Baijiayun Group Ltd 6-K, filed Feb 28, 2025
Baijiayun Group Ltd (RTCJF)
About this 6-K
Baijiayun Group Ltd filed this 6-K on February 28, 2025.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of February
Commission File No.
(Exact name of registrant as specified in its charter)
24F, A1 South Building, No. 32 Fengzhan Road
Yuhuatai District, Nanjing
People’s Republic of China
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
EXPLANATORY NOTE
The documents attached as exhibits 99.1 and 99.2 to this Form 6-K are hereby incorporated by reference into the Registrant’s Registration Statement on Form F-3 initially filed with the U.S. Securities and Exchange Commission on December 18, 2024 (Registration No. 333-283882) and shall be a part thereof from the date on which this current report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.
1
Safe Harbor Statement
This current report contains certain “forward-looking statements.” These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the parties’ perspectives and expectations, are forward-looking statements. The words “will,” “expect,” “believe,” “estimate,” “intend,” “plan” and similar expressions indicate forward-looking statements.
Such forward-looking statements are inherently uncertain, and shareholders and other potential investors must recognize that actual results may differ materially from the expectations as a result of a variety of factors. Such forward-looking statements are based upon management’s current expectations and include known and unknown risks, uncertainties, and other factors, many of which are hard to predict or control, that may cause the actual results, performance, or plans to differ materially from any future results, performance or plans expressed or implied by such forward-looking statements. The forward-looking information provided herein represents the Company’s estimates as of the date of this current report, and subsequent events and developments may cause the Company’s estimates to change.
The Company specifically disclaims any obligation to update the forward-looking information in the future. Therefore, this forward-looking information should not be relied upon as representing the Company’s estimates of its future financial performance as of any date subsequent to the date of this current report.
A further list and description of risks and uncertainties can be found in the documents that the Company has filed or furnished or may file or furnish with the U.S. Securities and Exchange Commission, which you are encouraged to read. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements relate only to the date they were made, and the Company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made except as required by law or applicable regulation.
About Baijiayun Group Ltd
Baijiayun is a one-stop AI video solution provider with core expertise in SaaS/PaaS solutions. Baijiayun is committed to delivering reliable, high-quality video experiences across devices and localities and has grown rapidly since its inception in 2017. Premised on its industry-leading video-centric technologies, Baijiayun offers a wealth of video-centric technology solutions, including Video SaaS/PaaS, Video Cloud and Software, and Video AI and System Solutions. Baijiayun caters to the evolving communications and collaboration needs of enterprises of all sizes and industries. For more information, please visit ir.baijiayun.com.
For investor and media enquiries, please contact:
Ms. Fangfei Liu
Chief Financial Officer, Baijiayun Group Ltd
Phone: +86 25 8222 1596
Email: ir@baijiayun.com
2
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Condensed Consolidated Financial Statements as of June 30, 2024 and December 31, 2024 (unaudited) and for the Six Months Ended December 31, 2023 (unaudited) and 2024 (unaudited) | |
| 99.2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 104 | Cover Page Interactive Data File formatted as Inline XBRL and contained in Exhibit 101 |
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February 28, 2025
| Baijiayun Group Ltd | ||
| By: | /s/ Fangfei Liu | |
| Name: | Fangfei Liu | |
| Title: | Chief Financial Officer | |
4
Exhibit 99.1
BAIJIAYUN GROUP LTD
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in US$, except for share data)
| December 31, 2024 | June 30, 2024 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Notes receivable | ||||||||
| Accounts receivable, net | ||||||||
| Prepayments | ||||||||
| Prepayments - related parties | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets, net | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right of use assets, net | ||||||||
| Deferred tax assets, net | ||||||||
| Goodwill | ||||||||
| Other non-current assets, net | ||||||||
| Total non-current assets | ||||||||
| Total assets | ||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Short-term borrowings | ||||||||
| Accounts and notes payable | ||||||||
| Accounts payable - related parties | — | |||||||
| Contract liabilities | ||||||||
| Income tax payable | ||||||||
| Deferred revenue | ||||||||
| Due to related parties | ||||||||
| Operating lease liabilities, current | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Total current liabilities | ||||||||
| Deferred tax liabilities | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Convertible notes payable | — | |||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity | ||||||||
| Class A ordinary shares (par value $ | ||||||||
| Class B ordinary shares (par value $ | ||||||||
| Additional paid-in capital (1)(2) | ||||||||
| Statutory reserve | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ equity attributable to Baijiayun Group Ltd | ||||||||
| Non-controlling interests | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| (1) |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-1
BAIJIAYUN GROUP LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(All amounts in US$, except for share data)
| For the Six Months Ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| Revenues | ||||||||
| Cost of revenues | ( |
) | ( |
) | ||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Selling and marketing expenses | ( |
) | ( |
) | ||||
| General and administrative expenses | ( |
) | ( |
) | ||||
| Research and development expenses | ( |
) | ( |
) | ||||
| Total operating expenses | ( |
) | ( |
) | ||||
| Loss from operations | ( |
) | ( |
) | ||||
| Interest income | ||||||||
| Interest expense | ( |
) | ( |
) | ||||
| Investment income | ||||||||
| Other income, net | ||||||||
| Income (loss) before income taxes | ( |
) | ||||||
| Income tax benefit (expense) | ( |
) | ||||||
| Net income (loss) | ( |
) | ||||||
| Less: Net income (loss) attributable to non-controlling interests | ( |
) | ( |
) | ||||
| Net income (loss) attributable to the Company | ( |
) | ||||||
| Net income (loss) attributable to the ordinary shareholders | ( |
) | ||||||
| Net income (loss) | ( |
) | ||||||
| Other comprehensive income (loss) | ||||||||
| Foreign currency translation adjustments | ( |
) | ||||||
| Comprehensive income (loss) | ( |
) | ||||||
| Less: Comprehensive income (loss) attributable to non-controlling interests | ( |
) | ( |
) | ||||
| Comprehensive income (loss) available to the Company | ( |
) | ||||||
| Comprehensive income (loss) attributable to the ordinary shareholders | ( |
) | ||||||
| Weighted average number of ordinary shares outstanding (1) | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Earnings (loss) per share (1) | ||||||||
| Basic | ( |
) | ||||||
| Diluted | ( |
) | ||||||
| (1) |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-2
BAIJIAYUN GROUP LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
(All amounts in US$, except for share and per share data)
| Class A | Class B | Accumulated | ||||||||||||||||||||||||||||||||||||||
| ordinary shares of | ordinary shares of | Additional | Other | Non- | Total | |||||||||||||||||||||||||||||||||||
| Baijiayun Group Ltd | Baijiayun Group Ltd | paid-in | Statutory | Accumulated | comprehensive | controlling | shareholder’ | |||||||||||||||||||||||||||||||||
| Shares(1) | Amount | Shares(1) | Amount | capital | reserve | Deficit | loss | interests | equity | |||||||||||||||||||||||||||||||
| Balance, July 1 2023 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | ||||||||||||||||||||||||||||||||||||||
| Conversion of Class B Ordinary Shares into Class A Ordinary Shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Non-controlling interests arising from acquisition of subsidiaries | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | ||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Net income | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| (1) |
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-3
BAIJIAYUN GROUP LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in US$)
| For the Six Months Ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | ( |
) | ||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization expenses | ||||||||
| Amortization of operating lease right of use assets | ||||||||
| Provision for doubtful accounts | ||||||||
| Deferred income taxes benefit | ( |
) | ( |
) | ||||
| Investment income on short-term investments | ( |
) | ||||||
| Share-based compensation | ||||||||
| Amortization of debt issuance cost | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( |
) | ||||||
| Accounts receivable – related parties | ||||||||
| Notes receivable | ( |
) | ||||||
| Prepayments | ( |
) | ||||||
| Prepayments – related parties | ( |
) | ||||||
| Inventories | ( |
) | ( |
) | ||||
| Due from related parties | ( |
) | ||||||
| Prepaid expenses and other current assets, net | ( |
) | ||||||
| Other non-current assets | ( |
) | ||||||
| Accounts and notes payable | ( |
) | ||||||
| Accounts and notes payable – related parties | ( |
) | ||||||
| Contract liabilities | ||||||||
| Income tax payable | ( |
) | ||||||
| Deferred revenue | ( |
) | ( |
) | ||||
| Operating lease liabilities | ( |
) | ( |
) | ||||
| Due to related parties | ( |
) | ||||||
| Accrued expenses and other liabilities | ( |
) | ( |
) | ||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| Cash flows from investing activities | ||||||||
| Acquisition of property and equipment | ( |
) | ( |
) | ||||
| Purchases of short-term investments | ( |
) | ||||||
| Redemption of short-term investments | ||||||||
| Cash from acquired company | ||||||||
| Net cash (used in) provided by investing activities | ( |
) | ||||||
F-4
| For the Six Months Ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| Cash flows from financing activities | ||||||||
| Net proceeds from issuance of convertible notes | ||||||||
| Repayment of convertible notes | ( |
) | ||||||
| Loans from related parties | ||||||||
| Proceeds from short-term borrowings | ||||||||
| Repayment of short-term borrowings | ( |
) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( |
) | ( |
) | ||||
| Net increase in cash, cash equivalents and restricted cash | ||||||||
| Cash, cash equivalents and restricted cash at beginning of the period | ||||||||
| Cash, cash equivalents and restricted cash at end of the period | ||||||||
| Supplemental cash flow information | ||||||||
| Cash paid for interest expense | ||||||||
| Cash paid for income tax | ||||||||
| Non-cash operating, investing and financing activities | ||||||||
| Payable arising from business combination | ||||||||
Reconciliation of cash, cash equivalents and restricted cash to the unaudited condensed consolidated balance sheets
| December 31, 2024 |
December 31, 2023 |
|||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | ||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
F-5
BAIJIAYUN GROUP LTD
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1 - NATURE OF THE ORGANIZATION AND BUSINESS
BaiJiaYun Limited (“BJY”) was incorporated on April 22, 2021, under the laws of the Cayman Islands as an exempted company with limited liability. BJY commenced operations on May 22, 2017, through its variable interest entity, BaiJiaYun Group Co., Ltd. (formerly known as “Beijing Baijia Shilian Technology Co., Ltd.”) (“VIE” or “BaiJiaYun VIE”), a limited liability company established under the laws of the People’s Republic of China (“PRC”), and the VIE’s subsidiaries. BJY is a global cloud computing company focusing on SaaS/PaaS and Video AI areas and provides comprehensive video and audio solutions to customers in various industries, including education, finance, healthcare, and information technology for their development and innovation.
On July 18, 2022, BJY entered into an
agreement and plan of merger (the “Merger Agreement”) with Fuwei Films (Holdings) Co., Ltd. (“Fuwei”). Fuwei is
principally engaged in the manufacture and distribution of high-quality plastic film using the biaxially-oriented stretch technique (“BOPET
film business”). Pursuant to the Merger Agreement, a wholly-owned subsidiary of Fuwei, Fuwei Films (BVI) Co., Ltd. (“Fuwei
BVI”), will be merged with and into BJY, with BJY being the surviving entity and a wholly-owned subsidiary of Fuwei (the “Merger”).
Shareholders of BJY will exchange all of the issued and outstanding shares of BJY immediately prior to the Merger for newly issued shares
of Fuwei. The Merger and all transactions contemplated by the Merger Agreement and plans of merger were consummated on December 23, 2022,
upon which Fuwei changed its name to “Baijiayun Group Ltd” (collectively with BJY, subsidiaries of BJY, VIE and VIE’s
subsidiaries, the “Company”). On March 9, 2023, the Company entered into a security purchase agreement with Aoji Holdings
Co., Ltd, pursuant to which the Company agreed to dispose
On September 7, 2021, BaiJiaYun WFOE entered into a series of agreements (the “VIE Agreements”) with BaiJiaYun VIE and the shareholders of BaiJiaYun VIE. The VIE Agreements are designed to provide BaiJiaYun WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of BaiJiaYun VIE, including absolute control rights and the rights to the management, operations, assets, property and revenue of BaiJiaYun VIE. The purpose of the VIE Agreements is solely to give BaiJiaYun WFOE the controlling financial interest over BaiJiaYun VIE’s management and operations.
