BAIYU Holdings, Inc. - Quarter Report: 2022 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2022

☐ 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)

+86 (0755) 88898711

(Registrant’s telephone number, including area code)

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

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.

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 August 9, 2022, 276,237,565 shares of the Company’s Common Stock, $0.001 par value per share, were issued and outstanding.

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TD HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2022 and December 31, 2021

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

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

TD HOLDINGS, INC.

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

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

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

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

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

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

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

TD HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. dollar)

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

TD HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)

The Company conducts business through Shanghai Jianchi Supply chain Co., Ltd (“Shanghai Jianchi”), a subsidiary of the Company, which is engaged in the commodity trading business and providing supply chain management services to customers in the PRC. Supply chain management services consist of loan recommendation services and commodity product distribution services. The Company incorporated Hainan Jianchi Import and Export Co., Ltd, a subsidiary of Shanghai Jianchi, Hainan Baiyu Cross-border e-commerce Limited, a subsidiary of Tongdow HK, and Yangzhou Baiyu Cross-border e-commerce Limited, a subsidiary of Yangzhou Baiyu Venture Capital Co., Ltd during the six months ended June 30, 2022.

The following diagram illustrates our corporate structure as of June 30, 2022.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All transactions and balances among the Company and its subsidiaries have been eliminated upon consolidation.

The unaudited interim condensed consolidated financial information as of June 30, 2022 and for the six months ended June 30, 2022 and 2021 have been prepared, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in annual condensed consolidated financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. The unaudited interim condensed consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K for the fiscal year ended December 31, 2021 previously filed with the SEC on March 16, 2022.

In the opinion of management, all adjustments (which include normal recurring adjustments) are necessary to present a fair statement of the Company’s unaudited condensed consolidated financial position as of June 30, 2022 and its unaudited condensed consolidated results of operations for the three months and six months ended June 30, 2022 and 2021, and its unaudited condensed consolidated cash flows for the six months ended June 30, 2022 and 2021, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the fiscal year or any future periods.

Error Correction

On March 4, 2021, the Company issued 750,000 fully-vested warrants with an exercise price of $0.01, with a five-year life, to an engaged agent to complete the warrant waiver and exercise agreements.

The Company applied Black-Scholes model and determined the fair value of the warrants to be $1.7 million. Significant estimates and assumptions used included stock price on March 4, 2021 of $2.27 per share, risk-free interest rate of one year of 0.08%, life of 5 years, and volatility of 71.57%.

The Company’s quarterly financial statements ended March 31, 2021 contained an error related to above share-based payment for service. Management has determined such error was qualitatively immaterial and the correction was made during this quarter. No restatement to previously issued interim financial statements was deemed necessary.

The following table illustrates the correction of the error had it been shown in the statement of operations on March 31, 2021 in the interim financial statement in Form 10-Q filing on June 25, 2021: 

The Company included $1,695,042 as share-based payment for service on the condensed consolidated statement of operations for the six months ended June 30, 2021. 

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews these estimates using the currently available information. Changes in facts and circumstances may cause the Company to revise its estimates. Significant accounting estimates reflected in the financial statements include: (i) useful lives and residual value of long-lived assets; (ii) the impairment of long-lived assets and investments; (iii) the valuation allowance of deferred tax assets; (iv) estimates of allowance for doubtful accounts, including loans receivable from third parties and related parties, (v) valuation of Inventory, and (vi) contingencies and litigation.

Foreign currency

The Company’s financial information is presented in U.S. dollars (“USD”). The functional currency of the Company is the Chinese Yuan Renminbi (“RMB”), the currency of PRC. Any transactions which are denominated in currencies other than RMB are translated into RMB at the exchange rate quoted by the People’s Bank of China prevailing at the dates of the transactions, and exchange gains and losses are included in the statements of operations as foreign currency transaction gain or loss. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. The financial information is first prepared in RMB and then translated into U.S. dollars at period-end exchange rates for assets and liabilities and average exchange rates for revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

Convertible promissory notes are recognized initially at fair value, net of upfront fees, debt discounts or premiums, debt issuance costs and other incidental fees. Upfront fees, debt discounts or premiums, debt issuance costs and other incidental fees are recorded as a reduction of the proceeds received and the related accretion is recorded as interest expense in the consolidated income statements over the estimated term of the facilities using the effective interest method.

The Company evaluates the conversion feature to determine whether it was beneficial as described in ASC 470-20. The intrinsic value of a beneficial conversion feature inherent to a convertible note payable, which is not bifurcated and accounted for separately from the convertible promissory notes payable and may not be settled in cash upon conversion, is treated as a discount to the convertible promissory notes payable. This discount is amortized over the period from the date of issuance to the date the notes are due using the effective interest method. If the notes payable are retired prior to the end of their contractual term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the shares of common stock at the commitment date to be received upon conversion.

