UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q10-Q/A

Amendment No. 1

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31,September 30, 2020

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________

 

Commission file number: 001-36055

 

TD Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware 45-4077653

(State or other jurisdiction of


incorporation or organization)

 

(I.R.S. Employer


Identification No.)

 

Room 104, No. 33 Section D,25th Floor, Block C, Tairan Building

No. 6 Middle Xierqi31 Tairan 8th Road, Futian District

Haidian District, Beijing, ChinaShenzhen, Guangdong, PRC

 100085518000
(Address of principal executive offices) (Zip Code)

 

+86 (010) 59441080(0755) 88898711

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 GLG Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

As of June 26,November 12, 2020, 68,585,80671,131,207 shares of the Company’s Common Stock, $0.001 par value per share, were issued and outstanding.

  

 

  

 

 

EXPLANATORY NOTE

 

On March 4, 2020As disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission issued an Order (Release No. 34-88318) under Section 36(the “SEC”) on March 29, 2021, as amended, on March 26, 2021, the Audit Committee (the “Audit Committee”) of the Exchange Act granting exemptions from specified provisionsBoard of the Exchange Act and certain rules thereunderDirectors of TD Holdings, Inc. (the “OrderCompany”). The Order provides that a registrant subject to the reporting requirements of Exchange Act Section 13(a) or 15(d), and any person required to make any filings with respect to such a registrant, is exempt from any requirement to file or furnish materialsafter discussion with the Commission under Exchange Act Sections 13(a)Company’s management, concluded that the Company’s previously issued financial statements contained in the Company’s Quarterly Reports (“2020 Quarterly Reports”) on Form 10-Q for the periods ended March 31, 2020, June 30, 2020, and September 30, 2020 (collectively “Non-Reliance Periods”), 13(f), 13(g), 14(a), 14(c), 14(f), 15(d)originally filed on June 26, 2020, August 14, 2020, and Regulations 13A, Regulation 13D-G (exceptNovember 13, 2020, respectively, should no longer be relied upon. Similarly, related press releases, earnings releases, and investor communications describing the Company’s financial statements for those provisions mandating the filing of Schedule 13D or amendments to Schedule 13D), 14A, 14C and 15D, and Exchange Act Rules 13f-1, and 14f-1, as applicable, where certain conditions are satisfied.Non-Reliance Periods should no longer be relied upon.

 

As a result of the global outbreak of the COVID-19 virus, the Company hadWe are therefore filing this this amended Form 10-Q (“Amended Form 10-Q”) to spend additional time in preparing for the filing of its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and was unable to timely prepare thisour Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020. Based onSeptember 30, 2020 (the “Original Form 10-Q”), to restate our interim financial statements and revise related disclosures (including, without limitation, those contained under Item 1, Financial Statements and Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the foregoing, on May 15, 2020, the Company filed a Current Report on Form 8-K to avail itself of a 45-day extension to file thisOriginal Form 10-Q relyingto reflect reversal of revenues from supply chain management, which impacted the Company’s net income (loss) and earnings (loss) per share, and related disclosures and Management’s Discussion and Analysis of Financial Condition and Results of Operations. In addition, the identification of related parties changes the footnote for related parties.

As several parts of the Original Form 10-Q are amended and/or restated by this Amended Form 10-Q, for convenience, we have repeated the entire text of the Original Form 10-Q, as amended and/or restated by this Amended Form 10-Q. Readers should therefore read and rely on this Amended Form 10-Q in lieu of the exemptions providedOriginal Form 10-Q.

Except as amended and/or restated by this Amended Form 10-Q, no other information included in the Order. ThisOriginal Form 10-Q is being filedamended or updated by this Amended Form 10-Q. This Amended Form 10-Q continues to describe the conditions as of the date of the Original Form 10-Q and, except as contained therein, we have not updated or modified the disclosures contained in reliance on the Order.  Original Form 10-Q. Accordingly, this Amended Form 10-Q should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Form 10-Q, including any amendment to those filings.

 

 

 

 

PART 1. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS

 

TD HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31,September 30, 2020 and December 31, 2019

 

  March 31,
2020
  December 31,
2019
 
ASSETS      
Current Assets      
Cash $27,101  $2,446,683 
Loans receivable from third parties  3,735,799   1,955,697 
Due from related parties  4,823,038   3,310,883 
Other current assets  291,063   166,617 
Total current assets  8,877,001   7,879,880 
         
Investments in equity investees  963,154   972,807 
Deposit in investment in equity investee  14,105   14,351 
Loan receivable from a third party, noncurrent  49,368   50,230 
Property and equipment, net  3,386   3,835 
Right-of-use lease assets, net  401,034   41,188 
Leasing business assets, net  2,306,133   2,426,109 
Total noncurrent assets  3,737,180   3,508,520 
         
Total Assets $12,614,181  $11,388,400 
         
LIABILITIES AND EQUITY        
Current Liabilities        
Advances from customers $14,987  $15,249 
Third party loans payable  2,369,669   2,367,967 
Due to related parties  2,005,891   1,017,362 
Stock subscription advance  -   1,600,000 
Income tax payable  62,124   14,735 
Lease liabilities, current  302,028   - 
Other current liabilities  402,301   420,101 
Total Current Liabilities  5,157,000   5,435,414 
         
Non-current Liabilities        
Related party loan, noncurrent  149,515   152,124 
Lease liabilities, noncurrent  52,352   - 
Total Non-current Liabilities  201,867   152,124 
         
Total Liabilities  5,358,867   5,587,538 
         
Commitments and Contingencies (Note 13)        
         
Equity        
Common stock (par value $0.001 per share, 100,000,000 shares authorized; 28,585,111 and 11,585,111 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively)  28,585   11,585 
Stock subscription receivable  (13,500,000)  - 
Additional paid-in capital  53,606,170   38,523,170 
Accumulated deficit  (32,526,743)  (32,391,040)
Accumulated other comprehensive loss  (339,857)  (334,281)
Total Shareholders’ Equity  7,268,155   5,809,434 
         
Non-controlling interests  (12,841)  (8,572)
Total Equity  7,255,314   5,800,862 
         
Total Liabilities and Equity $12,614,181  $11,388,400 

  September 30,
2020
  December 31,
2019
 
  (restated)    
ASSETS      
Current Assets      
Cash $2,967,557  $1,777,276 
Loans receivable from third parties  87,310,943   576,647 
Prepayments  5,432,099   - 
Due from related parties  1,469,875   2,840,728 
Other current assets  183,810   39,960 
Escrow account receivable  369,552   - 
Assets of discontinued operations  -   2,645,269 
Total current assets  97,733,836   7,879,880 
         
Investments in equity investees  410,000   410,000 
Right-of-use lease assets, net  237,524   - 
Assets of discontinued operations, noncurrent  -   3,098,520 
Total noncurrent assets  647,524   3,508,520 
         
Total Assets $98,381,360  $11,388,400 
         
LIABILITIES AND EQUITY        
Current Liabilities        
Advances from customers $1,896,139  $- 
Third party loans payable  -   315,729 
Due to related parties  2,076,573   166,332 
Stock subscription advance  -   1,600,000 
Income tax payable  1,633,121   14,735 
Lease liabilities  215,658   - 
Other current liabilities  656,940   200,602 
Current liabilities of discontinued operations  -   3,138,016 
Total Current Liabilities  6,478,431   5,435,414 
         
Noncurrent liabilities of discontinued operations  -   152,124 
Total Non-current Liabilities  -   152,124 
         
Total Liabilities  6,478,431   5,587,538 
         
Commitments and Contingencies (Note 12)        
         
Equity        
Common stock (par value $0.001 per share, 100,000,000 shares authorized; 71,130,512 and 11,585,111 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively)  71,130   11,585 
Stock subscription receivable  (5,000,000)  - 
Additional paid-in capital  131,393,177   38,523,170 
Accumulated deficit  (37,654,136)  (32,391,040)
Accumulated other comprehensive income (loss)  3,092,758   (334,281)
Total Shareholders’ Equity  91,902,929   5,809,434 
         
Non-controlling interests  -   (8,572)
Total Equity  91,902,929   5,800,862 
         
Total Liabilities and Equity $98,381,360  $11,388,400 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

 

1

 

 

TD HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSSINCOME (LOSS)

For the Three and Nine Months Ended March 31,September 30, 2020 and 2019

(Expressed in U.S. dollars, except for the number of shares)

 

  For the Three Months Ended
March 31,
 
  2020  2019 
Revenues      
-    Revenue from sales of commodity products $1,053,632  $- 
-    Revenue from supply chain management services  415,377   - 
-    Income from operating leases  14,051   399,999 
Total revenue  1,483,060   399,999 
         
Cost of revenue        
-    Cost of revenue - commodity product sales - related party  (1,055,143)  - 
-    Cost of revenue - supply chain management services  (717)  - 
-    Cost of operating lease  (99,314)  (237,651)
Total cost of revenue  (1,155,174)  (237,651)
         
Gross profit  327,886   162,348 
         
Operating expenses        
Selling, general, and administrative expenses  (425,115)  (1,906,319)
Impairment of leasing business assets  -   (96,318)
Total operating expenses  (425,115)  (2,002,637)
         
Net Operating Loss  (97,229)  (1,840,289)
         
Other income, net        
Interest income  140,012   10,463 
Interest expenses  (134,375)  - 
Total other income, net  5,637   10,463 
         
Loss Before Income Taxes  (91,592)  (1,829,826)
         
Income tax expenses  (48,380)  - 
         
Net Loss  (139,972)  (1,829,826)
         
Less: Net loss attributable to non-controlling interests  4,269   - 
         
Net loss attributable to TD Holdings, Inc.’s Stockholders  (135,703)  (1,829,826)
         
Comprehensive Loss        
Net Loss  (139,972)  (1,829,826)
Foreign currency translation adjustment  (5,576)  57,743 
Comprehensive loss  (145,548)  (1,772,083)
Less: Total comprehensive loss attributable to non-controlling interests  4,269   - 
Comprehensive loss attributable to TD Holdings, Inc. $(141,279) $(1,772,083)
         
Loss per share - basic and diluted        
Net loss per share – basic and diluted $(0.01) $(0.35)
         
Weighted Average Shares Outstanding-Basic and Diluted  13,673,023   5,169,041 
  For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
 
  2020  2019  2020  2019 
  (restated)     (restated)    
Revenues            
Sales of commodity products $2,722,836  $-  $2,722,836  $- 
Sales of commodity products – related parties  958,108       3,575,409     
Supply chain management services  1,148,839   -   1,609,469   - 
Supply chain management services – related parties  2,041,570       2,112,166     
Total Revenue  6,871,353   -   10,019,880   - 
                 
Cost of revenue                
Commodity product sales  (88,543)  -   (1,458,212)  - 
Commodity product sales – related parties  (3,609,639)  -   (4,865,857)  - 
Supply chain management services  (16,463)  -   (24,417)  - 
Total cost of revenue  (3,714,645)  -   (6,348,486)  - 
                 
Gross profit  3,156,708   -   3,671,394   - 
                 
Operating expenses                
Selling, general, and administrative expenses  (292,080)  (259,945)  (1,032,660)  (2,123,191)
Total operating cost and expenses  (292,080)  (259,945)  (1,032,660)  (2,123,191)
                 
Other income (expenses), net                
Interest income  1,836,016   -   3,736,079   636 
Interest expenses  (15,164)  -   (69,644)  - 
Amortization of beneficial conversion feature relating to issuance of convertible notes  -   -   (3,400,000)  - 
Amortization of relative fair value of warrants relating to issuance of convertible notes  -   -   (3,060,000)  - 
Total other income (expenses), net  1,820,852   -   (2,793,565)  636 
                 
Income (Loss) from Continuing Operations Before Income Taxes  4,685,480   (259,945)  (154,831)  (2,122,555)
                 
Income tax expenses  (1,149,563)  -   (1,573,531)  - 
                 
Net Income (Loss) from Continuing Operations  3,535,917   (259,945)  (1,728,362)  (2,122,555)
                 
Net Loss from Discontinued Operations  (2,989,116)  (132,898)  (3,541,807)  (1,140,439)
                 
Net Income (Loss)  546,801   (392,843)  (5,270,169)  (3,262,994)
Less: Net (income) loss attributable to non-controlling interests  -   (5)  7,073   486 
Net income (loss) attributable to TD Holdings, Inc.’s Stockholders $546,801  $(392,848) $(5,263,096) $(3,262,508)
                 
Comprehensive Income (Loss)                
Net Income (Loss) $546,801  $(392,843) $(5,270,169) $(3,262,994)
Foreign currency translation adjustment  3,515,011   (57,232)  3,427,039   (74,256)
Comprehensive income (loss)  4,061,812   (450,075)  (1,843,130)  (3,337,250)
Less: Total comprehensive (income) loss attributable to non-controlling interests  -   (5)  7,073   486 
Comprehensive income (loss) attributable to TD Holdings, Inc. $4,061,812  $(450,080) $(1,836,057) $(3,336,764)
                 
Income (Loss) per share – basic and diluted $0.01  $(0.05) $(0.12) $(0.46)
Income (Loss) per share from continuing operations – basic and diluted $0.06  $(0.03) $(0.03) $(0.30)
Income (Loss) per share from discontinued operations – basic and diluted $(0.05) $(0.02) $(0.09) $(0.16)
                 
Weighted Average Shares Outstanding-Basic and Diluted  58,625,143   8,646,297   43,695,789   7,122,560 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.


TD HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Nine Months Ended September 30, 2020 and 2019

(Expressed in U.S. dollars, except for the number of shares)

  Common Stock  Additional
paid-in
  Accumulated  Subscription
advanced
from a
Shareholder
(Stock
Subscription
  Accumulated
other
comprehensive
  Non-controlling  Total
(Deficit)
 
  Shares  Amount  capital  Deficit  receivable)  loss  interests  Equity 
                         
Balance as at December 31, 2018  5,023,906  $5,024  $28,765,346  $(25,457,090) $-  $(511,057) $-  $2,802,223 
Issuance of common stock to service providers  502,391   502   883,706   -   -   -   -   884,208 
Issuance of common stocks pursuant to registered direct offering, net of transaction cost  3,120,000   3,120   4,650,320   -   -   -   -   4,653,440 
Net loss  -   -   -   (3,262,508)  -   -   (486)  (3,262,994)
Foreign currency translation adjustments  -   -   -   -   -   (74,256)  -   (74,256)
Balance as at September 30, 2019  8,646,297  $8,646  $34,299,372  $(28,719,598) $-  $(585,313) $(486) $5,002,621 
                                 
Balance as at December 31, 2019  11,585,111  $11,585  $38,523,170  $(32,391,040) $-  $(334,281) $(8,572) $5,800,862 
Issuance of common stocks in connection with private placements  19,000,000   19,000   20,081,000   -   (18,500,000)  -   -   1,600,000 
Issuance of common stocks in connection with exercise of convertible notes  20,000,000   20,000   29,980,000   -   -   -   -   30,000,000 
Beneficial conversion feature relating to issuance of convertible notes  -   -   3,400,000   -   -   -   -   3,400,000 
Relative fair value of warrants relating to issuance of convertible notes          3,060,000                   3,060,000 
Issuance of common stocks in connection with exercise of warrants  20,545,401   20,545   36,349,007   -   -   -   -   36,369,552 
Collection of subscription fee  -   -   -   -   13,500,000   -   -   13,500,000 
Disposal of subsidiaries  -   -   -   -   -   (35,673)  15,645   (20,028)
Net income  -   -   -   (5,263,096)  -   -   (7,073)  (5,270,169)
Foreign currency translation adjustments  -   -   -   -   -   3,462,712   -   3,462,712 
Balance as at September 30, 2020 (restated)  71,130,512  $71,130  $131,393,177  $(37,654,136) $(5,000,000) $3,092,758  $-  $91,902,929 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements 

 


TD HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three Months Ended March 31,September 30, 2020 and 2019

(Expressed in U.S. dollars, except for the number of shares)

 

 Common Stock Additional paid-in Accumulated Subscription
advanced from a
 Accumulated other comprehensive Non-controlling Total (Deficit)  Common Stock  Additional
paid-in
  Accumulated  Subscription
advanced
from a
Shareholder
(Stock
Subscription
  

Accumulated
other
comprehensive

income

  Non-controlling  Total
(Deficit)
 
 Shares  Amount  capital  Deficit  shareholder  income (loss)  interests  Equity  Shares  Amount  capital  Deficit  receivable)  (loss)  interests  Equity 
                                  
Balance as at December 31, 2018  5,023,906  $5,024  $28,765,346  $(25,457,090) $-  $(511,057) $      -  $2,802,223 
Issuance of common stock to service providers  502,391   502   883,706   -   -   -   -   884,208 
Balance as at June 30, 2019  8,646,297  $8,646  $34,299,372  $(28,326,750) $-  $(528,081) $(491) $5,452,696 
Net loss  -   -   -   (1,829,826)  -   -   -   (1,829,826)  -   -   -   (392,848)  -   -   5   (392,843)
Foreign currency translation adjustments  -   -   -   -   -   57,743   -   57,743   -   -   -   -   -   (57,232)  -   (57,232)
Balance as at March 31, 2019  5,526,297  $5,526  $29,649,052  $(27,286,916) $-  $(453,314) $-  $1,914,348 
Balance as at September 30, 2019  8,646,297  $8,646  $34,299,372  $(28,719,598) $-  $(585,313) $(486) $5,002,621 
                                                                
Balance as at December 31, 2019  11,585,111  $11,585  $38,523,170  $(32,391,040) $-  $(334,281) $(8,572) $5,800,862 
Balance as at June 30, 2020  68,585,111  $68,585  $126,026,170  $(38,200,937) $-  $(422,253) $(15,645) $87,455,920 
Issuance of common stocks in connection with private placements  17,000,000   17,000   15,083,000   -   (13,500,000)  -   -   1,600,000   2,000,000   2,000   4,998,000   -   (5,000,000)  -   -   - 
Net loss  -   -   -   (135,703)  -   -   (4,269)  (139,972)
Issuance of common stocks in connection with exercise of warrants  545,401   545   369,007   -   -   -   -   369,552 
Disposal of subsidiaries  -   -   -   -   -   (35,673)  15,645   (20,028)
Net income  -   -   -   546,801   -   -   -   546,801 
Foreign currency translation adjustments  -   -   -   -   -   (5,576)  -   (5,576)  -   -   -   -   -   3,550,684   -   3,550,684 
Balance as at March 31, 2020  28,585,111  $28,585  $53,606,170  $(32,526,743) $-  $(339,857) $(12,841) $7,255,314 
Balance as at September 30, 2020 (restated)  71,130,512  $71,130  $131,393,177  $(37,654,136) $(5,000,000) $3,092,758  $-  $91,902,929 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements

 

3


 

TD HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the ThreeNine Months Ended March 31,September 30, 2020 and 2019

(Expressed in U.S. dollar)

 

  For the Three Months Ended
March 31,
 
  2020  2019 
Cash Flows from Operating Activities:      
Net loss $(139,972)  (1,829,826)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation of leasing business assets  79,578   46,858 
Depreciation of property and equipment  388   551 
Amortization of right of use assets  88,620   - 
Impairment on leasing business assets  -   96,318 
Stock-based compensation to service providers  -   884,208 
Changes in operating assets and liabilities:        
Other current assets  (132,271)  29,320 
Advances from customers  -   23,180 
Income tax payable  48,380   - 
Other current liabilities  (6,394)  (9,242)
Lease liabilities  (94,888)  - 
Net Cash Used in Operating Activities  (156,559)  (758,633)
         
Cash Flows from Investing Activities:        
Purchases of leasing business assets  -   (406,757)
Loans made to related parties  (1,593,260)  - 
Loans made to third parties  (1,831,708)  (592,724)
Net Cash Used in Investing Activities  (3,424,968)  (999,481)
         