On September 7, 2021, BJY completed a reorganization of entities under common control of its then existing shareholders, who collectively owned all of the equity interests of BaiJiaYun prior to the reorganization. BaiJiaYun and BaiJiaYun HK were established as the holding companies of BaiJiaYun WFOE. BaiJiaYun WFOE is the primary beneficiary of BaiJiaYun VIE and its subsidiaries, and all of these entities are under common control which results in the consolidation of BaiJiaYun VIE and its subsidiaries which have been accounted for as a reorganization of entities under common control at carrying value (“Reorganization”). The unaudited condensed consolidated financial statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the unaudited condensed consolidated financial statements.
On January 2, 2023, BaiJiaYun WFOE terminated its VIE Agreements with BaiJiaYun VIE and the shareholders of BaiJiaYun VIE. As a result, BaiJiaYun WFOE will no longer exercise effective control over, or receive substantially all of economics benefits of the VIE and its subsidiaries. On the same date, Zhejiang WFOE entered into a series of agreements, including exclusive technical and consulting services agreement, powers of attorney, exclusive options agreements and equity interest pledge agreement with BaiJiaYun VIE and the shareholders of BaiJiaYun VIE to provide Zhejiang WFOE with the power, rights and obligations equivalent in all material aspects to those it would possess as the sole equity holder of BaiJiaYun VIE, including absolute control rights and the rights to the management operations, assets, property and revenue of BaiJiaYun VIE. The purpose of these VIE agreements is solely to give Zhejiang WFOE the controlling financial interest over BaiJiaYun VIE’s management and operations. The change of WFOE from BaiJiaYun WFOE to Zhejiang WFOE had no impact on the Company’s consolidation of BaiJiaYun VIE, because BaiJiaYun WFOE and Zhejiang WFOE are both subsidiaries of the Company and the change of WFOE was conducted under common control. The key terms of the VIE agreements signed with Zhejiang WFOE are substantially similar to the VIE agreements signed with BaiJiaYun WFOE.
On June 29, 2023, Zhejiang WFOE entered into a series of agreements and established new contractual arrangements with BaiJiaYun VIE and its shareholders to reflect the changes in BaiJiaYun VIE’s shareholders, and the previous contractual arrangements were terminated. The replacement of the VIE agreements had no impact on the Company’s consolidation of BaiJiaYun VIE, because the key terms of the new VIE agreements and the previous VIE agreements (collectively referred as the “New VIE Agreements”), both signed between Zhejiang WFOE and BaiJiaYun VIE’s shareholders, are substantially similar.
F-6
VIE Agreements with BaiJiaYun VIE
Foreign ownership of internet-based businesses,
including distribution of online information (such as an online marketplace connecting customers and suppliers), is subject to restrictions
under current PRC laws and regulations. For example, foreign investors are not allowed to own more than
The key terms of the VIE Agreements, signed between BaiJiaYun VIE and BaiJiaYun WFOE and effective from September 7, 2021 to January 2, 2023, are as summarized below:
Shareholders’ Power of Attorney
Pursuant to the shareholders’ Power of Attorney entered into on September 7, 2021, by and among BaiJiaYun WFOE, BaiJiaYun VIE and the shareholders of BaiJiaYun VIE, each shareholder of BaiJiaYun VIE irrevocably authorized BaiJiaYun WFOE or any person(s) designated by BaiJiaYun WFOE to exercise such shareholder’s rights in BaiJiaYun VIE, including without limitation, the power to participate in and vote at shareholder’s meetings, the power to nominate and appoint the directors, senior management, the power to sell or transfer such shareholder’s equity interest in BaiJiaYun VIE, and other shareholders’ voting rights permitted by the Articles of Association of BaiJiaYun VIE. The shareholders’ Power of Attorney remains irrevocable and continuously valid from the date of execution so long as each shareholder remains as a shareholder of BaiJiaYun VIE.
Equity Interest Pledge Agreement
Pursuant to the equity interest pledge agreement entered into on September 7, 2021, by and among BaiJiaYun WFOE, BaiJiaYun VIE and the shareholders of BaiJiaYun VIE, the shareholders of BaiJiaYun VIE pledged all of their equity interests in BaiJiaYun VIE to BaiJiaYun WFOE to guarantee their and BaiJiaYun VIE’s obligations under the contractual arrangements including the exclusive business cooperation agreement, the exclusive option agreement and the shareholders’ power of attorney and this equity interest pledge agreement, as well as any loss incurred due to events of default defined therein and all expenses incurred by BaiJiaYun WFOE in enforcing such obligations of BaiJiaYun VIE or its shareholders. In the event of default defined therein, upon written notice to the shareholders of BaiJiaYun VIE, BaiJiaYun WFOE, as pledgee, will have the right to dispose of the pledged equity interests in BaiJiaYun VIE and priority in receiving the proceeds from such disposition. The shareholders of BaiJiaYun VIE agree that, without BaiJiaYun WFOE’s prior written approval, during the term of the equity pledge agreement, they will not dispose of the pledged equity interests or create or allow any other encumbrance on the pledged equity interests. The pledge shall become effective on such date when the pledge of the equity interest contemplated in the equity interest pledge agreement is registered appropriately, and the pledge shall remain effective until all contractual obligations have been fully performed and all secured indebtedness has been fully paid. The shareholders and BaiJiaYun VIE shall not have any right to terminate this agreement in any event unless otherwise required by PRC laws. BJY has completed the registration of the equity pledges with the relevant office of Administration for Market Regulation in accordance with the PRC Property Rights Law.
Exclusive Business Cooperation Agreement
Under the exclusive business cooperation agreement between BaiJiaYun WFOE and BaiJiaYun VIE, dated September 7, 2021, BaiJiaYun WFOE has the exclusive right to provide to BaiJiaYun VIE technical support, consulting services and other services related to, among other things, design and development, operation maintenance, product consulting, and management and marketing consulting. BaiJiaYun WFOE has the exclusive ownership of intellectual property rights created as a result of the performance of this agreement. BaiJiaYun VIE agrees to pay BaiJiaYun WFOE service fees at an amount as determined by BaiJiaYun WFOE. This agreement will remain effective, and unless terminated in accordance with the provisions of this agreement or terminated in writing by BaiJiaYun WFOE. BaiJiaYun VIE shall not have any right to terminate this agreement in any event unless otherwise required by PRC laws. The exclusive business cooperation agreement took effective on September 7, 2021, and BaiJiaYun WFOE did not charge service fee to BaiJiaYun VIE for the six months ended December 31, 2024 and 2023.
F-7
Exclusive Option Agreement
Pursuant to the exclusive option agreement entered into on September 7, 2021, by and among BaiJiaYun WFOE, BaiJiaYun VIE and each of the shareholders of BaiJiaYun VIE, each shareholder of BaiJiaYun VIE irrevocably granted BaiJiaYun WFOE an exclusive call option to purchase, or have its designated person(s) to purchase, at its discretion, all or part of their equity interests in BaiJiaYun VIE, and the purchase price shall be the lowest price permitted by applicable PRC law. Each of the shareholders of BaiJiaYun VIE and BaiJiaYun VIE undertake that, without the prior written consent of BaiJiaYun WFOE, they may not increase or decrease the registered capital or change its structure of registered capital, dispose of its assets or beneficial interest in the material business or allow the encumbrance thereon of any security interest, incur any debts or guarantee liabilities, enter into any material purchase agreements, enter into any merger, acquisition or investments, amend its articles of association, distribute dividends to any of the shareholders or provide any loans to third parties. The exclusive option agreement will remain effective until all equity interests in BaiJiaYun VIE held by the shareholders of BaiJiaYun VIE are transferred or assigned to BaiJiaYun WFOE or its designated person(s). The shareholders and BaiJiaYun VIE shall not have any rights to terminate this agreement in any event unless otherwise required by PRC laws.
The key terms of the New VIE Agreements, signed between BaiJiaYun VIE and Zhejiang WFOE, the VIE agreements signed on January 2, 2023 and effective from January 2, 2023 to June 29, 2023, the VIE agreements signed on and effective since June 29, 2023, are as summarized below:
Exclusive Technical and Consulting Services Agreement
Under the exclusive technical and consulting services agreement between Zhejiang WFOE and the VIE, Zhejiang WFOE has the exclusive right to provide, among other things, technical support and consulting services to the VIE. Zhejiang WFOE has the exclusive ownership of intellectual property rights created as a result of the performance of this agreement. In addition, the VIE irrevocably grants Zhejiang WFOE an exclusive option to purchase any or all of the assets and business of the VIE at the lowest price permitted under PRC law.
Powers of Attorney
Under the powers of attorney among Zhejiang WFOE, the VIE, and each shareholder of the VIE, such shareholder irrevocably nominates, appoints, and constitutes Zhejiang WFOE and its successors as his or her attorney-in-fact to exercise any and all of his or her rights as a shareholder of the VIE, including rights to convene and attend shareholders’ meetings, nominate and elect directors, and appoint and dismiss the senior management of the VIE.
Exclusive Option Agreements
Under the exclusive option agreements among Zhejiang WFOE, the VIE, and each shareholder of the VIE, such shareholder irrevocably grants Zhejiang WFOE or its designated person(s) an exclusive option to purchase, at any time and to the extent permitted under PRC law, all or part of his or her equity interests in the VIE at the lowest price permitted under the PRC law.
Equity Interest Pledge Agreements
Under the equity interest pledge agreements among Zhejiang WFOE, the VIE, and each shareholder of the VIE, such shareholder pledges all of his or her equity interests in the VIE to Zhejiang WFOE to secure the performance by the VIE and its shareholders of their respective obligations under the applicable contractual agreements. If the pledger or the VIE breaches its obligations under these contractual arrangements, Zhejiang WFOE, as the pledgee, will be entitled to certain rights and remedies including priority in receiving the proceeds from the auction or disposal of the pledged equity interests in the VIE. The shareholders of the VIE undertakes that during the term of the pledge, without the prior written consent of Zhejiang WFOE, they shall not dispose of the pledged equity interests, create, or allow any encumbrance on the pledged equity interests or increase the registered capital of the VIE. Zhejiang WFOE also has the right to receive dividends distributed on the pledged equity interests during the term of the pledge.
F-8
To further streamline the Company’s corporate structure and business operations, Baijia Cloud Technology, a then wholly-owned subsidiary of BaiJiaYun VIE, became directly owned by the shareholders of BaiJiaYun VIE. On December 29, 2023, Zhejiang WFOE entered into a series of contractual arrangements with Baijia Cloud Technology and its shareholders, including exclusive business cooperation agreement, powers of attorney, exclusive option agreements, and equity interest pledge agreements.
A summary of certain material terms of the currently effective contractual arrangements among Zhejiang WFOE, Baijia Cloud Technology, and their respective shareholders is as follows:
Exclusive Technical and Consulting Services Agreement
Under the exclusive technical and consulting services agreements between Zhejiang WFOE and Baijia Cloud Technology, Zhejiang WFOE has the exclusive right to provide, among other things, technical support and consulting services to Baijia Cloud Technology. Zhejiang WFOE has the exclusive ownership of intellectual property rights created as a result of the performance of these agreements. In addition, Baijia Cloud Technology irrevocably grant Zhejiang WFOE an exclusive option to purchase any or all of the assets and business of Baijia Cloud Technology at the lowest price permitted under PRC law.
Powers of Attorney
Under the powers of attorney among Zhejiang WFOE, Baijia Cloud Technology, and each shareholder of Baijia Cloud Technology, such shareholder irrevocably nominates, appoints, and constitutes Zhejiang WFOE and its successors as his or her attorney-in-fact to exercise any and all of his or her rights as a shareholder of Baijia Cloud Technology, including rights to convene and attend shareholders’ meetings, nominate and elect directors, and appoint and dismiss the senior management of Baijia Cloud Technology.
Exclusive Option Agreements
Under the exclusive option agreements among Zhejiang WFOE, Baijia Cloud Technology, and each shareholder of Baijia Cloud Technology, such shareholder irrevocably grants Zhejiang WFOE or its designated person(s) an exclusive option to purchase, at any time and to the extent permitted under PRC law, all or part of his or her equity interests in Baijia Cloud Technology at the lowest price permitted under the PRC law.