Inventories of the Company are bulk commodities products, such as precious metals. Inventories are stated at the lower of cost or net realizable value. Costs of inventory are determined using the first-in first-out method. Adjustments to reduce the cost of inventories are made, if required, for decreases in sales prices, obsolescence or similar reductions in the estimated net realizable value.

We keep inventory for our direct sales model. Our inventory control policy requires us to monitor our inventory level and to manage obsolete inventory. Risk is passed to our customers (or to delivery service providers) upon the delivery of commodities to our customers. For a substantial majority of precious metal sold through our network, the whole transaction process takes from a few hours to a few days, thus our inventory risk is limited. For a small portion of our transactions under direct sales model, we hold inventories for repeating customers with relatively stable demands of large quantity based on our transaction data. We analyze historical sales data and days in inventory to establish inventory management plans. We monitor our real-time inventory volume and adjust our inventory management plans based on factors such as fluctuations in supply and prices, seasonality, and sales of a particular product.

In June 2016, the FASB issued ASU No. 2016-13 (“ASU 2016-13”) “Financial Instruments - Credit Losses” (“ASC 326”): Measurement of Credit Losses on Financial Instruments” which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. In November 2019, the FASB issued ASU 2019-10 “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)” which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, for public entities which meet the definition of a smaller reporting company. The Company will adopt ASU 2016-13 effective January 1, 2023. Management is currently evaluating the effect of the adoption of ASU 2016-13 on the consolidated financial statements. The effect will largely depend on the composition and credit quality of our investment portfolio and the economic conditions at the time of adoption.

In January 2017, the FASB issued ASU 2017-04, “Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which simplifies how an entity is required to test goodwill for impairment by eliminating step two from the goodwill impairment test. Step two of the goodwill impairment test measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with its carrying amount. As amended by ASU 2019-10, annual or interim goodwill impairment tests are performed in fiscal years beginning after December 15, 2022. We do not expect that the adoption of this guidance will have a material impact on our financial position, results of operations and cash flows.

In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other 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 accounting models for convertible debt instruments and convertible preferred stock. For public business entities, the amendments in ASU 2020-06 are effective for public entities which meet the definition of a smaller reporting company and 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. The effect will largely depend on the composition and terms of the financial instruments at the time of adoption.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.

As of June 30, 2022, the Company has 13 loan agreements compared with ten loan agreements on December 31, 2021. The Company provided loans aggregating $80,502,961 for the purpose of making use of idle cash and maintaining long-term customer relationships and paid back $10,069,408 during the six months ended June 30, 2022. These loans will mature from July 2022 through June 2023, and charges interest rate of 10.95% per annum on these customers.

Interest income of $4,365,653 and $916,010 was recognized for the three months ended June 30, 2022 and 2021, respectively. Interest income of $8,755,200 and $1,400,678 was recognized for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022 and December 31, 2021, the Company recorded an interest receivable of $4,562,726 and $3,090,353 as reflected under “other current assets” in the unaudited condensed consolidated balance sheets.

As of June 30, 2022 and December 31, 2021 there was no allowance recorded as the Company considers all of the loans receivable fully collectible.

Depreciation expense was $3,851, and currency translation difference was $152 for the six months ended June 30, 2022. Purchase of office equipment was $4,936 and currency translation difference was $300 for the six months ended June 30, 2022.

The Company’s intangible assets consist of customer relationships, which are recorded in connection with acquisitions at their fair value, and software copyright which are purchased from the related party Yunfeihu. Intangible assets with estimable lives are amortized, generally on a straight-line basis, over their respective estimated useful lives of 6.2 years and 6.83 years respectively to their estimated residual values.

For the six months ended June 30, 2022, the Company amortized $2,016,116 and currency translation difference was $295,110. For the six months ended June 30, 2021, the Company amortized $1,895,871 and currency translation difference was $8,580. No impairment loss was made against the intangible assets during the six months ended June 30, 2022.

The estimated amortization expense for these intangible assets in the next five years and thereafter is as follows:

Derivative Instruments Not Designated As Hedge Accounting Treatment

On April 23, 2021 and May 26, 2022, Hainan Jianchi Import and Export Co., Ltd, a subsidiary of the Company, entered into a contract with CITIC Futures Co., Ltd and Guoyuan Futures Co., Ltd to deal with futures business to hedging sales and purchase commodity products market price risks respectively. The two futures contracts are to trade non-ferrous metal products such as aluminum ingots, copper, silver, and gold. The contract is a derivative instrument for accounting purposes. The quantities of product in these agreements are offset and are priced at prevailing market prices. The contract does not qualify for hedge accounting treatment. The Company recognized other current assets on fair value of $68,539, and the notional amount is about $1.77 million as of June 30, 2022. The realized loss of $128,543 and unrealized gain of $10,447 for the six months ended June 30, 2022, were recognized in other income in the unaudited condensed consolidated statement of operations and comprehensive income (loss). The realized loss of $263,377 and unrealized gain of $48,917 for the three months ended June 30, 2022, were recognized in other income in the unaudited condensed consolidated statement of operations and comprehensive income (loss).

