’s trademark and copyrights for business promotion purpose. The term of cooperation agreements is typically one to two years. The Group charges a fixed amount authorization fee which is non-refundable and to be paid upon execution of an authorization agreement. For all the Group’s cooperation agreements, the amount of fee is fixed or determinable and no right of return provision indicated in the agreement. Since the Group provides no financing to authorized distributors and offers no guarantees on their behalf, the services provided by the Group are considered to represent a single performance obligation. The agreement price is fully allocated to the single performance obligation. The total authorization fees are recognized ratably on a straight-line basis over the term of the cooperation agreements.
Revenue includes reimbursements
of travel and out-of-pocket expense, with equivalent amounts of expense recorded in cost of revenue. The Group reports revenues net of
value added tax (“VAT”). The Group’s subsidiaries in PRC are subject to a
F-13
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Practical Expedient and Exemptions
The Group does not disclose the value of unsatisfied performance obligations within one year by applying the right to invoice practical expedient provided by ASC 606-10-55-18.
Contract balance
The accounts receivable includes
both unbilled accounts receivable and billed accounts receivable. The Group records unbilled accounts receivable for revenue that has
been recognized in advance of billing the customer, which is common for application development service contracts. The unbilled accounts
receivable represents the Group’s right to consideration in exchange for the service that the Group has performed to the customer
before payment is due and the unbilled account receivable will be reclassified into billed accounts receivable when the Group has the
right to invoice. Contract liabilities are presented as deferred revenue on the consolidated balance sheet. Contract liabilities relate
to payments received in advance of completion of performance obligations under a contract. Contract liabilities are recognized as revenue
upon the completion of performance obligations. As of June 30, 2025 and December 31, 2024, the balance of deferred revenue amounted to
$
Operating leases
The Group adopted Topic 842 on January 1, 2022 using the modified retrospective transition approach. The Group has lease contracts for factory and office space under operating leases. The Group determines whether an arrangement constitutes a lease and records lease liabilities and right-of-use assets on its consolidated balance sheets at lease commencement. The Group measures its lease liabilities based on the present value of the total lease payments not yet paid discounted based on the more readily determinable of the rate implicit in the lease or its incremental borrowing rate, which is the estimated rate the Group would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease. The Group estimates its incremental borrowing rate based on an analysis of weighted average interest rate of its own bank loans. The Group measures right-of-use assets based on the corresponding lease liability adjusted for payments made to the lessor at or before the commencement date, and initial direct costs it incurs under the lease. The Group begins recognizing lease expense when the lessor makes the underlying asset available to the Group.
For leases with lease term less than one year (short-term leases), the Group records operating lease expense in its consolidated statements of operations on a straight-line basis over the lease term and record variable lease payments as incurred.
Income taxes
The Group accounts for current income taxes in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
An uncertain tax position
is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination.
The amount recognized is the largest amount of tax benefit that is greater than
F-14
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Loss per share
Earnings (loss) per ordinary share is calculated in accordance with ASC 260, Earnings per Share. Basic earnings (loss) per ordinary share is computed by dividing the net income (loss) attributable to shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings (loss) per share is computed using the weighted average number of ordinary shares and potential ordinary shares outstanding during the period. Potential ordinary shares include ordinary shares issuable upon the exercise of outstanding share options by using the treasury stock method and ordinary shares issuable upon the conversion of convertible instruments using the if-converted method. Potential ordinary shares are not included in the denominator of the diluted net (loss)/earnings per share calculation when inclusion of such shares would be anti-dilutive. For the six months ended June 30, 2025 and 2024, since the company had a loss, basic and dilutive loss per share is the same.
Share-Based compensation
The Group accounts for share-based awards to employees and nonemployees directors and consultants in accordance with the provisions of ASC 718, Compensation—Stock Compensation, and under the recently issued guidance following FASB’s pronouncement, ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under ASC 718, and applicable updates adopted, for employee stock-based awards, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense with graded vesting on a straight-line basis over the requisite service period for the entire award. For the non-employee stock-based awards, the fair value of the awards to non-employees are measured every reporting period based on the value of the Group’s Ordinary share.