Equity Interest Pledge Agreements
Under the equity interest pledge agreements among Zhejiang WFOE, Baijia Cloud Technology, and each shareholder of Baijia Cloud Technology, such shareholder pledges all of his or her equity interests in Baijia Cloud Technology to Zhejiang WFOE to secure the performance by Baijia Cloud Technology and their respective shareholders of their obligations under the applicable contractual agreements. If the pledger or Baijia Cloud Technology breach the obligations under these contractual arrangements, Zhejiang WFOE, as the pledgee, will be entitled to certain rights and remedies including priority in receiving the proceeds from the auction or disposal of the pledged equity interests in Baijia Cloud Technology. The shareholders of Baijia Cloud Technology undertake that during the term of the pledge, without the prior written consent of Zhejiang WFOE, they shall not dispose of the pledged equity interests, create, or allow any encumbrance on the pledged equity interests or increase the registered capital of Baijia Cloud Technology. Zhejiang WFOE also has the right to receive dividends distributed on the pledged equity interests during the term of the pledge.
BaiJiaYun VIE and Baijia Cloud Technology are collectively referred as the VIEs. The Company believes that the VIEs are considered variable interest entities under Accounting Codification Standards (“ASC”) 810, “Consolidation”, because the equity investors in BaiJiaYun VIE and Baijia Cloud Technology no longer have the characteristics of a controlling financial interest, and the Company, through BaiJiaYun WFOE and Zhejiang WFOE, is the primary beneficiary of the VIEs and controls the VIEs’ operations. Accordingly, the VIEs have been consolidated as deemed subsidiaries into the Company as a reporting company under ASC 810.
F-9
As required by ASC 810-10, the Company performs a qualitative assessment to determine whether the Company is the primary beneficiary of the VIEs, which are identified variable interest entities of the Company. A quality assessment begins with an understanding of the nature of the risks in the entity as well as the nature of the entity’s activities including terms of the contracts entered into by the entity, ownership interests issued by the entity and the parties involved in the design of the entity. The Company’s assessment of the involvement with the VIEs reveals that the Company has the absolute power to direct the most significant activities that impact the economic performance of the VIEs. Zhejiang WFOE (or BaiJiaYun WFOE, prior to January 2, 2023) is obligated to absorb a majority of the loss from the VIEs’ activities and receive a majority of the VIEs’ expected residual returns. In addition, the VIEs’ shareholders have pledged their equity interest in the VIEs to Zhejiang WFOE (or BaiJiaYun WFOE, prior to January 2, 2023), irrevocably granted Zhejiang WFOE (or BaiJiaYun WFOE, prior to January 2, 2023) an exclusive option to purchase, to the extent permitted under PRC Law, all or part of the equity interests in the VIEs and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by Zhejiang WFOE (or BaiJiaYun WFOE, prior to January 2, 2023). Under the accounting guidance, the Company is deemed to be the primary beneficiary of the VIEs and the financial positions, operating results and cash flows of the VIEs and the VIEs’ subsidiaries are consolidated in the Company for financial reporting purposes.
Additionally, pursuant to ASC 805, “Business Combinations”, as the Company and the VIEs are under common control, the Reorganization was accounted for in a manner similar to a pooling of interests. As a result, the Company’s historical amounts in the accompanying unaudited condensed consolidated financial statements give retrospective effect to the Reorganization, whereby the assets and liabilities of the VIEs and their subsidiaries are reflected at the historical carrying values and their operations are presented as if the Reorganization had become effective as of the beginning of the first period presented in the accompanying unaudited condensed consolidated financial statements.
As of December 31, 2024, the Company’s major subsidiaries, VIEs and subsidiaries of the VIEs are as follows:
| Date of | Place of | Ownership | ||||||
| Name of Entity | Incorporation | Incorporation | Percentage | Principal Activities | ||||
| BaiJiaYun Limited (“BJY”) | ||||||||
| Subsidiaries of BJY | ||||||||
| BaiJia Cloud Limited (“BaiJiaYun HK”) | ||||||||
| Beijing Baishilian Technology Co., Ltd. (“BaiJiaYun WFOE”) | ||||||||
| Shenzhen Baishilian Technology Co., Ltd. (“Shenzhen Baishilian”) | ||||||||
| Nanning Baishilian Information Technology Co., Ltd. (“Nanning Baishilian”) | ||||||||
| Nanjing Baishilian Technology Co., Ltd. (“Nanjing Baishilian”) | ||||||||
| Zhejiang Baijiashilian Technology Co., Ltd. (“Zhejiang WFOE”) | ||||||||
| VIEs | ||||||||
| BaiJiaYun Group Co., Ltd. (“BaiJiaYun VIE”) | ||||||||
| Baijia Cloud Technology Co., Ltd. (“BaiJia Cloud Technology “) | ||||||||
| VIEs’ Subsidiaries | ||||||||
| Nanjing Baijia Cloud Technology Co., Ltd. (“Nanjing BaiJiaYun”) | ||||||||
| Baijiayun Information Technology Co., Ltd. (“BaiJiaYun Information Technology”) | ||||||||
| Guizhou Baijia Cloud Technology Co., Ltd. (“Guizhou BaiJiaYun”) | ||||||||
| Beijing Baijiayun Digital Technology Co., Ltd. (formerly known as Beijing Haoyu Xingchen Cultural Communication Co., Ltd.) (“Haoyu Xingchen”) | ||||||||
| Xi’an Baijiayun Information Technology Co., Ltd. (“Xi’an BaiJiaYun”) |
F-10
| Date of | Place of | Ownership | ||||||
| Name of Entity | Incorporation | Incorporation | Percentage | Principal Activities | ||||
| Henan Baijia Cloud Information Technology Co., Ltd. (“Henan BaiJiaYun”) | ||||||||
| Wuhan BaiJiaShiLian Technology Co., Ltd. (“Wuhan BaiJiaShiLian”) | ||||||||
| Guangxi Weifang Technology Co., Ltd. (“Guangxi Weifang”) | ||||||||
| Shanghai BaiJiaYun Technology Co., Ltd. (“Shanghai BaiJiaYun”) | ||||||||
| Beijing Deran Technology Co., Ltd (“Beijing Deran”) | ||||||||
| Guangxi Hengsheng Information Technology Co., | ||||||||
| Ltd. (“Guangxi Hengsheng”) | ||||||||
| Guangxi Chuanghe Technology Co., Ltd. (“Guangxi Chuanghe”) | ||||||||
| BaiJiaYun Technology Development (Shaanxi) Co., Ltd. (“Shaanxi BaiJiaYun”) | ||||||||
| Beijing Baijia Yunlong Technology Co., Ltd (“Baijia Yunlong”) | ||||||||
| Wuhan Qiyunshilian Technology Co., Ltd. (“Wuhan Qiyunshilian”) | ||||||||
| Xinjiang BaiJiaYun Technology Co., Ltd.(“Xinjiang BaiJiaYun”) | ||||||||
| Beijing Hydrogen Data Information Technology Co., Ltd. (“Beijing Hydrogen”) | ||||||||
| Zhejiang Baijiayun Technology Co., Ltd. (“Zhejiang BaiJiaYun”) | ||||||||
| Guangzhou BaiJiaYun Technology Co., Ltd.(“Guangzhou BaiJiaYun”) | ||||||||
| Wuhan Baijia Cloud Technology Co.,Ltd.(“Wuhan BaiJiaYun”) | ||||||||
| Baijiayi Digital Technology (Henan) Co., Ltd. |
F-11
The following amounts and balances of the VIEs and their subsidiaries were included in the Company’s unaudited condensed consolidated financial statements after the elimination of intercompany balances and transactions as of December 31, 2024 and June 30, 2024 for the period then ended:
| As of December 31, 2024 | As of June 30, 2024 | |||||||
| (in U.S. dollars) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Short-term investments | ||||||||
| Notes receivable | ||||||||
| Accounts receivable, net | ||||||||
| Prepayments | ||||||||
| Prepayments - related parties | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets, net | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Operating lease right of use assets, net | ||||||||
| Deferred tax assets, net | ||||||||
| Goodwill | ||||||||
| Other non-current assets | ||||||||
| Total non-current assets | ||||||||
| Total assets | ||||||||
| LIABILITIES | ||||||||
| Current liabilities | ||||||||
| Short-term borrowings | ||||||||
| Accounts and notes payable | ||||||||
| Accounts payable - related parties | ||||||||
| Contract liabilities | ||||||||
| Income tax payable | ||||||||
| Deferred revenue | ||||||||
| Due to related parties | ||||||||
| Operating lease liabilities, current | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Total current liabilities | ||||||||
| Deferred tax liabilities | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
F-12
| For the Six Months Ended | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Revenues | ||||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Net income(loss) | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
There are no consolidated VIEs’ assets that are collateral for the VIEs’ obligations and can only be used to settle the VIEs’ obligations other than the right-of-use assets. No creditors (or beneficial interest holders) of the VIEs have recourse to the general credit of the Company or any of its consolidated subsidiaries.
No terms in any arrangements, considering both explicit arrangements and implicit variable interests, require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs ever need financial support, the Company or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to the VIEs through loans to the shareholders of the VIEs or entrustment loans to the VIEs.
Risks in relation to the VIE structure
It is possible that the Company’s operations of certain of its businesses through the VIEs could be found by the PRC authorities to be in violation of the PRC laws and regulations prohibiting or restricting foreign ownership of companies that engage in such operations and businesses. The National People’s Congress approved the Foreign Investment Law on March 15, 2019, and the State Council approved the Regulation on Implementing the Foreign Investment Law (the “Implementation Regulations”) on December 12, 2019, effective from January 1, 2020. The Supreme People’s Court of China issued a judicial interpretation on the Foreign Investment Law on December 27, 2019, effective from January 1, 2020. The Foreign Investment Law and the Implementation Regulations do not touch upon the relevant concepts and regulatory regimes that were historically suggested for the regulation of VIE structures, and thus this regulatory topic remains unclear under the Foreign Investment Law. Since the Foreign Investment Law and the Implementation Regulations are new, substantial uncertainties exist with respect to its implementation and interpretation and it is also possible that variable interest entities will be deemed as foreign invested enterprises and be subject to restrictions in the future. Such restrictions may cause interruptions to the Company’s operations, products and services and may incur additional compliance cost, which may in turn materially and adversely affect the Company’s business, financial condition, and results of operations.
In addition, if the legal structure and contractual arrangements were found to be in violation of any other existing PRC laws and regulations, the PRC government could:
| ● | revoke the Company’s business and operating licenses; |
| ● | require the Company to discontinue or restrict operations; |
| ● | restrict the Company’s right to collect revenues; |
| ● | block the Company’s platforms; |
| ● | require the Company to restructure the operations in such a way as to compel the Company to establish a new enterprise, re-apply for the necessary licenses or relocate its businesses, staff and assets; |
| ● | impose additional conditions or requirements with which the Company may not be able to comply; or |
| ● | take other regulatory or enforcement actions against the Company that could be harmful to the Company’s businesses. |
The Company’s ability to conduct its business may be negatively affected if the PRC government were to carry out any of the aforementioned actions. As a result, the Company may not be able to consolidate the VIEs and the VIEs’ subsidiaries in the unaudited condensed consolidated financial statements as the Company may lose the ability to exert effective control over the VIEs and the VIEs’ shareholders, and the Company may lose the ability to receive economic benefits from the VIEs.
F-13
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Principles of Consolidation
The unaudited condensed consolidated financial statements include the financial statements of the Company, its subsidiaries, the consolidated VIEs, and the subsidiaries of the consolidated VIEs for which the Company or its subsidiaries are the primary beneficiary.
A subsidiary is an entity in which the Company, directly or indirectly, controls more than 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 under a statute or agreement among the shareholders or equity holders.
A consolidated VIE is an entity in which the Company or its subsidiaries, through contractual arrangements, have the power to direct the activities that most significantly impact the entity’s economic performance, bear the risks of, and enjoy the rewards normally associated with ownership of the entity, and therefore the Company or its subsidiaries are the primary beneficiary of the entity.
All transactions and balances among
the Company, its subsidiaries, the consolidated VIEs, and the subsidiaries of the consolidated VIEs have been eliminated upon consolidation.
For consolidated subsidiaries where the Company’s ownership in the subsidiary is less than
Business combinations
The Company accounts for its business combinations using the acquisition method of accounting. The purchase price of the acquisition is allocated to the assets, including separately identifiable assets the Company acquired, the liabilities the Company assumed, and non-controlling interests, if any, based on their estimated fair values as of the acquisition date. The excess of the purchase price over those fair values is recorded as goodwill. The excess of fair values over the purchase price is recognized as a bargain purchase gain in earnings on the acquisition date. Acquisition-related expenses are expensed as incurred.