The goodwill associated with the Baiyu Acquisition was initially recognized at the acquisition closing date in October 2020.

Based on an assessment of the qualitative factors, management determined that it is more likely than not that the fair value of the reporting unit is in excess of its carrying amount. Therefore, management concluded that it was not necessary to proceed with the two-step goodwill impairment test. At June 30, 2022 and December 31, 2021, goodwill was $67,475,493 and $71,028,283, respectively. No impairment loss or other changes were recorded, except for the influence of foreign currency translation for the three months ended June 30, 2022 and 2021.

Bank borrowings represent the amounts due to Baosheng County Bank that are due within one year. As of June 30, 2022 and December 31, 2021, bank loans consisted of the following: 

On August 7, 2020, Qianhai Baiyu entered into three loan agreements with Baosheng County Bank to borrow a total amount of RMB12 million as working capital for one year, with the maturity date of August 7, 2021. The three loans bear a fixed interest rate of 6.5% per annum. The three loans are guaranteed by Shenzhen Herun Investment Co., Ltd, Li Hongbin and Wang Shuang. The loans were repaid in 2020 and 2021, and were finally repaid on August 7, 2021.

In August 2021, Qianhai Baiyu entered into another two loan agreements with Baosheng County Bank to borrow a total amount of RMB7.2 million as working capital for one year, with the maturity date of August 2022. The two loans bear a fixed interest rate of 7.8% per annum. The two loans are guaranteed by Shenzhen Herun Investment Co., Ltd, Li Hongbin and Wang Shuang.

The Company leases three offices under non-cancelable operating leases, two leases with terms of 38 months and the remaining lease term of 24 months. 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. The amortization of right-of-use assets for lease payment is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet.

The Company determines whether a contract is or contains a lease at the inception of the contract and whether that lease meets the classification criteria of 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 discounts lease payments based on an estimate of its incremental borrowing rate.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Supplemental consolidated balance sheet information related to the operating lease was as follows:

The weighted average remaining lease terms and discount rates for the operating lease were as follows as of June 30, 2022:

For the six months ended June 30, 2022 and 2021, the Company charged total amortization of right-of-use assets of $170,084 and $nil respectively. For the three months ended June 30, 2022 and 2021, the Company charged total amortization of right-of-use assets of $93,101 and $nil respectively.

The following is a schedule, by fiscal quarter, of maturities of lease liabilities as of June 30, 2022:

On March 4, 2021, the Company entered into a securities purchase agreement with Streeterville Capital, LLC, pursuant to which the Company issued an unsecured promissory note in the original principal amount of $3,320,000, convertible into shares of common stock, for proceeds of $3,000,000. The Company recorded a debt discount of $320,000, which is being amortized over 12 months. The Company settled convertible promissory note of $200,000 on January 5, 2022, $175,000 on January 26, 2022, $175,000 on February 8, 2022, $200,000 on February 25, 2022, $375,000 on March 17, 2022, $500,000 on March 17, 2022, $179,819 on March 18, 2022 and $262,331.48 on June 8, 2022, respectively, and issued 644,662, 882,412, 943,701, 1,376,652, 2,581,222, 2,500,000, 899,095 and 1,933,457 shares of the Company’s Common Stock on January 10, 2022, January 27, 2022, February 9, 2022, March 2, 2022, March 17, 2022, March 21, 2022, March 22, 2022 and June 14, 2022, respectively for the six months ended June 30, 2022. As of June 30, 2022, the convertible promissory note issued on March 4, 2021 has been fully settled.

On October 4, 2021, the Company entered into a securities purchase agreement with Atlas Sciences, LLC, a Utah limited liability company, pursuant to which the Company issued the investor an unsecured promissory note on October 4, 2021 in the original principal amount of $2,220,000, convertible into shares of the Company’s common stock, for $2,000,000 in gross proceeds. The convertible promissory note includes an original issue discount of $200,000 along with $20,000 for the investor’s fees, costs and other transaction expenses incurred in connection with the purchase and sale of the Note. The Company settled convertible promissory note of $250,000 on June 23, 2022 and issued 1,644,737 shares of the Company’s Common Stock on June 27, 2022 for the six months ended June 30, 2022.

