[PART 1. FINANCIAL INFORMATION](index=2&type=section&id=PART%201.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents TD Holdings, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows [Unaudited Condensed Consolidated Balance Sheets](index=2&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2022, shows total assets increased to **$274.6 million**, driven by higher loans receivable, while total equity rose to **$246.4 million** Condensed Consolidated Balance Sheet Highlights (in USD) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$274,621,691** | **$227,436,233** | | Cash and cash equivalents | $3,925,416 | $4,311,068 | | Loans receivable from third parties | $177,575,850 | $115,301,319 | | Goodwill | $67,475,493 | $71,028,283 | | **Total Liabilities** | **$28,257,438** | **$31,563,878** | | **Total Equity** | **$246,364,253** | **$195,872,355** | [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) For the six months ended June 30, 2022, total revenue increased by **14%** to **$101.8 million**, resulting in a net income of **$3.0 million** compared to a prior-year loss Statement of Operations Summary (Six Months Ended June 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total Revenue | $101,842,511 | $89,421,904 | | Gross Profit | $996,067 | $535,730 | | Total other income, net | $7,857,315 | $4,375,487 | | Net Income (Loss) | $3,019,128 | $(1,180,420) | | EPS - Basic & Diluted | $0.01 | $(0.01) | Statement of Operations Summary (Three Months Ended June 30) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Total Revenue | $53,683,395 | $59,839,647 | | Gross Profit | $439,129 | $373,116 | | Net Income | $1,425,271 | $357,856 | [Unaudited Condensed Consolidated Statements of Changes in Equity](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity increased to **$246.4 million** as of June 30, 2022, primarily due to common stock issuances and net income, partially offset by currency adjustments - Equity increased mainly due to the issuance of **122,100,000 common shares** in private placements, contributing **$56.9 million**[14](index=14&type=chunk) - Net income for the six-month period was **$3,019,128**[14](index=14&type=chunk) - A significant foreign currency translation adjustment of **$(12,677,381)** negatively impacted equity[14](index=14&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2022, operating activities provided **$0.47 million** cash, while investing activities used **$60.1 million**, and financing activities provided **$59.9 million** Cash Flow Summary (Six Months Ended June 30) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from Operating Activities | $469,839 | $(3,789,382) | | Net cash used in Investing Activities | $(60,102,346) | $(15,810,972) | | Net cash from Financing Activities | $59,920,000 | $23,096,801 | | **Net (decrease)/increase in cash** | **$(385,652)** | **$4,196,502** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's business, accounting policies, and financial items, including increased loans receivable, convertible notes, and Nasdaq listing compliance risks - The company's business consists of commodity trading and providing supply chain management services in the PRC[24](index=24&type=chunk) - Loans receivable from third parties increased to **$177.6 million** as of June 30, 2022, from **$115.3 million** at year-end 2021, carrying an interest rate of **10.95% per annum**[44](index=44&type=chunk)[45](index=45&type=chunk) - In May 2022, the company raised **$11.42 million** by selling **57.1 million shares** at **$0.20 per share** in a private placement[70](index=70&type=chunk) - The company received a Nasdaq notice for failing to meet the minimum bid price requirement and approved a reverse stock split to regain compliance[99](index=99&type=chunk)[109](index=109&type=chunk)[111](index=111&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=30&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial performance, highlighting revenue growth to **$101.8 million** and a shift to **$3.0 million** net income for the first half of 2022 [Results of Operations](index=32&type=section&id=Results%20of%20Operations) For the six months ended June 30, 2022, total revenue increased **14%** to **$101.8 million**, and net income reached **$3.0 million**, driven by commodity market conditions and interest income Financial Performance (Three Months Ended June 30) | Metric | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $53,683,395 | $59,839,647 | (10)% | | Gross Profit | $439,129 | $373,116 | 18% | | Net Income | $1,425,271 | $357,856 | 298% | Financial Performance (Six Months Ended June 30) | Metric | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $101,842,511 | $89,421,904 | 14% | | Gross Profit | $996,067 | $535,730 | 86% | | Net Income (Loss) | $3,019,128 | $(1,180,420) | 356% | - The increase in revenue for the first half of 2022 is attributed to a prosperous bulk market, rising commodity prices, and a strategic focus on the Hainan region[137](index=137&type=chunk) - Interest income for the six months ended June 30, 2022, increased by **74%** to **$8.8 million**, primarily from loans to third-party vendors[144](index=144&type=chunk) [Cash Flows and Capital Resources](index=38&type=section&id=Cash%20Flows%20and%20Capital%20Resources) The company's operations are financed through various sources, with **$0.47 million** cash from operations and **$59.9 million** from financing activities in the first half of 2022 - During the first six months of 2022, the company raised a total of **$59.92 million** in gross proceeds from private placements and the sale of convertible promissory notes[148](index=148&type=chunk)[149](index=149&type=chunk) Summary of Cash Flows (Six Months Ended June 30) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $469,839 | $(3,789,382) | | Net Cash Used in Investing Activities | $(60,102,346) | $(15,810,972) | | Net Cash Provided by Financing Activities | $59,920,000 | $23,096,801 | [ITEM 4. CONTROLS AND PROCEDURES](index=41&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were ineffective as of June 30, 2022, due to identified material weaknesses in accounting and internal policies - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were not effective as of June 30, 2022[165](index=165&type=chunk) - Material weaknesses identified include: lack of formal procedures for revenue recognition, inadequate control over related party transactions, absence of an accountant with adequate U.S. GAAP knowledge, and insufficient written policies for accounting and financial reporting[166](index=166&type=chunk)[167](index=167&type=chunk) [PART II. OTHER INFORMATION](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1A. RISK FACTORS](index=42&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K filed on March 16, 2022 - There have been no material changes to the risk factors disclosed in the annual report on Form 10-K filed on March 16, 2022[171](index=171&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=42&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details unregistered equity sales, including a **$3.0 million** convertible note and **$11.42 million** from common stock sales in May 2022 - On May 6, 2022, the company issued an unsecured convertible promissory note and received proceeds of **$3,000,000**[172](index=172&type=chunk) - On May 27, 2022, the company agreed to sell **57,100,000 shares** of Common Stock at **$0.20 per share**, receiving proceeds of **$11,420,000** in June 2022[173](index=173&type=chunk)

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the company's unaudited condensed consolidated financial statements, related notes, management's discussion, and internal control assessments [Financial Statements](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The company's unaudited condensed consolidated financial statements for Q1 2022 show a turnaround to net income, driven by a 63% revenue increase and growth in total assets to **$279.1 million** Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $186,605,653 | $134,258,763 | | Loans receivable from third parties | $175,999,505 | $115,301,319 | | **Total Assets** | **$279,130,880** | **$227,436,233** | | **Total Current Liabilities** | $28,957,218 | $26,799,020 | | **Total Liabilities** | $33,478,652 | $31,563,878 | | **Total Equity** | **$245,652,228** | **$195,872,355** | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | **Total Revenue** | **$48,159,116** | **$29,582,257** | | Gross Profit | $556,938 | $162,614 | | Net Operating Loss | ($1,690,769) | ($3,102,807) | | Total other income, net | $4,162,357 | $1,965,000 | | **Net Income (Loss)** | **$1,593,857** | **($1,538,276)** | | **EPS - basic and diluted** | **$0.01** | **($0.02)** | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $3,752,768 | ($4,215,515) | | Net cash used in investing activities | ($50,003,288) | ($25,060,192) | | Net cash provided by financing activities | $45,500,000 | $32,154,582 | | **Net (decrease)/increase in cash** | **($736,726)** | **$2,935,988** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section details accounting policies, significant increases in loans receivable, convertible note transactions, a shift from related-party dealings, identified risks, and subsequent financing events [Note 1. Organization and Business Description](index=9&type=section&id=Note%201.%20Organization%20and%20Business%20Description) The company operates in the PRC through Shanghai Jianchi, focusing on commodity trading and supply chain services, and incorporated three new subsidiaries in Q1 2022 - The company's primary business involves commodity trading and supply chain management services in the PRC[18](index=18&type=chunk) - Three new subsidiaries were incorporated in Q1 2022: Hainan Jianchi Import and Export Co., Ltd, Hainan Baiyu Cross-border e-commerce Limited, and Yangzhou Baiyu Cross-border e-commerce Limited[18](index=18&type=chunk) [Note 3. Loans Receivable from Third Parties](index=13&type=section&id=Note%203.