GD Culture Group(GDC) - 2020 Q3 - Quarterly Report

Revenue Performance - Total revenues decreased by approximately $1.3 million, or 34.7%, to approximately $2.5 million for the three months ended September 30, 2020, compared to approximately $3.8 million for the same period in 2019[182]. - Fuel revenues decreased by approximately $1.3 million, or 33.6%, to approximately $2.5 million for the three months ended September 30, 2020, primarily due to reduced sales influenced by COVID-19[184]. - Total revenues for the nine months ended September 30, 2020, decreased by approximately $7.7 million, or 46.4%, to approximately $9.0 million compared to approximately $16.7 million for the same period in 2019[192]. - Fuel revenues for the nine months ended September 30, 2020, decreased by approximately $7.0 million, or 44.3%, to approximately $9.0 million compared to approximately $16.1 million for the same period in 2019[193]. Operating Performance - Operating expenses increased by approximately $115,874, or 37.1%, from approximately $311,956 for the three months ended September 30, 2019, to approximately $427,830 for the same period in 2020[189]. - Loss from operations for the three months ended September 30, 2020, was approximately $348,649, an increase of approximately 53.5% from approximately $227,165 for the same period in 2019[190]. - Net loss for the three months ended September 30, 2020, was approximately $491,876, a decrease of approximately $626,332 or 465.8% from a net income of approximately $134,456 for the same period in 2019[191]. - Total cost of revenues decreased by approximately $7.8 million, or 47.6%, to approximately $8.6 million for the nine months ended September 30, 2020, compared to approximately $16.3 million for the same period in 2019[196]. Profitability - Gross profit for the nine months ended September 30, 2020, was approximately $398,667, an increase of 4.8% from approximately $380,564 for the same period in 2019[191]. - The Company's gross profit increased by approximately $18,103, or 4.8%, to approximately $0.4 million for the nine months ended September 30, 2020, compared to approximately $0.38 million for the same period in 2019, primarily due to a decrease in coal costs[197]. - The Company's net income rose by approximately $5.7 million, or 747.6%, to approximately $6.5 million for the nine months ended September 30, 2020, from approximately $0.8 million for the same period in 2019, mainly due to the disposal of certain subsidiaries[201]. - Income from discontinued operations for the nine months ended September 30, 2020, was approximately $498,332, a decrease of 68.0% from approximately $1.6 million for the same period in 2019[191]. Cash Flow and Liquidity - Net cash provided by operating activities was approximately $551,053 for the nine months ended September 30, 2020, compared to a net cash used of approximately $1,586,868 for the same period in 2019[224]. - Net cash used in investing activities was approximately $4.4 million for the nine months ended September 30, 2020, compared to approximately $16,596 for the same period in 2019, primarily due to spending on intangible assets and financial products[226]. - The Company had cash of $1,463,402 as of September 30, 2020, down from $4,027,744 as of December 31, 2019[224]. - The Company expects to continue generating cash flow from operations over the next twelve months, although it may require additional cash resources for future investments or acquisitions[222]. - The increase in accounts payable by approximately $0.7 million and customer deposits by approximately $1.2 million contributed to the positive cash flow from operating activities[225]. Financial Position and Risks - As of September 30, 2020, the Company's net working capital was approximately $8.3 million, with over 17% of current liabilities attributed to other payables related to major shareholders[221]. - Net cash provided by financing activities was approximately $3.0 million for the nine months ended September 30, 2020, compared to a net cash used of approximately $2.5 million for the same period in 2019[227]. - The company received approximately $0.4 million from short-term loans and $2.5 million from the issuance of common stock during the nine months ended September 30, 2020[227]. - Credit risk is significant for the company, primarily from cash and accounts receivable, which are typically unsecured[230]. - The company manages credit risk through credit approvals, limits, and monitoring procedures, requiring prepayment from customers before production or delivery[231]. - Liquidity risk is present, with the company analyzing its financial position and seeking short-term funding from financial institutions or owners when necessary[233]. - Inflation risk could impair operating results due to increases in raw material and overhead costs, although it has not materially impacted financial results to date[234]. - A majority of the company's operations and assets are denominated in RMB, which is not freely convertible into foreign currencies, exposing the company to foreign currency risk[235]. Accounting Policies - The Company has identified critical accounting policies that significantly affect its financial statements, requiring management's complex judgments and estimates[202]. - The Company adopted ASU 2014-09 for revenue recognition, which did not result in significant changes in revenue recording practices, except for warranty revenues recognized over a twelve-month period[211].