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Color Star Technology(ADD) - 2023 Q4 - Annual Report
ADDColor Star Technology(ADD)2023-11-13 16:00

Acquisitions and Disposals - Color Star Technology Co., Ltd. completed the acquisition of Sunway Kids on February 14, 2020, issuing 1,989,262 ordinary shares and 2millionincash,payableinfiveinstallmentsoverfiveyears[112]−ThecompanydisposedofXinAoConstructionMaterials,Inc.onMay6,2020,receiving2 million in cash, payable in five installments over five years[112] - The company disposed of Xin Ao Construction Materials, Inc. on May 6, 2020, receiving 600,000 in proceeds for working capital and general corporate purposes[115] - On June 3, 2020, Color Star acquired 100% of Color China Entertainment Limited by issuing 4,633,333 ordinary shares, aiming to develop it into an online performance and education provider[116] - The company sold Sunway Kids on June 25, 2020, for 2.4million,with2.4 million, with 400,000 paid upfront and 2millioninmonthlyinstallmentsover10months[117]FundraisingActivities−OnSeptember24,2021,ColorStarraisedapproximately2 million in monthly installments over 10 months[117] Fundraising Activities - On September 24, 2021, Color Star raised approximately 21.5 million by selling 22,137,448 ordinary shares and warrants to institutional investors[120] - On February 21, 2022, the company raised approximately 10millionbyselling25,000,000ordinarysharesandwarrantstoinstitutionalinvestors[122]−OnSeptember14,2022,ColorStarraisedapproximately10 million by selling 25,000,000 ordinary shares and warrants to institutional investors[122] - On September 14, 2022, Color Star raised approximately 5.6 million by selling 70,000,000 ordinary shares and warrants to institutional investors[124] - On December 20, 2022, Color Star raised approximately 1.5millionbyselling1,200,000ordinarysharesat1.5 million by selling 1,200,000 ordinary shares at 1.25 per share[127] - The company sold 1,120,000 Class A ordinary shares at 0.25pershareintheNovemberOffering,generating0.25 per share in the November Offering, generating 280,000 in gross proceeds[131] Share Structure and Capital - The company completed a 40-for-1 reverse share split on September 26, 2022, reducing outstanding ordinary shares from approximately 261,757,531 to 6,543,938[126] - On March 24, 2023, shareholders approved an amendment to the authorized share capital, introducing Class A and Class B Ordinary Shares[128] - The company's authorized share capital is USD32,000,000,dividedinto700,000,000ClassAOrdinarysharesand100,000,000ClassBOrdinaryshares,with22,511,012ClassAand1,200,000ClassBsharesissuedandoutstandingasofNovember13,2023[288]−Thecompany′s2023AmendedandRestatedMemorandumandArticlesauthorizetheBoardofDirectorstoissueadditionalOrdinarySharesandestablishpreferredshareswithspecificrightsandterms[302]−Thecompany′sBoardofDirectorsmaydeclinetoregisteranytransferofOrdinarySharesifthetransferinstrumentisnotaccompaniedbytherequireddocumentationorifitinvolvesmorethanoneclassofshares[295]−Thecompany′s2023AmendedandRestatedMemorandumandArticlesincludeanti−takeoverprovisionsthatmaydiscourage,delay,orpreventachangeofcontrol,suchastheissuanceofpreferredshareswithoutshareholderapproval[304]FinancialPerformance−RevenuefortheyearendedJune30,2023was32,000,000, divided into 700,000,000 Class A Ordinary shares and 100,000,000 Class B Ordinary shares, with 22,511,012 Class A and 1,200,000 Class B shares issued and outstanding as of November 13, 2023[288] - The company's 2023 Amended and Restated Memorandum and Articles authorize the Board of Directors to issue additional Ordinary Shares and establish preferred shares with specific rights and terms[302] - The company's Board of Directors may decline to register any transfer of Ordinary Shares if the transfer instrument is not accompanied by the required documentation or if it involves more than one class of shares[295] - The company's 2023 Amended and Restated Memorandum and Articles include anti-takeover provisions that may discourage, delay, or prevent a change of control, such as the issuance of preferred shares without shareholder approval[304] Financial Performance - Revenue for the year ended June 30, 2023 was 0, compared to 16.5millionin2022,a10016.5 million in 2022, a 100% decrease[202][203] - Cost of revenue for 2023 was 0, compared to 8.5millionin2022,a1008.5 million in 2022, a 100% decrease[203][204] - Gross profit for 2023 was 0, compared to 8.0millionin2022[204]−Selling,generalandadministrativeexpensesincreasedby8.0 million