TD Holdings(GLG) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's unaudited condensed consolidated financial statements, related notes, management's discussion, and internal control assessments Financial Statements 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 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 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] - 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] Note 3. Loans Receivable from Third Parties 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] - 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] Note 11. Convertible Promissory Notes 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][13] - For Q1 2022, the company recognized amortization of the beneficial conversion feature of $213,367[62] Note 12. Capital Transactions 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] - A total of 9,827,744 shares were issued to settle convertible promissory notes during the quarter[65] Note 15. Related Party Transactions and Balances 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] Note 17. Risks and Uncertainties 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] - Operations in the PRC are subject to political, economic, and legal risks, including the uncertain impact of COVID-19 and related government measures[99][100] - The commodity trading business is subject to seasonal fluctuations, with the first quarter typically contributing the smallest portion of annual revenues[104] Note 18. Subsequent Events 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] - In April 2022, stockholders approved the issuance of Common Stock shares exceeding 19.99% of outstanding shares upon conversion of the 2021 Notes[106] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) 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 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] - 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] Cash Flows and Capital Resources 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][139] - 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] Controls and Procedures 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] - Material weaknesses identified include: - Lack of formal procedures for revenue recognition[149] - Inadequate control over related party transactions[149] - No accountant with adequate U.S. GAAP knowledge in the Accounting Department[150] - Insufficient written policies and procedures for accounting and financial reporting[150] PART II. OTHER INFORMATION 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 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]