Cash Flows from Financing Activities:        
Proceeds from third party borrowings  -   592,724 
Proceeds from borrowings from related parties  1,063,773   - 
Net Cash Provided by Financing Activities  1,063,773   592,724 
         
Effect of exchange rate changes on cash and cash equivalents  98,172   21,969 
         
Net decrease in cash and cash equivalents  (2,419,582)  (1,143,421)
Cash at beginning of period  2,446,683   1,484,116 
Cash at end of period $27,101  $340,695 
         
Supplemental Cash Flow Information        
Cash paid for interest expense $-  $- 
Cash paid for income tax $-  $- 
         
Supplemental disclosure of Non-cash investing and financing activities        
Right-of-use assets obtained in exchange for operating lease obligations $455,635  $- 
Issuance of common stocks in connection with private placements, net of issuance costs with proceeds subsequently collected   in April 2020 $13,500,000  $- 
Issuance of common stocks in connection with private placements, net of issuance costs with proceeds collected in advance in November 2019 $1,600,000  $  

  For the Nine Months Ended
September 30,
 
  2020  2019 
  (restated)    
Cash Flows from Operating Activities:      
Net loss $(5,270,169) $(3,262,994)
Less: net loss from discontinued operations  3,541,807   1,140,439 
Net loss from continuing operations  (1,728,362)  (2,122,555)
Adjustments to reconcile net loss to net cash used in operating activities:        
Amortization of right of use assets  222,840   - 
Stock-based compensation to service providers  -   884,208 
Amortization of beneficial conversion feature relating to issuance of convertible notes  3,400,000   - 
Amortization of relative fair value of warrants relating to issuance of convertible notes  3,060,000   - 
Changes in operating assets and liabilities:        
Prepayments  (5,282,703)  - 
Escrow account receivable  (369,552)  - 
Other current assets  (139,114)  (13,000)
Advances from customers  1,843,990   - 
Due to related parties  296,611   - 
Income tax payable  1,573,531   - 
Other current liabilities  439,422   51,103 
Lease liabilities  (244,104)  - 
Net Cash Provided by (Used in) Operating Activities from Continuing Operations  3,072,559   (1,200,244)
Net Cash Used in Operating Activities from Discontinued Operations  (700,039)  (802,446)
Net Cash Provided by (Used in) Operating Activities  2,372,520   (2,002,690)
         
Cash Flows from Investing Activities:        
Investments in equity investees  -   (200,000)
Investments in financial products  -   (1,000,000)
Collection of loans from related parties  3,404,953   - 
Loans made to related parties  (4,826,640)  - 
Collection of loans from third parties  74,999,934   - 
Loans made to third parties  (157,087,880)  (499,000)
Net Cash Used in Investing Activities from Continuing Operations  (83,509,633)  (1,699,000)
Net Cash Used in Investing Activities from Discontinued Operations  368,612   (3,758,537)
Net Cash Used in Investing Activities  (83,141,021)  (5,457,537)
         
Cash Flows from Financing Activities:        
Proceeds from third party borrowings  1,558,595   - 
Proceeds from a private placement  13,500,000   5,241,440 
Proceeds from issuance of convertible notes  30,000,000   - 
Proceeds from exercise of warrants  36,369,552   - 
Net Cash Provided by Financing Activities from Continuing Operations  81,428,147   5,241,440 
Net Cash Provided by (Used in) Financing Activities from Discontinued Operations  (381,554)  2,157,822 
Net Cash Provided by Financing Activities  81,046,593   7,399,262 
         
Effect of exchange rate changes on cash and cash equivalents  912,189   (14,197)
         
Net increase (decrease) in cash and cash equivalents  1,190,281   (75,162)
Cash at beginning of period  1,777,276   416,459 
Cash at end of period $2,967,557  $341,297 
         
Supplemental Cash Flow Information        
Cash paid for interest expense $-  $- 
Cash paid for income tax $-  $- 
         
Supplemental disclosure of Non-cash investing and financing activities        
Right-of-use assets obtained in exchange for operating lease obligations $455,635  $- 
Issuance of common stocks in connection with private placements, net of issuance costs with proceeds collected in advance in November 2019 $1,600,000  $- 
Issuance of common stocks in connection with conversion of convertible notes $30,000,000  $- 
Issuance of common stocks in connection with private placements, net of issuance costs with proceeds uncollected $5,000,000  $- 
Issuance of common stocks in connection with cashless exercise of 1,502,022 warrants $868,530  $- 

 

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements


TD HOLDINGS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.ORGANIZATION AND BUSINESS DESCRIPTION

 

TD Holdings, Inc. (“TD” or “the Company”), is a holding company that was incorporated under the laws of the State of Delaware on December 19, 2011. On January 11, 2019, the Company changed its name to China Bat Group, Inc. and on June 3, 2019, further changed its name to Bat Group, Inc. On March 6, 2020, the Company amended its Certificate of Incorporation with the Secretary of State of Delaware to effect a name change to TD Holdings, Inc.

 

Currently,On April 2, 2020, HC High Summit Holding Limited (“HC High BVI���), the Company’s wholly owned subsidiary, established Tongdow Block Chain Information Technology Company Limited (“Tongdow Block Chain”), a holding company incorporated in accordance with the laws and regulations of Hong Kong. Tongdow Block Chain is wholly owned by HC High BVI. On April 2, 2020 and July 16, 2020, Tongdow Block Chain established Shanghai Jianchi Supply Chain Company Limited (“Shanghai Jianchi”) and Tongdow Hainan Digital Technology Co., Ltd. (“Tondow Hainan”), respectively, as its wholly owned subsidiaries. Both Shanghai Jianchi and Tongdow Hainan are holding companies incorporated in accordance with the laws and regulations of People’s Republic of China (“PRC”).

On June 25, 2020, Hao Limo Technology (Beijing) Co. Ltd. (“Hao Limo”), the Company’s wholly owned subsidiary incorporated in PRC, and Shenzhen Huamucheng Trading Co., Ltd. (“Huamucheng”), a former VIE of the Company, conducts business through twoentered into certain VIE Termination Agreement (the “VIE Termination Agreement”) to terminate the Huamucheng VIE Agreements. As such, Hao Limo will no longer have the control rights and rights to the assets, property and revenue of Huamucheng. On the same date, Shanghai Jianchi, Huamucheng and the shareholders of Huamucheng (the “Huamucheng Shareholders”) entered into certain Share Acquisition Agreement (the “Acquisition Agreement”) pursuant to which Shanghai Jianchi acquired 100% equity interest of Huamucheng from the Huamucheng Shareholders for nominal consideration.

As a result of the above reorganization, Huamucheng transitioned from being a variable interest entitiesentity (“VIEs”VIE”), controlled by Company into a wholly owned subsidiary of the Company. The Company remained in control of Huamucheng both before and after the reorganization and its operating results are consolidated into the Company’s consolidated financial statements.

On August 28, 2020, the Company closed the sales of HC High Summit Limited and its subsidiaries and Beijing Tianxing Kunlun Technology Co. Ltd. (“Beijing Tianxing”), the VIE with Vision Loyal Limited (“Vision Loyal”), at a nominal consideration of $1.00 based on a valuation report presented by a third party valuation firm.

On September 11, 2020, the Company acquired Zhong Hui Dao Ming Investment Management Limited (“ZHDM HK”) andShenzhen its wholly owned subsidiary, Tongdow E-trading Limited (“Tongdow HK”). Both entities were holding companies incorporated in accordance with the laws and regulations of Hong Kong. The consideration was zero because both entities have not commenced any operations before the date of acquisition.

As of September 30, 2020, the Company conducts business through Huamucheng, Trading Co., Ltd. (“Huamucheng”).Beijing Tianxinga subsidiary of the Company, which is primarily engaged in operating leasing business of used luxurious cars and Huamucheng is engaged inthe commodity trading business and providing supply chain management services to customers in the People’s Republic of China (“PRC”).PRC. Supply chain management services consistedconsist of loan recommendation serviceservices and commodity product distribution services.


1.ORGANIZATION AND BUSINESS DESCRIPTION (CONTINUED)

 

The accompanying consolidated financial statements reflect the activities of Beijing Tianxing, Shenzhen Huamucheng and each of the following holding entities:

 

Name Background Ownership

HC High Summit Holding Limited

(“ (“HC High BVI”)

 

●      A BVI company

●      Incorporated on March 22, 2018

●      A holding company

 100% owned by the Company

HC High SummitTongdow Block Chain Information Technology Company Limited

(“HC High HK” (“Tongdow Block Chain”)

 

●      A Hong Kong company

●      Incorporated on April 16, 20182, 2020

●      A holding company

 100% owned by HC High BVI
Hao Limo Technology (Beijing) Co. Ltd.
(“Hao Limo”Shanghai Jianchi Supply Chain Company Limited (“Shanghai Jianchi”)
 

●      A PRC company and deemed a wholly foreign owned enterprise (“WOFE”WFOE”)

●      Incorporated on May 10, 2018April 2, 2020

●      Registered capital of $15$10 million

●      A holding company

 WOFE,WFOE, 100% owned by HC High HK

Beijing Tianxing Kunlun Technology Co. Ltd.

(“Beijing Tianxing”)*

●      A PRC limited liability company

●      Incorporated on April 17, 2018

●      Registered capital of $31,839 (RMB 200,000)

●      Engaged in operating leasing business of used luxurious cars

VIE of Hao LimoTongdow Block Chain
Shenzhen Huamucheng Trading Co., Ltd. (“Huamucheng”) 

●      A PRC limited liability company

●      Incorporated on December 30, 2013

●      Registered capital of $1,417,736 (RMB 10 million) with registered capital fully paid-up

●      Engaged in commodity trading business and providing supply chain management services to customers

 VIE of Hao Limo before June 25, 2020, and a wholly owned subsidiary of Shanghai Jianchi

Tongdow Hainan Digital Technology Co., Ltd.

(“Tondow Hainan”)

●      A PRC limited liability company

●      Incorporated on July 16, 2020

●      Registered capital of $1,417,736 (RMB 10 million) with registered capital fully paid-up

●      Engaged in commodity trading business and providing supply chain management services to customers

A wholly owned subsidiary of Shanghai Jianchi

Zhong Hui Dao Ming Investment Management Limited

(“ZHDM HK”)

●      A Hong Kong company

●      Incorporated on March 28, 2007

●      A holding company

100% owned by HC High BVI
Tongdow E-trading Limited (“Tongdow HK”)

●      A Hong Kong company

●      Incorporated on November 25, 2010

●      A holding company

100% owned by HC High BVI

DISPOSITION OF HC High Summit Limited

Historically, one of the Company’s core businesses had been the used luxurious car leasing business conducted through Beijing Tianxing Kunlun Technology Co. Ltd. (“Beijing Tianxing”), an entity that the Company controlled via certain contractual arrangements.

On August 28, 2020, the Company entered into certain share purchase agreement (the “Disposition SPA”) with Vision Loyal, HC High Summit Limited (“HC High HK”) and HC High BVI. Pursuant to the Disposition SPA, Vision Loyal agreed to purchase HC High HK in exchange for nominal consideration of $1.00 based on a valuation report presented by an independent third party valuation firm, Beijing North Asia Asset Assessment Firm. The Company’s board of directors (the “Board”) approved the transaction contemplated by the Disposition SPA (the “Disposition”). The Disposition closed on August 28, 2020.

HC High HK is the sole shareholder of Hao Limo, and controls Beijing Tianxing via a series of contractual arrangements. The list of disposed entities are as follows:

NameRelationship
HC High Summit Limited (“HC High HK”)100% owned by HC High BVI before August 28, 2020
Hao Limo Technology (Beijing) Co. Ltd.
(“Hao Limo”)
WOFE, 100% owned by HC High HK
Beijing Tianxing Kunlun Technology Co. Ltd.
(“Beijing Tianxing”)*
VIE of Hao Limo

 

*As of March 31, 2020,Upon disposition, Beijing Tianxing hasTianxing’ six wholly owned subsidiaries including:and one 60% owned subsidiary were also disposed.

 Beijing Tianrenshijia Apparel Co., Ltd.
 Beijing Blue Light Marching Technology Co., Ltd.
 Beijing Eighty Weili Technology Co., Ltd.
 Beijing Bat Riding Technology Co., Ltd
 Beijing Blue Light Riding Technology Co., Ltd., and
 Car Master (Beijing) Information Consulting Co., Ltd.
Beijing Blue Light Supercar Technology Co., Ltd. (over which the Company previously held 60% equity interest)


1.ORGANIZATION AND BUSINESS DESCRIPTION (CONTINUED)

In addition, the Company has one subsidiary over which the Company has 60% ownership, Beijing Blue Light Super Car Technology Co., Ltd. The remaining 40% of ownership interest is owned by an employeeUpon closing of the Company.Disposition on August 28, 2020, Vision Loyal became the sole shareholder of HC High HK and as a result, assumed all assets and obligations of all the subsidiaries and VIE entities owned or controlled by HC High HK. See Note 4 for details of assets and liabilities of discontinued operations.

EachThe following diagram illustrates our corporate structure as of these subsidiaries owns a license to hold carsthe date of this report, reflecting the Disposition and acquisition of Qianhai Baiyu as discussed further in Beijing or Zhejiang, and was either inactive or generated minimal revenues for the periods ended March 31, 2020 and 2019.“Note 14. Subsequent Events” .

 


2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a)(a)Basis of Presentation

 

The interim unaudited condensed consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

 

The unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2020, have been restated (see Note 15). The unaudited condensed consolidated financial information as of March 31,September 30, 2020 and for the three and nine months ended March 31,September 30, 2020 and 2019 has been prepared without audit, pursuant to the rules and regulations of the SEC and pursuant to Regulation S-X. Certain information and footnote disclosures, which are normally included in annual financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited interim financial information should be read in conjunction with the audited financial statements and the notes thereto, included in the Form 10-K for the fiscal year ended December 31, 2019, which was filed with the SEC on May 29, 2020.

 

In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Company believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2019. The results of operations for the three and nine months ended March 31,September 30, 2020 and 2019 are not necessarily indicative of the results for the full years.

 

(b)(b)Consolidation of variable interest entitiesLoans receivable due from third parties

 

The Company provided loans to certain third parties for the purpose of making use of its cash.

The Company monitors all loans receivable for delinquency and provides for estimated losses for specific receivables that are not likely to be collected. As of March 31,September 30, 2020 and December 31, 2019, the Company’s business was primarily conducted through its two VIEs, Beijing TianxingCompany did not accrue allowance against loans receivables due from third parties. 

(c)Discontinued operation

In accordance with ASC 205-20, Reporting Discontinued Operations and Huamucheng. Beijing TianxingDisclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is engagedrequired to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.

On August 28, 2020 when the Company closed disposition of HC High Summit Limited, the Company’s used luxurious car leasing business met all the conditions required in order to be classified as a discontinued operation (Note 1). Accordingly, the operating results of used luxurious car leasing business are reported as a loss from discontinued operations in the accompanying consolidated financial statements for all periods presented. In addition, the assets and Huamucheng is engagedliabilities related to our used luxurious car leasing business are reported as assets and liabilities of discontinued operations in commoditythe accompanying consolidated balance sheets at December 31, 2019. For additional information, see Note 4, “Disposition of HC High Summit Limited”.

(d)Segment reporting

The Company has two operating business lines, including business with metal products trading and supply chain management business.

services business conducted by Huamucheng (“Commodity Trading and Supply Chain Management Services”) and used luxurious car leasing business (“Used Car Leasing”) conducted by Beijing Tianxing. However, due to changes in our organizational structure associated with the used luxurious car leasing business as a discontinued operation (Note 2(c)), management has determined that the Company now operates in one operating segment with one reporting segment. The following financial statement balances reflectaccounting policies of our one reportable segment are the financial positions of Beijing Tianxing and Huamucheng, which were includedsame as those described in the consolidated balance sheets as of March 31, 2020 and December 31, 2019, respectively:this Note 2.

  As of March 31, 2020  As of December 31, 2019 
  Beijing
Tianxing
  Huamucheng  Total  

Beijing

Tianxing

  Huamucheng  Total 
  (unaudited)  (unaudited)  (unaudited)          
Cash $5,780  $2,184  $7,964  $94,380  $1,730,793  $1,825,173 
Loans receivable from third parties  1,374,581   738,829   2,113,410   1,364,125   -   1,364,125 
Due from TD and Hao Limo*  990,195   -   990,195   966,882   -   966,882 
Due from related parties  292,828   4,360,949   4,653,777   470,154   2,840,729   3,310,883 
Other current assets  148,404   28,330   176,734   164,922   2,848   167,770 
Investment in equity investees  553,154   -   553,154   562,807   -   562,807 
Leasing business assets, net  2,306,133   -   2,306,133   2,426,109   -   2,426,109 
Other noncurrent assets  43,162   375,363   418,525   18,186   -   18,186 
Total Assets $5,714,237  $5,505,654  $11,219,891  $6,067,565  $4,574,370  $10,641,935 
                         
LIABILITIES                        
Advances from customers $14,987  $-  $14,987  $15,249  $-  $15,249 
Other current liabilities  317,481   496,252   813,733   218,688   207,834   426,522 
Third parties loans  2,045,250   141,052   2,186,302   2,080,941   315,729   2,396,670 
Due to related parties  234,329   1,062,965   1,297,294   197,733   166,332   364,065 
Due to TD and Hao Limo **  5,120,488   2,036,116   7,156,604   5,197,531   2,577,356   7,774,887 
Total Liabilities $7,732,535  $3,736,385  $11,468,920  $7,710,142  $3,267,251  $10,977,393 

 

(e)*Receivable due from TD and Hao Limo is eliminated upon consolidation.Reclassification

 

**Payable due to TD and Hao Limo is eliminated upon consolidation.

Certain items in the financial statements of comparative period have been reclassified to conform to the financial statements for the current period, primarily for the effects of discontinued operations.

 


2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(f)(b)Consolidation of variable interest entities (continued)Recent accounting pronouncement

 

In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments (Topic 326)”, which significantly changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life, instead of when incurred. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses”, which amends Subtopic 326-20 (created by ASU No.2016-13) to explicitly state that operating lease receivables are not in the scope of Subtopic 326-20. Additionally, in April 2019, the FASB issued ASU No.2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”, in May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief”, and in November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates”, and ASU No. 2019-11, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses”, to provide further clarifications on certain aspects of ASU No. 2016-13 and to extend the nonpublic entity effective date of ASU No. 2016-13. The followingchanges (as amended) are effective for the Company for annual and interim periods in fiscal years beginning after December 15, 2022, and the Company is in the process of evaluating the potential effect on its consolidated financial statement amounts reflectstatements.

In August 2020, the financial performancesFASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and cash flowsOther Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of Beijing Tianxingaccounting models for convertible debt instruments and Huamucheng,convertible preferred stock. For public business entities, the amendments in ASU 2020-06 are effective for public entities which were included inmeet the definition of a smaller reporting company are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company will adopt ASU 2020-06 effective January 1, 2024. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements forstatements. The effect will largely depend on the three months ended March 31, 2020composition and 2019, respectively:terms of the financial instruments at the time of adoption.

