BAIYU (BYU) - 2020 Q3 - Quarterly Report

PART 1. FINANCIAL INFORMATION Financial Statements The company's financials reflect a major transformation with asset growth to $100.4 million, new revenue from commodity trading, and a net loss of $3.3 million due to discontinued operations Unaudited Condensed Consolidated Balance Sheets Total assets surged to $100.4 million driven by a significant increase in loans receivable, while total equity grew substantially to $93.9 million Condensed Consolidated Balance Sheet Highlights (in USD) | Account | September 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $99,718,153 | $7,879,880 | | Loans receivable from third parties | $87,310,943 | $576,647 | | Total Assets | $100,365,677 | $11,388,400 | | Total Liabilities | $6,457,107 | $5,587,538 | | Total Equity | $93,908,570 | $5,800,862 | Unaudited Condensed Consolidated Statements of Operations The company generated $12.4 million in new revenue over nine months but reported a net loss of $3.3 million due to discontinued operations and financing costs Statement of Operations Highlights (in USD) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $7,212,829 | $0 | $12,391,317 | $0 | | Gross Profit | $3,498,184 | $0 | $6,042,831 | $0 | | 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) Attributable to Stockholders | $1,181,542 | ($392,848) | ($3,312,615) | ($3,262,508) | | EPS (basic and diluted) | $0.02 | ($0.05) | ($0.08) | ($0.46) | Unaudited Condensed Consolidated Statements of Cash Flows Cash flow was driven by $81.0 million from financing activities, which funded $81.7 million in investing activities, primarily loans to third parties Cash Flow Summary (in USD, for the Nine Months Ended Sep 30) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $942,577 | ($2,002,690) | | Net Cash Used in Investing Activities | ($81,711,571) | ($5,457,537) | | Net Cash from Financing Activities | $81,047,086 | $7,399,262 | | Net Increase (Decrease) in Cash | $1,190,281 | ($75,162) | | Cash at End of Period | $2,967,557 | $341,297 | Notes to Financial Statements Notes detail a corporate name change, the disposal of the car leasing business, and a new focus on commodity trading and supply chain management - The company changed its name to TD Holdings, Inc on March 6, 2020[16] - On August 28, 2020, the company sold its used luxurious car leasing business for a nominal consideration of $1.00, now classified as a discontinued operation[20][25][35] - The company's current business focuses on commodity trading and supply chain management services in the PRC through its subsidiary Huamucheng[22] - Subsequent to the quarter end, the company agreed to acquire Shenzhen Qianhai Baiyu Supply Chain Co, Ltd for approximately $99.3 million[122] Management's Discussion and Analysis (MD&A) Management discusses the strategic shift to commodity trading, which generated $12.4 million in revenue, and highlights key developments and associated risks - The company has discontinued its used luxury car leasing business and now has one main business line: commodities trading and supply chain management[123] - A key strategic move was the acquisition of Qianhai Baiyu in October 2020 for ~$99.3 million to expand its supply chain service business[132][133] - The company provided a revolving credit facility of up to ~$80 million to Shenzhen Xinsuniao to develop its supply chain financing services[128][137] - Management highlights risks associated with a limited operating history in the new business segment and the need for significant capital[144][145] Results of Operations - Three Months Ended September 30, 2020 vs 2019 The company reported Q3 2020 revenue of $7.2 million from new operations, achieving a net income of $1.2 million despite losses from discontinued operations Q3 2020 vs Q3 2019 Performance (in USD) | Metric | Q3 2020 | Q3 2019 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $7,212,829 | $0 | +$7,212,829 | | Gross Profit | $3,498,184 | $0 | +$3,498,184 | | Income (Loss) from Continuing Operations | $4,170,658 | ($259,945) | +$4,430,603 | | Net Income (Loss) | $1,181,542 | ($392,843) | +$1,574,385 | - Revenue in Q3 2020 was split between commodity product sales ($3.7M) and supply chain management services ($3.5M)[147][148] Results of Operations - Nine Months Ended September 30, 2020 vs 2019 For the nine-month period, new business revenue was $12.4 million, but a $6.46 million charge on convertible notes led to a net loss of $3.3 million Nine Months 2020 vs 2019 Performance (in USD) | Metric | Nine Months 2020 | Nine Months 2019 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $12,391,317 | $0 | +$12,391,317 | | Gross Profit | $6,042,831 | $0 | +$6,042,831 | | SG&A Expenses | ($1,032,660) | ($2,123,191) | +$1,090,531 (51% decrease) | | Net Income (Loss) from Continuing Operations | $222,119 | ($2,122,555) | +$2,344,674 | | Net Loss | ($3,319,688) | ($3,262,994) | -$56,694 (2% increase) | - A one-time expense of $6.46 million related to the amortization of convertible notes significantly impacted the net results for the nine-month period[162][174] Cash Flows and Capital Resources The company raised $81.1 million from financing activities, which was primarily deployed into loans to third parties to support the new supply chain business - The company raised approximately $81.1 million from equity financing transactions in 2020, which was used as working capital to expand the commodity trading business[180] - Net cash used in investing activities for the nine months was $81.7 million, dominated by loans made to third parties[185][189] - As of September 30, 2020, the company had a cash balance of $3.0 million and working capital of $93.3 million[181][183] PART II. OTHER INFORMATION Legal Proceedings The company has resolved several past legal matters and initiated a new lawsuit to recover a $1 million investment - The 2015 Derivative Action and the 2018 Court Matter with Shanghai Nonobank have been resolved in the company's favor[200][205] - The arbitration award in the 2017 matter with Sorghum was vacated, and the company has withdrawn its appeal[203] - In April 2020, the company initiated a lawsuit against Harrison Fund to recover a $1 million investment, against which a full impairment has been recorded[206][207] Risk Factors The company identifies new risks related to its recent acquisition, the volatility of the supply chain business, and potential competition - There is a risk of failing to effectively synergize the newly acquired Qianhai Baiyu with the existing commodities trading business of Huamucheng[209][210] - The supply chain business is susceptible to volatility from the ongoing COVID-19 pandemic and recovery efforts[213] - Competition includes the risk that customers may reduce costs by developing their own in-house supply chain solutions, which would adversely affect the company's business[214][216]