%20Loans%20Receivable%20from%20Third%20Parties) Loans receivable from third parties significantly increased to **$176.0 million** by March 31, 2022, generating **$4.4 million** in interest income for the quarter Loans Receivable from Third Parties | Date | Amount | | :--- | :--- | | March 31, 2022 | $175,999,505 | | December 31, 2021 | $115,301,319 | - The company provided new loans aggregating **$60.2 million** during Q1 2022 to utilize idle cash and maintain customer relationships[37](index=37&type=chunk) - Interest income of **$4,389,547** was accrued for the three months ended March 31, 2022, a substantial increase from **$532,730** in the prior-year period[38](index=38&type=chunk) [Note 11. Convertible Promissory Notes](index=17&type=section&id=Note%2011.%20Convertible%20Promissory%20Notes) The net balance of convertible promissory notes decreased to **$2.2 million** in Q1 2022, with **9,827,744** shares of common stock issued upon conversion and **$213,367** amortization expense recognized Convertible Promissory Notes, Net | Date | Amount | | :--- | :--- | | March 31, 2022 | $2,244,675 | | December 31, 2021 | $3,562,158 | - During Q1 2022, the company settled multiple convertible promissory notes, resulting in the issuance of **9,827,744** shares of common stock[57](index=57&type=chunk)[13](index=13&type=chunk) - For Q1 2022, the company recognized amortization of the beneficial conversion feature of **$213,367**[62](index=62&type=chunk) [Note 12. Capital Transactions](index=19&type=section&id=Note%2012.%20Capital%20Transactions) In Q1 2022, the company issued **65 million** common shares for **$45.5 million** in a private placement and **9.8 million** shares from promissory note conversions - The company received proceeds of **$45,500,000** in January 2022 from issuing **65,000,000** shares of Common Stock in a private placement at **$0.70** per share[64](index=64&type=chunk) - A total of **9,827,744** shares were issued to settle convertible promissory notes during the quarter[65](index=65&type=chunk) [Note 15. Related Party Transactions and Balances](index=22&type=section&id=Note%2015.%20RELATED%20PARTY%20TRANSACTIONS%20AND%20BALANCES) The company strategically shifted away from related-party business in Q1 2022, reporting **zero** revenues or purchases from related parties and collecting an **$11.4 million** outstanding loan balance Revenue from Related Parties | Period | Amount | | :--- | :--- | | Q1 2022 | $0 | | Q1 2021 | $20,403,015 | Purchases from Related Parties | Period | Amount | | :--- | :--- | | Q1 2022 | $0 | | Q1 2021 | $21,162,777 | - The balance due from related party Yunfeihu was reduced from **$11,358,373** at year-end 2021 to **zero** as of March 31, 2022[81](index=81&type=chunk) [Note 17. Risks and Uncertainties](index=24&type=section&id=Note%2017.%20Risks%20and%20uncertainties) Key risks include Nasdaq minimum bid price non-compliance, credit risk from uninsured cash deposits, foreign currency risk, and broad economic and political uncertainties in the PRC - The company is not in compliance with the Nasdaq minimum bid price requirement and has until **August 29, 2022**, to regain compliance or face delisting[96](index=96&type=chunk) - Operations in the PRC are subject to political, economic, and legal risks, including the uncertain impact of COVID-19 and related government measures[99](index=99&type=chunk)[100](index=100&type=chunk) - The commodity trading business is subject to seasonal fluctuations, with the first quarter typically contributing the smallest portion of annual revenues[104](index=104&type=chunk) [Note 18. Subsequent Events](index=27&type=section&id=Note%2018.%20SUBSEQUENT%20EVENTS) Post-quarter, stockholders approved share issuance for 2021 convertible notes, and in May 2022, the company issued a new convertible promissory note for **$3.0 million** in gross proceeds - On **May 6, 2022**, the company issued a new convertible promissory note with an original principal amount of **$3,320,000** for gross proceeds of **$3,000,000**[107](index=107&type=chunk) - In **April 2022**, stockholders approved the issuance of Common Stock shares exceeding **19.99%** of outstanding shares upon conversion of the 2021 Notes[106](index=106&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=28&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Q1 2022 financial performance, highlighting a **63%** revenue increase to **$48.2 million**, a shift to **$1.6 million** net income, and details capital resources and cash flow activities [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Total revenue increased **63%** to **$48.2 million** in Q1 2022, driven by a **427%** surge in third-party sales, leading to a shift from net loss to **$1.6 million** net income Comparison of Operations for the Three Months Ended March 31 | Metric | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $48,159,116 | $29,582,257 | 63% | | - Sales to third parties | $47,583,965 | $9,033,467 | 427% | | - Sales to related parties | $0 | $20,403,015 | (100)% | | Gross Profit | $556,938 | $162,614 | 242% | | Net Income (Loss) | $1,593,857 | ($1,538,276) | (204)% | - The increase in revenue was mainly due to the gradual success of a business transfer and an active commodity market[122](index=122&type=chunk) - Selling, general, and administrative expenses increased by **43%** to **$2.2 million**, primarily due to amortization of intangible assets (**$1.03 million**) and convertible notes (**$0.11 million**)[128](index=128&type=chunk) [Cash Flows and Capital Resources](index=33&type=section&id=Cash%20Flows%20and%20Capital%20Resources) Q1 2022 operating activities generated **$3.8 million** in cash, while **$45.5 million** was raised from a private placement, and **$50.0 million** was used in investing activities, primarily for new third-party loans Summary of Cash Flows | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net Cash Provided by/(Used in) Operating Activities | $3,752,768 | ($4,215,515) | | Net Cash Used in Investing Activities | ($50,003,288) | ($25,060,192) | | Net Cash Provided by Financing Activities | $45,500,000 | $32,154,582 | - The company raised **$45.5 million** from a private placement by issuing **65,000,000** shares of common stock at **$0.70** per share[132](index=132&type=chunk)[139](index=139&type=chunk) - Cash used in investing activities was primarily for loans disbursed to third parties totaling **$60,177,853**, offset by collections of **$11,066,822** from related parties[138](index=138&type=chunk) [Controls and Procedures](index=35&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were ineffective as of March 31, 2022, due to identified material weaknesses in accounting and financial reporting processes - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were not effective as of **March 31, 2022**[146](index=146&type=chunk) - Material weaknesses identified include: - Lack of formal procedures for revenue recognition[149](index=149&type=chunk) - Inadequate control over related party transactions[149](index=149&type=chunk) - No accountant with adequate U.S. GAAP knowledge in the Accounting Department[150](index=150&type=chunk) - Insufficient written policies and procedures for accounting and financial reporting[150](index=150&type=chunk) [PART II. OTHER INFORMATION](index=38&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers other required disclosures, including unregistered equity sales from promissory note conversions, with no new legal proceedings or material changes to risk factors [Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During Q1 2022, the company issued **9,827,744** shares of common stock in unregistered transactions to settle outstanding convertible promissory notes - The company issued **9,827,744** shares of common stock upon the conversion of convertible promissory notes in multiple tranches during Q1 2022[154](index=154&type=chunk)

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%201.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the period ended June 30, 2021 [Item 1. Financial Statements](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for TD Holdings, Inc. as of June 30, 2021, including balance sheets, statements of operations and comprehensive income (loss), statements of changes in equity, and statements of cash flows, along with detailed notes explaining accounting policies and financial data [Unaudited Condensed Consolidated Balance Sheets](index=2&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2021, total assets increased to $186.6 million from $167.2 million at the end of 2020, primarily driven by a significant rise in loans receivable from third parties and cash, while total liabilities decreased to $37.3 million from $47.1 million, mainly due to the settlement of acquisition payable and a reduction in amounts due to related parties, consequently growing total equity to $149.3 million from $120.0 million | | June 30, 2021 ($) | December 31, 2020 ($) | | :--- | :--- | :--- | | **Total Current Assets** | $93,497,746 | $78,282,311 | | **Total Assets** | $186,587,444 | $167,178,482 | | **Total Current Liabilities** | $32,795,296 | $42,255,795 | | **Total Liabilities** | $37,330,538 | $47,149,256 | | **Total Equity** | $149,256,906 | $120,029,226 | - Key changes in assets include a significant increase in Loans receivable from third parties to **$59.5 million** and Cash to **$6.9 million**[7](index=7&type=chunk) - The number of common shares issued and outstanding increased to **97,043,566** as of June 30, 2021, from **79,131,207** at the end of 