On May 6, 2022, the Company entered into a securities purchase agreement with Streeterville Capital, LLC, pursuant to which the Company issued an unsecured promissory note in the original principal amount of $3,320,000, convertible into shares of common stock, for proceeds of $3,000,000. The Company recorded a debt discount of $320,000, which is being amortized over 12 months.

The above two unsettled convertible promissory notes, issued on October 4, 2021 and May 6, 2022, has a maturity date of 12 months with an interest rate of 10% per annum. The Company retains the right to prepay the note at any time prior to conversion with an amount in cash equal to 125% of the principal that the Company elects to prepay at any time six months after the issue date, subject to maximum monthly redemption amount of $250,000 and $375,000, respectively. On or before the close of business on the third trading day of redemption, the Company should deliver conversion shares via “DWAC” (DTC’s Deposit/Withdrawal at Custodian system). The Company will be required to pay the redemption amount in cash, or chooses to satisfy a redemption in registered stock or unregistered stock, such stock shall be issued at 80% of the average of the lowest “VWAP” (the volume-weighted average price of the Common Stock on the principal market for a particular Trading Day or set of Trading Days) during the fifteen trading days immediately preceding the redemption notice is delivered.

For the above two unsettled convertible promissory notes, upon evaluation, the Company determined that the Agreements contained embedded beneficial conversion features which met the definition of Debt with Conversion and Other Options covered under the Accounting Standards Codification topic 470 (“ASC 470”). According to ASC 470, an embedded beneficial conversion feature present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. Pursuant to the agreements, the Company shall recognize embedded beneficial conversion features three months after commitment date of $610,000 and $913,000 respectively. Beneficial conversion features have been recognized into discount on convertible promissory notes and additional paid-in capital and such discount will be amortized in 12 months until the notes will be settled. For the three months ended June 30, 2022, the Company has recognized the amortization of beneficial conversion feature $168,125, and $152,167 to profit. For the six months ended June 30, 2022, the Company has recognized the amortization of beneficial conversion feature $320,625, and $152,166 to profit. For the settled convertible promissory notes issued on March 4, 2021, the Company has recognized embedded beneficial conversion features $60,867 to profit for the six months ended June 30, 2022, and $nil for the three months ended June 30, 2022.

Common stock issued in private placements

On May 27, 2022, the Company entered into that certain securities purchase agreement with Mr. Xiangjun Wang and Mr. Heung Ming (Henry) Wong, affiliates of the Company, and certain other non-affiliate purchasers who are “non-U.S. Persons” pursuant to which the Company agreed to sell an aggregate of 57,100,000 shares of Common Stock, par value $0.001 per share, at a per share purchase price of $0.20. The transaction was consummated on June 24, 2022 by the issuance of 57,100,000 shares of Common Stock. The Company received proceeds of $11,420,000 in June 2022.

Common stock issued pursuant to the conversion of convertible promissory notes

The Company settled convertible promissory note of $262,331.48 on June 8, 2022 and $250,000 on June 23, 2022, respectively, and issued 1,933,457 and 1,644,737 shares of the Company’s Common Stock on June 14, 2022 and June 27, 2022, respectively.

Warrants

A summary of warrants activity for the six months ended June 30, 2022 was as follows:

As of December 31, 2021, the Company had 19,273,370 shares of warrants, among which 273,370 shares of warrants were issued to two individuals in private placements, and 19,000,000 shares of warrants were issued in three private placements closed on September 22, 2021.

In connection with 19,000,000 shares of warrants, the Company issued warrants to investors to purchase a total of 19,000,000 ordinary shares with a warrant term of five (5) years. The warrants have an exercise price of $1.15 per share.

The Warrants ended on December 31, 2021 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 equity.

Basic earnings (loss) per share is computed by dividing the net profit or loss by the weighted average number of common shares outstanding during the period. As of June 30, 2022, the principal amount and interest expense of convertible promissory notes are $5,395,760 and $220,940. Total obligations of $5,616,700 may be dilutive common shares in the future.

The number of warrants is excluded from the computation as the anti-dilutive effect.

The following table sets forth the computation of basic and diluted loss per common share for the six months ended June 30, 2022 and 2021 respectively:

The Enterprise Income Tax Law of the People’s Republic of China (“PRC tax law”), which was effective on January 1, 2008, stipulates those domestic enterprises and foreign-invested enterprises 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.

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 six months ended June 30, 2022, 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. As of June 30, 2022 and December 31, 2021, the Company had deferred tax assets of $6,983,885 and $4,878,864, respectively. The Company maintains a full valuation allowance on its net deferred tax assets as of June 30, 2022.