Consideration transferred in a business combination is measured at the fair value as of the date of acquisition. Where the consideration in an acquisition includes contingent consideration, and the payment of which depends on the achievement of certain specified conditions post-acquisition, the contingent consideration is recognized and measured at its fair value at the acquisition date and is recorded as a liability. It is subsequently carried at fair value with changes in fair value reflected in earnings.
In a business combination achieved in stages, the Company remeasures the previously held equity interest in the acquiree immediately before obtaining control at its acquisition-date fair value and the remeasurement gain or loss, if any, is recognized in earnings.
Discontinued Operations
A discontinued operation represents: (i) a component of the Company or group of components that has been disposed of or is classified as held for sale in a single transaction and represents a strategic shift that has or will have a major effect on the Company’s operations and financial results or (ii) an acquired business that is classified as held for sale on the date of acquisition.
Assets are classified as “held for sale” when all of the following criteria for a plan of sale have been met: (1) management, having the authority to approve an action, commits to a plan to sell the assets; (2) the assets are available for immediate sale, in their present condition, subject only to sales terms that are usual and customary for sale of such assets; (3) an active program to locate a buyer and other actions required to complete the plan to sell the assets have been initiated; (4) the sale of assets is probable and is expected to be completed within one year; (5) assets are being actively marketed for a price that is reasonable in relation to their current fair value; and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. Assets classified as “held for sale” are reported at the lower of their carrying value or fair value less costs to sell. At the end of reporting period, if the fair value of the held for sale assets less costs to sell is lower than the carrying value of the assets, the Company will record an impairment loss. Depreciation and amortization of assets cease upon designation as “held for sale”.
F-14
The assets and liabilities of Fuwei BVI and its consolidated subsidiary have been classified as held for sale upon consummation of the Merger and prior to the completion of Fuwei Disposition. The related result of operations of Fuwei BVI and its consolidated subsidiary from consummation of the Merger to the completion of Fuwei Disposition and the gain or loss recognized on the completion of Fuwei Disposition are reported as discontinued operation in the consolidated statements of operations and comprehensive income (loss), also see Note 5.
Non-controlling Interests
Non-controlling interests represent
the equity interests in the subsidiaries of the VIEs that are not attributable, either directly or indirectly, to the VIEs. For the Company’s
unaudited condensed consolidated financial statements, non-controlling interests represent minority shareholders’
Non-controlling interests are presented as a separate line item in the equity section of the Company’s consolidated balance sheets and have been separately disclosed in the Company’s consolidated statements of operations and comprehensive income (loss) to distinguish the interests from that of the Company.
Use of Estimates
The preparation of the 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, disclosures of contingent assets and liabilities on the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews these estimates and assumptions using the currently available information. Changes in facts and circumstances may cause the Company to revise its estimates. The Company, its subsidiaries, VIE and VIE’s subsidiaries base their estimates on past experience and on various other assumptions that are believed to be reasonable and the results of these estimates form the basis for making judgments about the carrying values of assets and liabilities. Estimates are used when accounting for items and matters including, but not limited to, determinations of the selling price of products and services in multiple performance obligation revenue arrangements, determinations of the useful lives of long-lived assets, provision for credit losses, estimates for inventory and deferred contract cost provisions, valuation allowance for deferred tax assets, share-based compensation, impairment of long-lived assets, long-term investments and goodwill, the purchase price allocation relating to business acquisitions, and the fair value of ordinary shares and redeemable convertible preferred shares.
Cash and Cash Equivalents, and Restricted Cash
Cash and cash equivalents consist of bank deposits, as well as highly liquid investments with original maturities of less than three months, which are unrestricted as to withdrawal or use.
Restricted cash consists of bank deposits collateralized to banks for issuance of promissory notes.
Current Expected 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 Company adopted this ASC Topic 326 and its amendments on July 1, 2022 using a modified retrospective approach.
F-15
Starting from July 1, 2022, the Company’s accounts receivable, other receivables which is included in prepaid expenses and other current assets, and long-term other receivables which is included in other non-current assets, are within the scope of ASC Topic 326. The Company has identified the relevant risk characteristics of its customers and the related receivables, which include type of the services the Company provides, nature of the customers or a combination of these characteristics. Receivables with similar risk characteristics have been grouped into pools. For each pool, the Company considers the historical credit loss experience, current economic conditions, supportable forecasts of future economic conditions, and any recoveries in assessing the lifetime expected credit losses. Other key factors that influence the expected credit loss analysis include customer demographics, payment terms offered in the normal course of business to customers, and industry-specific factors that could impact on the Company’s receivables. Additionally, external data and macroeconomic factors are also considered.
Accounts Receivable, Net
Accounts receivable are recorded at the gross billing amount less an allowance for any uncollectible accounts due from the customers. Accounts receivable do not bear interest. The Company measures allowance using the current expected credit loss model. An allowance is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of operations and comprehensive income (loss). Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.
Inventories
Inventories, primarily consisting of finished goods, which also include goods in transit, are stated at the lower of cost or net realizable value. Cost of inventories is determined using the first-in, first-out (“FIFO”) method and includes all costs to acquire and other costs to bring the inventories to their present location and condition.
Inventories are written down to estimated net realizable value, which could be impacted by certain factors including historical usage, expected demand, anticipated sales price, new product development schedules, product obsolescence, and other factors. The Company continuously evaluates the recoverability of the Company’s inventories, and inventory provisions are recorded in the consolidated statements of operations and comprehensive income (loss). The Company did not record any inventory write-down in the six months ended December 31, 2024 and 2023.
Prepaid Expenses and Other Current Assets, Net
Prepaid expenses and other current assets primarily include other receivables, net, VAT recoverable, and income tax recoverable. The Company records credit losses for other receivables based on assessments of the collectability of the receivables. The allowance of credit loss is recorded against the other receivables balance with a corresponding charge recorded in the consolidated statements of operations and comprehensive income (loss).
The Company provided allowance for
doubtful accounts for prepaid expenses and other current assets for and $
Property and Equipment, Net
Property and equipment primarily consist
of electronic equipment, leasehold improvements and office equipment and are stated at cost less accumulated depreciation and impairment
losses. Depreciation is provided using the straight-line method based on the estimated useful life of
Expenditures for repairs and maintenance, which do not materially extend the useful lives of the assets, are expensed as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized.
Intangible Assets, Net
Intangible assets mainly include capitalized software development costs and certain intangible assets arising from business combinations. The Company capitalizes certain software development costs related to the internally used unified communications platform during the application development stage. The capitalized development costs are amortized over the estimated useful life of the internally-used software once it was ready for intended use. The costs related to preliminary project activities and post-implementation activities are expensed as incurred. The communication platform was ready for its intended use since December 31, 2022.
Acquired intangible assets from business combination are recognized and measured at fair value at the time of acquisition.
F-16
Amortization methods and estimated useful lives of the respective assets are set out as follows:
| Category | Amortization Method | Estimated Useful Life | ||
| Self-developed communications platform | ||||
| Intangible assets arising from business combination | ||||
| Distribution channel | ||||
| Technology | ||||
| Backlog | ||||
| Customer relationship | ||||
| Apipost data | N/A | |||
| Other |
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. The Company’s goodwill as of December 31, 2024 and June 30, 2024 relates to its acquisitions of certain entities.
Goodwill is not amortized but tested for impairment at the reporting unit level on an annual basis (June 30 for the Group) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. These events or circumstances could include a significant change in the stock prices, business climate, legal and regulatory factors, operating performance indicators, competition, or sale or disposition of a significant portion of the reporting unit.
The Company first assess qualitative factors to determine whether it is “more likely than not” that the fair value of the reporting unit is less than its carrying amount. If as a result of the qualitative assessment, it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. The quantitative impairment test consists of a comparison of the fair value of the reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss equal to the difference between the fair value of the reporting unit and its carrying amount will be recorded.
Impairment of Long-lived Assets Other Than Goodwill
Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable or that the useful life is shorter than the Company had originally estimated. When these events occur, the Company evaluates the impairment for the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Company recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets.
Certain of the Company’s intangible assets have been assigned an indefinite life as the Company concluded there is no foreseeable limit on the period of time over which the intangible asset is expected to contribute to its business and its cash flows. Intangible asset that is not subject to amortization shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. When performing the impairment test for an intangible asset that is not subject to amortization, the Company may first perform a qualitative assessment to determine whether it is not more likely than not that the indefinite-lived intangible asset is impaired. If the Company determines that it is more likely than not that the indefinite-lived intangible asset is impaired after assessing the totality of events and circumstances and their potential effect on significant inputs to the fair value determination, then the Company shall calculate the fair value of the intangible asset and perform the quantitative impairment test. The quantitative impairment test for an indefinite-lived intangible asset shall consist of a comparison of the fair value of the asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, the Company shall recognize an impairment loss in an amount equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the intangible asset shall be its new accounting basis. The Company evaluates the remaining useful life of an intangible asset that is not being amortized each reporting period to determine whether events and circumstances continue to support an indefinite useful life. If an intangible asset that is not being amortized is subsequently determined to have a finite useful life, the asset shall be tested for impairment in accordance with the requirement of that for finite-lived intangible assets.
impairment charge was recognized for long-lived assets in the six months ended December 31, 2023 and 2024.
F-17
Long-lived Assets Classified as Held for Sale
The Company classifies long-lived assets as held for sale when (1) management having the authority to approve an action commits to sell the assets; (2) assets are available for immediate sale in their present condition, subject only to sales terms that are usual and customary; (3) an active program to locate a buyer and actions to complete the sale are initiated; (4) assets are being actively marketed at a price that is reasonable in relation to its current fair value; (5) it is unlikely there will be significant changes to, or withdrawal from, the plan to sell the assets. Long-lived assets classified as held for sale are measured at the lower of its carrying amount or fair value less cost to sell, with loss recognized for any initial or subsequent write-down to fair value less cost to sell.
Operating Leases
The Company leases its offices that are classified as operating leases in accordance with ASC 842, “Leases”. Operating leases are required to be recorded in the balance sheet as right of use assets and lease liabilities, initially measured at the present value of the lease payments. The Company elected the short-term lease exemption for those lease terms that are 12 months or less. The Company recognizes lease expenses for such leases on a straight-line basis over the lease term.
The Company determines whether a contract is or contains a lease at the inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. At the commencement date, the Company recognizes the lease liability at the present value of the lease payments not yet paid, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate for the same term as the underlying lease.
The right of use asset is recognized initially at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. When a lease is terminated, the right of use asset and operating lease liability associated with the lease are derecognized and any difference between the carrying amounts of the right of use asset and the lease liability is recognized in earnings as a gain or loss. All right of use assets are reviewed for impairment. There was impairment for right-of-use lease assets in the six months ended December 31, 2023 and 2024.
Notes Payable
Notes payable, included in accounts and notes payable in the consolidated balance sheets, represents bank and commercial acceptance notes issued by the Company to its vendors in the normal course of business. Bank and commercial acceptance notes do not bear interest.
Holders of the acceptance notes are
allowed to cash the acceptance notes before the stated maturity, in which case, depending on the bank policy and the Company’s negotiation
with the holder of the acceptance notes, certain banks will charge the Company a fee regarding the early cashout. The fee is calculated
based on the interest rate on a given day. The effective annual interest rate used to calculate the early cashout fee is ranging from
Revenue Recognition
The Company accounts for its revenue according to ASC 606, “Revenue from Contracts with Customers”, pursuant to which, revenue is recognized when the control of the promised goods or services is transferred to the customers, and the performance obligations under the contract have been satisfied, in an amount that reflects the consideration expected to be entitled to in exchange for those goods or services (excluding value-added taxes collected on behalf of government authorities). The Company’s revenue contracts generally do not include a right of return in relation to the delivered products or services.
F-18
The Company determines revenue recognition through the following steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company primarily generated revenues from contracts with customers through the following arrangements:
SaaS/PaaS services
The SaaS/PaaS services were comprised of real-time engagement services, and SMS services, and content delivery network services (“CDN service”).
Real-time engagement services
The Company provides customers with SaaS/PaaS related services which are real-time engagement services leveraging the Company’s enterprise cloud computing platform. The Company either provides customers the access to its enterprise cloud computing platform so customers can operate on the platform themselves, or directly provides real-time engagement related services to customers through the utilization of its enterprise cloud computing platform. The usage-based fees are earned from customers, and the unit price for each use is fixed in the contracts. The performance obligation associated with the platform access is a series of distinct services that have the same pattern of transfer, and the usage-based fees are recognized as revenue in the period in which the usage occurs.