 

  

For the Three Months Ended

March 31, 2020

  

For the Three Months Ended

March 31, 2019

 
  Beijing Tianxing  Huamucheng  Total  

Beijing

Tianxing

  Huamucheng  Total 
  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited) 
Revenue $14,051  $1,469,009  $1,483,060  $399,999  $       -  $399,999 
Cost of revenue $(99,314) $(1,055,860) $(1,155,174) $(237,651) $-  $(237,651)
Operating expenses $(70,613) $(264,900) $(335,513) $(702,041) $-  $(702,041)
Net (loss) income $(213,444) $143,930  $(69,514) $(529,230) $-  $(529,230)
                         
  

For the Three Months Ended

March 31, 2020

  

For the Three Months Ended

March 31, 2019

 
  Beijing Tianxing  Huamucheng  Total  

Beijing

Tianxing

  Huamucheng  Total 
  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited)  (unaudited) 
Net Cash Used in Operating Activities $(94,559) $(295,142) $(389,701) $(342,335) $          -  $(342,335)
Net Cash Used in by Investing Activities  (34,377)  (2,343,539)  (2,377,916)  (999,481)  -   (999,481)
Net Cash Provided by Financing Activities  40,607   913,427   954,034   592,724   -   592,724 
Effect of Exchange Rate Changes on Cash  (271)  (3,355)  (3,627)  20,390   -   20,390 
Net Decrease in Cash  (88,600)  (1,728,609)  (1,817,209)  (728,702)  -   (728,702)
Cash at Beginning of Period  94,380   1,730,793   1,825,173   991,385   -   991,385 
Cash at End of Period $5,780  $2,184  $7,964  $262,683  $-  $262,683 


2.3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)LIQUIDITY

 

(c)Foreign currency translation

The reporting currency ofIn assessing the Company’s liquidity, the Company is United States Dollars (“US$”), which is alsomonitors and analyzes its cash and its ability to generate sufficient cash flow in the Company’s functional currency. HC High BVIfuture to support its operating and HC High HK maintain their book and records in US$, which is also their functional currency.capital expenditure commitments. The Company’s PRC subsidiariesliquidity needs are to meet its working capital requirements and VIEs maintain their books and records in its local currency, the Renminbi Yuan (“RMB”), which is their functional currencies as being the primary currency of the economic environment in which these entities operate.operating expenses obligations.

 

For financial reporting purposes,As of September 30, 2020, the financial statementsCompany had a positive working capital of approximately $91.3 million, among which the Company had a loan due from Shenzhen Xinsuniao Technology Co., Ltd. (“Shenzhen Xinsuniao”) of approximately $85.6 million for the purpose of developing supply chain financing business. Pursuant to the loan agreement, the loan term for each individual loan was twelve months from disbursement, but in practice the loans are revolving every 3 – 4 months. From October 1, 2020 to the date of the PRC subsidiaries and VIEs prepared using RMB, are translated intoreport, the Company’s reporting currency, US$, at the exchange rates quoted by www.oanda.com. Assets and liabilities are translated using the exchange rate at each balance sheet date. Revenue and expenses are translated using average rates prevailing during each reporting period, and shareholders’ equity is translated at historical exchange rates, except for the change in accumulated deficit during the year which is the result of the income statement translation process. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive loss in stockholders’ equity. Translation of amounts from RMB into US$ has been made at the following exchange rates for the respective periods:

  March 31,
2020
  December 31,
2019
 
       
Balance sheet items, except for equity accounts  7.0896   6.9680 

  For the Three Months Ended
March 31,
 
  2020  2019 
       
Items in the statements of operations, comprehensive loss and statements of cash flows  6.9814   6.7485 

Transactions denominated in currencies other than the functional currency are translated into prevailing functional currency at the exchange rates prevailing at the dates of the transactions. The resulting exchange differences are included in the consolidated statements of comprehensive loss.


2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d)Leasing business asset, net

Leasing business asset, net, represents the automobiles that are underlying our automotive lease contracts and is reported at cost, less accumulated depreciation and net of impairment charges and origination fees or costs. Depreciation of vehicles is recorded on a straight-line basis to an estimated residual value over the useful life of nine years. We periodically evaluate our depreciation rate for leased vehicles based on expected residual values and adjust depreciation expense over the remaining life of the lease if deemed necessary.Company fully collected outstanding balance.

 

We have significant investments in the residual values of the assets in our operating lease portfolio. The residual values represent an estimate of the values of the assets at the end of the lease contracts. At contract inception, we determine pricing based on the projected residual value of the lease vehicle. This evaluation is primarily based on a proprietary model, which includes variables such as age, expected mileage, seasonality, segment factors, vehicle type, economic indicators, production cycle, automotive manufacturer incentives, and shifts in used vehicle supply. This internally-generated data is compared against third-party, independent data for reasonableness. Realization of the residual values is dependent on our future ability to market the vehicles under the prevailing market conditions. Over the life of the lease, we evaluate the adequacy of our estimate of the residual value and make adjustments to the depreciation rates to the extent the expected value of the vehicle at lease termination changes. In addition to estimating the residual value at lease termination, we also evaluate the current value of the leasing business asset and test for impairment to the extent necessary when there is an indication of impairment based on market considerations and portfolio characteristics. Impairment is determined to exist if fair value of the leased asset is less than carrying value and it is determined that the net carrying value is not recoverable. The net carrying value of a leased asset is not recoverable if it exceeds the sum of the undiscounted expected future cash flows expected to result from the lease payments and the estimated residual value upon eventual disposition. If our leasing business assets are considered to be impaired, the impairment is measured as the amount by which the carrying amount of the assets exceeds the fair value as estimated by discounted cash flows. We recognize rental income on our operating leases when collection is reasonably assured.

(e)Income from operating lease

Income from operating lease represents lease origination fees and rental fee, netting off lease origination costs. In accordance with ASC 842, Leases,Going forward, the Company recognized the incomeplans to fund its operations through revenue generated from operating lease on a straight-line basis over the scheduled lease term. 


2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f)Revenue recognition

The Company generates income or revenue from the following source (1) income from operating lease of luxury cars, which is accounted for in accordance with ASC 842, Leases, the Company recognized the income from operating lease on a straight-line basis over the scheduled lease term; (2) Revenue associated with commodity trading and revenue associated with supply chain management services are accounted for in accordance with ASC 606.

On January 1, 2019, the Company adopted ASC Topic 606 Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective approach. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. This new guidance provides a five-step analysis in determining when and how revenue is recognized. Under the new guidance, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the new guidance requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company has assessed the impact of the new guidance by reviewing its existing customer contracts and current accounting policies and practices to identify differences that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control and principal versus agent considerations. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606 and therefore there was no material changes to the Company’s consolidated financial statements upon adoption of ASC 606.

Revenue from sales of commodity products

In December 2019, the Company started its commodity trading business, throughfunds from its VIE Huamucheng. The commodity trading business primarily involves purchasing non-ferrous metal product, including aluminium ingots, copper, silver, and gold from upstream metal and mineral suppliers and then selling to downstream customers. The Company makes advance payments to upstream suppliers to purchase the metal products, requests suppliers to ship products to designated warehouse. Upon obtaining purchase orders and receipt of full advance payments from downstream customers, the Company instructs warehouse agent to transfer ownership of products to customers. The transaction is normally completed within a short period of time, ranging from a few days to a month.

The Company’s contracts with customers for metal commodity trading are fixed-price contracts. The Company does not grant customers with incentives or return rights, and therefore, there is no variable considerations derived from the contracts. The Company acts as the principal because the Company is responsible for fulfilling the promise to provide the specified metal products to customers, is subject to inventory risk before the product ownership and risk are transferred and has the discretion in establishing prices. As a result, revenue is recognized on a gross basis. The Company recognizes revenue when the product ownership is transferred to its customers.

For the three months ended March 31, 2020, the Company sold non-ferrous metal products to two customers and generated revenue of $1,053,632.

Revenue from supply chain management services

In connection with the Company’s commodity sales, in order to help customers to obtain sufficient funds to purchase various metal products and also help upstream metal and mineral suppliers to sell their metal products, the Company launched its supply chain management service business in December 2019, which primarily consisted of loan recommendation service fees and distribution service fees. For the three months ended March 31, 2020, the Company provided loan recommendation services to customers.

10

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f)Revenue recognition (continued)

-Loan recommendation service fees

The Company recommends customers who have financing need for commodity trading to various financial institutions and assist these customers to obtain loans from the financial institutions. The Company’s services include conducting customer screening and credit check, matching customer with right financial institution and assisting in customer’s applications and related paperwork etc. The Company receives a referral fee from the customers if funding is secured. Such revenue is recognized at the point when referral services are performed and the related funds are drawdown by customer. For the three months ended March 31, 2020, the Company provided loan recommendation services to six customers and earned revenue of $415,377 from loan recommendation services.

(g)Income taxes

The Company accounts for income taxes in accordance with the U.S. GAAP for income taxes. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes.

The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis. Deferred tax assets are recognized to the extent that it is probable that taxable income to be utilized with prior net operating loss carried forward. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

11

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(g)Income taxes (continued)

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company did not have unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit as of March 31, 2020 and December 31, 2019. As of March 31, 2020, all of the Company’s income tax returns for the tax years ended December 31, 2015 through December 31, 2019 remain open for statutory examination by relevant tax authorities.

(h)Risks and uncertainties

1)Credit risk

Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents. The maximum exposure of such assets to credit risk is their carrying amount as at the balance sheet dates. As of March 31, 2020, approximately $17,187 was deposited with a bank in the United States which was insured by the government up to $250,000. As of March 31, 2020 and December 31, 2019, approximately $9,914 and $2,399,300, respectively, were primarily deposited in financial institutions located in Mainland China, which were uninsured by the government authority. To limit exposure to credit risk relating to deposits, the Company primarily place cash deposits with large financial institutions in China which management believes are of high credit quality.

The Company’s operations are carried out in Mainland China. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRCprivate placements as well as by the general state of the PRC’s economy. In addition,financial support commitments from the Company’s business may be influenced by changes in governmental policies with respect to lawsChief Executive Officer and regulations, anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation, and the extraction of mining resources, among other factors.major shareholders.

 

(b)Liquidity risk

The Company is also exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and liquidity to meet its commitments and business needs. Liquidity risk is controlled byBased on above operating plan, the application of financial position analysis and monitoring procedures. When necessary,management believes that the Company will turn to other financial institutions andcontinue as a going concern in the owners to obtain short-term funding to meet the liquidity shortage.

(c)Foreign currency risk

Substantially all of the Company’s operating activities and the Company’s major assets and liabilities are denominated in RMB, except for the cash deposit of approximately $17,187 which was in U.S. dollars as of March 31, 2020, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the Peoples’ Bank of China (“PBOC”) or other authorized financial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts.following 12 months.

 

The value of RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. Where there is a significant change in value of RMB, the gains and losses resulting from translation of financial statements of a foreign subsidiary will be significant affected.

(d)VIE risk

It is possible that the Company’s VIE agreements with Beijing Tianxing, and Huamucheng would not be enforceable in China if PRC government authorities or courts were to find that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event that the Company were unable to enforce these contractual arrangements, the Company would not be able to exert effective control over the VIEs. Consequently, the VIEs’ results of operations, assets and liabilities would not be included in the Company’s consolidated financial statements. If such were the case, the Company’s cash flows, financial position, and operating performance would be materially adversely affected.

1210

 

 

4.3.DISPOSITION OF HC HIGH SUMMIT LIMITED

On August 28, 2020, the Company entered into the Disposition SPA by and among Vision Loyal, HC High HK and HC High BVI. Pursuant to the Disposition SPA, Vision Loyal agreed to purchase the HC High HK in exchange for nominal consideration of $1.00 based on a valuation report presented by a third party valuation firm. The Board approved the transaction contemplated by the Disposition SPA. The Disposition closed on August 28, 2020.

Upon completion of the Disposition, the Company does not bear any contractual commitment or obligation to the used luxurious car leasing business or the employees of HC High HK, nor to Vision Loyal.

On August 28, 2020, management was authorized to approve and commit to a plan to sell HC High HK, therefore the major assets and liabilities relevant to the disposal are reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes, are reported as components of net income (loss) separate from the net loss of continuing operations in accordance with ASC 205-20-45. The assets relevant to the sale of HC High Summit Limited with a carrying value of $5.32 million were classified as assets held for sale as of August 28, 2020. The assets of discontinued operations mainly consisted of loan receivables due from third parties of $1.57 million due from third parties and leasing business assets (used luxurious cars) of $2.23 million. The liabilities relevant to the sale of HC High Summit Limited with a carrying value of $2.61 million were classified as liabilities held for sale, which was comprised of loans of $1.17 million due to third parties and due to related parties of $1.06 million. A net loss of $2.99 million was recognized as the net loss from disposal of discontinued operation, all attributable to the Company’s shareholders. The following is a reconciliation of net loss of $2.99 million from disposition in the consolidated statements of operations and comprehensive income (loss):

  Fair value 
    
Consideration in exchange for the disposal $1 
Noncontrolling interest of HC High Summit Limited  (15,645)
Less: Net assets (comprised of assets of $5,320,768 and liabilities of $2,606,257)  (2,714,511)
Loss from disposal  (2,730,155)
Other comprehensive income  (258,961)
Net loss from discontinued operations $(2,989,116)

The following is a reconciliation of the carrying amounts of major classes of assets and liabilities held for sale in the in the consolidated balance sheet as of August 28, 2020 and December 31, 2019. 

  August 28,
2020
  December 31,
2019
 
Carrying amounts of major classes of assets held for sale:      
Cash $84  $669,407 
Loans receivable from third parties  1,568,418   1,379,050 
Due from related parties  463,391   470,154 
Other current assets  488,911   167,846 
Investments in equity investees  554,711   562,807 
Leasing business assets, net  2,229,819   2,426,109 
Other noncurrent assets  15,434   68,416 
Total assets of disposal group classified as held for sale $5,320,768  $5,743,789 
Carrying amounts of major classes of liabilities held for sale:        
Third party loans payable $1,168,660  $2,052,236 
Due to related parties  1,056,249   1,003,154 
Other current liabilities  381,348   234,750 
Liabilities directly associated with the assets classified as held for sale $2,606,257  $3,290,140 


4.DISPOSITION OF HC HIGH SUMMIT LIMITED (CONTINUED)

The following is a reconciliation of the amounts of major classes of income from operations classified as discontinued operations in the consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2020 and 2019.

  For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
 
  2020  2019  2020  2019 
Discontinued Operations            
Income from operating leases $-  $564,614  $13,946  $1,505,508 
Cost of operating lease  -   (372,632)  (323,608)  (1,063,305)
Total operating cost and expenses  -   (351,969)  (175,959)  (1,569,833)
Total other income (expenses), net  -   27,089   (67,070)  (12,809)
Income tax expenses  -   -   -   - 
Net loss from disposal of discontinued operations  (2,989,116)  -   (2,989,116)  - 
Net Loss from Discontinued Operations $(2,989,116) $(132,898) $(3,541,807) $(1,140,439)

5.LOANS RECEIVABLE FROM THIRD PARTIES

 

  September 30,
2020
  December 31,
2019
 
       
Loans receivable from Shenzhen Xinsuniao $85,641,601  $- 
Loans receivable from Shenzhen Qianhai Baiyu Supply Chain Co., Ltd. (“Qianhai Baiyu”)  1,669,342   - 
Loans receivable from others  -   576,647 
Loan receivable from other third parties $87,310,943  $576,647 

Accounts

Loans receivable net consist of the following:from Shenzhen Xinsuniao

 

  

March 31,

2020

  December 31,
2019
 
       
Loans receivable from third parties $3,785,167  $2,005,927 
Less: loan receivable from third parties, current  3,735,799   1,955,697 
Loan receivable from a third party, noncurrent $49,368  $50,230 

During the three months endedOn March 31,25, 2020, and 2019, the Company entered into a revolving credit facility with Shenzhen Xinsuniao to provide a credit line of RMB 568 million or approximately $80 million to Shenzhen Xinsuniao. Shenzhen Xinsuniao was reputable for their extensive experiences in supply chain services for commodities trading.

Pursuant to the loan agreementsagreement, the proceeds should solely be used for the operations of the commodity trading business including sales and purchase of commodity products, and supply chain management services. Each loan was repayable in twelve months from disbursement, with three and two third parties, respectively, and advanced an aggregate of $1,831,708 and $592,724, respectively, to these third parties as interest-bearing loans. Thea per annum interest rate ranges between 9%of 10%. However in practice, the loans are generally revolving every three months, which matches the transaction turnover of Shenzhen Xinsuniao and 16% per annum.Qianhai Baiyu. From October 1, 2020 to the date of this report, the Company fully collected the outstanding balance.

The revolving credit facility lasts for a period of two years. Shenzhen Xinsuniao pledged 100% of its equity interest in Qianhai Baiyu, which enterprise value was estimated at approximately $106 million. For the nine months ended September 30, 2020, the Company made loans aggregating $155.9 million to Shenzhen Xinsuniao and recognized interest income of $3.6 million. As of March 31,September 30, 2020, the balances of loanCompany collected interest income from Shenzhen Xinsuniao. For the nine months ended September 30, 2020, the Company also collected loans principal and interest payment were due in September 2020 through August 2021. The Company classified loan receivables due before December 31, 2020 as current assets,of $72.6 million and those after December 31, 2020 as noncurrent assets.$1.8 million, respectively, from Shenzhen Xinsuniao.


5.LOANS RECEIVABLE FROM THIRD PARTIES (CONTINUED)

 

Management periodically assesses the collectability of these third-party loans receivable. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of March 31,September 30, 2020, and December 31, 2019, there was no allowance recorded as the Company considers all of the loans receivable fully collectible. In April

Loans receivable from Qianhai Baiyu

The Company had a balance of $1,669,342 due from Qianhai Baiyu, which was recorded as a balance due from a related party because Qianhai Biayu was controlled by Mr. Zhiping Chen, the legal representative of Huamucheng before March 31, 2020. On March 31, 2020, Mr. Zhiping Cheng transferred its equity interest in Qianhai Baiyu to unrelated third parties, and Qianhai Baiyu became a third party to the Company. As of September 30, 2020, the Company terminated certain third-party loanclassified the balance due from Qianhai Baiyu to the account of “loans receivable contractsdue from third parties.” The Company charged an interest rate of 10% per annum. Principal and interest are repaid on maturity of the loan. For the nine months ended September 30, 2020, the Company made loans of $1,665,495 to and collected approximately $1.0 million$2,846,325 from Qianhai Baiyu. For the three and nine months ended September 30, 2020, the Company recognized interest income of $18,275 and $96,833, respectively, from Qianhai Baiyu.

Management periodically assesses the collectability of these loans receivable. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of September 30, 2020, there was no allowance recorded as the Company considers all of the loans receivable fully collectible. 

Loans receivable from other third parties

As of December 31, 2019, the Company had balance of $576,647 due from three third party individuals who were engaged in used luxurious car leasing business. Pursuant to the loan agreements, these third-parties.  loans matured before December 2020, and the Company charged the third parties interest rates ranging between 11% and 13% per annum. Principal and interest are repaid on maturity of the loan. Upon disposition of the used luxurious car leasing business, the management assessed the collectability of these third-party loans receivable was remoted and wrote off the balance of $576,647 into “net loss from discontinued operations”.

 

Interest income of $85,275$1,828,080 and $12,429$nil was accruedrecognized for the three months ended March 31,September 30, 2020 and 2019, respectively. Interest income of $3,728,093 and $nil was accrued for the nine months ended September 30, 2020 and 2019. As of March 31,September 30, 2020 and December 31, 2019, the Company recorded an interest receivable of $216,271$126,048 and $133,742$nil as reflected under “other current assets” in the unaudited condensed consolidated balance sheets.

 

4.6.INVESTMENTS IN EQUITY INVESTEES

 

As of March 31,September 30, 2020, the Company’s investments in equity investees were comprised of the following:

 

  Investment  % of ownership  Investment
dates
         
Chengdu Jianluo Technology Co., Ltd. (“Chengdu Jianluo”) (a) $282,103   40% June 28, 2019
Shanghai Huxin Technology Co., Ltd. (“Shanghai Huxin”) (a)  282,103   40% July 4, 2019
Hangzhou Yihe Network Technology Co., Ltd. (“Hangzhou Yihe”) (b)  410,000   20% December 17, 2019
   974,206       
Less: Share of results of equity investees  (11,052)      
  $963,154       
  Investment  % of ownership  Investment
dates
         
Hangzhou Yihe Network Technology Co., Ltd. (“Hangzhou Yihe”)  410,000   20% December 17, 2019
Less: Share of results of equity investees  -       
  $410,000       

 

(a)On June 28, 2019 and July 4, 2019, the Company made investments of $282,103 (RMB 2,000,000) and $282,103 (RMB 2,000,000), for 40% of the ownership interest in each of these two investees, respectively. The purpose of such investment is to establish a cooperative business partnership with these investees and utilize their marketing strength and customer network to bring in more customers for the Company’s car leasing services in Chengdu and Shanghai markets.