Segment reporting
The Group’s chief operating decision maker (“CODM”) has been identified as its CEO, who reviews the consolidated results when making decisions about allocating resources and assessing performance of the Group as a whole and hence, the Group has only one reportable segment. The Group does not distinguish between markets or segments for the purpose of internal reporting. The Group’s long-lived assets are substantially all located in the PRC and all of the Group’s revenues are derived from the PRC. Therefore, no geographical segments are presented.
Concentrations of Risks
(a) Concentration of credit risk
Assets that potentially subject
the Group to significant concentration of credit risk primarily consist of cash, restricted cash, accounts receivable and other current
assets. The maximum exposure of such assets to credit risk is their carrying amounts as at the balance sheet dates. As of June 30, 2025
and December 31, 2024, the aggregate amount of cash, cash equivalents and restricted cash of $
F-15
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
(b) Foreign currency risk
A majority of the Group’s expense transactions are denominated in RMB and a significant portion of the Group and its subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Group in China must be processed through the PBOC or other China foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.
The Group’s functional
currency is the RMB, and the Group’s financial statements are presented in U.S. dollars. The RMB deprecation by
(c) Significant customers
For the six months ended June
30, 2025, two customers accounted for
(d) Significant suppliers
For the six months ended June
30, 2025, three suppliers accounted for
F-16
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 2 — Summary of significant accounting policies (continued)
Recently issued accounting pronouncements
The Group considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (“the JOBS Act”), the Group meets the definition of an emerging growth company, or EGC, and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2025. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. Once adopted, this ASU will result in additional disclosures. The Group is currently assessing the potential impact of the rule on our disclosures.
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. ASU 2025-03 clarifies the guidance to determine the accounting acquirer in a business combination that is affected primarily by exchanging equity interests, when the legal acquiree is a variable interest entity (“VIE”) that meets the definition of a business. ASU 2025-03 requires entities to consider the same factors in ASC 805, Business Combinations, required for determining which entity is the accounting acquirer in other acquisition transactions. ASU 2025-03 is effective for the Company’s annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-03 is required to be applied on a prospective basis to any acquisition transaction that occurs after the initial application date. The Group is currently evaluating the potential impact of adopting this guidance on Financial Statements.
In May 2025, the FASB issued ASU 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). ASU 2025-04 revises the definition of the term performance condition for share-based consideration payable to a customer to incorporate conditions that are based on the volume or monetary amount of a customer’s purchases or potential purchases. ASU 2025-04 also eliminates the policy election to account for forfeitures as they occur for awards with service conditions. ASU 2025-04 also clarifies that ASC 606 variable consideration guidance does not apply to share-based payments to customers; instead, vesting probability should be assessed solely under ASC 718, Compensation—Stock Compensation. ASU 2025-04 is effective for the Company’s annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-04 may be applied on either a modified retrospective basis or on a retrospective basis. The Group is currently evaluating the potential impact of adopting this guidance on Financial Statements.
In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 amends ASC 326, Financial Instruments—Credit Losses, and introduces a practical expedient available for all entities and an accounting policy election available for all entities, other than public business entities, that elect the practical expedient. These changes apply to the estimation of expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue Recognition. Under the practical expedient, entities may assume that current conditions as of the balance sheet date remain unchanged for the remaining life of the asset when developing reasonable and supportable forecasts. This simplifies the estimation process for short-term financial assets. ASU 2025-05 is effective for the Company’s annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. ASU 2025-05 should be applied on a prospective basis. The Group is currently evaluating the potential impact of adopting this guidance on Financial Statements.
Except for the above-mentioned pronouncements, there are no new recent issued accounting standards that will have a material impact on the consolidated financial position, statements of operations and cash flows.