in 2022[204] - Selling, general and administrative expenses increased by 1.1 million (8%) to 15.0millionin2023[205]−Provisionforexpectedcreditlossesincreasedby15.0 million in 2023[205] - Provision for expected credit losses increased by 9.9 million (100%) to 9.9millionin2023[208]−Researchanddevelopmentexpensesdecreasedby9.9 million in 2023[208] - Research and development expenses decreased by 68.2 million (100%) to 0.1millionin2023[209]−Stockcompensationexpensesdecreasedby0.1 million in 2023[209] - Stock compensation expenses decreased by 1.2 million (26%) to 3.5millionin2023[209]−Lossfromoperationsdecreasedby3.5 million in 2023[209] - Loss from operations decreased by 41.1 million (52%) to 37.8millionin2023[210]−Netlossdecreasedby37.8 million in 2023[210] - Net loss decreased by 39.4 million (51%) to 37.9millionin2023[200][211]−Revenueincreasedby14437.9 million in 2023[200][211] - Revenue increased by 144% to 16.5 million in FY 2022 compared to 6.8millioninFY2021[212][213]−Onlinemusiceducationacademysubscriptionrevenuegrewby2716.8 million in FY 2021[212][213] - Online music education academy subscription revenue grew by 271% to 16.5 million in FY 2022 from 4.5millioninFY2021[213]−Costofrevenuefortheonlinemusiceducationacademyincreasedby2884.5 million in FY 2021[213] - Cost of revenue for the online music education academy increased by 288% to 8.5 million in FY 2022 from 2.2millioninFY2021[215][216]−GrossprofitfortheonlineeducationacademyAppwas2.2 million in FY 2021[215][216] - Gross profit for the online education academy App was 8.0 million in FY 2022, with a gross profit percentage of 48.3%[216] - Selling, general and administrative expenses increased by 145% to 13.9millioninFY2022from13.9 million in FY 2022 from 5.7 million in FY 2021[217][218] - Research and development expenses surged to 68.3millioninFY2022,primarilyforaugmentedrealityfunctionsintheColorWorldApp[219]−Netlossincreasedto68.3 million in FY 2022, primarily for augmented reality functions in the Color World App[219] - Net loss increased to 77.2 million in FY 2022 from 8.2millioninFY2021[221][223]CashFlowandFinancing−Cashandcashequivalentswere8.2 million in FY 2021[221][223] Cash Flow and Financing - Cash and cash equivalents were 0.2 million as of June 30, 2023, with working capital at 10.7million[224]−Netcashusedinoperatingactivitiesfromcontinuingoperationswas10.7 million[224] - Net cash used in operating activities from continuing operations was 7.9 million in FY 2023[229] - Net cash used in operating activities for the year ended June 30, 2023 totaled 7.9million,primarilyduetoanetlossof7.9 million, primarily due to a net loss of 37.8 million and non-cash adjustments including 9.9millionforexpectedcreditlossesand9.9 million for expected credit losses and 9.4 million for impairment loss of long-lived assets[230] - Net cash used in operating activities for the year ended June 30, 2022 totaled 29.4million,primarilyduetoanetlossof29.4 million, primarily due to a net loss of 77.2 million and non-cash adjustments including 4.7millionforstockcompensationexpense[231]−NetcashusedinoperatingactivitiesfortheyearendedJune30,2021totaled4.7 million for stock compensation expense[231] - Net cash used in operating activities for the year ended June 30, 2021 totaled 2.8 million, primarily due to a net loss of 9.6millionandnon−cashadjustmentsincluding9.6 million and non-cash adjustments including 5.7 million for stock compensation expense[232] - Net cash used in investing activities for the year ended June 30, 2022 totaled 14.2million,primarilyduetothepurchaseofintangibleassetsof14.2 million, primarily due to the purchase of intangible assets of 15.1 million[234] - Net cash used in investing activities for the year ended June 30, 2021 totaled 66.9million,primarilyduetoa66.9 million, primarily due to a 52.0 million prepayment to a software development vendor for augmented reality functions in the Color World App[234] - Net cash provided by financing activities for the year ended June 30, 2023 totaled 7.2million,primarilyduetothesaleofunitsthroughprivateplacementofferingstotaling7.2 million, primarily due to the sale of units through private placement offerings totaling 6.5 million[235] - Net cash provided by financing activities for the year ended June 30, 2022 totaled 44.3million,primarilyduetothesaleofordinarysharesof44.3 million, primarily due to the sale of ordinary shares of 43.9 million[235] - Net cash provided by financing activities for the year ended June 30, 2021 totaled 67.5million,primarilyduetothesaleofordinarysharesof67.5 