October 14, 2019, the Company entered into an agreement with Hangzhou Yihe and agreed to issue 1,253,814 shares of the Company’s common stock to acquire 20% equity interest in Hangzhou Yihe. On December 17, 2019, the Company closed the acquisition.

(b)October 14, 2019, the Company entered into an agreement with Hangzhou Yihe and agreed to issue 1,253,814 shares of the Company’s common stock to acquire 20% equity interest in Hangzhou Yihe. Hangzhou Yihe was engaged in car leasing business, and the acquisition was for the purpose of producing synergy between the Company and Hangzhou Yihe so as to promote car leasing business in Zhejiang province.

 

For the three and nine months ended March 31,September 30, 2020, the three equity investees were closedHangzhou Yihe did not resume operations as affected by COVID-19. As a result, the Company had no share of results of equity investees for the period. As of March 31, 2020 and December 31, 2019, the balance of share of results of equity investees was $11,052 and $11,245, respectively. Because these equity investees gradually resumed work since April, the Company expected the closure of business was temporary, andthe management determined the decline in fair value below the carrying value is not other-than-temporary. As of March 31,September 30, 2020, the Company did not provide impairment against the investments in equity investees.


5.7.LEASING BUSINESS ASSETS, NETOTHER CURRENT LIABILITIES

 

As of March 31, 2020 and December 31, 2019, the Company had investments in eleven and eleven used luxury cars, respectively. 

As of March 31, 2020 and December 31, 2019, the Company, by reference to the market price, determined the fair value of nil and four used luxurious car were below the original carrying amount of the leased asset and had accumulated impairment of $316,683 and $322,210, respectively. For the three months ended March 31, 2020 and 2019, the Company recorded impairment of $nil and $96,318, respectively, for these leasing business assets.

As of the March 31, 2020 and December 31, 2019, the balance of the used luxurious cars is comprised of the following:

  March 31,
2020
  December 31,
2019
 
       
Used luxury cars $2,747,194  $2,795,136 
Less: accumulated depreciation  (441,061)  (369,027)
  $2,306,133  $2,426,109 

For the three months ended March 31, 2020 and 2019, the Company charged depreciation expenses of $79,578 and $46,858 on used luxurious cars, respectively.

As of March 31, 2020 and December 31, 2019, eight used luxurious cars with an aggregated carrying amount of $1,883,879 were pledged for borrowings from third parties (Note 6).

6.THIRD PARTIES LOANS PAYABLE

  March 31,
2020
  December 31,
2019
 
       
Third parties loans payable $2,369,669  $2,367,967 

The borrowings are due through December 2020. The purpose of such borrowings was to use the funds to purchase used luxurious cars. The interest rate charged on the borrowings ranged between 7% and 11.5%. For the three months ended March 31, 2020 and 2019, the Company accrued interest expenses of $98,115 and $6,869 on the borrowings, respectively.

As of March 31, 2020 and December 31, 2019, eight used luxurious cars with an aggregated carrying amount of $1,883,879 were pledged for borrowings from third parties (see Note 5).

  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  610,574   35,169 
Others  15,499   7,503 
  $656,940  $200,602 

 

7.8.STOCK SUBSCRIPTION ADVANCE FROM SHAREHOLDERSSHAREHOLDERS/STOCK SUBSCRIPTION RECEIVABLE

 

On November 21, 2019, the Company entered into a securities purchase agreement with certain investors (the “Purchasers”), pursuant to which the Company agreed to sell an aggregate of 2,000,000 shares of its common stock, par value $0.001 per share, at a per share purchase price of $0.80. As of December 31, 2019, the Company received the proceeds of $1,600,000 in advance from these investorsthe Purchasers and recorded the amount as “stock subscription advance from shareholder”. On February 5, 2020, the Company issued 2,000,000 shares of Common Stock to the Purchasers, and reversed the amount in the account of “stock subscription advance from shareholder”.

 

On September 1, 2020, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed to sell an aggregate of 2,000,000 shares of its common stock, par value $0.001 per share, at a per share purchase price of $2.50. As of March 31,September 30, 2020, and December 31, 2019, the Company had stockissued the shares but has not received the proceeds of $5,000,000. The Company recorded the amount in the account of “stock subscription advance from shareholder of $nil and $1,600,000, respectively.receivable”.

14

 

8.9.CAPITAL TRANSACTIONS

 

Common Stock

 

On January 22, 2020, the Company entered into certain securities purchase agreement with certain investors, pursuant to which the Company agreed to sell an aggregate of 15,000,000 shares of Common Stock, at a per share purchase price of $0.90. The transaction was consummated on March 23, 2020 by issuance of 15,000,000 shares of Common Stock. The Company received proceeds of $13,500,000 in April 2020.

 

Convertible Promissory Notes 

On January 22, 2020, the Company also agreed to sell unsecured senior convertible promissory notes (“Notes”) in the aggregate principal amount of $30,000,000 accompanied by warrants to purchase 20,000,000 shares of Common Stock issuable upon conversion of the Notes at an exercise price of $1.80.$1.80 (the “2020 Warrants” ). On March 23, 2020, the Company issued the Notes and Warrants to the investors. In April 2020, the Company received the proceeds of $30,000,000 from the issuance of Notes and 2020 Warrants.

 

The Notes have a maturity date of 12 months with an interest rate of 7.5% per annum. Holders have the right to convert all or any part of the Notes into shares of Common Stock at a conversion price of $1.50 per share 30 days after its date of issuance. The Company retains the right to prepay the Note at any time prior to conversion with an amount in cash equal to 107.5% of the principal that the Company elects to prepay.

 

The 2020 Warrants are exercisable immediately upon the date of issuance at the exercise price of $1.80 for cash (the Warrant Shares“Warrant Shares”). The 2020 Warrants may also be exercised cashless if at any time after the six-month anniversary of the issuance date. There is no effective registration statement registering, or no current prospectus available for the resale of the Warrant Shares, if exercised, Thethe 2020 Warrants will expire five years from date of issuance. The 2020 Warrants are subject to anti-dilution provisions to reflect stock dividends and splits or other similar transactions. The 2020 Warrants contain a mandatory exercise right for the Company to force exercise of the 2020 Warrants if the Company’s common stock trades at or above $3.00 for 20 consecutive trading days, provided, among other things, that the shares issuable upon exercise of the are registered or may be sold pursuant to Rule 144 and the daily trading volume exceeds 300,000 shares of Common stock per trading day on each trading day in a period of 20 consecutive trading days prior to the applicable date.

The Company applied Black-Scholes model to determine the fair value of the 2020 Warrants at $3.42 million. Significant estimates and assumptions used included stock price on January 22, 2020 of $1.52 per share, risk-free interest rate of six month of 1.52%, time to maturity of 2.5 years, and volatility of 25.99%. 


9.CAPITAL TRANSACIONS (CONTINUED)

The proceeds of $30 million must be allocated between the Note and the 2020 Warrants, based on the relative fair value. The ratio of the relative fair values of the Notes and the Warrants was 89.8% to 10.2%. After allocating 10.2%, or $3.06 million, of the proceeds to the 2020 Warrants, the Company estimated the embedded conversion option within the Notes is beneficial to the holders, because the effective conversion price was $1.35 ($27.0 million/20 million shares), which was below the Company’s share price of $1.52 on January 22, 2020. The fair value of this beneficial conversion feature was estimated to be $3.4 million, and was recorded to debt discount, to be amortized to interest expense using the effective interest method over the term of the Note.

The total Notes discount was recognized at $6.46 million ($3.06 million from the allocation of proceeds to the Warrants and an additional $3.4 million from the measurement of the intrinsic value of the conversion option). The Note discount was initially recognized as a reduction to the carrying amount of the Notes and an addition to paid-in capital, and was to be subsequently amortized to interest expense using the effective interest method over the Note period.

 

In April 2020, the Holders elected to convert the Notes at a conversion price of $1.50 per share and also exercise the Warrants at an exercise price of $1.80 per share, and paid a cash consideration of $36,000,000 for the exercise of the Warrants by April 15, 2020. As a result, an aggregate of 40,000,000 shares of the Company’s Common Stock were issued onon May 18, 2020. The Company received proceeds aggregating $66,000,000 from the transaction, and upon settlement of the Note and the 2020 Warrants, the Company immediately expensed the Note discount of $6.46 million For the nine months ended September 30, 2020, the Company recognized amortization of beneficial conversion feature relating to issuance of convertible notes of $3.4 million and amortization of relative fair value of warrants relating to issuance of conversion notes of $3.06 million.

 

BecauseDuring July 2020 through August 2020, the holders of warrants issued in direct offering closed on April 11, 2019 (“April Offer”) elected to exercise 167,978 shares of warrants at an exercise price of $2.2, and exercise 1,502,022 shares of warrants at cashless exercise. The Company received proceeds of $369,522 through escrow account and issued 545,401 shares of common stocks.

On March 10, 2021, the Company did not receiveentered into certain waiver and warrant exercise agreements (the “Exercise Agreement”) with each holders. Pursuant to the proceeds until April 2020,Exercise Agreement, in order to induce the Holders did not haveholders to exercise all of the conversion rightsoutstanding Original Warrants cashlessly, pursuant to the terms of either convertible notes or warrants until payment were made. Accordinglyand subject to beneficial ownership limitations contained in the Original Warrants, the Company did not record accounting book onagreed to waive the transaction.Holders’ obligation to pay such portion of the exercise price of each of the May Warrants in excess of $0.95 per share and each of the April Warrants in excess of $1.17 per share, immediately prior to the time of exercise of such Original Warrants. Upon the exercise of all the Original Warrants, the Company will issue a total of 808,891 shares of Common Shares (the “Warrant Shares”) to the Holders.


8.CAPITAL TRANSACIONS (CONTINUED)

 

Warrants

 

A summary of warrants activity for the threenine months ended March 31,September 30, 2020 was as follows:

 

  Number of
shares
  Weighted
average life
 Weighted
average
exercise
price
 
         
Balance of warrants outstanding 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 of warrants outstanding as of September 30, 2020  1,363,370  3.63 years  1.90 


9.Number of
shares
Weighted
average life
Expiration
dates
Balance of warrants outstanding as of December 31, 20193,033,3704.38 years
Grant of warrants during the three months ended March 31, 2020-
Exercise of warrants during the three months ended March 31, 2020-
Forfeiture of warrants during the three months ended March 31, 2020-
Balance of warrants outstanding as of March 31, 20203,033,3703.78 yearsCAPITAL TRANSACIONS (CONTINUED)

  

As of March 31,September 30, 2020 and December 31, 2019, the Company had 3,033,370 shares of warrants, among which 273,370 shares of warrants were issued to two individuals in private placements, and 2,760,000 shares of awrrantswarrants were issued in two direct offerings closed on May 20, 2019 (“May Offering”) and April 11, 2019 (“April Offering”)

 

In connection with April Offering, the Company issued warrants to investors to purchase a total of 1,680,000 ordinary shares with a warrant term of five (5) years. The warrants have an exercise price of $2.20 per share. On May 20, 2019, the exercise price was reduced to $1.32, and on August 30, 2019 the exercise price was revised to $2.20.

 

In connection with May Offering, the Company issued warrants to investors to purchase a total of 1,080,000 ordinary shares with a warrant term of five and a half (5.5) years. The warrants have an exercise price of $1.32 per share.

 

On August 30, 2019, the Company updated the estimation of fair value of warrants issued on April 11, 2019 as a result of the change in exercise price of the warrants from $1.32 to $2.20. Accordingly the fair value of the Replacement Warrant decreased from $1,638,000 to $1,357,440. 

 

Both warrants are subject to anti-dilution provisions to reflect stock dividends and splits or other similar transactions, but not as a result of future securities offerings at lower prices. The warrants did not meet the definition of liabilities or derivatives, and as such they are classified as an equity.

 

On April 11, 2019 and May 20, 2019, the Company estimated fair value of the both warrants at $1,638,000 and $762,480, respectively, using the Black-Scholes valuation model, which took into consideration the underlying price of ordinary shares, a risk-free interest rate, expected term and expected volatility. As a result, the valuation of the warrant was categorized as Level 3 in accordance with ASC 820, “Fair Value Measurement”. 


8.CAPITAL TRANSACIONS (CONTINUED)

Warrants (continued)

 

The key assumptionassumptions used in estimates are as follows:

 

 April 11, August 30, May 20,  April 11, August 30, May 20, 
 2019  2019  2019  2019  2019  2019 
    (Replacement Warrants)        (Replacement Warrants)    
Terms of warrants  60 months   55.3 months   66 months 
Price of underlying stock $1.71  $1.71  $1.32 
Terms of warrants (in months)  60.0   55.3   66.0 
Exercise price  1.32   2.20   1.32  $1.32  $2.20  $1.32 
Risk free rate of interest  2.77%  2.77%  2.77%  2.77%  2.77%  2.77%
Dividend yield  0.00%  0.00%  0.00%  0.00%  0.00%  0.00%
Annualized volatility of underlying stock  55.6%  63.45%  57.04%  55.6%  63.45%  57.04%

 

9.LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per common share for the three months ended March 31, 2020, respectively:

  For the Three Months Ended
March 31,
 
  2020  2019 
       
Net loss attributable to TD Holdings, Inc.’s Stockholders $(135,703) $(1,829,826)
   ��     
Weighted Average Shares Outstanding-Basic and Diluted  13,673,023   5,169,041 
Loss per share - basic and diluted        
Net loss per share – basic and diluted $(0.01) $(0.35)

Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is the same as basic loss per share due to the lack of dilutive items in the Company for the three months ended March 31, 2020 and 2019. The number of warrants is excluded from the computation as the anti-dilutive effect.


10.INCOME TAXES

 

Effective January 1, 2008, the New Taxation Law of PRC stipulates that domestic enterprises and foreign invested enterprises (the “FIEs”) are subject to a uniform tax rate of 25%. Under the PRC tax law, companies are required to make quarterly estimate payments based on 25% tax rate; companies that received preferential tax rates are also required to use a 25% tax rate for their installment tax payments. The overpayment, however, will not be refunded and can only be used to offset future tax liabilities.


10.INCOME TAXES (CONTINUED)

 

The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. For the three and nine months ended March 31,September 30, 2020, the Company had no unrecognized tax benefits. Due to uncertainties surrounding future utilization, the Company estimates there will not be sufficient future income to realize the deferred tax assets for certain subsidiaries and a VIE.subsidiaries. As of March 31,September 30, 2020 and December 31, 2019, the Company had deferred tax assets of $3,635,446$5,305,479 and $3,574,333,$2,933,705, respectively. The Company maintains a full valuation allowance on its net deferred tax assets as of March 31,September 30, 2020.

 

The Company does not anticipate any significant increase to its liability for unrecognized tax benefit within the next 12 months. The Company will classify interest and penalties related to income tax matters, if any, in income tax expense.

 

For the three months ended March 31,September 30, 2020 and 2019, the Company had current income tax expenses of $48,380$1,149,563 generated by a profitable VIEHuamucheng and $nil, respectively, and deferred income tax expenses of $nil and $nil, respectively. For the nine months ended September 30, 2020 and 2019, the Company had current income tax expenses of $1,573,531 generated by Huamucheng and $nil, respectively, and deferred income tax expenses of $nil and $nil, respectively.

 

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Interest and penalties related to uncertain tax positions are recognized and recorded as necessary in the provision for income taxes. The Company is subject to income taxes in the PRC. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment of taxes is more than RMB 100,000. In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. There were no uncertain tax positions as of March 31,September 30, 2020 and December 31, 2019 and the Company does not believe that its unrecognized tax benefits will change over the next twelve months.

 


11.RELATED PARTY TRANSACTIONS AND BALANCES

 

1)Nature of relationships with related parties

Name Relationship with the Company

Chengdu Jianluo Technology Co., Ltd.

(“Chengdu Jianluo”)

An associate of the Company, over which the Company has 40% equity interest and exercises significant influence

Shanghai Huxin Technology Co., Ltd.

(“Shanghai Huxin”)

An associate of the Company, over which the Company has 40% equity interest and exercises significant influence

Shenzhen Qianhai Baiyu Supply Chain Co., Ltd.

(“Qianhai Baiyu”)

 Controlled by Mr. Zhiping Chen, the legal representative of Huamucheng, prior to March 31, 2020
Guangzhou Chengji Investment Development Co., Ltd.
(“Guangzhou Chengji”)
 Controlled by Mr. Weicheng Pan, who is an independent director of the Company.
Jiaxi Gao

Yunfeihu International E-commerce Group Co., Ltd

(“Yunfeihu”)

 Chief Executive OfficeAn affiliate of the Company, prior to January 9, 2020over which an immediate family member of Chief Executive Officer owns equity interest and plays a role of director and senior management

Shenzhen Tongdow International Trade Co., Ltd.

(“TD International Trade”)

Controlled by an immediate family member of Chief Executive Officer of the Company

Guangdong Tongdow Xinyi Cable New Material Co., Ltd.

(“Guangdong TD”)

Controlled by an immediate family member of Chief Executive Officer of the Company

Yangzhou Tongdow E-commerce Co., Ltd.

(“Yangzhou TD”)

Controlled by an immediate family member of Chief Executive Officer of the Company

Shenzhen Meifu Capital Co., Ltd.

(“Shenzhen Meifu”)

Controlled by Chief Executive Officer of the Company
Guotao Deng Legal representative of an entity over which the Company exercised significant influence
Tao SunSenior Management of the Company
Shun LiLegal representative of Beijing Tianxing
Lu ZhaoSenior Management of the Company

11.RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)Huamucheng before December 31, 2019

 

2)Balances with related parties

 

As of March 31,September 30, 2020 and December 31, 2019, the balances with related parties were as follows:

 

-Due from related parties

  September 30,
2020
  December 31,
2019
 
       
Qianhai Baiyu (i) $-  $2,840,728 
TD International Trade (ii)  1,469,875   - 
Total due from related parties $1,469,875  $2,840,728 

 

  March 31,
2020
  December 31,
2019
 
       
Qianhai Baiyu (i) $4,360,948  $2,840,728 
Chengdu Jianluo (ii)  444,587   452,346 
Shanghai Huxin (iii)  17,503   17,809 
Total Due from related parties $4,823,038  $3,310,883 

(i)The balance due from Qianhai Baiyu represented a loan principal and interest due from the related party. The Company charged the related party interest rates 10% per annum. Principal and interest are repaid on maturity of the loan. Interest income amounted to $54,193 and $nil for the three months endedOn March 31, 2020, Mr. Zhiping Chen transferred his controlling equity interest to an unrelated third party and 2019. TheQianhai Baiyu was not a related party of the Company. As of September 30, 2020, the Company classified the balance of due from Qianhai Baiyu is fully collected as of the date of this report.to “Loans receivable from third parties” (Note 5).

 

(i)As of March 31, 2020, the balance due from Chengdu Jianluo consisted of receivables for transfers of two used luxurious cars at consideration aggregating $461,302, netting off against car-related fees due to the related party of $16,715.

As of December 31, 2019, the balance due from Chengdu Jianluo consisted of receivables for transfers of two used luxurious cars at consideration aggregating $461,513, netting off against car-related fees due to the related party of $17,006.

The balance was fully collected as of the date of this report.

(ii)

The balance due from Shanghai HuxinTD International Trade represented a loan due from the related party. The balance is collected on demand, and no interest income is charged to the associate. The balance was fully collected as of the date of this report.prepayments for commodity metal products.