F-17
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 — Accounts receivable, net
Accounts receivable, net, consists of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: Allowance for credit losses | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
Unbilled accounts receivable
included in accounts receivable above amounted to $
As of September 15, 2025,
approximately $
Movement of allowance for credit losses is as follows:
| For the Six Months Ended June 30, 2025 | For the Year ended December 31, 2024 | |||||||
| Beginning balance | $ | $ | ||||||
| (Recovery of) provision for credit losses | ( | ) | ||||||
| Written-off | ( | ) | ( | ) | ||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
F-18
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 — Prepayments, deposits and other assets, net
Prepayments, deposits and other assets, net consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Security deposits (1) | $ | $ | ||||||
| Advances to suppliers | ||||||||
| Advances to employees | ||||||||
| Prepaid expense | ||||||||
| Antique art pieces (2) | ||||||||
| Deferred financing cost | ||||||||
| Others | ||||||||
| Total | ||||||||
| Less: Long term portion | ( | ) | ( | ) | ||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Prepayments, deposits and other assets – current portion | $ | $ | ||||||
| (1) |
| (2) |
Movement of allowance for credit losses is as follows:
| For the Six Months Ended June 30, 2025 | For the Year Ended December 31, 2024 | |||||||
| Beginning balance | $ | $ | ||||||
| Provision for credit losses | ||||||||
| Written-off | ( | ) | ( | ) | ||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
Note 5 — Intangible assets, net
Intangible assets, net consist of the following:
| June 30, 2025 |
December 31, 2024 |
|||||||
| Capitalized development costs (1) | $ | $ | ||||||
| Purchased software | ||||||||
| Software from business combinations | ||||||||
| Subtotal | ||||||||
| Less: accumulated amortization | ( |
( |
) | |||||
| Impairment | ( |
( |
) | |||||
| Intangible assets, net | $ | $ | ||||||
| (1) |
Amortization expense for the
six months ended June 30, 2025 and 2024 amounted to $
F-19
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6 — Related party balances and transactions
The relationship of related parties
| Name of Related Party | Relationship to the Group | |
| Stewart Lor | ||
| Ban Lor | ||
| Yuxia Xu | ||
| Phillip Tao Qiu | ||
| Xiaoyan Liu | ||
| Zhongchuan Dadi (Beijing) Technology Co., LTD |
| June 30, 2025 | December 31, 2024 | |||||||
| Ban Lor | $ | $ | ||||||
| Stewart Lor | ||||||||
| Yuxia Xu | ||||||||
| Phillip Tao Qiu | ||||||||
| Xiaoyan Liu | ||||||||
| Subtotal | $ | $ | ||||||
| (1) | From time to time, the Group advances funds to senior management, mainly for expanding oversea business purpose. |
| June 30, 2025 | December 31, 2024 | |||||||
| Zhongchuan Dadi (Beijing) Technology Co., LTD | $ | $ | ||||||
| (1) | The above balance represent unpaid expenses to the related party. |
Related party transactions
| For the Six Months Ended June 30, | ||||||||||
| 2025 | 2024 | |||||||||
| Stewart Lor | Interest income | $ | $ | |||||||
| Yuxia Xu | Interest income | $ | $ | |||||||
Loan guarantee provided by related parties
In connection with the Group’s short term bank loans, Mr. Stewart Lor pledged his personal assets as collateral and signed guarantee agreements to provide guarantee to the Company’s bank loans. (See Note 7).