Certain SaaS/PaaS related service contracts provide both hardware and real-time engagement services for a predetermined period of time regardless of usage consumed during the period. The transaction price is allocated between the hardware and services to reflect their standalone selling prices which are observable in the Company’s operations.
The Company identifies
SMS services
The Company offers customers with a customer engagement platform with software designed to address specific use cases and a set of Application Programming Interfaces (“API”) to send and receive short messages. It uses intelligent sending features to ensure messages reliably reach end users wherever they are. The customers build use cases, such as appointment reminders, delivery notifications, order confirmations and many two-way and conversational use cases. The usage-based fees are earned from customers, and the unit price for each short message is fixed in the contracts. The performance obligation associated with the platform-assisted message distribution is a series of distinct services that have the same pattern of transfer, and the usage-based fees are recognized as revenue in the period in which the usage occurs.
CDN service
The Company offers CDN service to customers, so the customers are able to efficiently deliver web content to users. By leveraging the CDN service, customers will benefit from the reduction of network congestion, increase of user access response speed, and thus improving user experience of the customers’ website. The Company provides the CDN service to its customers on contract period and charge its customer at fixed usage-based fee. The performance obligation associated with the CDN service is a series of distinct services that have the same pattern of transfer and usage fees are recognized as revenue in the period in which the usage occurs.
Cloud related services
The cloud related services were comprised of customized platform development services and sale of software license and other cloud related services.
F-19
Customized platform development services
The Company provides customized platform development services to customers who aim to create a system that is integrated and large in nature. In this arrangement, the Company develops certain modules, which, once developed, together with other modules from other vendors, will be integrated into the customer’s system. The module is not functional and does not benefit the customer on its own. The module is highly customized and developed specifically for the customer’s needs. The Company does not provide any technical support service for such module and has no further obligation once the module is accepted. The Company recognizes revenue from customized platform development services at the point of customer acceptance.
Software license and other cloud related service
The Company provides software licenses mainly for customers to be used for online schools or corporation training sessions. The software licenses are created based on an existing software framework with certain customization or design to meet the needs of different customers. Each developed software is functional on a standalone basis without any further upgrade or support and is regarded as a functional intellectual property. The control of the software license is transferred to the customer and the Company does not retain the right to limit the use of the software once transferred. The Company recognizes revenue of software license at the point of customer acceptance.
In certain contracts, the Company provides
technical support service to the customer subsequent to the transfer of software license for a period of time, typically
AI Solution services
The Company’s AI solution services
pertain to arrangements with customers where the Company purchases or customizes a software development kit based on the customer’s
specific requirements, integrated it into hardware, and sells the hardware to the customer. AI solution services are considered as a single
performance obligation, as the individual components of the software and hardware are not sold on a standalone basis and are not separated
in the context of the contracts. Transaction price is fixed in the contracts. The Company recognizes revenues at the point of customer
acceptance of the hardware. The AI solution services contract also provides standard warranty to the customers for a period of
Contract balances
The Company classifies its right to consideration in exchange for services transferred to a customer as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional as compared to a contract asset which is a right to consideration that is conditional upon factors other than the passage of time. The Company recognizes accounts receivable in its consolidated balance sheets when it performs a service in advance of receiving consideration and has the unconditional right to receive consideration. A contract asset is recorded when the Company has transferred services to the customer before payment is received or is due, and the Company’s right to consideration is conditional on future performance or other factors in the contract. As of December 31, 2024 and June 30, 2024, the Company had contract assets.
F-20
Contract liabilities are recognized if the Company receives consideration prior to satisfying the performance obligations. Deferred revenue balance represents amount the Company has received from its customers from contracts primarily related to the real-time engagement services to be provided for a predetermined period of time under the SaaS/PaaS service arrangement, and the technical support service related to the software license product sales under the cloud related product and service arrangement.
Customer liabilities of $
Practical expedients
Payment terms and conditions vary by contract type; however, the Company’s terms include a requirement of payment, which is generally within a year if not paid in advance. The Company has elected the practical expedient to not assess whether a significant financing component exists if the period between when transfer a promised good or service to a customer and when the customer pays for that good or service is one year or less.
Additionally, the Company has applied the practical expedient to not capitalize incremental costs of obtaining a contract if the amortization would be less than 12 months.
Disaggregation of revenue
For six months ended December 31, 2024
and 2024, most of the Company’s revenue was generated in the PRC and contributed by the VIEs and VIEs’ subsidiaries.
| For the Six Months ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| SaaS/PaaS services | ||||||||
| Real-time engagement services | $ | $ | ||||||
| SMS services | ||||||||
| Subtotal | ||||||||
| Cloud related services | ||||||||
| Customized platform development services | ||||||||
| Software license and other cloud related services | ||||||||
| Subtotal | ||||||||
| AI solution services | ||||||||
| Total revenues | $ | $ | ||||||
The Company disaggregates revenue by transferal of products/services as follows:
| For the Six Months ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Services transferred over time | $ | $ | ||||||
| Services transferred at a point in time | ||||||||
| Goods transferred at a point in time | ||||||||
| Total revenues | $ | $ | ||||||
Cost of Revenues
Cost of revenues consists primarily of cost of hosting services purchased from data center operator, costs of business channels purchased from major mobile operating companies in the PRC, personal costs for system maintenance and hardware and software products purchased for certain projects, such as AI solution service projects. These costs are charged to the consolidated statements of operations and comprehensive income (loss) as incurred.
F-21
Value-added Taxes
Revenue is recognized net of value-added taxes (“VAT”). The VAT is based on the gross sales price. Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded as VAT payable if output VAT is larger than input VAT and is included in prepaid expenses and other current assets if input VAT is larger than output VAT. All of the VAT returns filed by the Company’s subsidiaries, VIEs and the VIEs’ subsidiaries incorporated in the PRC, have been and remain subject to examination by the tax authorities.
Share-based Compensation
The Company has granted share-based awards in the form of share options and restricted stock units (“RSU”) to eligible employees, officers and directors. These share-based awards are accounted for in accordance with ASC 718, “Compensation – Stock-based Compensation”. Share-based awards granted are measured at the grant date fair value of the awards and recognized as expenses over the vesting period, which is generally the requisite service period as required by agreement. For graded vesting awards with only service condition, the Company recognizes compensation cost on a straight-line basis over the requisite service period for the entire award, provided that the cumulative amount of compensation cost recognized at any date at least equals the portion of the grant-date value of such award that is vested at that date. When no future services are required to be performed by the employee in exchange for an award of equity instruments and if such award does not contain a performance or market condition, the cost of the award is expensed on the grant date. The Company elects to recognize forfeitures when they occur. To the extent the required vesting conditions are not met resulting in the forfeiture of the share-based awards, previously recognized compensation expense relating to those awards is reversed.
Advertising Expenses
The Company expenses advertising costs
as they incurred. Total advertising expenses of $
Research and Development Expenses
Research and development expenses consist primarily of employee wages and benefits, including stock-based compensation expense, for research and development personnel. Research and development costs are expensed as incurred in accordance with ASC 730, “Research and Development”.
Government Grant
Government grant is recognized when
there is reasonable assurance that the Company will comply with the conditions attach to it and the grant will be received. Government
grant for the purpose of giving immediate financial support to the Company with no future related costs or obligation is recognized when
received. Government grant with certain operating conditions is recorded as liability when received and will be recognized in earnings
when the conditions are met. For six months ended December 31, 2024 and 2023, the Company recognized government grant of $
F-22
Related Party Transaction
The Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, “Related Party Disclosures”.
Parties, which can be an entity or individual, are considered to be related if they have the ability, directly or indirectly, to control the Company or exercise significant influence over the Company in making financial and operational decisions. Entities are also considered to be related if they are subject to common control or common significant influence.
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
Foreign Currency Translation and Transaction
The Company uses U.S. dollars (“US$”) as its reporting currency. The functional currency of the Company and its subsidiaries incorporated outside of PRC is US$, while the functional currency of the PRC entities is Renminbi (“RMB”) as determined based on the criteria of ASC 830, “Foreign Currency Matters”.
Transactions denominated in other than the functional currencies are re-measured into the functional currency of the entity at the exchange rates prevailing on the transaction dates. Financial assets and liabilities denominated in other than the functional currency are re-measured at the balance sheet date exchange rate. The resulting exchange differences are recognized in earnings.
The financial statements of the Company’ subsidiaries, VIEs and VIEs’ subsidiaries using functional currency other than US$ are translated from the functional currency to the reporting currency, US$. Assets and liabilities of the Company’s subsidiaries, VIEs and VIEs’ subsidiaries incorporated in PRC are translated into US$ at balance sheet date exchange rate, while income and expense items are translated at average exchange rate prevailing during the fiscal year, representing the index rates stipulated by U.S. Federal Reserve. Equity is translated at historical rates. Translation adjustments arising from these are reported as foreign currency translation adjustments and are shown as accumulated other comprehensive income or loss on the consolidated balance sheets.
The following table outlines the currency exchange rates that were used in creating the unaudited condensed consolidated financial statements in this report:
| As of | ||||||||
| December 31, 2024 | June 30, 2024 | |||||||
| Period-end spot rate | ||||||||
| For the Six Months ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Average rate | ||||||||
Statement of Cash Flows
In accordance with FASB ASC Topic 230, “Statement of Cash Flows”, cash flows from the Company, its subsidiaries, VIEs and VIEs’ subsidiaries’ operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows may not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.
F-23
Earnings (Loss) per Share
In accordance with ASC 260, “Earnings Per Share”, basic earnings (loss) per share is computed by dividing net income (loss) attributable to ordinary shareholders, considering the accretions to redemption value of the preferred shares and the deemed dividends to preference shareholders, if any, by the weighted average number of unrestricted ordinary shares outstanding during the year using the two-class method. Under the two-class method, net income is allocated between ordinary shares and other participating securities based on dividends declared (or accumulated) and participating rights in undistributed earnings as if all the earnings for the reporting period had been distributed. Net income (loss) is not allocated to other participating securities if based on their contractual terms they are not obligated to share the loss.
Diluted earnings (loss) per share is calculated by dividing net income (loss) attributable to ordinary shareholders, as adjusted for the accretion and allocation of net income related to the preferred shares, if any, by the weighted average number of ordinary and dilutive ordinary share equivalents outstanding during the period. The Company had ordinary share equivalents from convertible note, share options and RSUs, which could potentially dilute basic earnings per share. To calculate the number of shares for diluted net earnings (loss) per share, the effect of convertible note is computed using the as-if converted method, and the effect of share options and RSUs is computed using the treasury method. Ordinary share equivalents are excluded from the computation in income (loss) periods should their effects be anti-dilutive.
Fair Value Measurements
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 the fair value hierarchy are described below:
| 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, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. | |
| Level 3 - | Inputs to the valuation methodology are unobservable and significant to the fair value. |
Financial instruments of the Company primarily comprised current assets and current liabilities including cash and cash equivalents, restricted cash, accounts receivable, accounts and notes payable, accounts payable-related parties, short-term borrowings and accrued expenses and other liabilities. As of December 31, 2024 and June 30, 2024, the carrying values of these financial instruments approximated to their fair values because of the short-term nature of these instruments.
Commitments and Contingencies
Certain conditions may exist as of the date the unaudited condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s unaudited condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
F-24
Segment Reporting
ASC 280, “Segment Reporting”,
establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic
areas, and major customers. Operating segments are defined as components of an enterprise engaging in businesses activities for which
separate financial information is available that is regularly evaluated by the Company’s chief operating decision makers (“CODM”)
in deciding how to allocate resources and assess performance. The Company’s CODM has been identified as the Chief Executive Officer,
who reviews consolidated results including revenue, gross profit and operating profit at a consolidated level only. The Company does not
distinguish between markets for the purpose of making decisions about resources allocation and performance assessment. Therefore, the
Company has only
Concentration and Credit Risk
1) Credit risk
Assets that potentially subject the Company to significant
concentration of credit risk primarily consist of cash and cash equivalents. The maximum exposure of such assets to credit risk is their
carrying amount as at the balance sheet dates. As of December 31, 2024 and June 30, 2024, $
The Company’s operations are carried out in China. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. In addition, the Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation among other factors.
2) Foreign currency risk
Substantially all of the Company’s revenues and expenses and assets and liabilities are denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the Peoples’ Bank of China (“PBOC”) or other authorized financial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts. The value of RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.