11.RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

 

2)Balances with related parties (continued)

 

-Due to related parties, current

 

  March 31,
2020
  December 31,
2019
 
       
Guangzhou Chengji (1) $1,920,589  $970,318 
Lu Zhao (2)  70,306   33,269 
Jiaxi Gao (3)  7,994   8,134 
Tao Sun (3)  6,515   4,206 
Guotao Deng (3)  487   1,435 
Total $2,005,891  $1,017,362 

  September 30,
2020
  December 31,
2019
 
       
Guangzhou Chengji (1) $1,771,574  $164,897 
Shenzhen Meifu (2)  304,999   - 
Guotao Deng (3)  -   1,435 
Total $2,076,573  $166,332 

 

(1)The balance due to Guangzhou Chengji represents loan principal and interest due to the related parties. For the nine months ended September 30, 2020, the Company borrowed a loan of $1,441,461 from Guangzhou Chengji. The loanLoan has an annual interest rate of 8% per annum with a maturity date of September 4, 2020.

(2)As of March 31, 2020 and December 31, 2019, the balance due to Lu Zhao consisted of the operating expenses of $2,821 and $2,870, respectively, which was paid by the related party on behalf the Company and is payable on demand and interest free, and loan principal and interest aggregating $67,485 and $$30,399 due to the related party. The loans have an interest rate of 10% per annum with a maturity date of December 4, 2020. For the three and nine months ended September 30, 2020, the Company accrued interest expenses of $29,949 and $67,106, respectively.

(2)

As of September 30, 2020, the balance due to Shenzhen Meifu represented advances from the related party for supply chain management services.

(3)

The balances due to Jiaxin Gao, Guotao Deng and Tao Sun representsrepresent the operating expenses paid by the related parties on behalf of the Company. The balance is payable on demand and interest free.

Mr. Guotao Deng was a legal representative before December 31, 2019, thus he was not a related party of the Company from January 1, 2020.

 

3)-Due toTransactions with related parties noncurrent

  December 31,
2019
  December 31,
2018
 
         
Tao Sun $149,515  $152,124 

The balance of related party loan was payable in September 2022, with an interest rate of 9.5% per annum.

For the above mentioned related party borrowings, interest expense amounted to $36,260 and $nil for the three months ended March 31, 2020 and 2019, respectively.

21

11.RELATED PARTY TRANSACTIONS AND BALANCES (CONTINUED)

 

3)Transactions with related parties

-PurchaseRevenues generated from a related party and cost of revenue associated with commodity trading businessparties

For the three and nine months ended March 31,September 30, 2020, the Company purchased aluminum ingots of $1,055,143generated revenues from Qianhai Baiyu, which was controlled by Mr. Zhiping Chen, the legal representative of Huamucheng. For the three months ended March 31, 2020, the Company sold all aluminum ingots to customers and recorded cost of revenue of $1,055,143 associated with commodity product sales.below related party customers:

  For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
 
  2020  2019  2020  2019 
Revenue from sales of commodity products            
Yunfeihu $-  $        -  $1,921,586  $         - 
TD International Trade  -   -   695,715   - 
Yangzhou TD  958,108   -   958,108   - 
   958,108   -   3,575,409   - 
                 
Revenue from supply chain management services                
Yunfeihu  1,353,735   -   1,424,331   - 
TD International Trade  418,047       418,047     
Guangdong TD  269,788       269,788     
   2,041,570       2,112,166     
                 
Total revenues generated from related parties $2,999,678  $-  $5,687,575  $- 

  

-Lending toPurchases from a related party

 

For the three and nine months ended March 31,September 30, 2020, the Company lent loans aggregating $1,593,260 to Qianhai Baiyu, which was controlled by Mr. Zhiping Chen, the legal representative of the Company. The Company charged thepurchased commodity products from below related party interest rates 10% per annum. For the three months ended March 31, 2020, the Company recognized interest income of $54,193.vendors:

 

-Borrowings from related parties
  For the Three Months Ended
September 30,
  For the Nine Months Ended
September 30,
 
  2020  2019  2020  2019 
Purchase of commodity products            
Yunfeihu $943,553  $         -  $943,553  $        - 
TD International Trade  -   -   1,256,218   - 
Yangzhou TD  2,666,086   -   2,666,086   - 
  $3,609,639  $-  $4,685,857  $- 

 

For the three months ended March 31, 2020, the Company borrowed loans aggregating $36,617 form Mr. Lu Zhao, a senior management of the Company. The loan will expire on December 24, 2020. The interest rate charged on the borrowing was 10%. For the three months ended March 31, 2020, the Company accrued interest expenses of $1,574.

For the three months ended March 31, 2020, the Company borrowed a loan of $948,863. The Loan has an annual interest rate of 8% and a maturity date of December 4, 2020. For the three months ended March 31, 2020, the Company accrued interest expenses of $32,270.


12.SEGMENT REPORTING

In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operation results by the revenue of different services. For the three months ended March 31, 2020, the Company has two operating business lines, including business with metal products trading and supply chain management services business conducted by Huamucheng (“Commodity Trading and Supply Chain Management Services” or “Huamucheng Business”) and used luxurious car leasing business conducted by Beijing Tianxing (“Used Car Leasing” or “Tianxing Business”). Based on management’s assessment, the Company has determined that the two operating business lines are two operating segments as defined by ASC 280. For the three months ended March 31, 2019, the Company had one operating business line and one reporting unit.

The following table presents summary information by segment for the three months ended March 31, 2020 and 2019:

  For the Three Months Ended March 31, 2020 
  Tianxing
Business
  Huamucheng
Business
  Unallocated  Total 
Revenue $14,051  $1,469,009  $         -  $1,483,060 
Cost of revenue and related tax  (99,314)  (1,055,860)  -   (1,155,174)
Gross profit $(85,263) $413,149  $-  $327,886 
Interest (expense) income, net $(57,425) $44,061  $19,001  $5,637 
Income tax expense $-  $(48,380) $-  $(48,380)
Segment (loss) profit $(213,444) $143,930  $(70,458) $(139,972)
Segment assets as of March 31, 2020 $4,724,042  $5,505,654  $2,384,485  $12,614,181 

  For the Three Months Ended March 31, 2019 
  Tianxing
Business
  Huamucheng
Business
  Unallocated  Total 
Revenue $399,999  $          -  $           -  $399,999 
Cost of revenue and related tax  (237,651)  -   -   (237,651)
Gross profit $162,348  $-  $-  $162,348 
Interest income, net $10,463  $-  $-  $10,463 
Income tax expense $-  $-  $-  $- 
Segment loss $(1,829,826) $-  $-  $(1,829,826)
Segment assets as of March 31, 2019 $2,941,747  $-  $-  $2,941,747 

13.COMMITMENTS AND CONTINGENCIES

 

11)Lease Commitments

 

The Company’s VIEs lease their offices which are classified as operating leases in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases) on the commencement date: (i) lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

 

The Company leases offices space with terms ranging from one to two years. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of right of use assets and lease liabilities. Lease expense for lease payment is recognized on a straight-line basis over the lease term. Leases with initial term of 12 months or less are not recorded on the balance sheet.

 

The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discount lease payments based on an estimate of its incremental borrowing rate.

 

As of March 31,September 30, 2020, the Company had twoone lease contractscontract with lease expiration in June 2021 and September 2020, respectively.2021. The lease contract does not contain any material residual value guarantees or material restrictive covenants. The table below presents the operating lease related assets and liabilities recorded on the balance sheet. 

 

 March 31,
2020
  December 31,
2019
  September 30,
2020
  December 31,
2019
 
          
Rights of use lease assets $401,034  $41,188  $237,524  $       - 
                
Operating lease liabilities, current $302,028  $-  $215,658  $- 
Operating lease liabilities, noncurrent  52,352   -   -   - 
Total operating lease liabilities $354,380  $-  $215,658  $- 

 

The Company did not enter into lease agreements until January 1, 2020. As of March 31,September 30, 2020, and December 31, 2019, the weighted average remaining lease term was 1.090.75 years and 0.71 years, respectively, and discount rates were 4.75% for all of the operating leases..

 

Lease expenses for the three and nine months ended March 31,September 30, 2020 were $79,098 and $234,744, respectively. Lease expenses for the three and nine months ended September 30, 2019 were $95,124 and $16,624, respectively.$nil.

 

The following is a schedule, by years, of maturities of lease liabilities as of March 31,September 30, 2020:

 

Twelve months ended March 31, 2021 $312,413 
Twelve months ended March 31, 2022  52,663 
Twelve months ended September 30, 2021 $219,517 
    
Total lease payments  365,076   219,517 
Less: imputed interest  (10,696)  (3,859)
Present value of lease liabilities $354,380  $215,658 

 


13.12.COMMITMENTS AND CONTINGENCIES (CONTINUED)

 

22)Contingencies

 

a2015 Derivative Action

 

On February 3, 2015, a purported shareholder Kiran Kodali filed a putative shareholder derivative complaint against the Company, alleging that the Company and its former officers and directors violated their fiduciary duties, grossly mismanaged the Company and were unjustly enriched based upon the transfer that was the subject of the Internal Review and other grounds substantially similar to those asserted in the class action complaints.

 

On July 16, 2019, the Company received a copy of the final order and judgment that the Court entered on July 11, 2019, approving the settlement set forth in the Stipulation. The Stipulation provides for dismissal of the Derivative Action as to the Company and the Individual Defendants, and the Company agrees to adopt or maintain certain corporate governance reforms for at least three years. The Stipulation also provides for attorneys’ fees and expenses to be paid by the Individual Defendants’ insurance carriers to plaintiffs’ counsel. 

 

b2017 Arbitration with Sorghum

 

On December 21, 2017, the Company delivered notice (“Notice”) to Sorghum notifying Sorghum that certain recent actions of Sorghum constituted breaches of Sorghum’s covenants under the Exchange Agreement. Specifically, we believe that Sorghum is in breach of Section 6.9 (a and Section 6.11 (b of the Exchange Agreement which required Sorghum to use commercially reasonable efforts and to cooperate fully with the other parties to consummate the transactions contemplated by the Exchange Agreement and to make its directors, officers and employees available in connection with responding in a timely manner to SEC comments. According to the terms of the Exchange Agreement, the Company is entitled to terminate the Exchange Agreement if the breach is not cured within twenty (20 days after the Notice is provided to Sorghum.

 

On January 25, 2018, the Company filed an arbitration demand (“Arbitration Demand” with the American Arbitration Association (“AAA” against Sorghum in connection with Sorghum’s breach of the Exchange Agreement.

 

On July 30, 2018, Arbitrator entered a reasoned award, accepting the Company’s proposal for resolution, awarding the Company damages of $1,436,522 against Sorghum and denying Sorghum’s Counterclaim against the Company in its entirety with prejudice. Sorghum has sought to vacate the arbitration award by filing a petition to vacate the arbitration award in the Supreme Court for the State of New York, New York County. The Court heard the Company and Sorghum’s arguments on May 1, 2019, and entered an order vacating the arbitration award. The Company vigorously opposed and moved to confirm the arbitration award on May 6, 2019. On June 5, 2019, the Company filed a notice of appeal with the New York Supreme Court Appellate Division First Department. The appeal was scheduled to be mediated on November 20, 2019. On November 15, 2019, the Company withdrew its appeal filed June 5, 2019, upon the stipulation of the parties and accordingly, the arbitration award is deemed to be vacated.


13.12.COMMITMENTS AND CONTINGENCIES (CONTINUED)

 

c2018 Court Matter with Shanghai Nonobank Financial Information Service Co. Ltd.

 

On August 2, 2018, the Company became party to an action filed by Shanghai Nonobank Financial Information Service Co. Ltd. (“Plaintiff”) in the Supreme Court for the State of New York, New York County (“NY Supreme Court” (Index No. 653834/2018 (the “Action”). Plaintiff’s complaint seeks to recover approximately $3.5 million of Plaintiff’s funds that were allegedly required to be held in escrow in New York pursuant to an agreement by and between Plaintiff, Yang Jie and Yi Lin (the “Complaint”). Plaintiff has alleged that the funds were required to be held in escrow in a New York attorney trust account pending the alleged consummation of a merger between Plaintiff’s parent company and the Company. Plaintiff alleged two causes of action against the Company for fraud/fraudulent inducement and conversion. On August 30, 2018, the Company filed a motion to dismiss Plaintiff’s causes of action against the Company. The Court has scheduled oral arguments on the Company’s motion to dismiss for May 1, 2019.

 

On July 15, 2019, the Company received a copy of the decision and order the Court entered on July 12, 2019, granting the Company’s motion to dismiss the Complaint in its entirety as against the Company without prejudice, with costs and disbursements to the Company as taxed by the Clerk of the Court, and the Clerk is directed to enter judgment accordingly in favor of the Company. 

 

d2020 Court Matter with Harrison Fund

 

On April 6, 2020, the Company filed a law suit against Harrison Fund, LLC (“Harrison Fund”) in the United States District Court for the Northern District of California (the “District Court”) (Case No. 3:20-cv-2307). The Company had invested $1,000,000 in Harrison Fund around May 2019. However, Harrison Fund had been reluctant to disclose related investment information to the Company and it was discovered that certain information presented on Harrison Fund’s brochure appeared to be problematic. The Company demanded a return of its investment from Harrison Fund. When the Company failed to obtain a response from Harrison Fund, it filed the complaint against Harrison Fund seeking to recover the $1,000,000 investment.

 

Due to the uncertainty arising from this pending legal proceeding, a full impairment has been applied against the Company’s investment in financial products.

 


14.13.SUBSEQUENT EVENTSRISKS AND UNCERTAINTIES

1)Credit risk

Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents. The maximum exposure of such assets to credit risk is their carrying amount as at the balance sheet dates. As of September 30, 2020, approximately $2.97 million was primarily deposited in financial institutions located in Mainland China, which were uninsured by the government authority. To limit exposure to credit risk relating to deposits, the Company primarily place cash deposits with large financial institutions in China which management believes are of high credit quality.

The Company’s operations are carried out in Mainland China. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. In addition, the Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation, and the extraction of mining resources, among other factors.

2)Liquidity risk

 

Please see “Note 8The Company is also exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and liquidity to meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, the Company will turn to other financial institutions and the owners to obtain short-term funding to meet the liquidity shortage.

3)Foreign currency risk

Substantially all of the Company’s operating activities and the Company’s major assets and liabilities are denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the Peoples’ Bank of China (“PBOC”) or other authorized financial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts.

The value of RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. Where there is a significant change in value of RMB, the gains and losses resulting from translation of financial statements of a foreign subsidiary will be significant affected.

Translation of amounts from RMB into US$ has been made at the following exchange rates for the respective periods:

  September 30,
2020
  December 31,
2019
 
       
Balance sheet items, except for equity accounts  6.8033   6.9680 

  For the Nine Months Ended
September 30,
 
  2020  2019 
       
Items in the statements of operations, comprehensive loss and statements of cash flows  6.9957   6.8634 

14.SUBSEQUENT EVENTS

On October 26, 2020, Huamucheng, a wholly owned subsidiary of the Company, entered into certain share purchase agreements (the “SPA”) with Shenzhen Xinsuniao Technology Co., Ltd. (the “Seller”), a limited liability company organized under the laws of the PRC, and Shenzhen Qianhai Baiyu Supply Chain Co., Ltd. (the “Target”), a limited liability company organized under the laws of the PRC. The Seller is the record holder and beneficial owner of all registered paid-up capital of the Target. Pursuant to the SPA, Huamucheng agreed to pay to the Seller an aggregate cash consideration of RMB670 million (approximately US$99.3 million) (the “Total Consideration”), of which 85% will be paid to the Seller in installments on or before December 25, 2020 and the remaining 15% will be paid to the Seller in installments on or before December 25, 2021, and the Seller agreed to transfer to Huamucheng, within 7 business days of the execution of the SPA, all of its registered paid-up capital of the Target (the “Acquisition”).

The Company evaluated all events and transactions that occurred after September 30, 2020 up through the date the Company previously issued these unaudited condensed consolidated financial statements on November 12, 2020.


15.RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

The Company has noted the following errors in relation to its consolidated financial statements for the three and nine months ended September 30, 2020 that had been filed on November 13, 2020. The errors related to the correction of revenue recognition from supply chain management services, recognition of interest income from loans due from a third party, and identification of related parties.

1)Revenue recognition from supply chain management services

The revenue generated from supply chain management services were misstated due to following two reasons:

a.Error in recognition of revenues generated from loan recommendation services

Pursuant to the accounting policy on revenue recognition for loan recommendation services, such revenue is recognized at the point when referral services are performed and the related funds are drawdown by customer. For the three and nine months ended September 30, 2020, the Company recognized revenues before related funds are drawdown by the customer. As a result, the Company made an accounting adjustment reflected in the restated consolidated financial statements. For the three and nine months ended September 30, 2020, revenue from supply chain management services decreased by $332,241 and $670,897, income tax expenses decreased by $83,060 and $167,724 and net loss increased by $249,181 and $503,173. As of September 30, 2020, advance from customers and due to related parties increased by $426,264 and $304,999, respectively, income tax payable decreased by $172,468 and other tax liabilitiesCapital Transactions”other tax payable decreased by $41,392.

b.Error in recognition of interest income on loans due from a third party

For the three and nine months ended September 30, 2020, the Company provided loans to Shenzhen Xinsuniao. The Company mistakenly recognized certain interest income as revenues from supply chain management services. As a result, the Company made an accounting adjustment reflected in the restated consolidated financial statements. For the three and nine months ended September 30, 2020, revenue from supply chain management services decreased by $9,232 and $1,700,540, income tax expenses decreased by $2,309 and $425,135 and net loss increased by $6,926 and $1,275,405. As of September 30, 2020, other current assets decreased by $2,220,003, and income tax payable decreased by $437,158.

2)Identification of related parties

For the three months and nine ended September 30, 2020, the Company did not identify companies controlled or exercised significant influences by an immediate family of the Chief Executive Officer as related parties. The Company restated the consolidated financial statements by classification of the balances due from/to these related parties from other current assets and other current liabilities. In addition, the Company presented revenues from related parties under a standalone caption in the consolidated statements of operations and comprehensive loss.

3)Adjustment of interest income earned from a third party

For the three and nine months ended September 30, 2020, the Company provided loans to Shenzhen Xinsuniao. Because part of the interest income was mistakenly recognized in the account of “revenue from supply chain management services” (see 1.b), the Company accrued additional interest income for all subsequent capital transactionsthe loans. As a result, the Company made accounting adjustments of 1) reclassification of interest income from supply chain management services and 2) reversal of accrued interest income in the restated consolidated financial statements.

As a result of the above adjustments, for the three and nine months ended September 30, 2020, interest income decreased by $519,984 and $229,204, income tax expenses decreased by $126,211 and $57,301, and net loss decreased by $378,634 and $171,903. As of September 30, 2020, other current assets increased by $235,686 and income tax payable decreased by $58,921.

 


15.RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table sets forth the adjustment to the Company’s results of operations compared to the previously reported consolidated financial statements.