F-20
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 7 — Short term bank loans
Outstanding balance of short-term bank loans consisted of the following:
| June 30, 2024 | December 31, 2024 | |||||||
| Loans from Bank of Communication Fixed interest rates ranging from | $ | $ | ||||||
| Loan from SPD Bank Fixed interest rates ranging from | ||||||||
| Short term bank loans | $ | $ | ||||||
The movement short-term bank loans are as follows:
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Beginning balance | $ | $ | ||||||
| Additions | ||||||||
| Repayments | ( | ) | ( | ) | ||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
For the six months ended June
30, 2025 and 2024, interest expense for above short-term bank loans were $
F-21
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 8 — Lease
The Group has several operating leases for offices. The Group’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Total lease expense for the
six months ended June 30, 2025 and 2024 amounted to $
Supplemental balance sheet information related to operating leases was as follows:
| June 30, 2024 | December 31, 2024 | |||||||
| Right-of-use assets, net | $ | $ | ||||||
| Operating lease liabilities - current | ||||||||
| Operating lease liabilities - non-current | ||||||||
| Operating lease liabilities | $ | $ | ||||||
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of June 30, 2025:
| Remaining lease term and discount rate: | ||||
| Weighted average remaining lease term (years) | ||||
| Weighted average discount rate | % | |||
The following is a schedule of maturities of lease liabilities as of June 30, 2025:
| Twelve months ending June 30, | Amount | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
F-22
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9 — Convertible notes
Convertible notes consist of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| YA Notes | $ | $ | ||||||
| Convertible notes | $ | $ | ||||||
YA 2024 Notes
On May 16, 2024, the
Group entered into entered into a standby equity purchase agreement with YA II PN, LTD (“YA”) Pursuant to the Purchase
Agreement, YA purchases convertible notes in the principal amount of $
On May 16, 2024, The Group
closed the first tranche of the YA 2024 Notes for the principal amount of $
On December 5, 2024, the Company
and YA entered into an omnibus amendment agreement (the “December 2024 modification”).
The Group adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”) by using a modified retrospective transition method. In accordance with ASU 2020-06, since the YA 2024 Notes were not issued at a substantial premium, all of the proceeds received from the issuance are recorded as a liability on the unaudited condensed consolidated balance sheet in accordance with ASC 470-20. That is, no portion of the proceeds from issuing are attributed to the conversion option at inception. The difference between the principal amount and net proceeds from the issuance is considered debt discount and is amortized at their respective effective interest rates to accrete the carrying value to its face value on the respective put dates.
During the year ended December
31, 2024, the effective interest rates of the first and second tranche of the YA 2024 Notes were ranged from
F-23
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9 — Convertible notes (continued)
The December 2024 modification
with YA was determined to be an extinguishment of debt in accordance with ASC 470. As a result, the difference between the fair value
of YA 2024 Notes immediately after the December 2024 modification and the carrying value of the YA 2024 Notes immediately before the modification
in the amount of $
On February 16, 2025, the
Company entered into a forbearance and repayment agreement (the “Forbearance Agreement”) with YA, pursuant to which YA agreed
(a) to forbear from exercising certain of its rights and remedies as stipulated under the related agreements and (b) to forbear from exercising
conversion right under the outstanding YA 2024 Notes into the Company’s Ordinary shares in connection with the outstanding amounts
under the YA 2024 Notes as set forth in the Forbearance Agreement, subject to the conditions, amendments and modifications contained in
the Forbearance Agreement for the period commencing from February 16, 2025 to June 30, 2025, so long as (i) the Company strictly complies
with the terms of this Forbearance Agreement and (ii) that there is no occurrence or existence of any event of default as defined in the
related agreements or in the Forbearance Agreement, other than the existing defaults as stated in the Forbearance Agreement. In addition,
the Forbearance Agreement does not constitute a waiver of, or an amendment to, any rights, powers, or remedies of the Investor under the
related agreements in conjunction therewith as in effect prior to the date of the Forbearance Agreement. Prior to April 24, 2025, the
Company repaid $
Note 10 — Taxes
Income tax
Cayman Islands
X3 was incorporated in the Cayman Islands and is not subject to tax on income or capital gains under the laws of Cayman Islands. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.
Singapore
Under Singapore tax laws, subsidiaries
in Singapore are subject to statutory income tax rate at
Hong Kong
Powerbridge HK is established in Hong Kong. Under the Hong Kong tax laws, Powerbridge HK is exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.