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 six months ended June 30, 2022 and 2021, the Company had current income tax expenses of $2,121,645 and $1,183,596, respectively, and deferred income tax benefit of $410,877 and $411,734 in the connection of intangible assets generated from the Baiyu acquisition, 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 RMB100,000. 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 June 30, 2022 and December 31, 2021 and the Company does not believe that its unrecognized tax benefits will change over the next 12 months.

As of June 30, 2022 and December 31, 2021, the balances with related parties were as follows:

For the three and six months ended June 30, 2022, the Company generated revenues from below related party customers:

For the six months ended June 30, 2022 and 2021, the Company purchased commodity products from below related party vendors:

For the three months and six months ended June 30, 2021, the Company purchased copyright software of $5,107,410 from “Yunfeihu”.

a Non-cancellable operating leases 

The following table sets forth our contractual obligations as of June 30, 2022:

On April 6, 2020, the Company filed a lawsuit 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 on its investment from Harrison Fund. When the Company failed to obtain a response from Harrison Fund, it filed a 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.

Assets that potentially subject the Company to a significant concentration of credit risk primarily consist of cash and cash equivalents and trade receivables with its customers. The maximum exposure of such assets to credit risk is their carrying amount as at the balance sheet dates. As of June 30, 2022, approximately $1.98 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 considers the credit standing of customers when making sales to manage the credit risk. Considering the nature of the business at current, the Company believes that the credit risk is not material to its operations.

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.

The Company is also exposed to liquidity risk which is the 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.

The Company is required to meet specified financial requirements to maintain its listing on the Nasdaq Capital Market. The minimum bid price per share of its common shares has been below $1.00 for a period of 30 consecutive business days and, therefore, no longer meets the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2). The Company hasn’t until February 28, 2022 to regain compliance, it must prove to be eligible for an additional 180 calendar days that the Company meets the continued listing requirement for the market value of publicly held shares and all other initial listing standards for Nasdaq except for Nasdaq Listing Rule 5550(a)(2). On March 1, 2022, the Company has received notice from Nasdaq indicating that, while it has not regained compliance with the minimum bid price requirement, the Staff of Nasdaq has determined that the Company is eligible for an additional 180 calendar day period, or until August 29, 2022, to regain compliance. If the Company doesn’t regain compliance until August 29, 2022, Nasdaq will provide notice that the common stock of the Company will be subject to delisting from trading.

The Company’s financial information is presented in USD. The functional currency of the Company is RMB, the currency of the PRC. Any transactions which are denominated in currencies other than RMB are translated into RMB at the exchange rate quoted by the People’s Bank of China prevailing at the dates of the transactions, and exchange gains and losses are included in the statements of operations as foreign currency transaction gain or loss. The consolidated financial statements of the Company have been translated into U.S. dollars in accordance with ASC 830, “Foreign Currency Matters”. The financial information is first prepared in RMB and then is translated into U.S. dollars at period- end exchange rates for assets and liabilities and average exchange rates for revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in stockholder’s equity. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets. The value of RMB is subject to changes in central government policies and international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. Where there is a significant change in the value of RMB, the gains and losses resulting from the translation of financial statements of a foreign subsidiary will be significantly affected.

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operation may be influenced by the political, economic and legal environment in the PRC and the general state of the PRC economy. In light of the uncertain and rapidly evolving situation relating to the spread of COVID-19, we have taken temporary precautionary measures intended to help minimize the risk of the virus to our employees, our customers, and the communities in which we participate, which could negatively impact our business. To this end, we are evaluating alternative working arrangements, including requiring all employees to work remotely, and we have suspended all non-essential travel for our employees and limiting in-person work-related meetings.

In addition, with the extended Chinese business shutdowns that resulted from the outbreak of COVID-19, we may experience delays or the inability to service our customers on a timely basis in our commodities trading business. The disruptions to our supply chain and business operations, or to our suppliers’ or customers’ supply chains and business operations, could include disruptions from the interruptions in the supply of commodities, personnel absences or delivery and storage of commodities, any of which could have adverse ripple effects on our commodities trading business. If we need to close any of our facilities or a critical number of our employees become too ill to work, our ability to provide our products and services to our customers could be materially adversely affected in a rapid manner. Similarly, if our customers experience adverse business consequences due to COVID-19, or any other pandemic, demand for our products and services could also be materially adversely affected in a rapid manner. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the localities in which we or our suppliers and customers operate within China.

While the potential economic impact brought by and the duration of COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. While it is too early to tell whether COVID-19 will have a material effect on our business over time, we continue to monitor the situation as it unfolds. The extent to which COVID-19 affects our results will depend on many factors and future developments, including new information about COVID-19 and any new government regulations which may emerge to contain the virus, among others.