The effects of the restatement on the Company’s consolidated balance sheet as of September 30, 2020 are as follows:

  As of September 30, 2020 
  As Previously Reported  Adjustments  As Restated 
Current Assets         
Prepayments $6,901,974  $(1,469,875) $5,432,099 
Due from related parties $-  $1,469,875  $1,469,875 
Other current assets $2,168,127  $(1,984,317) $183,810 
Total Current Assets $99,718,153  $(1,984,317) $97,733,836 
Total Assets $100,365,677  $(1,984,317) $98,381,360 
Current Liabilities            
Advances from customers $1,469,875  $426,264  $1,896,139 
Due to related parties $1,772,083  $304,490  $2,076,573 
Income tax payable $2,301,668  $(668,547) $1,633,121 
Other current liabilities $697,823  $(40,883) $656,940 
Total Current Liabilities $6,457,107  $21,324  $6,478,431 
Total Liabilities $6,457,107  $21,324  $6,478,431 
Equity            
Accumulated deficit $(35,703,655) $(1,950,481) $(37,654,136)
Accumulated other comprehensive loss $3,147,918  $(55,160) $3,092,758 
Total Shareholders’ Equity $93,908,570  $(2,005,641) $91,902,929 
Total Equity $93,908,570  $(2,005,641) $91,902,929 

The effects of the restatement on the Company’s consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2020 are as follows:

  For the three months ended
September 30, 2020
 
  As Previously Reported  Adjustments  As Restated 
Revenues         
-    Sales of commodity products $3,680,944  $(958,108) $2,722,836 
-    Sales of commodity products – related parties $-  $958,108  $958,108 
-    Supply chain management services $3,531,885  $(2,383,046) $1,148,839 
-    Supply chain management services – related parties $-  $2,041,570  $2,041,570 
Total Revenue $7,212,829  $(341,476) $6,871,353 
Cost of revenue            
-    Commodity product sales $(3,697,490) $3,608,947  $(88,543)
-    Commodity product sales – related parties $-  $(3,609,639) $(3,609,639)
-    Supply chain management services – related parties $(17,155) $692  $(16,463)
Gross profit $3,498,184  $(341,476) $3,156,708 
Other income (expenses), net            
Interest income $2,356,000  $(519,984) $1,836,016 
Total other income, net $2,340,836  $(519,984) $1,820,852 
Income Before Income Taxes $5,546,940  $(861,460) $4,685,480 
Income tax expenses $(1,376,282) $226,719  $(1,149,563)
Net Income from Continuing Operations $4,170,658  $(634,741) $3,535,917 
Net Income $1,181,542  $(634,741) $546,801 
Net income attributable to TD Holdings, Inc.’s Stockholders $1,181,542  $(634,741) $546,801 
Comprehensive Income            
Net Income $1,181,542  $(634,741) $546,801 
Foreign currency translation adjustment $3,576,833  $(61,822) $3,515,011 
Comprehensive income $4,758,375  $(696,563) $4,061,812 
Comprehensive income attributable to TD Holdings, Inc. $4,758,375  $(696,563) $4,061,812 
             
Income per share – basic and diluted $0.02  $(0.01) $0.01 
Income per share from continuing operations – basic and diluted $0.07  $(0.01)  0.06 
             
Weighted Average Shares Outstanding-Basic and Diluted  58,625,143       58,625,143 


15.RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

  For the nine months ended
September 30, 2020
 
  As Previously Reported  Adjustments  As Restated 
Revenues         
-    Sales of commodity products $6,298,245  $(3,575,409) $2,722,836 
-    Sales of commodity products – related parties $-  $3,575,409  $3,575,409 
-    Supply chain management services $6,093,072  $(4,483,603) $1,609,469 
-    Supply chain management services – related parties $-  $2,112,166  $2,112,166 
Total Revenue $12,391,317  $(2,371,437) $10,019,880 
Cost of revenue            
-    Commodity product sales $(6,322,765) $4,864,553  $(1,458,212)
-    Commodity product sales – related parties $-  $(4,865,857) $(4,865,857)
-    Supply chain management services – related parties $(25,721) $1,304  $(24,417)
Gross profit $6,042,831  $(2,371,437) $3,671,394 
Other income (expenses), net            
Interest income $3,965,283  $(229,204) $3,736,079 
Total other expenses, net $(2,564,361) $(229,204) $(2,793,565)
Income (Loss) Before Income Taxes $2,445,810  $(2,600,641) $(154,831)
Income tax expenses $(2,223,691) $650,160  $(1,573,531)
Net Income (Loss) from Continuing Operations $222,119  $(1,950,481) $(1,728,362)
Net Loss $(3,319,688) $(1,950,481) $(5,270,169)
Net loss attributable to TD Holdings, Inc.’s Stockholders $(3,312,615) $(1,950,481) $(5,263,096)
Comprehensive Income            
Net Loss $(3,319,688) $(1,950,481) $(5,270,169)
Foreign currency translation adjustment $3,482,199  $(55,160) $3,427,039 
Comprehensive loss $162,511  $(2,005,641) $(1,843,130)
Comprehensive loss attributable to TD Holdings, Inc. $169,584  $(2,005,641) $(1,836,057)
             
Income per share – basic and diluted $(0.08) $(0.04) $(0.12)
Income per share from continuing operations – basic and diluted $0.01  $(0.04) $(0.03)
             
Weighted Average Shares Outstanding-Basic and Diluted  43,695,789       43,695,789 

The effects of the restatement on the Company’s consolidated statements of cash flows for the nine months ended September 30, 2020 are as follows:

  For the nine months ended
September 30, 2020
 
  As Previously Reported  Adjustments  As Restated 
Cash Flows from Operating Activities:            
Net loss $(3,319,688) $(1,950,481) $(5,270,169)
Net Income (Loss) from Continuing Operations $222,119  $(1,950,481) $(1,728,362)
Changes in operating assets and liabilities:            
Prepayments $(6,712,152) $1,429,449  $(5,282,703)
Other current assets $(2,068,858) $1,929,744  $(139,114)
Advances from customers $1,429,450  $414,540  $1,843,990 
Due to related parties $-  $296,611  $296,611 
Income tax payable $2,223,691  $(650,160) $1,573,531 
Other current liabilities $479,182  $(39,760) $439,422 
Net Cash Provided by Operating Activities from Continuing Operations $1,642,616  $1,429,943  $3,072,559 
Net Cash Provided by Operating Activities $942,577  $1,429,943  $2,372,520 
Cash Flows from Investing Activities:            
Collection of loans from related parties $-  $3,404,953  $3,404,953 
Loans made to related parties $-  $(4,826,640) $(4,826,640)
Collection of loans from third parties $78,833,017  $(3,833,083) $74,999,934 
Loans made to third parties $(160,913,200) $3,825,320  $(157,087,880)
Net Cash Used in Investing Activities from Continuing Operations $(82,080,183) $(1,429,450) $(83,509,633)
Net Cash Used in Investing Activities $(81,711,571) $(1,429,450) $(83,141,021)
Cash Flows from Financing Activities:            
Proceeds from third party borrowings $1,559,088  $(493) $1,558,595 
Net Cash Provided by Financing Activities from Continuing Operations $81,428,640  $(493) $81,428,147 
Net Cash Provided by Financing Activities $81,047,086  $(493) $81,046,593 

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

During the nine months ended September 30, 2020, the Company discontinued its used luxury car leasing business. As of March 31,September 30, 2020, the Company had twoone main business lines, used luxury car leasing business andline, which is the commodities trading business.

 

Used luxury car leasing businessCommodities Trading Business

Currently the Company has eleven used luxurious cars with net book value of approximately US$2.43 million. In addition, the Company also leased used luxurious cars from peer companies and individuals to provide more varieties of luxurious cars to our customers. To determine the model of vehicles to be purchased, we collect data related to customers’ demands and preferences through sales and online promotions. Our professional procurement personnel will then compare models of vehicles offered by different sellers. The decision to purchase a specific vehicle is based on a number of considerations including time of delivery, vehicle condition, vehicle safety features, mileage, repair and maintenance history, accident history, market scarcity, etc. Due to the effects of COVID-19, we had closed our luxury car rental facilities from the end of January 2020 and have resumed our operations since April 2020. For the three months ended March 31, 2020 and 2019, the Company earned income from operating lease of $14,051 and $399,999, respectively.

We rent our luxurious cars to our customers from our offices in Beijing, Shanghai, Zhejiang and Chengdu. We market our cars to targeted potential customers via phone calls or messages. The rental price varies based on the rental term which ranges from one day to one month. The longer the rental term, the cheaper the price. The daily rental price is the highest, while the average weekly rental price and average monthly rental price are 10% to 20% cheaper and 20% to 30% cheaper, respectively, than that of the daily rental price.

We conduct a comprehensive credit check against customers who place orders. We work with credit rating platforms such as JD Wanxiang and TYi Online to evaluate the customer’s credit. We may reject an order for any reason including unacceptable credit ratings. Once an order is accepted, we will require a deposit ranging from US$7,500 to US$15,000 based on the vehicle being ordered and the customer’s credit score. The deposit covers vehicle deposit and traffic violation deposit. Customer can confirm the time and place for vehicle delivery and rental term via SMS messages, phone calls or face-to-face communication with our sales personnel. After that, our sales personnel will deliver the vehicle to the customers at their designated location. The customer, before signing the car rental agreement, will inspect the vehicle in person and pay the lease fee along with the deposit via credit card, Wechat Pay or Alipay. The customer is responsible for the gas, toll fee, fees incurred to return the car, and any other expenses related to the use of the vehicle during the rental term.

We install five GPS trackers on each vehicle to track the location of the vehicles. Once the rental period is over, the vehicle needs to be returned to our designated location. In the event the vehicle is returned with no damage other than normal wear and tear, we will process the refund of the vehicle deposit on the next business day. The traffic deposit will be refunded after we confirm that there are no traffic violation records associated with the vehicle from the local police (approximately a month after the return).

Competition

We compete with car rental companies, many of which are more established and have more resources than us. Currently we compete primarily with Benson, V-FLY Travel and Wagons.


Commodities trading business

In order to diversify the Company’s business and generate additional revenue, on November 22, 2019, the Company’s wholly-owned subsidiary, Hao Limo Technology (Beijing) Co., Ltd. (“Hao Limo”), entered into a series of contractual agreements (the “Huamucheng VIE Agreements”) with Shenzhen Huamucheng Trading Co., Ltd. (“Huamucheng”) and certain shareholders of Huamucheng (“Huamucheng Shareholders”), who collectively hold 100% of Huamucheng. The Huamucheng VIE Agreements are designed to provide Hao Limo with the power, rights and obligations equivalent, in all material respects, to those it would possess as the sole equity holder of Huamucheng, including absolute control rights and the rights to the management, operations, assets, property and revenue of Huamucheng. The purpose of the VIE Agreements is solely to give Hao Limo the exclusive control over Huamucheng’s management. Through Huamucheng VIE structure, the Company is able to consolidate operations of Huamucheng effective November 22, 2019 and now operates a separate commodity trading business.

 

The commodity trading business primarily involves purchasing non-ferrous metal product, such as aluminium ingots, copper, silver, and gold, from upstream metal and mineral suppliers and then selling to downstream customers. In connection with the Company’s commodity sales, in order to help customers to obtain sufficient funds to purchase various metal products and also help upstream metal and mineral suppliers to sell their metal products, the Company launched its supply chain management service in December 2019. The Company primarily generates revenues from bulk non-ferrous commodity products, and from providing related supply chain management services in the PRC.

 

For the three months ended March 31, 2020, the Company recorded revenue of $1,053,632 from commodities trading business and $415,377 from supply chain management services (all from loan recommendation services), respectively, from Huamucheng’s operations.

Through Huamucheng’s business, the Company sources bulk commodity products from non-ferrous metal and mines or its designated distributors and then sells to manufacturesmanufacturers who need these metals in large quantity.quantities. The Company works with upstream suppliers in the sourcing of commodities. Major suppliers include various metal and mineral suppliers such as Kunsteel Group, Baosteel Group, Aluminum Corporate of China Limited, Yunnan Benyuan, Yunnan Tin, and Shanghai Copper. PotentialThe Company’s target customers include large infrastructure companies such as China National Electricity, Datang Power, China Aluminum Foshan International Trade, Tooke Investment (China), CSSC International Trade Co., Ltd., Shenye Group, and Keliyuan.

For the nine months ended September 30, 2020, the Company recorded revenue of $6,298,245 from commodities trading business and $3,721,635 from commodity distribution services, respectively, from Huamucheng’s operations. For the three months ended September 30, 2020, the Company recorded revenue of $3,680,944 from commodities trading business and $3,190,409 from commodity trading services, respectively, from Huamucheng’s operations.

For the nine and three months ended September 30, 2020, the Company generated net loss of $5,270,169 and net income of $731,010.

In addition, the Company commenced supply chain financing services and for the nine months ended September 30, 2020, the Company provided such services to one customer. On March 25, 2020, the Company entered into a revolving credit facility with Shenzhen Xinsuniao to provide a credit line of RMB 568 million or approximately $80 million to Shenzhen Xinsuniao, to which the Company also provided loan recommendations services during the nine months ended September 30, 2020. The Company selected Shenzhen Xinsuniao as its customer because Shenzhen Xinsuniao and its wholly-owned subsidiary Qianhai Baiyu were reputable for their extensive experience in supply chain services for commodities trading.

 

Competition

 

The Company mainly competes against other large domestic commodity metal product trading service providers such as Xiamen International Trade and Yijian Shares. Currently, the principal competitive factors in the non-ferrous metals commodities trading business are price, product availability, quantity, service, and financing terms for purchases and sales of commodities.

 

Applicable Government Regulations

 

Huamucheng has obtained all material approvals, permits, licenses and certificates required for our metal product trading operations, including registrations from the local business and administrative department authorizing the purchase of raw materials.


Recent developments

Acquisition of supply chain service business

As disclosed on the Company’s current report on Form 8-K filed on October 29, 2020, Huamucheng acquired Qianhai Baiyu pursuant to certain share purchase agreements dated October 26, 2020, by and among Huamucheng, Qianhai Baiyu, and Shenzhen Xinsuniao for an aggregate cash consideration of RMB670 million (approximately US$99.3 million). Upon closing of this acquisition, Huamucheng owns all the registered paid-up capital of Qianhai Baiyu.

Qianhai Baiyu was established on August 17, 2016 and is engaged in the supply chain service business, covering a full range of commodities, including non-ferrous metals, ferrous metals, coal, metallurgical raw materials, soybean oils, oils, rubber, wood and various other types of commodities. It also has a supply chain infrastructure, which includes processing, logistics, warehousing and terminals. Utilizing its customer base, industry experience, and expertise in the commodity trading industry, Qianhai Baiyu serves as an one-stop commodity supply chain service and digital intelligence supply chain platform integrating enterprises, warehouses, logistics, information, and futures trading.

The acquisition of Qianhai Baiyu has laid a solid foundation for us to expand our operations in the commodity supply chain field. We plan to strengthen and upgrade our supply chain services platform by introducing a systematic quantitative risk control system, which will be based on the Qianhai Baiyu’s massive historical market data and complex data analysis models. The platform is expected to establish a quantitative risk management system utilizing Extract, Transform, Load (ETL) data integration as its core, and then optimize trading portfolios by incorporating a combination of various factors and strategies in order to effectively control risks and sustain business development.

Disposition of used luxurious car leasing business

Historically, one of the Company’s core business has been the used luxurious car leasing business conducted through Beijing Tianxing Kunlun Technology Co. Ltd. (“Beijing Tianxing”), an entity that the Company controlled via certain contractual arrangements.

On August 28, 2020, the Company entered into the Disposition SPA with Vision Loyal, HC High HK and HC High BVI. Pursuant to the Disposition SPA, Vision Loyal agreed to purchase HC High HK in exchange for nominal consideration of $1.00 based on a valuation report presented by an independent third party valuation firm, Beijing North Asia Asset Assessment Firm. The Board approved the Disposition and the Disposition closed on August 28, 2020.

Revolving Credit Facility

On March 25, 2020, the Company entered into a revolving credit facility with Shenzhen Xinsuniao to provide a credit line of RMB 568 million or approximately $80 million to Shenzhen Xinsuniao, to which the Company also provided loan recommendations services during the nine months ended September 30, 2020.

From October 1, 2020 to the date of this report, the Company collected RMB 76.1 million, or $10.9 million from Shenzhen Xinsuniao.

Termination of VIE Agreement

On April 2, 2020, HC High Summit Holding Limited (“HC High BVI”), the Company’s wholly owned subsidiary, established Tongdow Block Chain Information Technology Company Limited (“Tongdow Block Chain”), a holding company incorporated in accordance with the laws and regulations of Hong Kong. Tongdow Block Chain is wholly owned by HC High BVI. On April 2, 2020, Tongdow Block Chain established Shanghai Jianchi Supply Chain Company Limited (“Shanghai Jianchi”) as its wholly owned subsidiary. Shanghai Jianchi is a holding company incorporated in accordance with the laws and regulations of People’s Republic of China (“PRC”).


On June 25, 2020, Hao Limo Technology (Beijing) Co. Ltd. (“Hao Limo”), the Company’s wholly owned subsidiary incorporated in PRC, and Shenzhen Huamucheng Trading Co., Ltd. (“Huamucheng”), a former VIE of the Company, entered into certain VIE Termination Agreement (the “VIE Termination Agreement”) to terminate the Huamucheng VIE Agreements. As such, Hao Limo will no longer have the control rights and rights to the assets, property and revenue of Huamucheng. On the same date, Shanghai Jianchi, Huamucheng and the shareholders of Huamucheng (the “Huamucheng Shareholders”) entered into certain Share Acquisition Agreement (the “Acquisition Agreement”) pursuant to which Shanghai Jianchi acquired 100% equity interest of Huamucheng from the Huamucheng Shareholders for nominal consideration.

As a result of the above reorganization, Huamucheng transitioned from being a variable interest entity (“VIE”) controlled by Company into a wholly owned subsidiary of the Company. The Company remained in control of Huamucheng both before and after the reorganization and its operating results are consolidated into the Company’s consolidated financial statements.

The Company has commenced its supply chain financing services and the Company provided such services to one customer for the nine months ended September 30, 2020.

 

Key Factors Affecting Our Results of Operation

 

The car rental and car service industry in China is competitive and fragmented. The commodities trading industry is also experiencing decreasing demand as a result of China’s overall economic slowdown. We expect competition in both China’s car leasing industry and commodities trading business to persist and intensify.

 

We have a limited operating history having just launched the car leasing business in May 2018 and started our commodities trading business in late November 2019. We believe our future success depends on our ability to significantly increase sales as well as maintain profitability from our operations. Our limited operating history makes it difficult to evaluate our business and future prospects. You should consider our future prospects in light of the risks and challenges encountered by a company with a limited operating history in an emerging and rapidly evolving industry. These risks and challenges include, among other things,

 

 our ability to integrate commodities trading business with car leasing business;

our ability to continue our growth as well as maintain profitability;

 

 preservation of our competitive position in both of the luxurious car leasing and car service industry and commodities trading industry in China;

 

 our ability to implement our strategies and make timely and effective responses to competition and changes in customer preferences; and

 

 recruitment, training and retaining of qualified managerial and other personnel.

 

Our business requires a significant amount of capital in large part due to needing to continuously grow our fleet, to purchase bulk volume of commodities, and expand our business in existing markets and to additional markets where we currently do not have operations.