F-24
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 — Taxes (continued)
PRC
Powerbridge Zhuhai is governed
by the Enterprise Income Tax (“EIT”) laws of PRC. Under EIT laws of PRC, domestic enterprises and Foreign Investment Enterprises
(the “FIE”) are usually subject to a unified
The impact of the preferred
tax treatment noted above decreased income taxes by $
Significant components of the provision for income taxes are as follows:
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Current | $ | $ | ( | ) | ||||
| Deferred | ( | ) | ( | ) | ||||
| Income tax expense (benefit) | $ | ( | ) | $ | ( | ) | ||
The following table reconciles China statutory rates to the Group’s effective tax rate:
| For the Six Months Ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| PRC statutory rates | % | % | ||||||
| Preferential tax rates | % | ( | )% | |||||
| R&D credits | % | % | ||||||
| Change in valuation allowance and others | ( | )% | ( | )% | ||||
| Effective tax rate | % | % | ||||||
Deferred income taxes reflect
the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes.
| June 30, 2025 | December 31, 2024 | |||||||
| Deferred tax assets: | ||||||||
| Provision for credit losses | $ | $ | ||||||
| Depreciation and amortization | ||||||||
| Net operating loss carryforward | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net | $ | $ | ||||||
| Deferred tax liabilities: | ||||||||
| Increase in fair value of intangible assets acquired through acquisition | $ | $ | ||||||
| Impairment of intangible assets acquired through acquisition | ( | ) | ||||||
| Deferred tax liabilities | $ | $ | ||||||
F-25
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 10 — Taxes (continued)
As of June 30, 2025, the Group
has approximately $
Value added tax
Enterprises who sell goods
in the PRC are subject to a value added tax in accordance with PRC laws. VAT standard rates are
Tax payable
Taxes payable consists of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Income taxes payable | $ | $ | ||||||
| VAT and other tax payable | ||||||||
| Taxes payable | $ | $ | ||||||
Uncertain tax positions
The Group evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of June 30, 2025 and December 31, 2024, the Group did not have any significant unrecognized uncertain tax positions. The Group did not incur any interest and penalties related to potential underpaid income tax expenses for the six months ended June 30, 2025 and 2024. The Group also does not anticipate any significant increases or decreases in unrecognized tax benefits in the next 12 months from June 30, 2025.
F-26
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 — Equity
Ordinary Shares
On February 10, 2025, the
Company held an extraordinary general meeting. At the meeting, the Company’s shareholders approved the following among other items:
(a) a share consolidation of every six (
All historical share and per share amounts in these condensed financial statements have been retroactively adjusted to reflect the share consolidation.
The Company had
Shares issued for consulting services
On November 29, 2023, the
Company signed a consulting agreement with an advisory firm with term of six months. The Company agreed to pay $
On December 8, 2023, the Company
signed a consulting agreement with an advisory firm with term of six months. The Company agreed to pay $
On June 18, 2025, the Company
issued
For the six months ended June
30, 2025 and 2024, the Group recorded a consulting fee expense of $
F-27
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 — Equity (continued)
Restricted share units (“RSUs”) issued for consulting services
On June 16, 2022, the board of directors proposed to modify the Company’s Amended 2018 Stock Option Plan), by supplementing various clauses in relation to the grant of Restricted Shares and Restricted Share Units to the employees, Directors and consultants of the Company.
On July 15, 2022, the Company
signed six consulting agreements with six third-party consultants with term of three years. Pursuant to the agreements, the Company agreed
to pay total of
For the six months ended June
30, 2025 and 2024, the Company recorded a consulting fee expense of $
2018 Stock option plan
On August 18, 2018 and further
amended on February 10, 2019, the Board of Directors (“Board”) approved an amended the 2018 Stock Option Plan (the “2018
Plan”). The Plan provides for discretionary grants of stock options to key employees, directors and consultants of the Company.
The purpose of the Plan is to attract and retain the best available personnel and to promote the success of the Company’s business.