2020[7](index=7&type=chunk) [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20%28LOSS%29) For the three months ended June 30, 2021, the company achieved a net income of $357,856, a significant turnaround from a net loss of $5.46 million in the same period of 2020, driven by a massive 2981% increase in total revenue to $59.8 million, while for the six-month period, the net loss attributable to stockholders narrowed to $1.18 million from $5.81 million year-over-year, with revenue surging 2740% to $89.4 million Three Months Ended June 30, (2021 vs 2020) | Metric | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | **Total Revenue** | $59,839,647 | $1,942,411 | | **Gross Profit** | $373,116 | $364,430 | | **Net Income (Loss) Attributable to Stockholders** | $357,856 | $(5,459,681) | Six Months Ended June 30, (2021 vs 2020) | Metric | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | **Total Revenue** | $89,421,904 | $3,148,527 | | **Gross Profit** | $535,730 | $514,686 | | **Net Loss Attributable to Stockholders** | $(1,180,420) | $(5,809,897) | | **Loss Per Share (Basic & Diluted)** | $(0.01) | $(0.17) | - The significant increase in revenue was primarily driven by sales of commodity products to third parties, which amounted to **$58.0 million** in Q2 2021 and **$67.0 million** in H1 2021, compared to zero in the prior-year periods[9](index=9&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the six months ended June 30, 2021, net cash used in operating activities was $3.8 million, investing activities used $15.8 million mainly for loans to third parties and intangible asset purchases, while financing activities provided $23.1 million in cash primarily from the issuance of common stock and convertible notes, resulting in an overall cash balance increase of $4.2 million, ending the period at $6.9 million Cash Flow Summary for the Six Months Ended June 30, | Cash Flow Activity | 2021 ($) | 2020 ($) | | :--- | :--- | :--- | | **Net Cash Used in Operating Activities** | $(3,789,382) | $(2,720,861) | | **Net Cash Used in Investing Activities** | $(15,810,972) | $(78,859,738) | | **Net Cash Provided by Financing Activities** | $23,096,801 | $80,240,216 | | **Net Increase/(Decrease) in Cash** | $4,196,502 | $(959,089) | | **Cash at End of Period** | $6,896,515 | $1,487,594 | - Financing activities in H1 2021 were driven by **$24.45 million** from private placements and **$4.5 million** from convertible notes issuance[15](index=15&type=chunk) [Notes to Consolidated Financial Statements](index=12&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%28UNAUDITED%29) The notes detail the company's business operations in commodity trading and supply chain management in the PRC, with key disclosures including a significant increase in third-party loans receivable to $59.5 million, the issuance of $5.2 million in convertible notes, and substantial capital raised through stock offerings, alongside significant transactions with related parties, a $1.7 million share-based payment for services, and subsequent events involving the settlement of some convertible notes - The company's business involves commodity trading and providing supply chain management services in the PRC. Several new subsidiaries were incorporated in H1 2021 to expand these operations[18](index=18&type=chunk)[20](index=20&type=chunk) - Loans receivable from third parties increased significantly to **$59.5 million** as of June 30, 2021, from **$18.4 million** at year-end 2020[43](index=43&type=chunk) - In January and March 2021, the company issued convertible promissory notes with a net value of **$5.2 million**[50](index=50&type=chunk) - The company raised **$24.45 million** in January 2021 by selling **15 million shares** of common stock in a private placement[55](index=55&type=chunk) - Subsequent to the quarter end, the company settled convertible notes of approximately **$1.9 million** by issuing over **2.2 million shares** of common stock[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=31&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes the substantial revenue growth in the first half of 2021 to a prosperous global bulk commodity market and the company's strategic expansion in Hainan province, detailing a 2981% YoY revenue increase for Q2 and 2740% for H1, noting that while gross profit remained stable, operating expenses rose sharply due to amortization and share-based payments, and the company secured significant equity financing of approximately $31.6 million during the period, which management believes is adequate for ongoing operations despite a net loss and operating cash outflow [Results of Operations](index=32&type=section&id=Results%20of%20Operations) For Q2 2021, revenue surged to $59.8 million from $1.9 million in Q2 2020, a 2981% increase primarily from third-party commodity sales, with gross profit stable at $373,116, though SG&A expenses increased 368% to $2.1 million due to amortization of intangible assets and convertible notes; for H1 2021, revenue grew 2740% to $89.4 million, and the net loss for H1 2021 was $1.18 million, a significant improvement from a $5.82 million loss in H1 2020, which included large non-cash expenses related to convertible notes Revenue Comparison - Three Months Ended June 30, | Revenue Source | 2021 ($) | 2020 ($) | Change % | | :--- | :--- | :--- | :--- | | Sales of commodity products – third parties | $57,989,381 | $- | 100% | | **Total Revenue** | **$59,839,647** | **$1,942,411** | **2981%** | Revenue Comparison - Six Months Ended June 30, | Revenue Source | 2021 ($) | 2020 ($) | Change % | | :--- | :--- | :--- | :--- | | Sales of commodity products – third parties | $67,022,848 | $- | 100% | | Sales of commodity products – related parties | $21,926,631 | $2,617,301 | 738% | | **Total Revenue** | **$89,421,904** | **$3,148,527** | **2740%** | - The significant revenue increase is attributed to the prosperous bulk market, rising commodity prices, and the company's expansion in Hainan province, which offers supportive policies[128](index=128&type=chunk)[143](index=143&type=chunk) - Selling, general, and administrative expenses for H1 2021 increased by **389%** to **$3.6 million**, mainly due to amortization of intangible assets (**$1.9 million**) and convertible notes (**$0.16 million**)[149](index=149&type=chunk) [Cash Flows and Capital Resources](index=40&type=section&id=Cash%20Flows%20and%20Capital%20Resources) In the first six months of 2021, the company experienced a net loss of $1.18 million and a cash outflow from operations of $3.8 million, yet successfully raised approximately $31.6 million in gross proceeds through various equity financing activities, including private placements and convertible notes, which increased the cash balance to $6.9 million, and management asserts these funds provide sufficient liquidity to sustain the company as a going concern for the next 12 months - The company raised total gross proceeds of **$31.58 million** in H1 2021 through private placements (**$24.45M**), convertible notes (**$4.99M** principal), and a registered direct offering (**$2.62M**)[161](index=161&type=chunk)[162](index=162&type=chunk)[164](index=164&type=chunk) - Despite a net loss and operating cash outflow, management believes the company will continue as a going concern for the next 12 months due to successful capital raising activities[162](index=162&type=chunk)[165](index=165&type=chunk) Cash Flow Summary (H1 2021 vs H1 2020) | | H1 2021 ($) | H1 2020 ($) | | :--- | :--- | :--- | | **Net Cash Used in Operating Activities** | $(3,789,382) | $(2,740,074) | | **Net Cash Used in Investing Activities** | $(15,810,972) | $(78,559,027) | | **Net Cash Provided by Financing Activities** | $23,096,801 | $86,621,770 | [Item 4. Controls and Procedures](index=43&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The company's management, including the CEO and CFO, concluded that as of June 30, 2021, the disclosure controls and procedures were not effective, and there were no changes in the internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls - Management concluded that the Company's disclosure controls and procedures were **not effective** as of June 30, 2021[178](index=178&type=chunk) - No changes were made to the internal control over financial reporting during the quarter ended June 30, 2021, that were likely to materially affect internal controls[180](index=180&type=chunk) [PART II. OTHER INFORMATION](index=44&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings and risk factors, providing updates on ongoing litigation and reaffirming previously disclosed risks [Item 1. Legal Proceedings](index=44&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company reports on several legal matters, including a 2015 shareholder derivative action and a 2018 court matter with Shanghai Nonobank that have been dismissed in the company's favor, a 2017 arbitration with Sorghum that resulted in a vacated award, and an ongoing 2020 lawsuit against Harrison Fund to recover a $1 million investment, which has been fully impaired - The 2015 Derivative Action was settled and dismissed in July 2019, with the company agreeing to certain corporate governance reforms[184](index=184&type=chunk)[185](index=185&type=chunk) - In the 2017 Arbitration with Sorghum, an initial award in the company's favor was vacated, and the company subsequently withdrew its appeal[186](index=186&type=chunk)[188](index=188&type=chunk) - The company is pursuing a lawsuit filed in April 2020 against Harrison Fund to recover a **$1,000,000** investment. Due to uncertainty, this investment has been **fully impaired**[193](index=193&type=chunk)[194](index=194&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's annual report on Form 10-K for the year ended December 31, 2020, which was filed on June 4, 2021 - No material changes to the risk factors disclosed in the annual report on Form 10-K filed on June 4, 2021, have occurred as of the date of this report[195](index=195&type=chunk)