3) Concentration risks
Accounts receivable are typically unsecured and derived from
goods sold and services rendered to customers that are located primarily in China, thereby exposed to credit risk. The risk is mitigated
by the Company’s assessment of customers’ creditworthiness and its ongoing monitoring of outstanding balances. The Company
has a concentration of its receivables with specific customers. As of December 31, 2024 and June 30, 2024, one and one customer accounted
for
4) Other risks
The Company’s business, financial condition and results of operations may also be negatively impacted by risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, such as the COVID-19 outbreak and spread, which could significantly disrupt the Company’s operations.
F-25
Recently Issued Accounting Standards
In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 intends to improve reportable segment disclosure requirements, enhance interim disclosure requirements and provide new segment disclosure requirements for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods with fiscal years beginning after December 15, 2024. ASU 2023-07 is to be adopted retrospectively to all prior periods presented. The Company is currently assessing the impact this guidance will have on the unaudited condensed consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09 “Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 intends to improve the transparency of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively. The Company is currently assessing the impact of this guidance, however, the Company do not expect a material impact to the unaudited condensed consolidated financial statements.
In January 2024, the FASB issued ASU 2024-01 “Compensation—Stock Compensation” (“ASU 2024-01”). ASU 2024-01 is intended to improve generally accepted accounting principles (GAAP) by adding an illustrative example to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether profits interest and similar awards (“profits interest awards”) should be accounted for in accordance with Topic 718, Compensation—Stock Compensation. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. For all other entities, the amendments are effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is currently assessing the impact of this guidance, however, the Company do not expect a material impact to the unaudited condensed consolidated financial statements.
4 - BUSINESS ACQUISITION AND GOODWILL
Acquisition of Wuhan BaiJiaYun
In July 2023 the Company acquired
| Amount | ||||
| US$ | ||||
| Cash and cash equivalents | ||||
| Other current assets | ||||
| Property and equipment, net | ||||
| Other long-term assets | ||||
| Total identifiable assets acquired | ||||
| Current liabilities | ||||
| Lont-term borrowings | ||||
| Total liabilities assumed | ||||
| Net identifiable assets acquired | ( | ) | ||
| Total purchase consideration | ||||
| Goodwill | ||||
| Effect on cash flows of the Company | ||||
| Cash paid (as above) | ||||
| Less: cash and cash equivalents in entity acquired | ( | ) | ||
| Cash outflow (inflow) on acquisition | ||||
The determination of fair values involves the use of significant judgments and estimates. The judgments used to estimate the fair value assigned to assets acquired and liabilities assumed, the intangible asset life and non-controlling interests, as well as the significant assumptions, can materially impact the Company’s unaudited condensed consolidated financial statements. Significant assumptions used for the models included but not limited to the weighted average cost of capital, forecasted operating cash flows, discount rates, and attrition rate. The Company utilized the assistance of third-party valuation appraisers to determine the fair values as of the date of acquisition.
After the acquisition date, Wuhan BaiJiaYun
contributed revenues and net loss of $
F-26
5 - DISPOSAL OF SUBSIDIARIES
Completion of Fuwei Disposition
In March 2023, the Company completed
the Fuwei Disposition. The Fuwei BVI and the BOPET film business disposed met the criteria for discontinued operations and was classified
as held for sale upon the consummation of the Merger. Accordingly, the results of operations for Fuwei BVI and the BOPET film business
from consummation of the Merger of Fuwei to the completion of Fuwei Disposition have been excluded from the Company’s results from
continuing operations in the consolidated statements of operations and comprehensive income (loss) and are presented in separate line
items as discontinued operations. Upon the completion of Fuwei Disposition, the Company recognized gain of $
The following tables set forth the results of operations and cash flows of discontinued operations with respect to Fuwei BVI and the BOPET film business from consummation of the Merger of Fuwei to the completion of Fuwei Disposition:
| Amount | ||||
| US$ in | ||||
| thousands | ||||
| Revenues | ||||
| Cost of revenues | ( | ) | ||
| Gross profit | ||||
| Operating expenses | ||||
| Selling and marketing expenses | ( | ) | ||
| General and administrative expenses | ( | ) | ||
| Total operating expenses | ( | ) | ||
| Loss from operations | ( | ) | ||
| Interest income | ||||
| Interest expense | ( | ) | ||
| Other expenses, net | ( | ) | ||
| Loss from discontinued operation | ( | ) | ||
| Gain on sale of business | ||||
| Loss from discontinued operation before income taxes | ||||
| Income tax expense | ( | ) | ||
| Income from discontinued operations, net of tax | ||||
| Amount | ||||
| US$ in | ||||
| thousands | ||||
| Net cash used in operating activities | ( | ) | ||
| Net cash provided by investing activities | ||||
| Net cash provided by (used in) financing activities | ||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ||||
| Net increase (decrease) in cash, cash equivalents and restricted cash of discontinued operations | ||||
Aoji Holdings Co., Ltd, is obligated
to pay the Company the purchase price no later than the third anniversary of the closing date pursuant to a supplemental agreement signed
in July 2023. The Company estimated the collectability of the $
F-27
6 - ACCOUNTS RECEIVABLE, NET
As of December 31, 2024 and June 30, 2024, accounts receivable, net consisted of the following:
| As of December 31, 2024 | As of June 30, 2024 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: Doubtful allowance | ( | ) | ( | ) | ||||
| $ | $ | |||||||
The roll-forward of the allowance for credit losses related accounts receivable for the year ended June 30, 2024 and the six months ended December 31, 2024 consists of the following activity:
For the six 2024 | For the year 2024 | |||||||
| Balance at beginning of the period/year | $ | $ | ||||||
| Provision and reversal | ||||||||
| Effects of foreign exchange rate | ( | ) | ( | ) | ||||
| Balance at end of the period/year | $ | $ | ||||||
7 - PROPERTY AND EQUIPMENT, NET
As of December 31, 2024 and June 30, 2024, property and equipment, net consisted of the following:
| As of December 31, 2024 | As of June 30, 2024 | |||||||
| Electronic equipment | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Office equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
For the six months ended December 31,
2024 and 2023, depreciation expenses were $
8 - INTANGIBLE ASSETS, NET
As of December 31, 2024 and June 30, 2024, intangible assets, net, consisted of the following:
| As of December 31, 2024 | As of June 30, 2024 | |||||||
| Self-developed communications platform | $ | $ | ||||||
| Distribution channel | ||||||||
| Technology | ||||||||
| Backlog | ||||||||
| Customer relationship | ||||||||
| Apipost data | ||||||||
| Other | ||||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
For the six months ended December 31,
2024 and 2023, amortization expenses were $
F-28
9 - LEASES
The Company leases office spaces in
different cities in the PRC under non-cancelable operating leases, with terms ranging between
The table below presents the operating lease related assets and liabilities recorded on the consolidated balance sheets.
| As of December 31, 2024 | As of June 30, 2024 | |||||||
| Right of use assets | $ | $ | ||||||
| Operating lease liabilities, current | $ | $ | ||||||
| Operating lease liabilities, noncurrent | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
Other information about the Company’s leases is as follows:
For the Six Months Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||
| Operating cash flows used in operating leases | $ | $ | ||||||
| Operating cash flows used in short-term leases | $ | $ | ||||||
| Supplemental lease cash flow disclosure | ||||||||
| Operating lease right of use assets obtained in exchange for operating lease liabilities | $ | $ | ||||||
| Weighted average remaining lease term (years) | ||||||||
| Weighted average discount rate | % | % | ||||||
Operating lease expenses were $
F-29
The Company’s maturity analysis of operating lease liabilities as of December 31, 2024 is as follows:
| Operating | ||||
| For the Year Ended June 30, | leases | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total lease payments | ||||
| Less: Imputed interest | ( | ) | ||
| Present value of lease liabilities | ||||
| Less: Operating lease liabilities, current | ||||
| Operating lease liabilities, noncurrent | $ | |||
10 - GOODWILL, NET
Goodwill, net, consisted of the following:
| As of December 31, 2024 | As of June 30, 2024 | |||||||
| Begining balance | $ | $ | ||||||
| Acquisition | ||||||||
| Exchange differences | $ | ( | ) | $ | ( | ) | ||
| Ending balance | ||||||||
| Accumulated impairment | ( | ) | ( | ) | ||||
| Goodwill, net | $ | $ | ||||||
The Company performed its annual goodwill
impairment testing at the end of each reporting period or more frequently if events or changes in circumstances indicate that it might
be impaired. In its goodwill impairment assessment as of June 30, 2024, the Company concluded that the carrying amount of the reporting
unit exceeded its implied fair value and recorded the impairment losses of $
11 - ACCRUED EXPENSES AND OTHER LIABILITIES
As of December 31, 2024 and June 30, 2024, accrued expenses and other liabilities consisted of the following:
| As of December 31, 2024 | As of June 30, 2024 | |||||||
| Accrued payroll and welfare | $ | $ | ||||||
| VAT and other taxes payable | ||||||||
| Investment consideration payable | ||||||||
| Accrued expenses | ||||||||
| Interest payable | ||||||||
| $ | $ | |||||||
12 - BORROWINGS
As of December 31, 2024 and June 30,
2024, the short-term borrowings mainly consisted of working capital loans at with annual interest rates ranging from
F-30
13 - CONVERTIBLE NOTES
On December 6, 2024, the Company entered
into a Standby Equity Purchase Agreement (the “SEPA”) with an institutional investor (“the Investor”), pursuant
to which the company may issue and sell up to $
In connection with and subject to
the satisfaction of certain conditions set forth in the Purchase Agreement, the Selling Securityholder will pre-advance to us up
to US$
14 - SHARE BASED COMPENSATION
On October 1, 2021, BJY adopted the
2021 Share Option Plan (“2021 Plan”), under which the maximum number of shares that may be granted is
On January 21, 2023, the Company adopted
2023 Share Incentive Plan (“2023 Plan”), under which the maximum number of Class A ordinary shares that may be issued pursuant
to all awards under such plan is initially
On April 12, 2024, the Company adopted 2024 Share Incentive Plan (“2024 Plan”), pursuant to which share-based awards may be granted to the Company’s employees,
directors and consultants. Under the 2024 Plan, the maximum aggregate number of Class A ordinary shares which may be issued pursuant
to all awards under such plan is
RSUs
On October 1, 2021, BJY awarded
On March 31, 2023, the Company awarded
F-31
On October 31, 2023, the Company awarded
On October 31, 2023, the Company awarded
On December 31, 2024, the Company awarded
A summary of the changes in the RSUs relating to ordinary shares granted by the Company during the six months
| Weighted | ||||||||
| Average | ||||||||
| Number of | Grant Date | |||||||
| RSUs | Fair Value | |||||||
| Awarded and unvested as of July 1, 2024 | $ | |||||||
| Granted | $ | |||||||
| Cancelled/forfeited | $ | |||||||
| Vested | ( | ) | $ | |||||
| Awarded and unvested as of December 31, 2024 | $ | |||||||
| Expected to vest as of December 31, 2024 | $ | |||||||
For the six months ended December 31,
2024 and 2023, the Company recognized share-based compensation expense of $
As of December 31, 2024, $
Share Options
BJY awarded share options to management
and employees. These options have graded vesting schedule over the requisite service period ranging between
The following table summarized the Company’s share option activities for the six months ended December 31, 2024:
| Weighted | ||||||||||||||||||||
| Average | Weighted | |||||||||||||||||||
| Weighted | Remaining | Average | ||||||||||||||||||
| Average | Contract | Grant | Aggregate | |||||||||||||||||
| Number of | Exercise | Life | Date | Intrinsic | ||||||||||||||||
| Options | Price | Years | Fair value | Value | ||||||||||||||||
| Options outstanding on July 1, 2024 | ||||||||||||||||||||
| Granted | ||||||||||||||||||||
| Cancelled/forfeited | ( | ) | ||||||||||||||||||
| Exercised | ||||||||||||||||||||
| Options outstanding on December 31, 2024 | $ | |||||||||||||||||||
| Options vested and exercisable on December 31, 2024 | $ | |||||||||||||||||||
For the six months ended December 31,
2024 and 2023, the Company recognized share-based compensation expense of $
F-32
The key assumptions used to determine the fair value of the options at the grant date were as follows:
| For the Six Months Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Expected volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Expected life | ||||||||
The above inputs have been determined based on the following:
| ● | Expected volatility is estimated based on the daily close price volatility of a number of comparable companies; |
| ● | Risk-free interest rate was estimated based on the daily treasury long term rate of the U.S. Treasury Department with a maturity period close to the expected term of the options; |
| ● | Dividend yield was estimated by the Company based on its expected dividend policy over the expected term of the option; |
| ● | Exercise multiple is based on empirical research on typical share award exercise behavior. |
| ● | Expected life is estimated based on the remaining maturity of the options. |
As of December 31, 2024, $
15 - EQUITY
Subsequent to the reverse acquisition, the Company had two classes of ordinary shares: Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Holders of Class A ordinary shares are entitled to one vote per Class A ordinary share, and holders of Class B ordinary shares are entitled to 15 votes per Class B ordinary share. At the option of the holder of Class B ordinary shares, each Class B ordinary share is convertible into one Class A ordinary share at any time. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances.