million, primarily due to the sale of ordinary shares of 62.3 million[236] Platform and User Engagement - The Color World platform has over 300,000 registered users and generates revenue through paid fees priced at 9.90peruserperviewofstarteachers′videoclasses[143]−Thecompanyhassignedcontractswithover50globalartistsandprofessionalsfortheirservicesasinstructorsontheColorWorldplatform[144]−Thecompany′sColorWorldOnlineConcertinSeptember2020attractedover500,000viewersandreachedover10millionhitsonglobalsocialmedianetworks[145]−ThecompanypartneredwiththeWBAtoorganizeboxingcompetitions,withthefirstmatchinAugust2023garneringover4millionviewers[148]−Thecompany′sproprietarylivebroadcastingtechnologyallowsupto200,000peopletojoinlivebroadcastingactivitiessimultaneously[152]−Thecompany′sColorWorldplatform,launchedgloballyinSeptember2020,hastransformedintoametaverseplatformwith"artificialintelligence+celebrityentertainment"asitscorefeatures,featuringover50celebrityteachersandglobalsuperstarcollaborations[189]LegalandRegulatoryCompliance−ThecompanyoperatesunderSingapore′sBroadcastingAct1994,whichmandatesautomaticclasslicensingforinternetcontentproviderswithoutspecificapplications,andrequirescompliancewiththeInternetCodeofPractice[164]−ThecompanyissubjecttotheProtectionfromOnlineFalsehoodsandManipulationAct(POFMA)inSingapore,whichallowsgovernmentministerstoissuedirectionstointernetintermediariesforcorrectingordisablingfalsestatementsoffact[165]−OnlinegamesofferedbythecompanyaregenerallyexemptfromSingapore′svideogameclassificationsystemundertheFilmsAct1981,astheyareonlyavailableviainternetdownload[166]−ThecompanydoesnotanticipateSingapore′sonlinegamblinglaws,includingtheRemoteGamblingAct2014andtheGamblingControlBill,toapplytoitsgamingbusinessduetotheabsenceofin−gamefacilitiesforconvertingvirtualrewardstoreal−worldmoneyormerchandise[168]−ThecompanyissubjecttoSingapore′sConsumerProtection(FairTrading)Act2003,whichprohibitsunfairpracticessuchasmisleadingconsumersormakingfalseclaimsine−commercetransactions[171]−ThecompanymustcomplywithSingapore′sConsumerProtection(TradeDescriptionsandSafetyRequirements)Act1975,whichprohibitsfalsetradedescriptionsongoodsandimposescriminalliabilityforviolations[172]−Thecompany′sonlinegamesandcomputerprogramsqualifyforcopyrightprotectionunderSingapore′sCopyrightAct2021,whichgrantsexclusiverightstoauthorsofprotectedworks[176]−ThecompanyissubjecttoSingapore′sCompetitionAct2004,whichprohibitsanti−competitivepracticesandimposesfinancialpenaltiesofupto109.90 per user per view of star teachers' video classes[143] - The company has signed contracts with over 50 global artists and professionals for their services as instructors on the Color World platform[144] - The company's Color World Online Concert in September 2020 attracted over 500,000 viewers and reached over 10 million hits on global social media networks[145] - The company partnered with the WBA to organize boxing competitions, with the first match in August 2023 garnering over 4 million viewers[148] - The company's proprietary live broadcasting technology allows up to 200,000 people to join live broadcasting activities simultaneously[152] - The company's Color World platform, launched globally in September 2020, has transformed into a metaverse platform with "artificial intelligence + celebrity entertainment" as its core features, featuring over 50 celebrity teachers and global superstar collaborations[189] Legal and Regulatory Compliance - The company operates under Singapore's Broadcasting Act 1994, which mandates automatic class licensing for internet content providers without specific applications, and requires compliance with the Internet Code of Practice[164] - The company is subject to the Protection from Online Falsehoods and Manipulation Act (POFMA) in Singapore, which allows government ministers to issue directions to internet intermediaries for correcting or disabling false statements of fact[165] - Online games offered by the company are generally exempt from Singapore's video game classification system under the Films Act 1981, as they are only available via internet download[166] - The company does not anticipate Singapore's online gambling laws, including the Remote Gambling Act 2014 and the Gambling Control Bill, to apply to its gaming business due to the absence of in-game facilities for converting virtual rewards to real-world money or merchandise[168] - The company is subject to Singapore's Consumer Protection (Fair Trading) Act 2003, which prohibits unfair