 

2829

 

 

Results of Operations

 

The Company has noted the following errors in relation to its unaudited condensed consolidatedfinancial statements for the three and nine months ended September 30, 2020 that had been filed on November 13, 2020. The errors related to the correction of revenue recognition from supply chain management services, recognition of interest income from loans due from a third party, and identification of related parties.Please refer to Note 15 of the Unaudited Condensed Consolidated Financial Statements included in this Form 10-Q

Three Months Ended March 31,September 30, 2020 as Compared to Three Months Ended March 31,September 30, 2019

 

  For the Three Months Ended
March 31,
  Change 
  2020  2019  Amount  % 
Revenues            
Revenue from sales of commodity products $1,053,632  $-  $1,053,632   100%
Revenue from supply chain management services  415,377   -   415,377   100%
Income from operating leases  14,051   399,999   (385,948)  (96)%
Total Revenue  1,483,060   399,999   1,083,061   271%
                 
Cost of revenue                
Cost of revenue - commodity product sales - related party  (1,055,143)  -   (1,055,143)  100%
Cost of revenue - supply chain management services  (717)  -   (717)  100%
Cost of operating lease  (99,314)  (237,651)  138,337   (58)%
Total cost of revenue  (1,155,174)  (237,651)  (917,523)  386%
                 
Gross profit  327,886   162,348   165,538   102%
                 
Operating expenses                
Selling, general, and administrative expenses  (425,115)  (1,906,319)  1,481,204   (78)%
Impairment on leasing business assets  -   (96,318)  96,318   (100)%
Total operating cost and expenses  (425,115)  (2,002,637)  1,577,522   (79)%
                 
Other income, net                
Interest income, net  5,637   10,463   (4,826)  (46)%
Total other income, net  5,637   10,463   (4,826)  (46)%
                 
Loss Before Income Taxes  (91,592)  (1,829,826)  1,738,234   (95)%
                 
Income tax expenses  (48,380)  -   (48,380)  100%
                 
Net Loss $(139,972) $(1,829,826) $1,689,854   (92)%
  For the Three Months Ended
September 30,
  Change 
  2020  2019  Amount  % 
Revenues            
Sales of commodity products $2,722,836  $-  $2,722,836   100%
Sales of commodity products – related parties  958,108       958,108   100%
Supply chain management services  1,148,839   -   1,148,839   100%
Supply chain management services – related parties  2,041,570       2,041,570   100%
Total Revenue  6,871,353   -   6,871,353   100%
                 
Cost of revenue                
Commodity product sales  (88,543)  -   (88,543)  100%
Commodity product sales – related parties  (3,609,639)  -   (3,609,639)  100%
Supply chain management services  (16,463)  -   (16,463)  100%
Total cost of revenue  (3,714,645)  -   (3,714,645)  100%
                 
Gross profit  3,156,708   -   3,156,708   100%
                 
Operating expenses                
Selling, general, and administrative expenses  (292,080)  (259,945)  (32,135)  12%
Total operating cost and expenses  (292,080)  (259,945)  (32,135)  12%
                 
Other income (expenses), net                
Interest income  1,836,016   -   1,836,016   100%
Interest expenses  (15,164)  -   (15,164)  100%
Total other income, net  1,820,852   -   1,820,852)  100%
                 
Income (Loss) from Continuing Operations Before Income Taxes  4,685,480   (259,945)  4,945,425   (1902)%
                 
Income tax expenses  (1,149,563)  -   (1,149,563)  100%
                 
Net Income (Loss) from Continuing Operations  3,535,917   (259,945)  3,795,862   (1,460)%
                 
Net Loss from Discontinued Operations  (2,989,116)  (132,898)  (2,856,218)  2,149%
                 
Net Income (Loss) $546,801  $(392,843) $939,644   (239)%

 

2930

 

   

Revenue

 

WeFor the three months ended September 30, 2020, we generate revenue from the following threetwo sources, including (1) revenue from sales of commodity products,, and (2) revenue from supply chain management services, and (3) income from operating lease. Both revenue from sales of commodity and revenue from supply chain management services were newly incorporated into our operations as a result of the consolidation of Huamucheng through VIE contractual agreements in November 2019.services. Total revenue increased by $1,083,061 or 271%,$6,871,353 from $399,99$nil for the three months ended March 31,September 30, 2019 to $1,483,060$6,871,353 for the three months ended March 31,September 30, 2020, among which revenue frombecause we just commenced our commodity product trading supply chain management and car leasing accounted for 71.1%, 28.0% and 0.9%, respectively, of our total revenuebusiness in December 2019. Among the revenues for the three months ended March 31, 2020. For the three months ended March 31, 2019, 100% of ourSeptember 30, 2020, revenue was generated from the used luxurious car leasing business.commodity trading and supply chain management accounted for 53.6% and 46.4%, respectively.

 

(1)Revenue from sales of commodity products

 

For the three months ended March 31,September 30, 2020, the Company sold non-ferrous metals to twoone related party customer and three third party customers at fixed prices, and earned revenues when the product ownership was transferred to its customers. The Company earned revenues of $1,053,632$2,722,836 and $958,108, respectively, from sales of commodity products.products to three third party customers and one related party customer. There was no such revenue for the three months ended March 31,September 30, 2019.

 

(2)Revenue from supply chain management services

 

In connection with the Company’s commodity sales, in order to help customers to obtain sufficient funds to purchase various metal products and also help upstream metal and mineral suppliers sell their metal products, the Company launched its supply chain management service business in December 2019, which primarily consisted of loan recommendation services andcommodity distribution services. For the three months ended March 31, 2020, the Company provided loan recommendation services to customers.

 

Loan recommendationCommodity distribution service fees

 

The Company refersutilizes its strong sales, marketing expertise and customer network to introduce customers who have financing needs forto large metal and mineral suppliers, and facilitate the metal product trading to various financial institutionssales between the suppliers and assists these customers in obtain loans from the financial institutions.customers. The Company receivesmerely acts as an agent in this type of transaction and earns a referralcommission fee frombased on the percentage of volume of metal products that customers if funding is secured. Suchpurchase. Commodity distribution service fees are recognized as revenue is recognized atwhen the point when referral services are performedCompany successfully facilitates the sales transactions between the suppliers and the related funds are drawdown by the customer. The referral service fee is set at 2.5% of the amount of loans obtained by the customers from the financial institutions. The Company earned $415,377 from loan recommendation services from the facilitation of a loan volume of approximately $17.6 million (RMB 123.0 million) with six customers.

(3)Income from operating lease

The Company commenced its business of lease services of used luxurious cars in May 2018. As of March 31, 2020 and 2019, the Company had eleven and eight used luxurious cars, respectively. The lease term is generally within one month. The operating lease income is recognized on a straight-line basis over the scheduled lease term.

As affected by COVID-19, we closed our car rental facilities from the end of January to March 2020, and gradually resumed business in April 2020. As a result, we generated minimal operating lease income for the three months ended March 31, 2020. The extent to which COVID-19 impacts our income from operating lease for the fiscal year 2020 will depend on certain future developments, including the duration and spread of the outbreak, emerging information concerning the severity of COVID-19 and the actions taken by governments and private businesses in attempting to contain the spread of COVID-19, all of which is uncertain at this point.

For the three months ended March 31, 2019,September 30, 2020, the Company generated operating lease incomeearned commodity distribution commission fees of $1,148,839 and $2,041,570 from used luxurious cars which are either owned by the Company or leased fromfacilitating such sales transactions with three third party vendors. The Company generated operating lease income of $399,999 for thecustomers and three months ended March 31, 2019.related party customers, respectively.

30

 

Cost of revenue

 

Our cost of revenue primarily includeincludes cost of revenuecommodity products and taxes and surcharges associated with sales of commodity product sales, cost of revenue associated withproducts and management services of supply chain and cost of operating lease.chain. Total cost of revenue increased by $917,523 or 386%$3,714,645 from $237,651$nil for the three months ended March 31,September 30, 2019 to $1,155,174$3,714,645 for the three months ended March 31,September 30, 2020, primarily due to an increase of $1,055,143 in cost of revenue associated withbecause we just launched commodity product sales which was just launchedtrading business in December 2019, against a decrease of $138,337 in cost of operating lease as affected by COVID-19.2019.

 

Cost of revenue associated with commodity trading

 

Cost of revenue primarily consists of purchase costs of non-ferrous metal products.products and business taxes and surcharges. For the three months ended March 31,September 30, 2020, the Company purchased non-ferrous metal products of $1,055,143$3,609,639 from Shenzhen Qianhai Baiyu Supply Chain Co., Ltd. (“Shenzhen Baiyu”), atwo related party controlled by the legal representative of Huamucheng, and sold non-ferrous metal products to two customers.suppliers. The Company recorded cost of revenue of $1,055,143.$3,698,182. There was no such cost for the three months ended March 31,September 30, 2019 because this was a new business launched in December 2019.

 

Costs associated with Operating lease


Selling, general, and administrative expenses

 

The operating lease expense mainly consisted of depreciationSelling, general and administrative expenses on leasing business assets and car related expenses arising from lease of cars.

The depreciation expenses on leasing business assets increased from $46,858$259,945 for the three months ended March 31,September 30, 2019 to $79,578$292,080 for the three months ended March 31,September 30, 2020, representing an increase of $32,720,$32,135, or 70%12%. Selling, general and administrative expenses primarily consisted of salary and employee benefits, office rental expense, business tax and surcharge, professional service fees, office supplies. The increase was mainly caused by the Company’s continuous investmentsattributable to an increase of $79,098 in used luxurious cars. Asrental expenses with our launch of March 31, 2020, the Company had eleven used luxurious cars, as compared with eight cars ascommodity product trading business, against a decrease of March 31, 2019.salary and payroll expenses of $27,012 because our new senior management charged less salary expenses.

 

InInterest income

Interest income was primarily generated from loans made to third parties and related parties. For the three months ended March 31,September 30, 2020, interest income was $1,836,016, as compared with $nil for the same period ended September 30, 2019. The increase was primarily due to net loans of $83.3 million made to Shezhen Xinsuniao, from which the Company earned interest income of $1.9 million.

Net loss from discontinued operations

During the three months ended September 30, 2020, the net loss from discontinued operations was comprised of a net loss of $nil from discontinued operations of used luxurious car leasing business and a loss of $2,989,116 from disposal of the discontinued operations of used luxurious car leasing business. 

During the three months ended September 30, 2019, the Company officially launched sub-leasenet loss from discontinued operations was comprised of a net loss of $132,898 from discontinued operations of used luxurious car business through leasing cars from both third party peer companies and individuals. The Company recorded car leasing expensesbusiness.

For details of $19,736 and $190,793discontinued operations, please refer to Note 4 to unaudited condensed financial statements. 

Net income (loss)

As a result of the foregoing, net income for the three months ended March 31,September 30, 2020 was $546,801, representing a change of $939,644 from net loss of $392,843 for the three months ended September 30, 2019.


Nine Months Ended September 30, 2020 as Compared to Nine Months Ended September 30, 2019

  For the Nine Months Ended
September 30,
  Change 
  2020  2019  Amount  % 
Revenues            
Sales of commodity products $2,722,836  $-  $2,722,836   100%
Sales of commodity products – related parties  3,575,409       3,575,409   100%
Supply chain management services  1,609,469   -   1,609,469   100%
Supply chain management services – related parties  2,112,166       2,112,166   100%
Total Revenue  10,019,880   -   10,019,880   100%
                 
Cost of revenue                
Commodity product sales  (1,458,212)  -   (1,458,212)  100%
Commodity product sales – related parties  (4,865,857)  -   (4,865,857)  100%
Supply chain management services  (24,417)  -   (24,417)  100%
Total cost of revenue  (6,348,486)  -   (6,348,486)  100%
                 
Gross profit  3,671,394   -   3,671,394   100%
                 
Operating expenses                
Selling, general, and administrative expenses  (1,032,660)  (2,123,191)  1,090,531   (51)%
Total operating cost and expenses  (1,032,660)  (2,123,191)  1,090,531   (51)%
                 
Other income (expenses), net                
Interest income  3,736,079   636   3,728,093   >100% 
Interest expenses  (69,644)  -   (69,644)  100%
Amortization of beneficial conversion feature relating to issuance of convertible notes  (3,400,000)  -   (3,400,000)  100%
Amortization of relative fair value of warrants relating to issuance of convertible notes  (3,060,000)  -   (3,060,000)  100%
Total other expenses, net  (2,793,565)  636   (2,801,551)  100%
                 
Loss from Continuing Operations Before Income Taxes  (154,831)  (2,122,555)  1,967,724   (93)%
                 
Income tax expenses  (1,573,531)  -   (1,573,531)  100%
                 
Net Loss from Continuing Operations  (1,728,362)  (2,122,555)  394,193   (19)%
                 
Net Loss from Discontinued Operations  (3,541,807)  (1,140,439)  (2,401,368)  211%
                 
Net Loss $(5,270,169) $(3,262,994) $(2,007,175)  62%

33

Revenue

For the nine months ended September 30, 2020, we generate revenue from the following three sources, including (1) revenue from sales of commodity products, and (2) revenue from supply chain management services. Total revenue increased by $10,019,880 from $nil for the nine months ended September 30, 2019 to $10,019,880 for the nine months ended September 30, 2020, because we just commenced our commodity product trading business in December 2019. Among the revenues for the nine months ended September 30, 2020, revenue from commodity trading and supply chain management accounted for 62.9% and 37.1%, respectively.

(1)Revenue from sales of commodity products

For the nine months ended September 30, 2020, the Company sold non-ferrous metals to three related party customers and three third party customers at fixed prices, and earned revenues when the product ownership was transferred to its customers. The decreaseCompany earned revenues of $2,722,836 and $3,575,409, respectively, from sales of commodity products to three third party customers and three related party customer. There was mainly caused byno such revenue for the nine months ended September 30, 2019.

(2)Revenue from supply chain management services

In connection with the Company’s closurecommodity sales, in order to help customers to obtain sufficient funds to purchase various metal products and also help metal and mineral suppliers sell their metal products, the Company launched its supply chain management service business in December 2019, which primarily consisted of car rental facilities from the end of January 2020 to March 2020, as affected by COVID-19.commodity distribution services.

 

Commodity distribution service fees

The Company utilizes its strong sales and marketing expertise and customer network to introduce customers to large metal and mineral suppliers, and facilitate the metal product sales between the suppliers and the customers. The Company merely acts as an agent in this type of transaction and earns a commission fee based on the percentage of volume of metal products that customers purchase. Commodity distribution service fees are recognized as revenue when the Company successfully facilitates the sales transactions between the suppliers and the customers. For the nine months ended September 30, 2020, the Company earned commodity distribution commission fees of $1,609,469 and $2,112,166 from facilitating such sales transactions with six third party customers and three related party customers.

Cost of revenue

Our cost of revenue primarily includes cost of commodity products and taxes and surcharges associated with sales of commodity products and management services of supply chain. Total cost of revenue increased by $6,348,486 from $nil for the nine months ended September 30, 2019 to $6,348,486 for the nine months ended September 30, 2020, primarily because we just launched commodity product trading business in December 2019.

Cost of revenue associated with commodity trading

Cost of revenue primarily consists of purchase costs of non-ferrous metal products and business taxes and surcharges. For the nine months ended September 30, 2020, the Company purchased non-ferrous metal products of $4,865,857 and $1,458,212 from three related party vendors and one third party vendor, and sold non-ferrous metal products to customers. The Company recorded cost of revenue of $6,324,069. There was no such cost for the nine months ended September 30, 2019 because this was a new business launched in December 2019.


Selling, general, and administrative expenses

 

Selling, general and administrative expenses decreased from $1,906,319$2,123,191 for the threenine months ended March 31,September 30, 2019 to $425,115$1,032,660 for the threenine months ended March 31,September 30, 2020, representing a decrease of $1,481,204,$1,090,531, or 78%51%. Selling, general and administrative expenses primarily consisted of salary and employee benefits, office rental expense, business tax and surcharge, professional service fees, office supplies. The decrease was mainly attributable to combined effects ofa decrease a decrease of other operatingstock-based compensation expenses of $358,518 as a result of closures of our car rental facilities for the three months ended March 31, 2020, and a decrease of legal and consulting expenses of $1,220,923 as a result of 1) issuance of$884,208, because we issued 502,391 restricted shares as compensation of $884,208 to certain service providers for the threenine months ended March 31,September 30, 2019, while no such issuance for the threenine months ended March 31,September 30, 2020, and 2) a decrease of $112,061 in salary and payroll expenses incurred forbecause the registered direct offerings in Aprilnew senior management of the Company charged less payroll expenses.

Interest income

Interest income was primarily generated from loans made to third parties and May 2019, includingrelated parties. For the nine months ended September 30, 2020, interest income was $3,736,079, representing an increase of audit related fees$3,728,093 from $636 for the nine months ended September 30, 2019. The increase was primarily due to net loans of $156,659, an increase of commission of $100,000$83.3 million made to a third party vendor for referralcustomer. The Company earned interest income of underwriters.$3.59 million from this customer.

Amortization of beneficial conversion feature and relative fair value of warrants relating to issuance of convertible notes

For the nine months ended September 30, 2020, the item represented the full amortization of beneficial conversion feature of $3.4 million and amortization of relative fair value of warrants of $3.06 million relating to the convertible notes which was exercised in May 2020.

For the nine months ended September 30, 2020, no such expenses incurred.

Net loss from discontinued operations

During the nine months ended September 30, 2020, the net loss from discontinued operations was comprised of a net loss of $552,691 from discontinued operations of used luxurious car leasing business and a loss of $3,541,807 from disposal of the discontinued operations of used luxurious car leasing business. 

During the nine months ended September 30, 2019, the net loss from discontinued operations was comprised of a net loss of $1,140,439 from discontinued operations of used luxurious car leasing business.

For details of discontinued operations, please refer to Note 4 to unaudited condensed financial statements. 

 

Net loss

 

As a result of the foregoing, net loss for the threenine months ended March 31,September 30, 2020 was $139,972,$5,270,169, representing a decreasean increase of $1,689,854$2,007,175 from net loss of $1,829,826$3,262,994 for the threenine months ended March 31,September 30, 2019.


Cash Flows and Capital Resources

 

We have financed our operations primarily through shareholder contributions, cash flow from operations, borrowings from third parties and related parties, and equity financing through public offerings of our securities.

 

For the three months endedIn March 31, 2020, the Company issued an aggregate of 17,000,000 shares of its common stock, and unsecured senior convertible promissory notes (“Notes”) in the aggregate principal amount of $30,000,000 accompanied by warrants to purchase 20,000,000 shares of Common Stock issuable upon conversion of the Notes at an exercise price of $1.80. In April 2020, the Holders elected to convert the Notes at a conversion price of $1.50 per share and also exercise the Warrants at an exercise price of $1.80 per share. The Company raised an aggregation of $81.1 million from these equity financing transactions, among which $1.6 million was advanced from investors in November 2019, and the remaining $79.5 million was collected in April and May 2020.

Liquidity

During the three months ended March 31, 2020, the Company entered into additional private placement agreements with certain private investors and issued 15,000,000 shares of common stock at $0.90 per share and also soldunsecured senior convertible promissory notes (“Notes”) in the aggregate principal amount of $30,000,000 accompanied by warrants to purchase 20,000,000 shares of Common Stock issuable upon conversion of the Notes at an exercise price of $1.80.On April 14 and 15, 2020, the holders of Notes exercised warrants and paid cash consideration of $36,000,000  to the Company.Total equity financing from this transaction was $79.5 million. The Company received $79.5 million proceeds by April 15, 2020. The Company expects to use the proceeds from this equity financing as working capital to expand its commodity trading business.

Liquidity

For the nine months ended September 30, 2020, the Company incurred a net loss of $3.32 million, and reported cash inflows of approximately $1.31 million from operating activities. As of September 30, 2020, the Company had cash balance of $2,967,557.

In assessing the Company’s liquidity, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements and operating expenses obligations.

As of September 30, 2020, the Company had a positive working capital of approximately $93.3 million, among which the Company had a loan due from Shenzhen Xinsuniao of approximately $85.6 million for the purpose of developing supply chain financing business. Pursuant to the loan agreement, the loan term for each individual loan was twelve months from disbursement, but in practice the loans are revolving every 3 – 4 months. From October 1, 2020 to the date of the report, the Company fully collected outstanding balance from Xinsuniao.

Going forward, the Company plans to fund its operations through revenue generated from its commodity trading business, funds from its private placements as well as financial support commitments from the Company’s Chief Executive Officer and major shareholders.

 

Based on above financing activities,operating plan, the management believes that the Company will continue as a going concern in the following 12 months.