The Company sells precious products to customers through our industrial relationship. Sales contracts are entered into with each individual customer. The Company is the principal under the precious metal direct sales model as the Company controls the products with the ability to direct the use of, and obtain substantially all the remaining benefits from the precious metal products before they are sold to its customers. The Company has a single performance obligation to sell metal products to the buyers. Revenue for precious metal trading under direct sales model is recognized at a point in time when the single performance obligation is satisfied when the products are delivered to the customer. We are under the risk of economic environment in general and specific to the precious metal industry and to China as well as changes to the existing governmental regulations.

Commodity trading in China is subject to seasonal fluctuations, which may cause our revenues to fluctuate from quarter to quarter. We generally experience less user traffic and purchase orders during national holidays in China, particularly during the Chinese New Year holiday season in the first quarter of each year. Consequently, the first quarter of each calendar year generally contributes the smallest portion of our annual revenues. Furthermore, as we are substantially dependent on sales of precious metals, our quarterly revenues and results of operations are likely to be affected by price fluctuation under macroeconomic circumstances these years.

As our revenues have grown rapidly in recent years, these factors are difficult to discern based on our historical results, which, therefore, should not be relied on to predict our future performance. Our financial condition and results of operations for future periods may continue to fluctuate. As a result, the trading price of our stock may fluctuate from time to time due to seasonality.

The Company settled convertible promissory notes of $125,000 on July 7, 2022, $125,000 on July 18, 2022, $125,000 on July 26, 2022 and $125,000 on August 4, 2022, respectively, and issued 678,463, 628,014, 625,500 and 625,500 shares of the Company’s common stock on July 7, 2022, July 19, 2022, July 26, 2022 and August 5, 2022 respectively.

On July 22, the Company’s Board of Directors approved the holding of the 2022 Annual Meeting of Stockholders of the Company at 25^th Floor, Block C, Tairan Building, No. 31 Tairan 8^th Road, Futian District, Shenzhen, Guangdong, PRC 518000, on August 11, 2022, at 9:30 am EST, for stockholders to consider and vote on certain proposals, including, (i) electing Renmei Ouyang, Tianshi (Stanley) Yang, Xiangjun Wang, Heung Ming (Henry) Wong and Donghong Xiong to serve on the Company’s Board until the next annual stockholders meeting and until their successors are duly elected and qualified, (ii) ratifying the selection of Audit Alliance LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022, (iii) approving and adopting certain amendments to the Company’s Certificate of Incorporation (the “Charter Amendment”) to effect a reverse stock split of our issued and outstanding common stock (“Common Stock”) at a ratio of one-for-five to one-for-ten immediately following the reverse split (the “Reverse Split”) at any time prior to August 12, 2022, with the final decision of whether to proceed with Reverse Split and the exact ratio to be set at a whole number within this range, as determined by our Board in its sole discretion, and (iv) transacting such other business as may properly come before the meeting or any adjournment or postponement thereof.

The Reverse Stock Split is primarily intended to bring the Company into compliance with the minimum bid price requirement for maintaining its listing on the Nasdaq Capital Market. If the stockholders approve the Reverse Split, and the Board decides to implement it, the Reverse Split will become effective upon the filing of the Charter Amendment with the Secretary of State of State of Delaware and will be realized simultaneously for all our Common Stock, which is expected to be August 11, 2022. The Reverse Split does not change the number of the Company’s authorized shares or the par value of the shares of our Common Stock. Immediately after the Reverse Split, each stockholder’s percentage ownership interest in the Company and proportional voting power will remain virtually unchanged except for minor changes and adjustments that will result from rounding fractional shares into whole shares. The rights and privileges of the holders of shares of Common Stock will be substantially unaffected by the Reverse Split. The expected Nasdaq marketplace effective date is August 17, 2022.

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

Overview

As of June 30, 2022, the Company had two business lines, which are the commodities trading business and supply chain management services.

Commodities trading business

The commodity trading business primarily involves purchasing non-ferrous metal products, such as aluminum ingots, copper, silver, and gold, from metal and mineral suppliers and then selling to 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 selling bulk non-ferrous commodity products and providing related supply chain management services in the PRC.

For the six months ended June 30, 2022, the Company recorded revenue of $100,692,259 from commodities trading business and $1,150,252 from commodity distribution services and other related services, respectively.

The Company sources bulk commodity products from non-ferrous metal and mines or its designated distributors and then sells to manufacturers that need these metals in large 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. Potential 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.

Supply Chain Management Services

We offer a distribution service to bulk suppliers of precious metals by acting as a sales intermediary, procuring small to medium-sized buyers through our own professional sales team and channels and distributing the bulk precious metals of the suppliers. Upon executing a purchase order from our sourced buyers, we charge the suppliers with a commission fee ranging from 1% to 2% of the distribution order, depending on the size of the order. We also offer some other supply chain management services business. For the six months ended June 30, 2022, the Company earned other supply chain management services revenue of $1,150,252 with 16 third-party customers, compared with a commodity distribution services revenue of $472,425 to eight third-party customers for the same period ended June 30, 2021.