[PART 1. FINANCIAL INFORMATION](index=3&type=section&id=PART%201.%20FINANCIAL%20INFORMATION) This section presents TD Holdings, Inc.'s unaudited condensed consolidated financial statements for periods ended September 30, 2020, and December 31, 2019 [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents TD Holdings, Inc.'s unaudited condensed consolidated financial statements for periods ended September 30, 2020, and December 31, 2019 [UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS](index=3&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The balance sheets show a significant increase in total assets and equity as of September 30, 2020, primarily driven by a substantial rise in loans receivable from third parties and additional paid-in capital, while liabilities also increased but at a slower pace | Metric | September 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------------- | :------------------ | | Total Assets | $100,365,677 | $11,388,400 | | Total Liabilities | $6,457,107 | $5,587,538 | | Total Equity | $93,908,570 | $5,800,862 | - Loans receivable from third parties increased significantly from **$576,647** as of December 31, 2019, to **$87,310,943** as of September 30, 2020[4](index=4&type=chunk) - Additional paid-in capital surged from **$38,523,170** to **$131,393,177**, reflecting significant capital transactions during the period[4](index=4&type=chunk) [UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)](index=4&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20(LOSS)) The company transitioned from a net loss to a net income for the three months ended September 30, 2020, primarily due to the commencement of commodity product sales and supply chain management services, alongside significant interest income, despite a net loss from discontinued operations | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Revenue | $7,212,829 | $- | $12,391,317 | $- | | Gross Profit | $3,498,184 | $- | $6,042,831 | $- | | Net Income (Loss) from Continuing Operations | $4,170,658 | $(259,945) | $222,119 | $(2,122,555) | | Net Loss from Discontinued Operations | $(2,989,116) | $(132,898) | $(3,541,807) | $(1,140,439) | | Net Income (Loss) | $1,181,542 | $(392,843) | $(3,319,688) | $(3,262,994) | | Income (Loss) per share – basic and diluted | $0.02 | $(0.05) | $(0.08) | $(0.46) | - Revenue from sales of commodity products and supply chain management services commenced in 2020, generating **$7,212,829** for the three months and **$12,391,317** for the nine months ended September 30, 2020[5](index=5&type=chunk) - Interest income significantly increased to **$2,356,000** for the three months and **$3,965,283** for the nine months ended September 30, 2020, compared to negligible amounts in 2019[5](index=5&type=chunk) [UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY](index=6&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20EQUITY) The company's total equity saw a substantial increase from $5,800,862 as of December 31, 2019, to $93,908,570 as of September 30, 2020, primarily driven by the issuance of common stocks in private placements and in connection with the exercise of convertible notes and warrants | Metric | December 31, 2019 | September 30, 2020 | | :-------------------------------- | :------------------ | :------------------- | | Common Stock (shares) | 11,585,111 | 71,130,512 | | Common Stock (amount) | $11,585 | $71,130 | | Additional Paid-in Capital | $38,523,170 | $131,393,177 | | Accumulated Deficit | $(32,391,040) | $(35,703,655) | | Total Equity | $5,800,862 | $93,908,570 | - Issuance of common stocks in connection with private placements and exercise of convertible notes and warrants contributed significantly to the increase in additional paid-in capital and common stock[6](index=6&type=chunk)[8](index=8&type=chunk)[13](index=13&type=chunk) - The company recorded a stock subscription receivable of **$(5,000,000)** as of September 30, 2020, for shares issued but proceeds not yet received[8](index=8&type=chunk)[13](index=13&type=chunk) [UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=10&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the nine months ended September 30, 2020, the company generated positive cash flow from operating activities, significantly increased cash used in investing activities due to loans made to third parties, and saw a substantial increase in cash provided by financing activities from equity issuances | Cash Flow Activity | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Net Cash Provided by (Used in) Operating Activities | $942,577 | $(2,002,690) | | Net Cash Used in Investing Activities | $(81,711,571) | $(5,457,537) | | Net Cash Provided by Financing Activities | $81,047,086 | $7,399,262 | | Net increase (decrease) in cash and cash equivalents | $1,190,281 | $(75,162) | | Cash at end of period | $2,967,557 | $341,297 | - Operating activities shifted from a cash outflow of **$2,002,690** in 2019 to a cash inflow of **$942,577** in 2020[14](index=14&type=chunk) - Investing activities saw a significant increase in cash used, primarily due to **$160.9 million** in loans made to third parties, partially offset by **$78.8 million** in collections[14](index=14&type=chunk) - Financing activities provided substantial cash, mainly from proceeds of third-party borrowings, private placements, issuance of convertible notes, and exercise of warrants, totaling **$81,047,086**[14](index=14&type=chunk) [NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=12&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section details notes to the unaudited condensed consolidated financial statements, covering organization, policies, liquidity, and key financial items [1. ORGANIZATION AND BUSINESS DESCRIPTION](index=12&type=section&id=1.%20ORGANIZATION%20AND%20BUSINESS%20DESCRIPTION) TD Holdings, Inc. underwent several name changes and significant corporate reorganizations in 2020, including establishing new subsidiaries, transitioning a VIE (Huamucheng) into a wholly-owned subsidiary, and disposing of its used luxurious car leasing business. As of September 30, 2020, the company's primary business is commodity trading and supply chain management services in the PRC - The company changed its name to **TD Holdings, Inc.** on March 6, 2020[16](index=16&type=chunk) - Huamucheng, formerly a VIE, became a wholly-owned subsidiary of the Company through Shanghai Jianchi's acquisition of **100% equity interest** on June 25, 2020[18](index=18&type=chunk)[19](index=19&type=chunk) - The company disposed of its used luxurious car leasing business (HC High Summit Limited and its subsidiaries, including Beijing Tianxing) on August 28, 2020, for a nominal consideration of **$1.00**[20](index=20&type=chunk)[25](index=25&type=chunk) - As of September 30, 2020, the company's core business is **commodity trading and providing supply chain management services** through Huamucheng[22](index=22&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=16&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The company's financial statements follow U.S. GAAP, reclassified its car leasing business, and is evaluating new accounting pronouncements - Interim unaudited condensed consolidated financial statements are prepared in accordance with **U.S. GAAP** and **Regulation S-X**[29](index=29&type=chunk)[30](index=30&type=chunk) - The used luxurious car leasing business was classified as a **discontinued operation** as of August 28, 2020, representing a strategic shift[34](index=34&type=chunk)[35](index=35&type=chunk) - The company now operates in **one reportable segment**: Commodity Trading and Supply Chain Management Services[36](index=36&type=chunk) - The company is evaluating the potential effects of **ASU No. 2016-13 (Credit Losses)** and **ASU No. 2020-06 (Convertible Instruments)** on its financial statements[38](index=38&type=chunk)[39](index=39&type=chunk) [3. LIQUIDITY](index=18&type=section&id=3.%20LIQUIDITY) As of September 30, 2020, the company had a positive working capital of approximately $93.3 million, largely due to a $85.6 million loan receivable from a customer for supply chain financing. Management believes the company will continue as a going concern for the next 12 months, funded by commodity trading revenue, private placements, and shareholder support - As of September 30, 2020, the Company had a positive working capital of approximately **$93.3 million**[41](index=41&type=chunk) - A significant portion of working capital, approximately **$85.6 million**, was a loan receivable from a customer for supply chain financing, with loans revolving every 3-4 months[41](index=41&type=chunk) - The company plans to fund operations through **commodity trading revenue, private placements, and financial support from its CEO and major shareholders**[42](index=42&type=chunk) - Management believes the company will continue as a **going concern** for the next 12 months[42](index=42&type=chunk) [4. DISPOSITION OF HC HIGH SUMMIT LIMITED](index=19&type=section&id=4.%20DISPOSITION%20OF%20HC%20HIGH%20SUMMIT%20LIMITED) On August 28, 2020, the company completed the disposition of HC High Summit Limited and its used luxurious car leasing business for a nominal consideration of $1.00. This resulted in a net loss from discontinued operations of $2.99 million, with assets of $5.32 million and liabilities of $2.61 million classified as held for sale - The disposition of HC High Summit Limited closed on **August 28, 2020**, for a nominal consideration of **$1.00**[44](index=44&type=chunk) - Assets of discontinued operations held for sale were **$5,320,768**, and liabilities were **$2,606,257** as of August 28, 2020[46](index=46&type=chunk)[48](index=48&type=chunk) - A net loss of **$2,989,116** was recognized from the disposal of discontinued operations for the three and nine months ended September 30, 2020[46](index=46&type=chunk)[51](index=51&type=chunk) [5. LOANS RECEIVABLE FROM THIRD PARTIES](index=20&type=section&id=5.