At the general meeting held on May
29, 2024, the Company’s shareholders approved the Share Consolidation (also referred to as “reverse stock split”), which
became effective on May 30, 2024. Upon the effective time of the Share Consolidation, every
Effective on September, 27, 2024, the
par value of Class A ordinary shares and Class B ordinary shares is changed to US$
BaiJiaYun Limited Equity
BJY’s authorized ordinary share
capital is
In August 2022, BJY issued
Upon the completion of the Merger,
each BJY ordinary share that is issued and outstanding immediately prior to the Merger was cancelled in exchange for the right to receive
the number of Fuwei newly issued ordinary shares as is equal to one (1) multiplied by the conversion ratio of
F-33
Baijiayun Group Ltd Equity
Class A Ordinary Shares
The Company is authorized to issue
In addition, the Company also issued
share warrants to subscribe for
During the year ended June 30, 2023,
the Company issued
In June 2023,
As of December 31, 2024 and June 30,
2024, there were
Class B Ordinary Shares
The Company is authorized to issue
In June 2023,
In July 2023,
As of December 31, 2024 and June 30,
2024, there were
Restricted Net Assets
The Company’s ability to pay
dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and
regulations permit payments of dividends by the Company’s PRC subsidiaries, VIEs and VIEs’ subsidiaries only out of their
respective retained earnings, if any, as determined in accordance with PRC accounting standards and regulations and after it has met the
PRC requirements for appropriation to statutory reserves. Paid in capital of the PRC subsidiaries included in the Company’s consolidated
net assets are also non-distributable for dividend purposes. The results of operations reflected in the accompanying unaudited condensed
consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements
of the subsidiaries. The Company’s PRC subsidiaries, VIEs and VIEs’ subsidiaries are required to set aside at least
As of December 31, 2024 and June 30,
2024, the Company’s PRC subsidiaries, VIEs and VIEs’ subsidiaries set aside statutory reserves amounted to$
As of December 31, 2024 and June 30,
2024, the Company had net assets restricted in the aggregate, which include paid-in capital and statutory reserve of the Company’s
PRC subsidiaries, VIEs and VIEs’ subsidiaries that are included in the Company’s consolidated net assets, of $
F-34
16 - INCOME TAX
Cayman Islands
Under the current and applicable laws of the Cayman Islands, the Company and its subsidiary incorporated in the Cayman Islands is not subject to tax on income or capital gain. Additionally, upon payments of dividends by BJY or the Company to its shareholders, no Cayman Islands withholding tax will be imposed.
Hong Kong
The Company’s subsidiary incorporated
in Hong Kong is subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance
with relevant Hong Kong tax laws. The applicable tax rate for the first Hong Kong Dollar (“HKD$”)
PRC
The Company’s subsidiaries incorporated
in the PRC are subject to PRC Enterprise Income Tax (“EIT”) on the taxable income in accordance with the relevant PRC income
tax laws. Effective from January 1, 2008, a new Enterprise Income Tax Law, or the New EIT Law, combined the previous income tax laws for
foreign invested and domestic invested enterprises in the PRC by the adoption of a unified tax rate of
Entities qualifying as Software Enterprises
enjoy full exemption from EIT for
BaiJiaYun VIE qualified as a Software
Enterprise and is entitled to full exemption from EIT for the tax year ended on December 31, 2020 and 2021. BaiJiaYun VIE did not renew
the Software Enterprise qualification and the preferential tax treatment regarding the
Entities qualifying as High and New
Technology Enterprise are eligible for a preferential tax rate of
Entities qualifying as “small
enterprise with low profit” and with a taxable income not exceeding RMB
F-35
In September 2018, the State Taxation
Administration of the PRC announced a preferential tax treatment for research and development expenses. Qualified entities are entitled
to deduct
The current PRC EIT Law imposes a
The Company recorded an income tax expense of $
17 - EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted earnings (loss) per share for the six months ended December 31, 2024 and 2023:
| For the six months ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Earnings (loss) from continuing operations per share | ||||||||
| Numerator: | ||||||||
| Net income (loss) attributable to ordinary shareholders – basic and diluted | ( | ) | ||||||
| Denominator: | ||||||||
| Weighted average ordinary shares outstanding – basic (1)(2)(3) | ||||||||
| Adjustments for dilutive options and RSUs | ||||||||
| Weighted average ordinary shares outstanding – diluted (1)(2)(3) | ||||||||
| Basic earnings (loss) per share attributable to the Company’s ordinary shareholders | ( | ) | ||||||
| Diluted earnings (loss) per share attributable to the Company’s ordinary shareholders | ( | ) | ||||||
| (1) |
| (2) |
| (3) |
Basic and diluted loss per ordinary share is computed using the weighted average number of ordinary shares outstanding during the period. Both Class A and Class B ordinary shares are included in the calculation of the weighted average number of ordinary shares outstanding, basic and diluted. The effects of share options and RSUs were excluded from the computation of diluted loss per share for six months ended December 31, 2023, as their effects would be anti-dilutive during the respective period.
F-36
18 - COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company has entered into operating
lease agreements for certain offices. Future minimum lease payments under non-cancellable operating leases with initial terms in excess
of
The total future minimum lease payments under non-cancellable short-term leases, including the agreed property management fee, with respect to the office as of December 31, 2024 are payable as follows:
| Lease Commitment | ||||
| Within 1 year | ||||
| 1-2 years | ||||
| Total | ||||
From time to time, the Company may be involved in various legal actions arising in the ordinary course of business. The Company accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Company did not have other significant commitments, long-term obligations, significant contingencies or guarantees as of December 31, 2024 and June 30, 2024 except for the guarantee the Company provided to Nanjing Baishi Cloud Technology Co., Ltd. (“Nanjing Baishi Cloud”), also see Note 19.
19 - RELATED PARTY TRANSACTIONS
1)
| Name | Relationship with the Company | |
| Gangjiang Li | ||
| Jinan Zhongshi Huiyun Technology Co., Ltd. (formerly known as “Jinan Huiyun Quantum Technology Co., Ltd.”) (“Jinan Zhongshi Huiyun”) | ||
| Nanjing Guosheng Huaxing Technology Co., Ltd. (“Nanjing Guosheng Huaxing”) | ||
| Bejing Guosheng Huaxing Technology Co., Ltd. (“Beijing Guosheng Huaxing”) | ||
| Beijing Zhongshi Huiyun Technology Co., Ltd. (“Beijing Zhongshi Huiyun”) | ||
| Nanjing Baishi Cloud Technology Co. Ltd. (“Nanjing Baishi Cloud”) | ||
| Nanjing Baishi Cloud Technology Co., Ltd. (“Nanjing Baishi Cloud”) |
2) Transactions with related parties
During the six months ended December 31, 2024 and 2023, the transactions with related parties were as follows:
Sales to related parties
For the Six Months Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Nanjing Guosheng Huaxing | ||||||||
F-37
Guarantees with related parties
On December 5, 2022, Nanjing BaiJiaYun
entered into a loan guarantee agreement with the Industrial and Commercial Bank of China, pursuant to which, Nanjing BaiJiaYun provided
guarantee for a loan in the principal amount of RMB
| Maximum | ||||||||
| Carrying | exposure to | |||||||
| Amount | loss | |||||||
| Guarantee provided by the Company to Nanjing Baishi Cloud | $ | $ | ||||||
In June 2023, Mr. Gangjiang Li provided
guarantee with maximum guaranteed amount of RMB
As of December 31, 2024 and June 30, 2024, the balances with related parties were as follows:
| December 31, | June 30, | |||||||
| 2024 | 2024 | |||||||
| Prepayments - related parties | ||||||||
| Nanjing Guosheng Huaxing | ||||||||
| Accounts payable - related parties | ||||||||
| Jinan Zhongshi Huiyun | ||||||||
| Due to related parties | ||||||||
| Beijing Guosheng Huaxing | ||||||||
| Beijing Zhongshi Huiyun | ||||||||
20 - SUBSEQUENT EVENTS
The Company evaluated its subsequent events through February 28, 2025, the date the unaudited condensed consolidated financial statements were available to be issued.
In January 2025, the Company transferred
F-38
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This management’s discussion and analysis is designed to provide you with a narrative explanation of our financial condition and results of operations for the six months ended December 31, 2023 and 2024. This section should be read in conjunction with our unaudited consolidated financial statements and the related notes included elsewhere in this interim report. See “Exhibit 99.1—Condensed Consolidated Financial Statements as of June 30, 2024 and December 31, 2024 (unaudited) and for the six months ended December 31, 2023 (unaudited) and 2024 (unaudited).” We also recommend that you read our management’s discussion and analysis and our audited consolidated financial statements for fiscal year 2024, and the notes thereto, which appear in our annual report on Form 20-F for the year ended June 30, 2024, or the Annual Report, filed with the U.S. Securities and Exchange Commission, or the SEC, on October 25, 2024.
Unless otherwise indicated or the context otherwise requires, all references to “our company,” “we,” “our,” “ours,” “us” or similar terms refer to Baijiayun Group Ltd, its subsidiaries, and its variable interest entities. All references to “China” or “PRC” refer to the People’s Republic of China. All references to “RMB” or “Renminbi” refer to the legal currency of China. All references to “$,” “U.S. dollars,” “$” or “dollars” refer to the legal currency of the United States of America.
All such financial statements were prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. We have made rounding adjustments to some of the figures included in this management’s discussion and analysis. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors.
Overview
We are a one-stop AI video solution provider with core expertise in SaaS and PaaS solutions. Leveraging industry-leading video-centric technologies, we offer a wealth of video-centric technology solutions, including SaaS/PaaS solutions, cloud and software related solutions, and enterprise AI and system solutions, catered to the evolving communication and collaboration needs of enterprises of all sizes and across industries.
We generate revenues primarily from our SaaS/PaaS solutions, cloud and software related solutions, and enterprise AI and system solutions. We generally charge customers of SaaS/PaaS solutions usage-based fees for real-time engagement services, SMS services, and CDN services. For cloud and software related solutions, we generally charge our customers customized platform development service fees, or software license fees. We generally generate revenues of our enterprise AI and system solutions from the sales of hardware together with AI solutions that are tailor-made or purchased from third parties for the customers’ needs and integrated into the hardware.
Our revenues were $30.5 million and $25.3 million for the six months ended December 31, 2023 and 2024, respectively. The decrease in revenues was primarily due to the decrease of revenue in real-time engagement services and cloud related services for the six months ended December 31, 2024. We recorded a net loss of $19.2 million for the six months ended December 31, 2023 and a net income of $0.6 million for the six months ended December 31 2024.
In evaluating our business, we consider and use adjusted net income (loss) as an additional non-GAAP measure to review and assess our operating performance. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. We define adjusted net income (loss) as net income (loss) excluding share-based compensation expense. Our adjusted net loss for the six months ended December 31, 2023 was $4.3 million, and our adjusted net income for the same period of 2024 was $1.0 million.