 

Statement of Cash Flows

 

The following table sets forth a summary of our cash flows. For the threenine months ended March 31,September 30, 2020 and 2019, respectively:

 

 For the Three Months Ended
March 31,
  For the Nine Months Ended
September 30,
 
 2020  2019  2020  2019 
Net Cash Used in Operating Activities  (156,559)  (758,633)
Net Cash Provided by (Used in) Operating Activities $2,372,520  $(2,002,690)
Net Cash Used in Investing Activities  (3,424,968)  (999,481)  (83,141,021)  (5,457,537)
Net Cash Provided by Financing Activities  1,063,773   592,724   81,046,593   7,399,262 
Effect of exchange rate changes on cash and cash equivalents  98,172   21,969   912,189   (14,197)
Net decrease in cash and cash equivalents  (2,419,582)  (1,143,421)
Net increase (decrease) in cash and cash equivalents  1,190,281   (75,162)
Cash at beginning of period  1,777,276   416,459 
Cash at end of period $2,967,557  $341,297 

 


Net Cash Used inProvided by (Used in) Operating Activities

 

During the threenine months ended March 31,September 30, 2020, we had a cash outflowinflow from operating activities of $156,559,$2,372,520, a decreasechange of $602,074$4,375,210 from a cash outflow of $758,633$2,002,690 for the threenine months ended March 31,September 30, 2019. We incurred a net loss for the threenine months ended March 31,September 30, 2020 of $139,972, a decrease$5,270,169, an increase of $1,689,854$2,007,175 from the threenine months ended March 31,September 30, 2019, during which we recorded a net loss of $1,829,826. $3,262,994. For the nine months ended September 30, 2020 and 2019, we had a cash outflow of $700,039 and $802,446 from operating activities from discontinued operations, and we incurred net loss of $3,541,807 and $1,140,439 from discontinued operations, respectively.

In addition to the change in profitability, the decreasechange in net cash provided by/(used inin) operating activities from continuing operations was the result of several factors, including:

 

An increase of $132,271$5,282,703 in changes of other current assetsprepayments for the threenine months ended March 31,September 30, 2020 because the Company recognized but yet collected interest incomesuppliers of $85,275, and deferred NASDAQ service fees of $33,750, as compared with a decrease of $29,320 in changes of other current assets for the three months ended March 31, 2019 as a result of timely collection of petty cash from staff;trading commodities required us to make repayments; and

  

502,391 restricted shares were issuedAn increase of $1,843,990 in changes of advance from customers for the nine months ended September 30, 2020 because we required of one of our customers to service providers as compensation for past services, at a fair value of $884,208make advance payments before we delivering commodity products.

 

Net Cash Used in Investing Activities 

 

Net cash used in investing activities for the threenine months ended March 31,September 30, 2020 was $3,424,968 as compared to net cash used in investing activities$83,141,021, which was primarily loans of $999,481 for the three months ended March 31, 2019.


The cash used in investing activities for the three months ended March 31, 2020 was for the loans disbursed$157,087,880 and $4,826,640 made to third parties and related parties, against collections of $1,831,708loans of $74,999,934 and $1,593,260, respectively.$3,404,953 from third parties and related parties, respectively, and cash of $368,612 used in investing activities from discontinued operations.

 

Net cash used in investing activities for the threenine months ended March 31,September 30, 2019 was $5,457,537. The cash used in investing activities for the nine months ended September 30, 2019 was combined effects of purchaseinvestment in one equity investee of two used luxurious cars$200,000, investments in financial products of $406,757$1,000,000 and loans disbursed to two third parties of $592,724.$499,000, and cash of $3,758,537 used in investing activities from discontinued operations.

 

Net Cash Provided by Financing Activities

 

During the threenine months ended March 31,September 30, 2020, the cash provided by financing activities was mainly attributable to borrowings from related parties of $1,063,773. During the three months ended March 31, 2019, the cash provided by financing activities was mainly attributable to borrowings from third parties of $592,724.$1,558,595, cash raised of $13,500,000 from a private placements by issuance of 15,000,000 shares of common stocks, cash raised of $66,000,000 from issuance of unsecured senior convertible promissory notes in the aggregate principal amount of $30,000,000, exercise of accompanied warrants to purchase 20,000,000 shares of common stock at an exercise price of $1.80, and cash used in investing activities from discontinued operations of $381,554.

During the nine months ended September 30, 2019, the cash provided by financing activities was mainly attributable to cash raised in registered direct offerings of $5,241,440 and cash provided by financing activities from discontinued operations of $2,157,822.

 

Off-balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements as of March 31,September 30, 2020.

 


Contractual Obligations

 

As of March 31,September 30, 2020, the present value of annual amounts of future minimum payments under certain of our contractual obligations were:

 

    Less than          Less than      
 Total  1 year  1-2 years  Thereafter  Total  1 year  1-2 years  Thereafter 
Contractual obligations:                  
Operating lease (1) $365,076  $312,413  $52,663            -  $215,658  $215,658  $       -  $       - 
Total $365,076  $312,413  $52,663  $-  $215,658  $215,658  $-  $- 

 

(1)During the threenine months ended March 31,September 30, 2020, the Company entered into one additional lease contract. As of March 31,September 30, 2020, we had one rental free office lease agreement with a third party and fourone office lease agreement with third parties which expire through June 30, 2021, amongboth of which two lease agreements have leases term over 12 months.

 

(2)The Company classifies these lease agreements as operating leases in accordance with Topic 842.

 

Critical Accounting Policies

 

Please refer to Note 2 of the Unaudited Condensed Consolidated Financial Statements included in this Form 10-Q and Note 2 of the Consolidated Financial Statements included in the Form 10-K file on May 29, 2020 for details of our critical accounting policies.


ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4.CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of March 31,September 30, 2020 (please refer to Item 9A. Controls and Procedures enclosed in Form 10-K filed on May 29, 2020).

 

Limitations on the Effectiveness of Disclosure Controls. Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions.

  

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2020 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 


PART II. OTHER INFORMATION

 

ITEM 1.LEGAL PROCEEDINGS

 

The Company is involved in various legal actions arising in the ordinary course of its business.

 

a)2015 Derivative Action

 

On February 3, 2015, a purported shareholder Kiran Kodali filed a putative shareholder derivative complaint against the Company, alleging that the Company and its former officers and directors violated their fiduciary duties, grossly mismanaged the Company and were unjustly enriched based upon the transfer that was the subject of the Internal Review and other grounds substantially similar to those asserted in the class action complaints.

 

On July 16, 2019, the Company received a copy of the final order and judgment that the Court entered on July 11, 2019, approving the settlement set forth in the Stipulation. The Stipulation provides for dismissal of the Derivative Action as to the Company and the Individual Defendants, and the Company agrees to adopt or maintain certain corporate governance reforms for at least three years. The Stipulation also provides for attorneys’ fees and expenses to be paid by the Individual Defendants’ insurance carriers to plaintiffs’ counsel.

 

b)2017 Arbitration with Sorghum

 

On December 21, 2017, the Company delivered notice (“Notice”) to Sorghum notifying Sorghum that certain recent actions of Sorghum constituted breaches of Sorghum’s covenants under the Exchange Agreement. Specifically, we believe that Sorghum is in breach of Section 6.9 (a and Section 6.11 (b of the Exchange Agreement which required Sorghum to use commercially reasonable efforts and to cooperate fully with the other parties to consummate the transactions contemplated by the Exchange Agreement and to make its directors, officers and employees available in connection with responding in a timely manner to SEC comments. According to the terms of the Exchange Agreement, the Company is entitled to terminate the Exchange Agreement if the breach is not cured within twenty (20 days after the Notice is provided to Sorghum.

 

On January 25, 2018, the Company filed an arbitration demand (“Arbitration Demand” with the American Arbitration Association (“AAA” against Sorghum in connection with Sorghum’s breach of the Exchange Agreement.

 

On July 30, 2018, Arbitrator entered a reasoned award, accepting the Company’s proposal for resolution, awarding the Company damages of $1,436,522 against Sorghum and denying Sorghum’s Counterclaim against the Company in its entirety with prejudice. Sorghum has sought to vacate the arbitration award by filing a petition to vacate the arbitration award in the Supreme Court for the State of New York, New York County. The Court heard the Company and Sorghum’s arguments on May 1, 2019, and entered an order vacating the arbitration award. The Company vigorously opposed and moved to confirm the arbitration award on May 6, 2019. On June 5, 2019, the Company filed a notice of appeal with the New York Supreme Court Appellate Division First Department. The appeal was scheduled to be mediated on November 20, 2019. On November 15, 2019, the Company withdrew its appeal filed June 5, 2019, upon the stipulation of the parties and accordingly, the arbitration award is deemed to be vacated.

 

c)2018 Court Matter with Shanghai Nonobank Financial Information Service Co. Ltd.

 

On August 2, 2018, the Company became party to an action filed by Shanghai Nonobank Financial Information Service Co. Ltd. (“Plaintiff”) in the Supreme Court for the State of New York, New York County (“NY Supreme Court” (Index No. 653834/2018 (the “Action”). Plaintiff’s complaint seeks to recover approximately $3.5 million of Plaintiff’s funds that were allegedly required to be held in escrow in New York pursuant to an agreement by and between Plaintiff, Yang Jie and Yi Lin (the “Complaint”). Plaintiff has alleged that the funds were required to be held in escrow in a New York attorney trust account pending the alleged consummation of a merger between Plaintiff’s parent company and the Company. Plaintiff alleged two causes of action against the Company for fraud/fraudulent inducement and conversion. On August 30, 2018, the Company filed a motion to dismiss Plaintiff’s causes of action against the Company. The Court has scheduled oral arguments on the Company’s motion to dismiss for May 1, 2019.

 

On July 15, 2019, the Company received a copy of the decision and order the Court entered on July 12, 2019, granting the Company’s motion to dismiss the Complaint in its entirety as against the Company without prejudice, with costs and disbursements to the Company as taxed by the Clerk of the Court, and the Clerk is directed to enter judgment accordingly in favor of the Company. 

 


d)2020 Court Matter with Harrison Fund

 

On April 6, 2020, the Company filed a law suit against Harrison Fund, LLC (“Harrison Fund”) in the United States District Court for the Northern District of California (the “District Court”) (Case No. 3:20-cv-2307). The Company had invested $1,000,000 in Harrison Fund around May 2019. However, Harrison Fund had been reluctant to disclose related investment information to the Company and it was discovered that certain information presented on Harrison Fund’s brochure appeared to be problematic. The Company demanded a return of its investment from Harrison Fund. When the Company failed to obtain a response from Harrison Fund, it filed the complaint against Harrison Fund seeking to recover the $1,000,000 investment.

 


Due to the uncertainty arising from this pending legal proceeding, a full impairment has been applied against the Company’s investment in financial products.

ITEM 1A.RISK FACTORS

 

As of the date of this Report and except as set forth below, there have been no material changes to the risk factors disclosed in our annual report on Form 10-K filed with the SEC on May 29, 2020.

Risk Factors Relating to Our Acquisition of Supply Chain Service Business

 

There is no assurance that we will be able to synergize the operations of Huamucheng and Qianhai Baiyu effectively.

Synergizing the commodity supply chain services of Qianhai Baiyu with the commodities trading business of Huamucheng is a significant challenge and there is no assurance that we will be able to manage the synergization successfully. If we are unable to efficiently synergize these businesses, the attention of our management could be diverted from our existing operations and the ability of the management teams at these business units to meet operational and financial expectations could be adversely impacted, which could impair our ability to execute our business plans. Failure to successfully synergize the commodity supply chain services of Qianhai Baiyu or to realize the expected benefits of our expansion in the commodity supply chain services field may have an adverse impact on our results of operations and financial condition. 

Acquisitions or strategic investments we have made or may make could turn out to be unsuccessful.

As part of our strategy, we frequently monitor and analyze acquisition or investment opportunities that we believe will create value for our shareholders. For example, in October 2020, we acquired Qianhai Baiyu and plan to leverage Qianhai Baiyu’s experiences and technique to expand our operations in the commodity supply chain service field.

However, our acquisition of Qianhai Baiyu or future acquisitions and investments could involve numerous risks that may prevent us from fully realizing the benefits that we anticipated as a result of the transaction. These risks include the failure to derive any commercial value from the acquired technology, products and intellectual property including as a result of the failure to obtain regulatory approval or to monetize products once approved, as well as risks from lengthy product development and high upfront development costs without guarantee of successful results. Patents and other intellectual property rights covering acquired technology and/or intellectual property may not be obtained, and if obtained, may not be sufficient to fully protect the technology or intellectual property. We may be subject to liabilities, including unanticipated litigation costs, that are not covered by indemnification protection we may obtain. As we pursue or consummate a strategic acquisition or investment, we may value the acquired or funded company incorrectly, fail to successfully manage our operations as our asset diversity increases, expend unforeseen costs during the acquisition or integration process, or encounter other unanticipated risks or challenges. Once an investment is made, we may fail to value it accurately, properly account for it in our consolidated financial statements, or successfully divest it or otherwise realize the value which we originally invested or have subsequently reflected in our consolidated financial statements. Any failure by us to effectively limit such risks as we implement our acquisitions or strategic investments could have a material adverse effect on our business, financial condition or results of operations and may negatively impact our net income and cause the price of our securities to fall.

41

Our Supply Chain Service Business is susceptible to volatility due to ongoing uncertainty as a result of ongoing international and domestic pandemic response and recovery efforts.

Our Supply Chain Services Business has been relatively stable since May 2020 when the COVID-19 pandemic has been brought under control in China. As of the date of this Report, we are continuing to execute our pandemic response plan and planning to best position our company to emerge as strong as possible when the COVID-19 pandemic officially ends. However, our supply chain services business is still susceptible to volatility due to ongoing international and domestic pandemic response and recovery efforts. Despite our diligent efforts to monitor and respond as appropriate to the impacts of the pandemic on our supply chain services business, there remains a fair degree of uncertainty regarding the potential impact of the pandemic on our business, from both a financial and operational perspective, and the scope and costs associated with additional measures that may be necessary in response to the pandemic going forward.

If customers of our supply chain services are able to reduce their logistics and supply chain costs or increase utilization of their internal solutions, our supply chain services business and operating results may be materially and adversely affected.

Our acquisition of Qianhai Baiyu in October 2020, has laid a solid foundation for us to expand our operations in the commodity supply chain service field. Qianhai Baiyu has a supply chain infrastructure, which includes processing, logistics, warehousing and terminals. Utilizing its customer base, industry experience, and expertise in the commodity trading industry, Qianhai Baiyu serves as a one-stop commodity supply chain service and digital intelligence supply chain platform integrating enterprises, warehouses, logistics, information, and futures trading.

A major driver for merchants and other customers to use third-party logistics and supply chain service providers is the high cost and degree of difficulty associated with developing in-house logistics and supply chain expertise and operational efficiencies. If, however, our customers are able to develop their own logistics and supply chain solutions, increase utilization of their in-house supply chain, reduce their logistics spending, or otherwise choose to terminate our services, our logistics and supply chain management business and operating results may be materially and adversely affected.


ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On January 22, 2020, the Company also agreed to sell unsecured senior convertible promissory notes (“Notes”) in the aggregate principal amount of $30,000,000 accompanied by warrants to purchase 20,000,000 shares of Common Stock issuable upon conversion of the Notes at an exercise price of $1.80. On March 23, 2020, the Company issued the Notes and Warrants to the investors. In April 2020, the Company received the proceeds of $30,000,000 from the issuance of Notes and Warrants.None.

 

The Notes have a maturity date of 12 months with an interest rate of 7.5% per annum. Holders have the right to convert all or any part of the Notes into shares of Common Stock at a conversion price of $1.50 per share 30 days after its date of issuance. The Company retains the right to prepay the Note at any time prior to conversion with an amount in cash equal to 107.5% of the principal that the Company elects to prepay.

The Warrants will be exercisable immediately upon the date of issuance at the exercise price of $1.80 for cash (the “Warrant Shares”. The Warrants may also be exercised cashless if at any time after the six-month anniversary of the issuance date, there is no effective registration statement registering, or no current prospectus available for, the resale of the Warrant Shares, exercised, The Warrants will expire five years from its date of issuance. The Warrants are subject to anti-dilution provisions to reflect stock dividends and splits or other similar transactions. The Warrants contain a mandatory exercise right for the Company to force exercise of the Warrants if the Company’s common stock trades at or above $3.00 for 20 consecutive trading days, provided, among other things, that the shares issuable upon exercise of the are registered or may be sold pursuant to Rule 144 and the daily trading volume exceeds 300,000 shares of Common stock per trading day on each trading day in a period of 20 consecutive trading days prior to the applicable date.

In April 2020, the Holders elected to convert the Notes at a conversion price of $1.50 per share and also exercise the Warrants at an exercise price of $1.80 per share, and paid a cash consideration of $36,000,000 for the exercise of the Warrants by April 15, 2020. As a result, an aggregate of 40,000,000 shares of the Company’s Common Stock were issued on May 18, 2020.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5.OTHER INFORMATION

 

None. 

ITEM 6.EXHIBITS

 

Exhibit No. Description
   
3.1* Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 of the draft registration statement on Form DRS filed on February 14, 2013)
3.2* Bylaws of Registrant (incorporated by reference to Exhibit 3.2 of the draft registration statement on Form DRS filed on February 14, 2013)
3.3* Articles of Association of Wujiang Luxiang Rural Microcredit Co. Ltd. (incorporated by reference to Exhibit 3.3 of the registration statement on Form S-1/A filed on June 27, 2013)
3.4* Certificate of Approval of Wujiang Luxiang Rural Microcredit Co. Ltd. (incorporated by reference to Exhibit 3.4 of the registration statement on Form S-1 filed on June 7, 2013)
3.5* Certificate of Amendment of the Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.5 of the registration statement on Form S-1/A filed on July 16, 2013)
3.6* Certificate of Amendment to the Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on January 16, 2019)
3.7* Certificate of Amendment to the Certificate of Incorporation of Registrant incorporated(incorporated herein by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on June 7, 20192019)
3.8* Certificate of Amendment to the Certificate of Incorporation of Registrant incorporated(incorporated herein by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on March 12, 2020
4.1*Form of Common Stock Purchase Warrant, incorporated herein by reference to Exhibit 4.1 of the Current Report on Form 8-K filed on April 12, 2019
4.2*Form of Common Stock Purchase Warrant, incorporated herein by reference to Exhibit 4.1 of the Current Report on Form 8-K filed on May 22, 2019


4.3*Form of Amended & Restated Common Stock Purchase Warrant, incorporated herein by reference to Exhibit 4.2 of the Current Report on Form 8-K filed on May 22, 2019
4.4*Form of Exchange Warrant, incorporated herein by reference to Exhibit 4.1 of the Current Report on Form 8-K filed on September 3, 20192020)
10.1* Form of SecuritiesShare Purchase Agreement incorporateddated August 28, 2020 by and among the Company, Vision Loyal Limited, HC High Summit Limited and HC High Summit Holding Limit (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on January 22, 2020August 28, 2020)
10.2* Form of Note SecuritiesShare Purchase Agreement incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed on January 22, 2020
10.3*Unofficial Translation of Warehousing Agreement dated January 22,October 26, 2020 by and betweenamong Shenzhen Huamucheng and Foshan Nanchu Storage ManagementTrading Co., Ltd., incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K filed on January 22, 2020
10.4*Unofficial Translation of Purchase Agreement dated January 22, 2020, by and between HuamuchengShenzhen Xinsuniao Technology Co., Ltd. and Shenzhen Qianhai Baiyu Supply Chain Co., Ltd., incorporated by reference to Exhibit 10.4 of the Current Report on Form 8-K filed on January 22, 2020
10.5*Unofficial Translation of Sales Agreement dated January 22, 2020, by and between Huamucheng and Yunfeihu Cross-border E-Commerce Co., Ltd., incorporated by reference to Exhibit 10.5 of the Current Report on Form 8-K filed on January 22, 2020
10.6*Amended and Restated Employment Agreement dated January 9, 2020 by and between Registrant and Renmei Ouyang, incorporated (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on January 10, 2020
10.7*Employment Agreement dated January 9, 2020 by and between Registrant and Qun Xie, incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed on January 10, 2020
10.8*Director Offer Letter dated January 9, 2020 by and between Registrant and Qun Xie, incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K filed on January 10, 2020October 29, 2020)
31.1** Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2** Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1** Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2** Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

*Previously filed
**Filed herewith

   

3643

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  

TD HOLDINGS, INC.

TD HOLDINGS, INC.

Date: June 26, 20204, 2021  

By:/s/ Renmei Ouyang
 Name:  Renmei Ouyang
 Title:

Chief Executive Officer

(Principal Executive Officer)

   
 By:/s/ Yang AnWei Sun
 Name: Yang AnWei Sun
 Title:Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

 

3744