%20LOANS%20RECEIVABLE%20FROM%20THIRD%20PARTIES) As of September 30, 2020, the company's loans receivable from third parties significantly increased to $87.3 million, primarily from Shenzhen Xinsuniao ($85.6 million) for commodity trading operations and Qianhai Baiyu ($1.67 million). These loans carry a 10% per annum interest rate, and management assesses them as fully collectible with no allowance for doubtful accounts recorded | Loan Recipient | September 30, 2020 | December 31, 2019 | | :--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | :------------------- | :------------------ | | Loans receivable from Shenzhen Xinsuniao Technology Co., Ltd. ("Shenzhen Xinsuniao") | $85,641,601 | $- | | Loans receivable from Shenzhen Qianhai Baiyu Supply Chain Co., Ltd. ("Qianhai Baiyu") | $1,669,342 | $- | | Loans receivable from other third parties | $- | $576,647 | | Total Loans receivable from other third parties | $87,310,943 | $576,647 | - The company entered into a revolving credit facility with Shenzhen Xinsuniao on March 25, 2020, providing a credit line of approximately **$80 million** at a **10% per annum interest rate**[52](index=52&type=chunk)[53](index=53&type=chunk) - For the nine months ended September 30, 2020, the company recognized interest income of **$3.8 million** from Shenzhen Xinsuniao and **$116,135** from Qianhai Baiyu[54](index=54&type=chunk)[57](index=57&type=chunk) - Management considers all loans receivable **fully collectible** and has not recorded any allowance for doubtful accounts as of September 30, 2020[56](index=56&type=chunk)[58](index=58&type=chunk) [6. INVESTMENTS IN EQUITY INVESTEES](index=21&type=section&id=6.%20INVESTMENTS%20IN%20EQUITY%20INVESTEES) As of September 30, 2020, the company held a 20% equity interest in Hangzhou Yihe Network Technology Co., Ltd. valued at $410,000. Due to COVID-19, Hangzhou Yihe did not resume operations, resulting in no share of results for the period, but the company determined the decline in fair value was temporary | Investment | Investment Amount | % of ownership | Investment Date | | :------------------------------------------------ | :---------------- | :------------- | :---------------- | | Hangzhou Yihe Network Technology Co., Ltd. ("Hangzhou Yihe") | $410,000 | 20% | December 17, 2019 | - Hangzhou Yihe did not resume operations for the three and nine months ended September 30, 2020, due to COVID-19, resulting in **no share of results of equity investees**[62](index=62&type=chunk) - Management determined the decline in fair value of the investment was **temporary** and did not provide impairment as of September 30, 2020[62](index=62&type=chunk) [7. OTHER CURRENT LIABILITIES](index=22&type=section&id=7.%20OTHER%20CURRENT%20LIABILITIES) Other current liabilities significantly increased from $200,602 as of December 31, 2019, to $697,823 as of September 30, 2020, primarily driven by an increase in other tax payable | Category | September 30, 2020 | December 31, 2019 | | :---------------------- | :------------------- | :------------------ | | Other payable | $- | $128,301 | | Accrued interest expenses | $- | $163 | | Accrued payroll and benefit | $30,867 | $29,466 | | Other tax payable | $651,964 | $35,169 | | Others | $14,992 | $7,503 | | Total | $697,823 | $200,602 | - Other tax payable increased substantially from **$35,169** to **$651,964**[63](index=63&type=chunk) [8. STOCK SUBSCRIPTION ADVANCE FROM SHAREHOLDERS/STOCK SUBSCRIPTION RECEIVABLE](index=22&type=section&id=8.%20STOCK%20SUBSCRIPTION%20ADVANCE%20FROM%20SHAREHOLDERS%2FSTOCK%20SUBSCRIPTION%20RECEIVABLE) In 2019, the company received a $1.6 million advance for stock subscriptions, which was reversed upon issuance of shares in February 2020. As of September 30, 2020, the company issued 2,000,000 shares for $5,000,000 but had not yet received the proceeds, recording it as a stock subscription receivable - A **$1,600,000** stock subscription advance from shareholders as of December 31, 2019, was reversed in February 2020 upon issuance of **2,000,000 shares**[64](index=64&type=chunk) - As of September 30, 2020, the company recorded a **$5,000,000** stock subscription receivable for **2,000,000 shares** issued but proceeds not yet received[65](index=65&type=chunk) [9. CAPITAL TRANSACTIONS](index=22&type=section&id=9.%20CAPITAL%20TRANSACTIONS) In 2020, the company issued 15,000,000 common shares for $13.5 million and $30 million in convertible notes with warrants. The notes and warrants were subsequently converted/exercised, generating $66 million in proceeds and resulting in the issuance of 40,000,000 common shares. The company also recognized and amortized a total note discount of $6.46 million related to the beneficial conversion feature and fair value of warrants - On March 23, 2020, the company issued **15,000,000 shares** of Common Stock for **$13,500,000**[66](index=66&type=chunk) - The company issued **$30,000,000** in convertible notes and warrants to purchase **20,000,000 shares** of Common Stock in March 2020[67](index=67&type=chunk) - In April 2020, holders converted the notes and exercised the warrants, leading to the issuance of **40,000,000 shares** and generating **$66,000,000** in proceeds[73](index=73&type=chunk) - A total note discount of **$6.46 million** (**$3.4 million** for beneficial conversion feature and **$3.06 million** for warrants) was recognized and fully amortized for the nine months ended September 30, 2020[72](index=72&type=chunk)[73](index=73&type=chunk) | Warrants Activity | Number of shares | Weighted average life | Weighted average exercise price | | :--------------------------------------- | :----------------- | :-------------------- | :------------------------------ | | Balance as of December 31, 2019 | 3,033,370 | 4.38 years | $1.58 | | Granted | 20,000,000 | | $1.80 | | Exercised | (21,670,000) | | $1.68 | | Balance as of September 30, 2020 | 1,363,370 | 3.63 years | $1.90 | [10. INCOME TAXES](index=25&type=section&id=10.%20INCOME%20TAXES) The company is subject to a uniform PRC tax rate of 25%. It had deferred tax assets of $5,305,479 as of September 30, 2020, but maintains a full valuation allowance due to uncertainties regarding future income. Current income tax expenses for the three and nine months ended September 30, 2020, were $1,376,282 and $2,223,691, respectively, generated by Huamucheng - PRC companies are subject to a uniform tax rate of **25%**[83](index=83&type=chunk) - Deferred tax assets were **$5,305,479** as of September 30, 2020, but a **full valuation allowance** is maintained[84](index=84&type=chunk) | Income Tax Expense | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2020 | | :----------------- | :------------------------------ | :----------------------------- | | Current Income Tax | $1,376,282 | $2,223,691 | | Deferred Income Tax | $0 | $0 | - The company does not anticipate any significant increase to its liability for unrecognized tax benefits within the next 12 months[85](index=85&type=chunk) [11. RELATED PARTY TRANSACTIONS AND BALANCES](index=26&type=section&id=11.%20RELATED%20PARTY%20TRANSACTIONS%20AND%20BALANCES) Balances due from related parties decreased to zero as Qianhai Baiyu ceased to be a related party on March 31, 2020. Balances due to related parties significantly increased to $1,772,083 as of September 30, 2020, primarily due to a loan from Guangzhou Chengji. Transactions included purchases from and lending to Qianhai Baiyu before it became a third party, and borrowings from Guangzhou Chengji | Related Party Balance | September 30, 2020 | December 31, 2019 | | :-------------------- | :------------------- | :------------------ | | Due from related parties | $0 | $2,840,728 | | Due to related parties | $1,772,083 | $166,332 | - Qianhai Baiyu ceased to be a related party on March 31, 2020, and its balance was reclassified to 'Loans receivable from third parties'[90](index=90&type=chunk) - The balance due to Guangzhou Chengji, controlled by an independent director, increased to **$1,771,574**, representing a loan with an **8% annual interest rate**[92](index=92&type=chunk) - For the nine months ended September 30, 2020, the company borrowed **$1,441,461** from Guangzhou Chengji[95](index=95&type=chunk) [12. COMMITMENTS AND CONTINGENCIES](index=28&type=section&id=12.%20COMMITMENTS%20AND%20CONTINGENCIES) The company has operating lease commitments, with lease liabilities of $215,658 as of September 30, 2020, primarily for office space. It is also involved in several legal proceedings, including a settled 2015 derivative action, a vacated 2017 arbitration award with Sorghum, a dismissed 2018 court matter with Shanghai Nonobank, and an ongoing 2020 court matter against Harrison Fund to recover a $1 million investment | Lease Commitments | September 30, 2020 | | :-------------------------------- | :------------------- | | Rights of use lease assets | $237,524 | | Operating lease liabilities, current | $215,658 | | Operating lease liabilities, noncurrent | $- | | Total operating lease liabilities | $215,658 | - Lease expenses for the three and nine months ended September 30, 2020, were **$79,098** and **$234,744**, respectively[102](index=102&type=chunk) - The **2015 Derivative Action** was settled, with the company agreeing to corporate governance reforms[105](index=105&type=chunk) - A **2017 arbitration award of $1,436,522** against Sorghum was vacated after the company withdrew its appeal[108](index=108&type=chunk) - The company's motion to dismiss the **2018 court matter with Shanghai Nonobank Financial Information Service Co. Ltd.