Results of Operations
The following table sets forth a summary of our unaudited consolidated statements of operations, both in absolute amount, for the periods indicated. This information has been derived from and should be read together with our unaudited consolidated financial statements. The results of operations in any period are not necessarily indicative of the results that may be expected for any future period.
| Six Months Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| (in U.S. dollars) | ||||||||
| Summary Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) | ||||||||
| Revenues | 25,278,428 | 30,539,962 | ||||||
| Cost of revenues | (20,381,763 | ) | (23,695,634 | ) | ||||
| Gross profit | 4,896,665 | 6,844,328 | ||||||
| Total operating expenses | (7,580,487 | ) | (26,919,889 | ) | ||||
| Net (loss) income | 590,430 | (19,219,691 | ) | |||||
| Net (loss) income per ordinary share: | ||||||||
| Basic | 0.03 | (0.98 | ) | |||||
| Diluted | 0.03 | (0.98 | ) | |||||
| Weighted average number of shares used in per share calculation: | ||||||||
| Basic | 19,255,424 | 19,255,424 | ||||||
| Diluted | 21,716,463 | 19,255,424 | ||||||
Non-GAAP Financial Measures
To supplement our unaudited consolidated financial statements which are presented in accordance with U.S. GAAP, we also use adjusted net income (loss) as an additional non-GAAP financial measure. We present the non-GAAP financial measure because it is used by our management to evaluate our operating performance. We also believe that the non-GAAP financial measure provides useful information to investors and others in understanding and evaluating our consolidated results of operations in the same manner as our management and in comparing financial results across accounting periods and to those of our peer companies.
2
We define adjusted net income (loss) as net income (loss) excluding share-based compensation expense. We believe that adjusted net income (loss) provides useful information to investors and others in understanding and evaluating our operating results. The non-GAAP financial measure adjusts for the impact of items that we do not consider indicative of the operational performance of our business and should not be considered in isolation or construed as an alternative to net income (loss) or any other measure of performance or as an indicator of our operating performance. Investors are encouraged to compare the historical non-GAAP financial measure with the most directly comparable GAAP measures.
Adjusted net income (loss) presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.
The following table sets forth a reconciliation of our net income (loss) to non-GAAP adjusted net income (loss) for the periods indicated.
| Six Months Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| (in U.S. dollars) | ||||||||
| Net (loss) income | 590,430 | (19,219,691 | ) | |||||
| Add: | ||||||||
| Share-based compensation | 409,132 | 14,879,140 | ||||||
Non-GAAP net income (loss) | 999,562 | (4,340,551 | ) | |||||
| Interest income | (31,180 | ) | (149,684 | ) | ||||
| Interest expense | 193,909 | 407,960 | ||||||
| Depreciation and amortization | 867,657 | 760,084 | ||||||
| Amortization of debt issuance cost | 27,397 | - | ||||||
| Income tax (benefit) expense | (187,527 | ) | 127,502 | |||||
| Non-GAAP EBITDA | 1,869,818 | (3,194,689 | ) | |||||
Six Months Ended December 31, 2024 Compared to Six Months Ended December 31, 2023
Revenues
Total revenues were $25.3 million in the six months ended December 31, 2024, representing a decrease of 17.2% from $30.5 million in the six months ended December 31, 2023. The decrease in total revenues was primarily due to (1) a 23.6% decrease in the revenues from real-time engagement services from $10.2 million in the six months ended December 31, 2023 to $7.8 million in the six months ended December 31, 2024, (2) a 74.8% decrease in the revenues from customized platform development service from $2.5 million in the six months ended December 31, 2023 to $0.6 million in the six months ended December 31, 2024, and (3) a 45.9% decrease in the revenues from software license and other cloud related service from $1.9 million in the six months ended December 31, 2023 to $1.0 million in the six months ended December 31, 2024. The decrease in revenue was resulted from decrease in customer demands in these services.
3
Cost of Revenues
Cost of revenues was $20.4 million in the six months ended December 31, 2024, a 14.0% decrease compared to $23.7 million in the six months ended December 31, 2023, primarily due to (1) a 27.6% decrease in cost incurred for real-time engagement services from $6.4 million in the six months ended December 31, 2023 to $4.6 million in the six months ended December 31, 2024, and (2) a 71.9% decrease in customized platform development service from $2.3 million in the six months ended December 31, 2023 to $0.6 million in the six months ended December 31, 2024. The decrease in cost of revenues was in line with reduction of revenues.
Gross Profit
As a result of the foregoing, the gross profit decreased by 28.5% from $6.8 million in the six months ended December 31, 2023 to $4.9 million in the six months ended December 31, 2024. The gross profit margin decreased from 22.4% in the six months ended December 31, 2023 to 19.4% in the six months ended December 31, 2024.
Operating Expenses
The total operating expenses decreased by 71.8% from $26.9 million in the six months ended December 31, 2023 to $7.6 million in the six months ended December 31, 2024.
Selling and marketing expenses. The selling and marketing expenses decreased by 26.4% from $3.1 million in the six months ended December 31, 2023 to $2.3 million in the six months ended December 31, 2024. The decrease was primarily due to decrease in share-based compensation expenses.
General and administrative expenses. The general and administrative expenses decreased by 81.0% from $18.6 million in the six months ended December 31, 2023 to $3.5 million in the six months ended December 31, 2024. The decrease was primarily due to decrease in share-based compensation expenses.
Research and development expenses. The research and development expenses decreased by 66.1% from $5.2 million in the six months ended December 31, 2023 to $1.8 million in the six months ended December 31, 2024. The decrease was primarily due to a decrease in share-based compensation expenses and decrease in general staff compensation related to research and development personnel as we streamlined our research and development team
Operating Loss
As a result of the foregoing, operating loss was $2.7 million in the six months ended December 31, 2024 as compared to operating loss of $20.1 million in the six months ended December 31, 2023.
Other income
Other income was $3.2 million in the six months ended December 31, 2024 as compared to other income of $1.2 million in the six months ended December 31, 2023.
Income Tax Benefit (Expenses)
Income tax benefit was $0.2 million in the six months ended December 31, 2024 as compared to income tax expense of $0.1 million in the six months ended December 31, 2023. Share based compensation is not currently deductible for income tax purpose.
4
Net Income (Loss)
As a result of the foregoing, net income was $0.6 million in the six months ended December 31, 2024 as compared to net loss of $19.2 million in the six months ended December 31, 2023.
Liquidity and Capital Resources
We have funded our operations primarily through cash generated from operations, proceeds from issuance of equity and debt securities, and loans from related parties. As of June 30, 2024 and December 31, 2024, we had cash and cash equivalents of $8.7 million and $14.5 million, respectively, and restricted cash of $0.4 million and $0.4 million, respectively. Approximately 54% of our cash and cash equivalents and restricted cash as of December 31, 2024 was held in China. Cash and cash equivalents primarily consists of bank deposits and highly liquid investments with original maturities of less than three months, which are unrestricted as to withdrawal or use. Restricted cash consists of bank deposits collateralized to banks for issuance of promissory notes.
In December 2024, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with an institutional investor (“the Investor”), pursuant to which we may issue and sell up to $50,000,000 of our Class A ordinary shares over the course of 24 months following the date of the SEPA, subject to terms and conditions specified in the SEPA. Pursuant to the SEPA, the investor will advance to the Company, subject to the satisfaction of certain conditions, the principal amount of up to $15 million (the “Pre-paid Advance”), which will be evidenced by convertible promissory notes (each, a “Convertible Note” and collectively, the “Convertible Notes”, together with the “SEPA”, the “Offering”). As of December 31, 2024, we received net proceed of $6,580,000, representing principal of $8,000,000 pre-paid advance after deduction of issuance discount, agent fee, and other expenses and reimbursement.
We believe that our existing cash and cash equivalents and anticipated cash flow from operations, together with the net proceeds from the Convertible Notes, will be sufficient to meet our anticipated cash needs for general corporate purposes for the next 12 months from the date of this interim report. However, the exact amount of proceeds we use for our operations and expansion plans will depend on the amount of cash generated from our operations and any strategic decisions we may make that could alter our expansion plans and the amount of cash necessary to fund these plans. We may, however, decide to enhance our liquidity position or increase our cash reserve for future investments through additional capital and finance funding. We may need additional cash resources in the future if we experience changes in business conditions or other developments, or if we find and wish to pursue opportunities for investments, acquisitions, capital expenditures or similar actions. If we determine that our cash requirements exceed the amount of cash and cash equivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
The following table sets forth a summary of the cash flows for the periods indicated:
| Six Months Ended December 31, |
||||||||
| 2024 | 2023 | |||||||
| (in U.S. dollars) | ||||||||
| Net cash used in operating activities | (1,372,020 | ) | (351,358 | ) | ||||
| Net cash provided by (used in) investing activities | (15,148 | ) | 5,724,938 | |||||
| Net cash provided by financing activities | 7,251,297 | 20,000,000 | ||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (36,727 | ) | (361,331 | ) | ||||
| Net increase in cash, cash equivalents and restricted cash | 5,827,402 | 25,012,249 | ||||||
| Cash, cash equivalents and restricted cash at beginning of the period | 9,078,491 | 12,857,176 | ||||||
| Cash, cash equivalents and restricted cash at end of the period | 14,905,893 | 37,869,425 | ||||||
5
Operating Activities
Net cash used in operating activities in the six months ended December 31, 2024 was $1.3 million, which reflected the net income of $0.6 million, adjusted for (i) a net increase of non-cash items of $1.4 million, which consisted primarily of provision for doubtful accounts, depreciation and amortization, deferred income tax, share-based compensation and amortization of debt issuance cost, and (ii) a net decrease of $3.3 million in changes in operating assets and liabilities. The decrease in changes in operating assets and liabilities was attributable primarily to (1) an increase of $4.0 million in accounts receivable, (2) an increase in inventory of $3.1 million, (3) an increase of $1.4 million in prepayments, and (4) a decrease of $3.4 million in accrued expenses and other liabilities, and partially offset by (1) a decrease of $3.0 million in prepaid expenses and other current assets, (2) an increase of $2.9 million in account payable and notes payable, and (3) an increase of $3.1 million in contract liabilities.
Net cash used in operating activities in the six months ended December 31, 2023 was $0.3 million, which reflected the net loss of $19.2 million, adjusted for (i) a net increase of non-cash items of $17.7 million, which consisted primarily of provision for doubtful accounts, depreciation and amortization, deferred income tax, share-based compensation and investment income on short-term investments, and (ii) a net increase of $1.2 million in changes in operating assets and liabilities. The net increase in changes in operating assets and liabilities was attributable primarily to (1) a decrease of $3.5 million in accounts receivable, (2) a decrease of $1.5 million in prepayments, (3) a decrease of $1.8 million in other non-current assets, and (4) an increase of $2.6 million in contract liabilities and partially offset by (1) an increase of $2.4 million in inventories and (2) a decrease in accounts payable and notes payable of $5.1 million.
Investing Activities
Net cash used in investing activities for the six months ended December 31, 2024 was $15,148, due to purchase of property and equipment.
Net cash provided by investing activities in the six months ended December 31, 2023 was $5.7 million, primarily due to redemption of short-term investments of $13.0 million, partially offset by purchases of short-term investments of $7.5 million.
Financing Activities
Net cash provided by financing activities for the six months ended December 31, 2024 was $7.3 million, consisted of net proceeds from issuance of convertible notes of $6.6 million and proceeds from net of repayment of short term loan of $0.7 million.
Net cash provided by financing activities the six months ended December 31, 2023 was $20.0 million, consisted of loan from a related parity of $30.0 million, and partially offset by repayment of a convertible note issued by the company in February 2023 of $10.0 million.
Capital Expenditures
Our capital expenditures are incurred primarily in connection with acquisition of property and equipment such as computer equipment. We had capital expenditures of $607 and $15,148 in the six months ended December 31, 2023 and 2024, respectively.
6
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Cautionary Statement Regarding Forward-Looking Statements
We have made statements in this report that constitute forward-looking statements. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “could” and similar expressions. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.
These forward-looking statements include statements about:
The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. Many factors could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Consequently, you should not place undue reliance on these forward-looking statements.
The forward-looking statements speak only as of the date on which they are made; and, except as required by law we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. The forward-looking statements included in this report relate to, among others:
| ● | our goals and strategies; |
| ● | our business and operating strategies and plans for the development of existing and new businesses, ability to implement such strategies and plans and expected time; |
| ● | our future business development, results of operations and financial condition; |
| ● | expected changes in our revenue, costs or expenditures; |
| ● | our expectations regarding demand for and market acceptance of our products and services; |
| ● | our projected markets and growth in markets; |
| ● | our potential need for additional capital and the availability of such capital; |
| ● | competition in our industry; |
| ● | relevant government policies and regulations relating to our industry; |
| ● | general economic and business conditions in China and globally; |
| ● | assumptions underlying or related to any of the foregoing. |
You should thoroughly read this current report and the documents that we refer to in this current report with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this current report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.
You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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