On January 20, 2023, the Board
approved to register all the shares issuable under the Company’s Amended 2018 Plan in a registration statement on a Form S-8 (File
No. 333-269513) representing additional
On April 4, 2019, the Board
approved to issue
F-28
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 — Equity (continued)
On April 4, 2019, the Board
approved to issue
On May 26, 2021, the Board
approved to issue
The fair value of stock options
was determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option model requires management to
make various estimates and assumptions, including expected term, expected volatility, risk-free rate, and dividend yield. The expected
term represents the period of time that stock-based compensation awards granted are expected to be outstanding and is estimated based
on considerations including the vesting period, contractual term and anticipated employee exercise patterns. Expected volatility is based
on the historical volatility of the Company’s stock. The risk-free rate is based on the U.S. Treasury yield curve in relation to
the contractual life of stock-based compensation instruments. The dividend yield assumption is based on historical patterns and future
expectations for the Company dividends.
| Options granted in May 2021 | Options Amended in January, 2022 | Options Amended in May, 2022 | Options Amended in December, 2022 | |||||||||||||
| Risk-free interest rate | % | % | % | % | ||||||||||||
| Expected life of the options | ||||||||||||||||
| Expected volatility | % | % | % | % | ||||||||||||
| Expected dividend yield | % | % | % | % | ||||||||||||
| Fair value | $ | $ | $ | $ | ||||||||||||
F-29
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 — Equity (continued)
A summary of activities of the stock options is presented as follows:
| Number of Share Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
| US$ | Year | US$ | ||||||||||||||
| Outstanding as of December 31, 2023 | ||||||||||||||||
| Granted | - | |||||||||||||||
| Cancelled | - | - | - | |||||||||||||
| Outstanding as of December 31, 2024 | ||||||||||||||||
| Granted | - | |||||||||||||||
| Cancelled | - | |||||||||||||||
| Outstanding as of June 30, 2025 | ||||||||||||||||
| Exercisable as of June 30, 2025 | ||||||||||||||||
For the six months ended June 30, 2025 and 2024, total share-based compensation expenses recognized for the share options granted both were $. As of June 30, 2025 and December 31, 2024, there was no unrecognized share-based compensation expenses related to the share options granted.
Private placement
On November 24, 2023, the
Company entered into purchase agreements with twelve investors. The investors agreed to purchase an aggregate of $
On May 19, 2025, the Company
entered into purchase agreements with thirteen investors. Pursuant to the purchase agreement, the Company agreed to sell
Shares issued for reserve
As of June 30, 2025, the Company
issued
Shares issued for long-term investments
On March 24, 2023, the Company
entered into an equity transfer agreement with a shareholder of DTI which the Company agrees to prepaid 34,911 (post-reverse stock split
adjusted to
F-30
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 11 — Equity (continued)
Warrants
During the year ended December
31, 2021, the Company completed in aggregate of $
Statutory reserve
Under PRC law, the Company’s
subsidiary located in the PRC (collectively referred as the (“PRC entities”) are required to provide for certain statutory
reserves. The PRC entities are required to allocate at least
The Company’s subsidiaries in PRC had accumulated deficits as of June 30, 2025 and December 31, 2024, as a result, the statutory reserve balances were $ as of June 30, 2025 and December 31, 2024.
Note 12 — Commitments and contingencies
Contingencies
The Group is subject to legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Group does not anticipate that the final outcome arising out of any such matters will have a material adverse effect on our consolidated financial position, cash flows or results of operations on an individual basis or in the aggregate.
Note 13 — Segment reporting
The following table presents revenues by the service lines:
| For the Six Months Ended June 30, | ||||||||
| REVENUES: | 2025 | 2024 | ||||||
| Application development services | $ | $ | ||||||
| Consulting and technical support services | ||||||||
| Subscription services | ||||||||
| Trading revenue | ||||||||
| Others revenue | ||||||||
| Total revenues | $ | $ | ||||||
F-31
X3 HOLDINGS CO., LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 14 — Subsequent events
On July 11, 2025, the Company
entered into a definitive securities purchase agreement with certain individuals, the Company agreed to sell
The Company entered into a
definitive share purchase agreement (the “Share Purchase Agreement”) dated as of August 1, 2025, with a Non-U.S. individual
(“Seller”), pursuant to which the Company agreed to acquire
On August 13, 2025, the Company
entered into entered into a promissory note agreement with a creditor, pursuant to which the Company issued the creditor an unsecured
promissory note with original principal amount of $
F-32