** was granted[112](index=112&type=chunk) - An ongoing **2020 lawsuit against Harrison Fund** seeks to recover a **$1,000,000** investment, with a full impairment applied due to uncertainty[113](index=113&type=chunk)[114](index=114&type=chunk) [13. RISKS AND UNCERTAINTIES](index=31&type=section&id=13.%20RISKS%20AND%20UNCERTAINTIES) The company faces credit risk primarily from cash deposits in uninsured Chinese financial institutions, liquidity risk in meeting commitments, and foreign currency risk due to RMB's non-convertibility and susceptibility to government policies and economic developments - Credit risk is concentrated in cash deposits in uninsured financial institutions in Mainland China, totaling approximately **$2.97 million** as of September 30, 2020[117](index=117&type=chunk) - Liquidity risk is managed through financial position analysis and monitoring, with plans to seek short-term funding from financial institutions and owners if needed[119](index=119&type=chunk) - Foreign currency risk arises from operations and assets/liabilities denominated in RMB, which is subject to central government policies and international economic developments[120](index=120&type=chunk)[121](index=121&type=chunk) [14. SUBSEQUENT EVENTS](index=31&type=section&id=14.%20SUBSEQUENT%20EVENTS) On October 26, 2020, Huamucheng, a wholly-owned subsidiary, entered into an agreement to acquire Shenzhen Qianhai Baiyu Supply Chain Co., Ltd. for RMB670 million (approximately US$99.3 million), with payments in installments through December 2021 - On October 26, 2020, Huamucheng agreed to acquire **100% equity interest** of Shenzhen Qianhai Baiyu Supply Chain Co., Ltd. for **RMB670 million** (approximately **US$99.3 million**)[122](index=122&type=chunk) - The total consideration for the acquisition will be paid in installments, with **85% by December 25, 2020**, and the remaining **15% by December 25, 2021**[122](index=122&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers management's discussion, legal proceedings, risk factors, and other required disclosures [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=32&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial condition and operations, focusing on the shift to commodities trading, recent developments, and performance analysis [Overview](index=32&type=section&id=Overview) During the nine months ended September 30, 2020, the company discontinued its used luxury car leasing business and now primarily operates in the commodities trading business - The company discontinued its used luxury car leasing business during the nine months ended September 30, 2020[123](index=123&type=chunk) - As of September 30, 2020, the company's main business line is **commodities trading**[123](index=123&type=chunk) [Commodities Trading Business](index=33&type=section&id=Commodities%20Trading%20Business) The commodities trading business involves purchasing non-ferrous metals and selling them to downstream customers, complemented by supply chain management services launched in December 2019. For the nine months ended September 30, 2020, this segment generated significant revenue from both commodity sales and supply chain services, and the company also commenced supply chain financing services - The commodities trading business primarily involves purchasing non-ferrous metals (e.g., aluminum, copper, silver, gold) from upstream suppliers and selling to downstream customers[124](index=124&type=chunk) - Supply chain management services, launched in December 2019, include loan recommendation and commodity product distribution services[124](index=124&type=chunk) | Revenue Source | Nine Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2020 | | :----------------------------------- | :----------------------------- | :------------------------------ | | Commodity product sales | $6,298,245 | $3,680,944 | | Supply chain management services | $6,093,072 | $3,531,885 | - The company commenced supply chain financing services, providing a **$80 million** revolving credit facility to Shenzhen Xinsuniao[128](index=128&type=chunk) [Competition](index=33&type=section&id=Competition) The company competes with other large domestic commodity metal product trading service providers, with key competitive factors being price, product availability, quantity, service, and financing terms - Main competitors include **Xiamen International Trade** and **Yijian Shares**[129](index=129&type=chunk) - Principal competitive factors are **price, product availability, quantity, service, and financing terms**[129](index=129&type=chunk) [Applicable Government Regulations](index=33&type=section&id=Applicable%20Government%20Regulations) Huamucheng has obtained all necessary approvals, permits, licenses, and certificates for its metal product trading operations, including registrations from local business and administrative departments - Huamucheng has obtained all material approvals, permits, licenses, and certificates required for its metal product trading operations[130](index=130&type=chunk) [Recent developments](index=34&type=section&id=Recent%20developments) Recent developments include the acquisition of Qianhai Baiyu for $99.3 million to expand supply chain services, the disposition of the used luxurious car leasing business for a nominal fee, the establishment of a revolving credit facility with Shenzhen Xinsuniao, and the termination of the Huamucheng VIE agreement, transitioning it to a wholly-owned subsidiary - Acquired Qianhai Baiyu for approximately **$99.3 million (RMB670 million)** on October 26, 2020, to expand commodity supply chain services[132](index=132&type=chunk) - Disposed of the used luxurious car leasing business (HC High Summit Limited) on August 28, 2020, for a nominal consideration of **$1.00**[136](index=136&type=chunk) - Established a revolving credit facility of approximately **$80 million** with Shenzhen Xinsuniao on March 25, 2020[137](index=137&type=chunk) - Terminated the Huamucheng VIE Agreement on June 25, 2020, making Huamucheng a **wholly-owned subsidiary**[140](index=140&type=chunk)[141](index=141&type=chunk) [Key Factors Affecting Our Results of Operation](index=35&type=section&id=Key%20Factors%20Affecting%20Our%20Results%20of%20Operation) The company's operating results are influenced by decreasing demand in the commodities trading industry due to China's economic slowdown, intense competition, its limited operating history in this new business, and significant capital requirements for expansion - Decreasing demand in the commodities trading industry due to China's overall economic slowdown[143](index=143&type=chunk) - Limited operating history in the commodities trading business, which commenced in late November 2019, makes future prospects difficult to evaluate[144](index=144&type=chunk) - The business requires a significant amount of capital for purchasing bulk commodities and market expansion[145](index=145&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) This section provides a comparative analysis of the company's financial performance for the three and nine months ended September 30, 2020, versus the corresponding periods in 2019, detailing changes in revenue, cost of revenue, operating expenses, other income/expenses, and net income/loss [Three Months Ended September 30, 2020 as Compared to Three Months Ended September 30, 2019](index=36&type=section&id=Three%20Months%20Ended%20September%2030,%202020%20as%20Compared%20to%20Three%20Months%20Ended%20September%2030,%202019) For the three months ended September 30, 2020, total revenue increased significantly to $7.2 million from zero in 2019 due to the new commodity trading and supply chain management businesses. This led to a net income of $1.18 million, a substantial improvement from a net loss of $0.39 million in the prior year, despite a $2.99 million loss from discontinued operations | Metric | Sep 30, 2020 | Sep 30, 2019 | Change Amount | % Change | | :------------------------------------------------ | :----------- | :----------- | :------------ | :------- | | Total Revenue | $7,212,829 | $- | $7,212,829 | 100% | | Gross profit | $3,498,184 | $- | $3,498,184 | 100% | | Selling, general, and administrative expenses | $(292,080) | $(259,945) | $(32,135) | 12% | | Interest income | $2,356,000 | $- | $2,356,000 | 100% | | Net Income (Loss) from Continuing Operations | $4,170,658 | $(259,945) | $4,430,603 | (1,704)% | | Net Loss from Discontinued Operations | $(2,989,116) | $(132,898) | $(2,856,218) | 2,149% | | Net Income (Loss) | $1,181,542 | $(392,843) | $1,574,385 | (401)% | - Revenue from commodity trading and supply chain management accounted for **51.0%** and **49.0%** of total revenue, respectively, for the three months ended September 30, 2020[148](index=148&type=chunk) - Interest income increased significantly due to **$83.3 million** in net loans made to a customer[157](index=157&type=chunk) [Nine Months Ended September 30, 2020 as Compared to Nine Months Ended September 30, 2019](index=39&type=section&id=Nine%20Months%20Ended%20September%2030,%202020%20as%20Compared%20to%20Nine%20Months%20Ended%20September%2030,%202019) For the nine months ended September 30, 2020, total revenue reached $12.4 million, a substantial increase from zero in 2019, driven by new commodity trading and supply chain management businesses. Despite this, the company reported a net loss of $3.32 million, a slight increase from $3.26 million in 2019, primarily due to significant amortization expenses related to convertible notes and a larger loss from discontinued operations | Metric | Sep 30, 2020 | Sep 30, 2019 | Change Amount | % Change | | :-------------------------------------------------------------------------------- | :----------- | :----------- | :------------ | :------- | | Total Revenue | $12,391,317 | $- | $12,391,317 | 100% | | Gross profit | $6,042,831 | $- | $6,042,831 | 100% | | Selling, general, and administrative expenses | $(1,032,660) | $(2,123,191) | $1,090,531 | (51)% | | Interest income | $3,965,283 | $636 | $3,964,647 | >100% | | Amortization of beneficial conversion feature and relative fair value of warrants | $(6,460,000) | $- | $(6,460,000) | 100% | | Net Income (Loss) from Continuing Operations | $222,119 | $(2,122,555) | $2,344,674 | (110)% | | Net Loss from Discontinued Operations | $(3,541,807) | $(1,140,439) | $(2,401,368) | 211% | | Net Loss | $(3,319,688) | $(3,262,994) | $(56,694) | 2% | - Revenue from commodity trading and supply chain management accounted for **50.8%** and **49.2%** of total revenue, respectively, for the nine months ended September 30, 2020[164](index=164&type=chunk) - Selling, general, and administrative expenses decreased by **51%** due to a decrease in stock-based compensation and payroll expenses[172](index=172&type=chunk) - Amortization of beneficial conversion feature and relative fair value of warrants totaled **$6.46 million** for the nine months ended September 30, 2020, due to the exercise of convertible notes[174](index=174&type=chunk) [Cash Flows and Capital Resources](index=42&type=section&id=Cash%20Flows%20and%20Capital%20Resources) The company's operations are financed through shareholder contributions, cash flow from operations, borrowings, and equity financing. For the nine months ended September 30, 2020, it generated positive cash from operations, used significant cash in investing activities (primarily for loans), and received substantial cash from financing activities, including $81.1 million from equity transactions - The company raised **$81.1 million** from equity financing transactions in March and April 2020, including common stock issuance, convertible notes, and warrants[180](index=180&type=chunk) - Net cash provided by operating activities was **$942,577** for the nine months ended September 30, 2020, a significant improvement from a cash outflow in the prior year[185](index=185&type=chunk)[187](index=187&type=chunk) - Net cash used in investing activities was **$81,711,571**, primarily due to **$160.9 million** in loans made to third parties, partially offset by **$78.8 million** in collections[185](index=185&type=chunk)[189](index=189&type=chunk) - Net cash provided by financing activities was **$81,047,086**, mainly from borrowings, private placements, and the issuance/exercise of convertible notes and warrants[185](index=185&type=chunk)[191](index=191&type=chunk) [Off-balance Sheet Arrangements](index=43&type=section&id=Off-balance%20Sheet%20Arrangements) As of September 30, 2020, the company did not have any off-balance sheet arrangements - The company does not have any off-balance sheet arrangements as of September 30, 2020[193](index=193&type=chunk) [Contractual Obligations](index=44&type=section&id=Contractual%20Obligations) As of September 30, 2020, the company's contractual obligations primarily consisted of operating lease payments totaling $215,658, all due within one year | Contractual Obligations | Total | Less than 1 year | 1-2 years | Thereafter | | :---------------------- | :---- | :--------------- | :-------- | :--------- | | Operating lease | $215,658 | $215,658 | $- | $- | - The company classifies its lease agreements as operating leases in accordance with **Topic 842**[196](index=196&type=chunk) [Critical Accounting Policies](index=44&type=section&id=Critical%20Accounting%20Policies) Details regarding the company's critical accounting policies are referenced to Note 2 of the Unaudited Condensed Consolidated Financial Statements in this Form 10-Q and Note 2 of the Consolidated Financial Statements in the Form 10-K filed on May 29, 2020 - Critical accounting policies are detailed in **Note 2** of the Unaudited Condensed Consolidated Financial Statements and the Form 10-K[197](index=197&type=chunk) [ITEM 1. LEGAL PROCEEDINGS](index=45&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various legal actions, including a settled 2015 derivative action, a vacated 2017 arbitration award with Sorghum, a dismissed 2018 court matter with Shanghai Nonobank, and an ongoing 2020 court matter against Harrison Fund to recover a $1 million investment - The **2015 Derivative Action** was settled, with the company agreeing to corporate governance reforms[200](index=200&type=chunk) - A **2017 arbitration award of $1,436,522** against Sorghum was vacated after the company withdrew its appeal[203](index=203&type=chunk) - The company's motion to dismiss the **2018 court matter with Shanghai Nonobank Financial Information Service Co. Ltd.** was granted[205](index=205&type=chunk) - An ongoing **2020 lawsuit against Harrison Fund** seeks to recover a **$1,000,000** investment, with a full impairment applied due to uncertainty[206](index=206&type=chunk)[207](index=207&type=chunk) [ITEM 1A. RISK FACTORS](index=46&type=section&id=ITEM%201A.%20RISK%20FACTORS) New risk factors primarily relate to the acquisition of Qianhai Baiyu, including challenges in synergizing operations, potential for unsuccessful acquisitions, and susceptibility of the supply chain service business to volatility from the ongoing pandemic and customer internal solutions - There is no assurance that the company will be able to effectively synergize the operations of Huamucheng and Qianhai Baiyu[209](index=209&type=chunk)[210](index=210&type=chunk) - Acquisitions or strategic investments, such as Qianhai Baiyu, could be unsuccessful due to various risks including failure to derive commercial value, unanticipated litigation costs, or incorrect valuation[211](index=211&type=chunk)[212](index=212&type=chunk) - The Supply Chain Service Business is susceptible to volatility due to ongoing uncertainty from international and domestic pandemic response and recovery efforts[213](index=213&type=chunk) - If customers reduce logistics costs or increase internal solutions, the supply chain services business and operating results may be materially and adversely affected[214](index=214&type=chunk)[216](index=216&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=48&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[218](index=218&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=48&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[218](index=218&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=48&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[218](index=218&type=chunk) [ITEM 5. OTHER INFORMATION](index=48&type=section&id=ITEM%205.%20OTHER%20INFORMATION) There is no other information to report for the period - No other information to report[218](index=218&type=chunk) [ITEM 6. EXHIBITS](index=48&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including organizational documents, share purchase agreements, and certifications - Key exhibits include Certificate of Incorporation, Bylaws, Share Purchase Agreements (August 28, 2020, and October 26, 2020), and Certifications of CEO and CFO[218](index=218&type=chunk) [SIGNATURES](index=49&type=section&id=SIGNATURES) The report was duly signed on November 13, 2020, by the Chief Executive Officer and Chief Financial Officer [SIGNATURES](index=49&type=section&id=SIGNATURES) The report was duly signed on November 13, 2020, by Renmei Ouyang, Chief Executive Officer, and Wei Sun, Chief Financial Officer, on behalf of TD Holdings, Inc - The report was signed on **November 13, 2020**[220](index=220&type=chunk) - Signatories include **Renmei Ouyang, Chief Executive Officer**, and **Wei Sun, Chief Financial Officer**[220](index=220&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.001 GLG Nasdaq Capital Market Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 ☐ TRANSITION REPORT PURSUANT TO SE ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%201.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The unaudited condensed consolidated financial statements for Q1 2020 show increased assets and revenue from new commodity trading, significantly reducing net loss Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash | $27,101 | $2,446,683 | | Total Current Assets | $8,877,001 | $7,879,880 | | **Total Assets** | **$12,614,181** | **$11,388,400** | | Total Current Liabilities | $5,157,000 | $5,435,414 | | **Total Liabilities** | **$5,358,867** | **$5,587,538** | | **Total Equity** | **$7,255,314** | **$5,800,862** | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Account | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | **Total Revenue** | **$1,483,060** | **$399,999** | | Gross Profit | $327,886 | $162,348 | | Net Operating Loss | ($97,229) | ($1,840,289) | | **Net Loss** | **($139,972)** | **($1,829,826)** | | Loss per share - basic and diluted | ($0.01) | ($0.35) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($156,559) | ($758,633) | | Net Cash Used in Investing Activities | ($3,424,968) | ($999,481) | | Net Cash Provided by Financing Activities | $1,063,773 | $592,724 | | **Net decrease in cash** | **($2,419,582)** | **($1,143,421)** | [Note 1: Organization and Business Description](index=9&type=section&id=1.