TD Holdings(GLG) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION 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 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 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] - 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] Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) 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] Unaudited Condensed Consolidated Statements of Cash Flows 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] Notes to Consolidated Financial Statements 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][20] - 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] - In January and March 2021, the company issued convertible promissory notes with a net value of $5.2 million[50] - The company raised $24.45 million in January 2021 by selling 15 million shares of common stock in a private placement[55] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) 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 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][143] - 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] Cash Flows and Capital Resources 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 ($2.62M)[161][162][164] - Despite a net loss and operating cash outflow, management believes the company will continue as a going concern for the next 12 months due to successful capital raising activities[162][165] Cash Flow Summary (H1 2021 vs H1 2020) | | H1 2021 ($) | 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 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] - 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] PART II. OTHER INFORMATION This section covers legal proceedings and risk factors, providing updates on ongoing litigation and reaffirming previously disclosed risks Item 1. Legal Proceedings 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][185] - In the 2017 Arbitration with Sorghum, an initial award in the company's favor was vacated, and the company subsequently withdrew its appeal[186][188] - 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][194] Item 1A. Risk Factors 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]