TD Holdings(GLG) - 2020 Q3 - Quarterly Report

PART 1. FINANCIAL INFORMATION 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 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 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] - Additional paid-in capital surged from $38,523,170 to $131,393,177, reflecting significant capital transactions during the period[4] UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (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] - 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] UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 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][8][13] - 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][13] UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 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] - 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] - 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] NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS This section details notes to the unaudited condensed consolidated financial statements, covering organization, policies, liquidity, and key financial items 1. ORGANIZATION AND BUSINESS DESCRIPTION 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] - 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][19] - 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][25] - As of September 30, 2020, the company's core business is commodity trading and providing supply chain management services through Huamucheng[22] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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][30] - The used luxurious car leasing business was classified as a discontinued operation as of August 28, 2020, representing a strategic shift[34][35] - The company now operates in one reportable segment: Commodity Trading and Supply Chain Management Services[36] - 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][39] 3. LIQUIDITY 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] - 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] - The company plans to fund operations through commodity trading revenue, private placements, and financial support from its CEO and major shareholders[42] - Management believes the company will continue as a going concern for the next 12 months[42] 4. DISPOSITION OF HC HIGH SUMMIT LIMITED 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] - Assets of discontinued operations held for sale were $5,320,768, and liabilities were $2,606,257 as of August 28, 2020[46][48] - 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][51] 5. LOANS RECEIVABLE FROM THIRD PARTIES 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][53] - 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][57] - Management considers all loans receivable fully collectible and has not recorded any allowance for doubtful accounts as of September 30, 2020[56][58] 6. INVESTMENTS IN EQUITY INVESTEES 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] - Management determined the decline in fair value of the investment was temporary and did not provide impairment as of September 30, 2020[62] 7. OTHER CURRENT LIABILITIES 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] 8. STOCK SUBSCRIPTION ADVANCE FROM SHAREHOLDERS/STOCK SUBSCRIPTION RECEIVABLE 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] - 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] 9. CAPITAL TRANSACTIONS 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] - The company issued $30,000,000 in convertible notes and warrants to purchase 20,000,000 shares of Common Stock in March 2020[67] - 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] - 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][73] | 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 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] - Deferred tax assets were $5,305,479 as of September 30, 2020, but a full valuation allowance is maintained[84] | 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] 11. RELATED PARTY TRANSACTIONS AND BALANCES 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] - 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] - For the nine months ended September 30, 2020, the company borrowed $1,441,461 from Guangzhou Chengji[95] 12. COMMITMENTS AND CONTINGENCIES 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] - The 2015 Derivative Action was settled, with the company agreeing to corporate governance reforms[105] - A 2017 arbitration award of $1,436,522 against Sorghum was vacated after the company withdrew its appeal[108] - The company's motion to dismiss the 2018 court matter with Shanghai Nonobank Financial Information Service Co. Ltd. was granted[112] - An ongoing 2020 lawsuit against Harrison Fund seeks to recover a $1,000,000 investment, with a full impairment applied due to uncertainty[113][114] 13. RISKS AND UNCERTAINTIES 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] - 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] - Foreign currency risk arises from operations and assets/liabilities denominated in RMB, which is subject to central government policies and international economic developments[120][121] 14. SUBSEQUENT EVENTS 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] - 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] PART II. OTHER INFORMATION 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 Management discusses financial condition and operations, focusing on the shift to commodities trading, recent developments, and performance analysis 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] - As of September 30, 2020, the company's main business line is commodities trading[123] Commodities Trading Business 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] - Supply chain management services, launched in December 2019, include loan recommendation and commodity product distribution services[124] | 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] 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] - Principal competitive factors are price, product availability, quantity, service, and financing terms[129] Applicable Government Regulations 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] Recent developments 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] - Disposed of the used luxurious car leasing business (HC High Summit Limited) on August 28, 2020, for a nominal consideration of $1.00[136] - Established a revolving credit facility of approximately $80 million with Shenzhen Xinsuniao on March 25, 2020[137] - Terminated the Huamucheng VIE Agreement on June 25, 2020, making Huamucheng a wholly-owned subsidiary[140][141] Key Factors Affecting Our Results of Operation 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] - Limited operating history in the commodities trading business, which commenced in late November 2019, makes future prospects difficult to evaluate[144] - The business requires a significant amount of capital for purchasing bulk commodities and market expansion[145] Results of Operations 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 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] - Interest income increased significantly due to $83.3 million in net loans made to a customer[157] Nine Months Ended September 30, 2020 as Compared to Nine Months Ended September 30, 2019 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] - Selling, general, and administrative expenses decreased by 51% due to a decrease in stock-based compensation and payroll expenses[172] - 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] Cash Flows and Capital Resources 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] - 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][187] - 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][189] - 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][191] Off-balance Sheet Arrangements 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] Contractual Obligations 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] Critical Accounting Policies 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] ITEM 1. LEGAL PROCEEDINGS 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] - A 2017 arbitration award of $1,436,522 against Sorghum was vacated after the company withdrew its appeal[203] - The company's motion to dismiss the 2018 court matter with Shanghai Nonobank Financial Information Service Co. Ltd. was granted[205] - An ongoing 2020 lawsuit against Harrison Fund seeks to recover a $1,000,000 investment, with a full impairment applied due to uncertainty[206][207] ITEM 1A. RISK FACTORS 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][210] - 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][212] - The Supply Chain Service Business is susceptible to volatility due to ongoing uncertainty from international and domestic pandemic response and recovery efforts[213] - If customers reduce logistics costs or increase internal solutions, the supply chain services business and operating results may be materially and adversely affected[214][216] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 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] ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[218] ITEM 4. MINE SAFETY DISCLOSURES Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable[218] ITEM 5. OTHER INFORMATION There is no other information to report for the period - No other information to report[218] ITEM 6. EXHIBITS 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] SIGNATURES The report was duly signed on November 13, 2020, by the Chief Executive Officer and Chief Financial Officer 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] - Signatories include Renmei Ouyang, Chief Executive Officer, and Wei Sun, Chief Financial Officer[220]