GD Culture Group(US:GDC)2022-08-21 16:00Part I. Financial Information Financial Statements (Unaudited) Unaudited H1 2022 financials show decreased total assets and a net loss, reflecting a business shift to digital door signs Condensed Consolidated Balance Sheet Highlights | Balance Sheet Items | June 30, 2022 (Unaudited) ($) | December 31, 2021 ($) | | :--- | :--- | :--- | | Total current assets | 16,165,861 | 15,931,353 | | Goodwill | 0 | 6,590,339 | | Total assets | 29,373,168 | 50,535,257 | | Total current liabilities | 16,526,125 | 18,446,528 | | Total liabilities | 16,531,655 | 18,455,266 | | Total shareholders' equity | 12,841,513 | 32,079,991 | Condensed Consolidated Statements of Operations Highlights (Six Months Ended June 30) | Income Statement Items | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Total Revenues | 7,616,615 | 6,876,290 | | Gross Profit | 2,088,665 | 6,717,604 | | Income (Loss) from Operations | (19,202,637) | (20,178,663) | | Net Income (Loss) | (19,382,278) | (29,553,783) | | Basic and Diluted EPS | (0.47) | (0.85) | Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Items | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (1,074,693) | (3,333,791) | | Net cash used in investing activities | (6,820) | (1,211,929) | | Net cash provided by financing activities | 0 | 22,795,027 | | Net (Decrease)/Increase in Cash | (1,305,299) | 18,252,675 | - The company's primary operations are now focused on the Wuge business in the digital door sign space, with all prior energy and industrial solid waste recycling businesses having been discontinued and disposed of2141 - Substantially all operations are conducted in the PRC through a VIE structure2141 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses H1 2022 financials, highlighting revenue growth, gross profit decline, and the Yuan Ma acquisition - On June 21, 2022, the company completed the acquisition of Shanghai Yuanma Food and Beverage Management Co., Ltd. ("Yuan Ma") through a VIE structure, issuing 7,680,000 shares of common stock149150151 - This transaction was made with related parties, as Yuanma Shareholders include the company's CEO and Chairman, Wei Xu149150151 Results of Operations Comparison (Three Months Ended June 30) | Metric | 2022 ($) | 2021 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | 0 | 3,495,731 | (3,495,731) | (100.0)% | | Gross Profit | 0 | 3,341,838 | (3,341,838) | (100.0)% | | Operating Expenses | 20,434,767 | 9,135,385 | 11,299,382 | 123.7% | | Loss from Operations | (20,434,767) | (5,793,547) | (14,641,220) | 252.7% | | Net Loss | (20,368,154) | (3,208,989) | (17,159,165) | 534.7% | - For Q2 2022, revenues dropped to zero, and operating expenses increased by 123.7%, primarily due to a $12.9 million impairment of prepayments, leading to a significant increase in net loss169172175 Results of Operations Comparison (Six Months Ended June 30) | Metric | 2022 ($) | 2021 ($) | Change ($) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | 7,616,615 | 6,876,290 | 740,325 | 10.8% | | Gross Profit | 2,088,665 | 6,717,604 | (4,628,939) | (68.9)% | | Operating Expenses | 21,291,302 | 26,896,267 | (5,604,965) | (20.8)% | | Net Loss | (19,382,278) | (29,553,783) | 10,171,505 | (34.4)% | - For the first six months of 2022, revenues from Wuge digital door signs increased by 10.8% year-over-year177178182 - However, cost of revenues surged by 3383.6%, causing a sharp decline in gross profit177178182 - The net loss improved due to lower operating expenses compared to the prior year177178182 - As of June 30, 2022, the company had a negative net working capital of approximately $0.4 million201202 - Management believes current cash and cash flows from operations will be sufficient for the next twelve months, but may need to raise additional capital for future opportunities or changed conditions201202 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks including credit, liquidity, and foreign currency exposure from RMB operations - The company faces significant credit risk, as cash held in PRC financial institutions is not government-insured, and accounts receivable are typically unsecured207 - A majority of the company's operations, assets, and liabilities are denominated in RMB, exposing it to foreign currency risk due to exchange rate fluctuations and PRC government policies on currency conversion211 - The company is exposed to liquidity risk, which is the risk of being unable to meet financial commitments209 - This risk is managed through financial position analysis and monitoring209 Controls and Procedures Management concluded disclosure controls were not effective as of June 30, 2022, with no material changes to internal controls - Based on an evaluation by management, the company's disclosure controls and procedures were concluded to be not effective as of June 30, 2022212 - There were no changes in internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting214 Part II. Other Information Legal Proceedings The company reported no legal proceedings during the period - None216 Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for FY2021 - There are no material changes to the risk factors described in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021216 Unregistered Sales of Equity Securities and Use of Proceeds On June 21, 2022, the company issued common shares to acquire Yuan Ma via a VIE structure - On June 21, 2022, the company issued 7,680,000 shares of common stock to acquire Yuan Ma through a VIE structure, following stockholder approval on June 13, 2022219 - The shares were issued in exchange for Yuan Ma's shareholders agreeing to enter into VIE agreements with the company's subsidiary, Makesi WFOE217218 Defaults Upon Senior Securities The company reported no defaults upon senior securities - None219 Mine Safety Disclosures This item is not applicable to the company - Not applicable219 Other Information The company reported no other information - None219 Exhibits The report includes various exhibits, primarily CEO and CFO certifications and Inline XBRL data files List of Exhibits | Exhibit | Description | | :--- | :--- | | 31.1 | CEO Certification (Rule 13a-14(a)) | | 31.2 | CFO Certification (Rule 13a-14(a)) | | 32.1 | CEO Certification (Rule 13a-14(b) / 18 U.S.C. 1350) | | 32.2 | CFO Certification (Rule 13a-14(b) / 18 U.S.C. 1350) | | 101 Series | Inline XBRL Documents (Instance, Schema, Calculation, etc.) | | 104 | Cover Page Interactive Data File |