BAIYU (BYU) - 2023 Q1 - Quarterly Report

PART 1. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2023, detailing assets, revenue, net income, and financing activities Unaudited Condensed Consolidated Financial Statements The company's total assets increased to $414.4 million, revenue decreased to $34.6 million, and net income fell to $0.45 million, with significant cash generated from financing activities Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $199,018,830 | $148,566,325 | | Total Assets | $414,375,811 | $363,097,798 | | Total Current Liabilities | $24,746,002 | $23,212,031 | | Total Liabilities | $67,007,474 | $65,123,629 | | Total Equity | $347,368,337 | $297,974,169 | Condensed Consolidated Statements of Operations (Unaudited) | Account | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total Revenue | $34,577,638 | $48,159,116 | | Gross (Loss)/Profit | $(75,641) | $556,938 | | Net Operating Loss | $(2,818,702) | $(1,690,769) | | Net Income | $451,277 | $1,593,857 | | Net Income per Share (Basic & Diluted) | $0.00 | $0.04 | Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $2,767,040 | $3,752,768 | | Net Cash Used in Investing Activities | $(46,689,327) | $(50,003,288) | | Net Cash Provided by Financing Activities | $45,909,073 | $45,500,000 | | Net Increase/(Decrease) in Cash | $1,087,955 | $(736,726) | | Cash and Cash Equivalents at End of Period | $1,981,012 | $3,574,342 | Notes to Financial Statements The notes detail the company's structure, accounting policies, and key financial components, including significant loan expansion, equity financing, and a reverse stock split - The company primarily conducts its commodity trading and supply chain management services business in the PRC through various subsidiaries, including a VIE structure[26] - Loans receivable from third parties increased from $143.2 million at year-end 2022 to $191.6 million as of March 31, 2023, carrying an interest rate of 10.95% per annum[42] - In January 2023, the company sold 35,000,000 shares of common stock in a private placement for gross proceeds of $42.35 million[69] - The company settled portions of its convertible promissory notes throughout Q1 2023, converting debt into common stock[63][64][69] - A five-for-one reverse stock split of common stock was completed on August 8, 2022, with all share and per-share data retroactively restated[70] - Subsequent to the quarter's end, on April 5, 2023, the company settled a convertible promissory note of $250,000 and issued 357,142 shares of common stock[98] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's Q1 2023 financial performance, highlighting a 28% revenue decrease, a net income of $0.45 million, and significant capital raised for operations and new loans Results of Operations Total revenue decreased by 28% to $34.6 million in Q1 2023, primarily due to declines in commodity sales and supply chain services, leading to a gross loss and a 72% fall in net income Comparison of Results for the Three Months Ended March 31 | Metric | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $34,577,638 | $48,159,116 | (28)% | | - Sales of commodity products | $34,571,288 | $47,583,965 | (27)% | | - Supply chain management services | $6,350 | $575,151 | (99)% | | Gross (Loss)/Profit | $(75,641) | $556,938 | (114)% | | Operating Expenses | $(2,743,061) | $(2,247,707) | 22% | | Net Income | $451,277 | $1,593,857 | (72)% | - The decrease in revenue from commodity product sales was attributed to the impact of COVID-19 and the depreciation of RMB against USD[115] - The increase in SG&A expenses was mainly due to a $1.02 million increase in amortization of intangible assets related to a software copyright acquired in October 2022[120] Cash Flows and Capital Resources The company maintained positive working capital, generated $2.8 million from operations, and raised $45.9 million through financing, primarily used for investing in third-party loans Summary of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $2,767,040 | $3,752,768 | | Net Cash Used in Investing Activities | $(46,689,327) | $(50,003,288) | | Net Cash Provided by Financing Activities | $45,909,073 | $45,500,000 | - Cash used in investing activities for Q1 2023 was mainly for loans disbursed to third parties amounting to $46.7 million[130] - Financing activities in Q1 2023 included raising $42.35 million from private placements, $0.56 million from a direct offering, and $3.0 million from convertible notes[124][131] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is marked as "Not applicable," indicating the company has not provided specific quantitative and qualitative disclosures about market risk in this quarterly report - The company states this item is "Not applicable"[136] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2023, due to identified material weaknesses - Management concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2023[137] - Material weaknesses identified include: lack of U.S. GAAP expertise among accounting staff, lack of formal procedures for revenue recognition and related-party dealings, and insufficient written accounting policies[139][140] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control[142] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports that there were no legal proceedings during the period - The company reports "None" for legal proceedings[143] Item 1A. Risk Factors The company states that there have been no material changes to the risk factors disclosed in its Annual Report on Form 10-K filed with the SEC on March 10, 2023 - There have been no material changes to the risk factors disclosed in the annual report on Form 10-K filed on March 10, 2023[143] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section discloses the issuance of common stock from the conversion of convertible promissory notes throughout the first quarter of 2023 - The company issued common stock upon the conversion of convertible promissory notes dated October 4, 2021, and May 6, 2022, with conversions occurring on multiple dates throughout Q1 2023[143][144] Other Items (3, 4, 5, 6) The company reports no defaults on senior securities, no other material information, and notes mine safety disclosures are not applicable, while listing all filed exhibits - The company reports "None" for Item 3 (Defaults Upon Senior Securities) and Item 5 (Other Information)[144] - Item 4 (Mine Safety Disclosures) is reported as "Not applicable"[144] - Item 6 lists exhibits filed with the report, including required CEO and CFO certifications and XBRL interactive data files[146]