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

Shenzhen Baiyu Jucheng 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.

Key Factors Affecting Our Results of Operation

The commodities trading industry has been experiencing decreasing demand as a result of China’s overall economic slowdown. We expect competition in the commodities trading business to persist and intensify.

We have a limited operating history, having just 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 business requires a significant amount of capital in large part due to our need to purchase a bulk volume of commodities and expand our business in existing markets and to additional markets where we currently do not have operations.

Results of Operations 

The Company included $1,695,042 as share-based payment for services on the condensed consolidated statement of operations for the six months ended June 30, 2021. 

Three Months Ended June 30, 2022 as Compared to Three Months Ended June 30, 2021

Revenue

For the three months ended June 30, 2022, we generate revenue from two sources, including (1) revenue from sales of commodity products, and (2) revenue from supply chain management services. Total revenue decreased by $6,156,252 or 10%, from $59,839,647 for the three months ended June 30, 2021 to $53,683,395 for the three months ended June 30, 2022, among which revenue from commodity trading and supply chain management accounted for 98.9% and 1.1% of our total revenue for the three months ended June 30, 2022. For the three months ended June 30, 2021, revenue from commodity trading and supply chain management accounted for 99.5% and 0.5% of our total revenue for the three months ended June 30, 2021.

(1) Revenue from sales of commodity products

For the three months ended June 30, 2022 and 2021, the Company sold non-ferrous metals to 22 customers at fixed prices, and earned revenues when the product ownership was transferred to its customers. The Company earned revenues of $53,108,294 from sales of commodity products for the three months ended June 30, 2022 compared with $59,512,997 generated from sales of commodity products for the same period in 2021.

(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 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 and commodity distribution services. For the three months ended June 30, 2022, the Company provided $575,101 commodity distribution services to third-party customers compared with $326,650 to the third-party customers for the same period ended June 30, 2021.

Cost of revenue

Our cost of revenue primarily includes cost of revenue associated with commodity product sales and cost of revenue associated with management services of supply chain. Total cost of revenue decreased by $6,222,265 or 10% from $59,466,531 for the three months ended June 30, 2021 to $53,244,266 for the three months ended June 30, 2022, primarily due to an decrease of $4,682,425 in cost of revenue associated with commodity product sales from the third-party. The decreased cost of revenue is in line with the decrease in revenue.

Cost of revenue associated with commodity trading

Cost of revenue primarily consists of purchase costs of non-ferrous metal products. For the three months ended June 30, 2022, the Company purchased non-ferrous metal products of $53,250,178 from 15 third-party vendors compared with $57,932,603 from 15 third-party vendor and $1,531,336 from five related party vendor for the three months ended June 30, 2021.

Selling, general, and administrative expenses

Selling, general and administrative expenses decreased from $2,054,354 for the three months ended June 30, 2021 to $ 1,875,779 for the three months ended June 30, 2022, representing an decrease of $178,575 or 9%. Selling, general and administrative expenses primarily consisted of salary and employee benefits, office rental expense, amortizations of intangible assets and convertible promissory notes, professional service fees and finance offering related fees. There is no big decrease for the three months ended June 30, 2022 compared with the three months ended June 30, 2021.

Interest income

Interest income was primarily generated from loans made to third parties and related parties. For the three months ended June 30, 2022, interest income was $4,366,318, representing an increase of $1,420,082, or 48% from $2,946,236 for the three months ended June 30, 2021. The increase was full due to loans made to third-party vendors for the three months ended June 30, 2022.

Amortization of relative fair value of warrants relating to service provider

For the three months ended June 30, 2022, the item represented the amortization of beneficial conversion feature of $320,291 and relating to the convertible promissory notes.

For the three months ended June 30, 2021, no such expenses incurred.

Net income

As a result of the foregoing, net income for the three months ended June 30, 2022 was $1,425,271, representing an increase of $1,067,415 from net income of $357,856 for the three months ended June 30, 2021.