practices such as misleading consumers or making false claims in e-commerce transactions[171] - The company must comply with Singapore's Consumer Protection (Trade Descriptions and Safety Requirements) Act 1975, which prohibits false trade descriptions on goods and imposes criminal liability for violations[172] - The company's online games and computer programs qualify for copyright protection under Singapore's Copyright Act 2021, which grants exclusive rights to authors of protected works[176] - The company is subject to Singapore's Competition Act 2004, which prohibits anti-competitive practices and imposes financial penalties of up to 10% of turnover for infringements[181] Corporate Governance and Compensation - The company had 47 full-time employees as of June 30, 2023[154] - Total compensation for Wei Zhang, Chairman of the Board, increased from 196,291 in 2022 to 449,450in2023,drivenbyasignificantriseinstockawardsfrom449,450 in 2023, driven by a significant rise in stock awards from 26,700 to 277,450[265]−LouisLou,ChiefExecutiveOfficer,receivedtotalcompensationof277,450[265] - Louis Lou, Chief Executive Officer, received total compensation of 53,175 in 2023, primarily from stock awards of 30,675[265]−FarhanQadir,FormerChiefExecutiveOfficer,earned30,675[265] - Farhan Qadir, Former Chief Executive Officer, earned 383,361 in 2023, with 320,100fromstockawards[265]−LiliJiang,ChiefFinancialOfficer,sawadecreaseintotalcompensationfrom320,100 from stock awards[265] - Lili Jiang, Chief Financial Officer, saw a decrease in total compensation from 418,140 in 2022 to 300,663in2023,withstockawardsdroppingfrom300,663 in 2023, with stock awards dropping from 238,140 to 175,163[265]−Non−executivedirectors,includingHung−JenKuoandHongleiJiang,eachearned175,163[265] - Non-executive directors, including Hung-Jen Kuo and Honglei Jiang, each earned 36,000 and 18,000respectivelyinfeesforfiscalyear2023[266]−Thecompany′sAuditCommittee,chairedbyHongleiJiang,isresponsibleforselectingindependentauditorsandreviewingrelated−partytransactions[271]−TheCompensationCommittee,chairedbyAhmadKhalfanAhmadSaeedAlmansoori,overseesexecutivecompensationandlong−termincentiveplans[273]−TheCorporateGovernanceandNominatingCommittee,chairedbyHung−JenKuo,identifiesqualifiedindividualsforboardmembershipanddevelopscorporategovernanceguidelines[274]−Thecompanyhasnorelatedpartytransactionsexceeding18,000 respectively in fees for fiscal year 2023[266] - The company's Audit Committee, chaired by Honglei Jiang, is responsible for selecting independent auditors and reviewing related-party transactions[271] - The Compensation Committee, chaired by Ahmad Khalfan Ahmad Saeed Almansoori, oversees executive compensation and long-term incentive plans[273] - The Corporate Governance and Nominating Committee, chaired by Hung-Jen Kuo, identifies qualified individuals for board membership and develops corporate governance guidelines[274] - The company has no related party transactions exceeding 120,000 since the beginning of fiscal year 2021[280] Intellectual Property and Assets - The company has one copyright and one domain name: www.colorstarinternational.com[153] - As of June 30, 2023, the company held 14.0millionincopyrights,netofaccumulatedamortization,comparedto14.0 million in copyrights, net of accumulated amortization, compared to 25.6 million as of June 30, 2022[241] Shareholder Information - Vast Ocean, Inc. is the largest shareholder with 9.78% ownership of the company's ordinary shares[278] - The company's shareholders holding at least 25% of the paid-up share capital can requisition an extraordinary general meeting, but the company's articles do not provide shareholders with the right to propose resolutions at general meetings[307] Business Strategy and Future Plans - The company plans to transform the Color World App into a paid subscription model, expected to resume revenue generation in November 2023[226] - The company has never declared or paid any dividends on its ordinary shares and does not anticipate doing so in the future, as it plans to retain all future earnings for operations and business expansion[285] - The company's Class A ordinary shares are listed on the Nasdaq Capital Market under the symbol "ADD" and have been trading since February 25, 2013[286] - The company is an exempted company under Cayman Islands law, which allows it to conduct business mainly outside the Cayman Islands and exempts it from certain regulatory requirements, such as filing annual returns or holding annual general meetings[309]