%20ORGANIZATION%20AND%20BUSINESS%20DESCRIPTION) TD Holdings, Inc. operates as a holding company through two PRC VIEs, Beijing Tianxing (used luxury car leasing) and Huamucheng (commodity trading), and changed its name on March 6, 2020 - The company conducts its business through two VIEs: Beijing Tianxing (used luxury car leasing) and Huamucheng (commodity trading and supply chain management)[14](index=14&type=chunk) - On March 6, 2020, the company changed its name from Bat Group, Inc. to TD Holdings, Inc[13](index=13&type=chunk) [Note 2: Summary of Significant Accounting Policies](index=9&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The company's significant accounting policies include VIE consolidation, straight-line revenue recognition for operating leases, and ASC 606 adoption for new commodity trading and supply chain services started in December 2019 - The company's business is primarily conducted through its two VIEs, Beijing Tianxing (used car leasing) and Huamucheng (commodity trading)[19](index=19&type=chunk) - The commodity trading business, started in December 2019, involves purchasing and selling non-ferrous metals. Revenue is recognized when product ownership is transferred to the customer[33](index=33&type=chunk)[34](index=34&type=chunk) - Supply chain management services, launched in December 2019, consist of loan recommendation services, with revenue recognized when the referral is complete and funds are drawn down by the customer[35](index=35&type=chunk)[37](index=37&type=chunk) [Note 8: Capital Transactions](index=19&type=section&id=8.%20CAPITAL%20TRANSACTIONS) In Q1 2020, the company engaged in significant capital raising, agreeing to sell 15 million common shares and **$30 million** in convertible notes with warrants, yielding **$79.5 million** in proceeds received post-quarter - On January 22, 2020, the company agreed to sell **15,000,000 shares** of Common Stock at **$0.90 per share**, with the transaction closing on March 23, 2020. Proceeds of **$13.5 million** were received in April 2020[64](index=64&type=chunk) - The company also agreed to sell **$30 million** in convertible promissory notes with an interest rate of **7.5%** and a conversion price of **$1.50 per share**, accompanied by warrants to purchase **20 million shares** at an exercise price of **$1.80**[65](index=65&type=chunk)[66](index=66&type=chunk) - In April 2020, the note holders converted the notes and exercised the warrants, resulting in the company receiving **$36 million** in cash and issuing **40 million shares** of common stock in May 2020[68](index=68&type=chunk) [Note 11: Related Party Transactions and Balances](index=23&type=section&id=11.%20RELATED%20PARTY%20TRANSACTIONS%20AND%20BALANCES) The company engaged in significant related party transactions, including purchasing **$1.05 million** in aluminum ingots and lending **$1.59 million** to Qianhai Baiyu, while also receiving loans from various related parties - For the three months ended March 31, 2020, the company purchased aluminum ingots worth **$1,055,143** from Qianhai Baiyu, a related party[93](index=93&type=chunk) - The company lent **$1,593,260** to the related party Qianhai Baiyu during the quarter, charging a **10%** annual interest rate[94](index=94&type=chunk) - As of March 31, 2020, amounts due from related parties totaled **$4.82 million**, while amounts due to related parties (current) totaled **$2.01 million**[84](index=84&type=chunk)[88](index=88&type=chunk) [Note 12: Segment Reporting](index=27&type=section&id=12.%20SEGMENT%20REPORTING) For Q1 2020, the company reported two segments: profitable commodity trading (Huamucheng Business) generating most revenue, and loss-making used car leasing (Tianxing Business), unlike 2019 which had only the latter Segment Performance for Three Months Ended March 31, 2020 | Segment | Revenue | Segment (Loss) Profit | | :--- | :--- | :--- | | Tianxing Business (Used Car Leasing) | $14,051 | ($213,444) | | Huamucheng Business (Commodity) | $1,469,009 | $143,930 | - The company has determined it has two operating segments: Huamucheng Business and Tianxing Business. For the same period in 2019, the company only had one operating segment[98](index=98&type=chunk) [Note 13: Commitments and Contingencies](index=28&type=section&id=13.%20COMMITMENTS%20AND%20CONTINGENCIES) As of March 31, 2020, the company has **$365,076** in operating lease commitments and is involved in several legal matters, including a settled 2015 derivative action, a vacated 2017 arbitration, and a new **$1 million** lawsuit against Harrison Fund - The 2015 Shareholder Derivative Action was settled and dismissed in July 2019[109](index=109&type=chunk)[110](index=110&type=chunk) - The 2017 arbitration award of **$1.44 million** against Sorghum was vacated by the court, and the company withdrew its appeal in November 2019[111](index=111&type=chunk)[113](index=113&type=chunk) - In April 2020, the company filed a lawsuit against Harrison Fund, LLC to recover a **$1,000,000** investment, against which a full impairment has been applied[117](index=117&type=chunk)[118](index=118&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the impact of COVID-19 on used car leasing and the significant revenue contribution from the new commodity trading business, which drove a **271%** increase in total revenue to **$1.48 million** and a **92%** reduction in net loss for Q1 2020 [Overview](index=31&type=section&id=Overview) As of March 31, 2020, the company operates two business lines: used luxury car leasing, impacted by COVID-19 closures, and a new commodities trading business launched in late 2019 through Huamucheng - The company's luxury car rental facilities were closed from the end of January 2020 and resumed operations in April 2020 due to COVID-19[121](index=121&type=chunk) - In November 2019, the company entered the commodity trading business through a VIE agreement with Huamucheng, trading non-ferrous metals like aluminum, copper, silver, and gold[127](index=127&type=chunk)[128](index=128&type=chunk) - For Q1 2020, the company generated **$1,053,632** from commodities trading and **$415,377** from supply chain management services[129](index=129&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) For Q1 2020, total revenue surged **271%** to **$1.48 million** driven by new commodity trading, while operating lease income fell **96%**; gross profit increased **102%**, and net loss narrowed **92%** due to lower SG&A expenses Comparison of Operations for Three Months Ended March 31 | Metric | 2020 | 2019 | Change (%) | | :--- | :--- | :--- | :--- | | **Total Revenue** | **$1,483,060** | **$399,999** | **271%** | | - Commodity Products | $1,053,632 | $0 | 100% | | - Supply Chain Services | $415,377 | $0 | 100% | | - Operating Leases | $14,051 | $399,999 | (96)% | | **Gross Profit** | **$327,886** | **$162,348** | **102%** | | SG&A Expenses | ($425,115) | ($1,906,319) | (78)% | | **Net Loss** | **($139,972)** | **($1,829,826)** | **(92)%** | - The **78%** decrease in SG&A expenses was mainly due to a **$884,208** stock compensation charge in Q1 2019 that did not recur in Q1 2020, and lower legal and consulting fees[150](index=150&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company financed operations through various means, securing **$81.1 million** in equity financing in Q1 2020, with **$79.5 million** collected post-quarter, which management deems sufficient for the next 12 months to expand commodity trading - In April and May 2020, the company collected **$79.5 million** from equity financing transactions arranged in Q1 2020[154](index=154&type=chunk) - Management expects to use the proceeds from the recent equity financing as working capital to expand its commodity trading business and believes it has sufficient funds for the next 12 months[155](index=155&type=chunk)[156](index=156&type=chunk) Summary of Cash Flows | Cash Flow Activity | Three Months Ended Mar 31, 2020 | Three Months Ended Mar 31, 2019 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($156,559) | ($758,633) | | Net Cash Used in Investing Activities | ($3,424,968) | ($999,481) | | Net Cash Provided by Financing Activities | $1,063,773 | $592,724 | [Item 4. Controls and Procedures](index=38&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were ineffective as of March 31, 2020, with no material changes to internal control over financial reporting during the quarter - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were not effective as of March 31, 2020[166](index=166&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected or are reasonably likely to materially affect internal controls[168](index=168&type=chunk) [PART II. OTHER INFORMATION](index=39&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=39&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company provides updates on legal matters, including the settled 2015 derivative action, vacated 2017 arbitration, dismissed 2018 matter, and a new **$1 million** lawsuit filed in April 2020 against Harrison Fund - A 2015 shareholder derivative action was settled and dismissed in July 2019[169](index=169&type=chunk)[170](index=170&type=chunk) - A 2017 arbitration award against Sorghum was vacated, and the company withdrew its appeal in November 2019[171](index=171&type=chunk)[173](index=173&type=chunk) - On April 6, 2020, the company filed a lawsuit against Harrison Fund, LLC to recover a **$1,000,000** investment[175](index=175&type=chunk)[176](index=176&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to risk factors were reported since the company's annual report on Form 10-K filed on May 29, 2020 - No material changes to risk factors were reported since the last annual report[176](index=176&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) On March 23, 2020, the company issued **$30 million** in convertible notes and warrants for **20 million** shares, which were converted and exercised in April 2020, resulting in **40 million** common shares issued - On March 23, 2020, the company issued **$30 million** in convertible notes and warrants to purchase **20 million shares**[177](index=177&type=chunk) - In April 2020, the notes were converted and warrants were exercised, leading to the issuance of **40,000,000 shares** of Common Stock on May 18, 2020[180](index=180&type=chunk)