Six Months Ended June 30, 2022 as Compared to Six Months Ended June 30, 2021

Revenue

For the six months ended June 30, 2022, we generate revenue from the following two sources, including (1) revenue from sales of commodity products and (2) revenue from supply chain management services. Total revenue increased by $12,420,607 or 14%, from $89,421,904 for the six months ended June 30, 2021 to $101,842,511 for the six months ended June 30, 2022, among which revenue from commodity trading and supply chain management accounted for 98.9% and 1.1%, respectively, of our total revenue for the six months ended June 30, 2022. The increase is mainly due to the prosperous bulk market all over the world. An obvious increase in commodity price and growing demand drive more frequent transactions occurred during the first half of 2022. Since 2022, the Company put more emphasis on its business in Hainan which was able to obtain a competitive and supportive policy and generates more revenue from customers in the Hainan region. The Company made efforts to explore competitive upstream vendors in Hainan to meet the demands of lower transportation cost and time cost, meanwhile, our long-term positive image in the commodity products industry enhanced our comprehensive competitive support from local trade associates.

(1) Revenue from sales of commodity products

For the six months ended June 30, 2022, the Company sold non-ferrous metals to 22 third-party customers at fixed prices, and earned revenues when the product ownership was transferred to its customers. The Company earned revenues of $100,692,259 from sales of commodity products compared with $88,949,479 for the same period in 2021.

(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 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 and 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 the 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 six months ended June 30, 2022, the Company earned commodity distribution commission fees of $1,150,252 from 16 third-party vendors compared with commission fees of 472,425 from third-party vendors for the six months ended June 30, 2021.

Cost of revenue

Our cost of revenue primarily includes cost of revenue associated with commodity product sales, cost of revenue associated with management services of supply chain. Total cost of revenue increased by $11,960,270 or 13% from $88,886,174 for the six months ended June 30, 2021 to $100,846,444 for the six months ended June 30, 2022, primarily due to an increase of $11,958,222 in cost of revenue associated with commodity product sales. The cost of revenue increased in line with the increase in sales volume.

Cost of revenue associated with commodity trading

Cost of revenue primarily consists of purchase costs of non-ferrous metal products.

For the six months ended June 30, 2022, the Company purchased non-ferrous metal products of $100,840,754 from 15 third-party vendors.

For the six months ended June 30, 2021, the Company purchased non-ferrous metal products of $66,965,015 from 15 third-party vendors and $21,917,517 from five related-party vendors. 

Selling, general, and administrative expenses

Selling, general and administrative expenses increased from $3,624,733 for the six months ended June 30, 2021 to $4,123,486 for the six months ended June 30, 2022, representing an increase of $498,753, or 14%. Selling, general and administrative expenses primarily consisted of salary and employee benefits, office rental expense, amortizations of intangible assets and convertible promissory notes, professional service fees and finance offering related fees. The increase was mainly attributable to 1) salary and employee benefits increased by $0.62 million and, 2) amortization of convertible promissory notes increased by $0.22 million.

Interest income

Interest income was primarily generated from loans made to third parties and related parties. For the six months ended June 30, 2022, interest income was $8,756,659 representing an increase of $3,711,566, or 74% from $5,045,903 for the six months ended June 30, 2021. The increase was primarily due to loans made to third-party vendor customers, among which, $702,756 was attributed to related parties and $8,053,903 was generated from third-party vendors.

Share-based payment for service

On March 4, 2021, the Company issued 750,000 fully-vested warrants with an exercise price of $0.01, with a five-year life, to an agent who was engaged to complete the warrant waiver and exercise agreements. The Company applied Black-Scholes model and determined the fair value of the warrants to be $1,695,042. Significant estimates and assumptions used included stock price on March 4, 2021 of $2.27 per share, risk-free interest rate of one year of 0.08%, life of 5 years, and volatility of 71.57% for the six months ended June 30, 2021.

For the six months ended June 30, 2022, no such expenses incurred.

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

For the six months ended June 30, 2022, the item represented the amortization of beneficial conversion feature of $533,658 relating to the convertible promissory notes.

For the six months ended June 30, 2021, no such expenses incurred.

Net income (loss)

As a result of the foregoing, net income for the six months ended June 30, 2022 was $3,019,128, representing an increase of $4,199,548 from net loss of $1,180,420 for the six months ended June 30, 2021.

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 private placement and public offerings of our securities.

As reflected in the accompanying unaudited condensed consolidated financial statements, the Company incurred net income of $3,019,128 and cash inflow of $ 469,839 for the six months ended June 30, 2022. As of June 30, 2022, the Company positive working capital of $164 million.

During the six months ended June 30, 2022, the Company entered into additional private placement agreements with certain private investors and issued 65,000,000 shares of common stock at $0.7 per share for $45,500,000, and issued 57,100,000 shares of common stock at $0.2 per share for $11,420,000, sold unsecured senior convertible promissory notes (“Notes”) in the aggregate principal amount of $3,000,000.

The total gross proceeds from these transactions were $59.92 million. The Company expects to use the proceeds from the equity financing as working capital to expand its commodity trading business.

Based on the foregoing capital market activities, 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 six months ended June 30, 2022 and 2021, respectively: