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 September 30, 2024

☐ 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

BAIYU 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 3707. Jingji Binhe Times Building, Binhe Avenue, Futian District Shenzhen, Guangdong, PRC		518000
(Address of principal executive offices)		(Zip Code)

+86 (0755) 82792111

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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		BYU		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 filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller 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 November 13, 2024, 49,945,235 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

BAIYU HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2024 and December 31, 2023

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

	September 30,			December 31,
	2024			2023
ASSETS
Current Assets
Cash and cash equivalents	$	327,318		$	1,516,358
Loans receivable from third parties		301,335,694			240,430,865
Inventories, net		278,129			259,806
Other current asset		13,071,773			10,134,829
Total current assets		315,012,914			252,341,858

Non-Current Assets
Plant and equipment, net		23,250			32,090
Goodwill		159,003,547			157,542,081
Intangible assets, net		39,705,485			45,285,617
Right-of-use assets, net		15,300			83,375
Total non-current assets		198,747,582			202,943,163

Total Assets	$	513,760,496		$	455,285,021

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable		603			-
Bank borrowings		997,492			1,057,648
Third party loans payable		499,019			476,627
Contract liabilities		5,227,543			3,090,201
Income tax payable		21,319,296			16,187,826
Lease liabilities		16,186			86,691
Other current liabilities		7,837,297			6,578,349
Convertible promissory notes		4,168,304			4,284,622
Total current liabilities		40,065,740			31,761,964

Non-Current Liabilities
Deferred tax liabilities		1,708,224			2,256,696
Due to related parties		38,474,692			38,121,056
Total non-current liabilities		40,182,916			40,377,752
Total liabilities		80,248,656			72,139,716

Commitments and Contingencies (Note 17)

Equity
Common stock (par value $0.001 per share, 600,000,000 shares authorized; 49,945,235 and 19,335,220 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively)*		49,945			19,335
Additional paid-in capital		476,450,077			438,980,687
Statutory surplus reserve		2,602,667			2,602,667
Accumulated deficit		(30,641,615	)		(39,520,164	)
Accumulated other comprehensive loss		(11,031,061	)		(16,144,752	)
Total BAIYU Shareholders’ Equity		437,430,013			385,937,773

Non-controlling interest		(3,918,173	)		(2,792,468	)
Total Equity		433,511,840			383,145,305
Total Liabilities and Equity	$	513,760,496		$	455,285,021

*	On October 30, 2023, the Company completed a 50:1 reverse stock split of our common stock issued and outstanding. All shares and associated amounts have been retroactively restated to reflect the reverse stock split. See Note 13 - Reverse stock split of common stock.

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

BAIYU HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

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

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2024			2023			2024			2023
Revenues
- Sales of commodity products – third parties	$	37,162,036		$	33,883,096		$	91,714,259		$	102,937,623
- Supply chain management services – third parties		-			28,630			2,811			64,037
Total revenue		37,162,036			33,911,726			91,717,070			103,001,660

Cost of revenues
- Commodity product sales-third parties		(37,220,150	)		(33,916,806	)		(91,856,394	)		(103,107,066	)
- Supply chain management services-third parties		-			(18,157	)		(16	)		(41,540	)
Total operating costs		(37,220,150	)		(33,934,963	)		(91,856,410	)		(103,148,606	)

Gross loss		(58,114	)		(23,237	)		(139,340	)		(146,946	)

Operating expenses
Selling, general, and administrative expenses		(2,416,176	)		(3,034,313	)		(7,487,247	)		(14,108,225	)
Total operating expenses		(2,416,176	)		(3,034,313	)		(7,487,247	)		(14,108,225	)

Net Operating Loss		(2,474,290	)		(3,057,550	)		(7,626,587	)		(14,255,171	)

Other income (expenses), net
Interest income		7,354,682			5,124,728			20,113,780			14,482,016
Interest expenses		(115,082	)		(129,716	)		(344,680	)		(352,938	)
Amortization of beneficial conversion feature relating to issuance of convertible promissory notes		-			(228,250	)		(92,552	)		(713,292	)
Other income, net		4,308			8,227			1,595			7,130
Total other income, net		7,243,908			4,774,989			19,678,143			13,422,916

Net income (loss) before income taxes		4,769,618			1,717,439			12,051,556			(832,255	)

Income tax expenses		(1,596,361	)		(1,037,781	)		(4,298,712	)		(2,875,040	)

Net income (loss)		3,173,257			679,658			7,752,844			(3,707,295	)
Less: Net loss attributable to non-controlling interests		(366,205	)		(382,556	)		(1,125,705	)		(1,166,557	)
Net income (loss) attributable to BAIYU Holdings, Inc.’s Stockholders’		3,539,462			1,062,214			8,878,549			(2,540,738	)

Comprehensive income (loss)
Net income (loss)		3,173,257			679,658			7,752,844			(3,707,295	)
Foreign currency translation adjustments		10,429,678			2,156,075			5,113,691			(12,025,878	)
Comprehensive income (loss)	$	13,602,935		$	2,835,733		$	12,866,535		$	(15,733,173	)

Less: Total comprehensive loss attributable to non-controlling interests		(366,205	)		(382,556	)		(1,125,705	)		(1,166,557	)
Comprehensive income (loss) attributable to BAIYU Holdings, Inc.’s Stockholders	$	13,969,140		$	3,218,289		$	13,992,240		$	(14,566,616	)

Income (loss) per share - basic and diluted
Continuing Operation- income (loss) per share – basic*	$	0.08		$	0.23		$	0.47		$	(1.21	)
Continuing Operation- income (loss) per share –diluted*	$	0.07		$	0.17		$	0.35		$	(0.93	)
Weighted Average Shares Outstanding-Basic*		38,782,001			3,016,281			16,671,646			3,074,862
Weighted Average Shares Outstanding- Diluted*		44,146,337			3,948,068			22,035,982			4,006,649

*	On October 30, 2023, the Company completed a 50:1 reverse stock split of our common stock issued and outstanding. All shares and associated amounts have been retroactively restated to reflect the reverse stock split. See Note 13 - Reverse stock split of common stock.

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

BAIYU HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

	Common Stock				Additional paid-in		Accumulated			Surplus		Accumulated other comprehensive			Non- controlling			Total
	Shares		Amount		capital		Deficit			Reserve		Income (loss)			interests			Equity
Balance as of December 31, 2022		2,134,842	$	2,135	$	344,400,599	$	(38,800,375	)		2,602,667	$	(8,984,925	)	$	(1,245,932	)	$	297,974,169
Issuance of common stocks in connection with private placements		1,260,000		1,260		52,148,740		-			-		-			-			52,150,000
Issuance of common stocks pursuant to exercise of convertible promissory notes		124,427		124		2,877,091		-			-		-			-			2,877,215
Issuance of common stocks pursuant to ATM transaction		13,786		14		559,059		-			-		-			-			559,073
Issuance of common stock pursuant to stock incentive stock plan		220,000		220		5,697,780		-			-		-			-			5,698,000
Beneficial conversion feature relating to issuance of convertible promissory notes		-		-		913,000		-			-		-			-			913,000
Net loss		-		-		-		(2,540,738	)		-		-			(1,166,557	)		(3,707,295	)
Foreign currency translation adjustments		-		-		-		-			-		(12,025,878	)					(12,025,878	)
Balance as of September 30, 2023		3,753,055	$	3,753	$	406,596,269	$	(41,341,113	)		2,602,667	$	(21,010,803	)	$	(2,412,489	)	$	344,438,284

Balance as of December 31, 2023		19,335,220	$	19,335	$	438,980,687	$	(39,520,164	)		2,602,667	$	(16,144,752	)	$	(2,792,468	)	$	383,145,305
Issuance of common stocks in connection with private placements		30,000,000		30,000		36,870,000		-			-		-			-			36,900,000
Issuance of common stocks pursuant to exercise of convertible promissory notes		610,015		610		599,390		-			-		-			-			600,000
Net income (loss)		-		-		-		8,878,549			-		-			(1,125,705	)		7,752,844
Foreign currency translation adjustments		-		-		-		-			-		5,113,691			-			5,113,691
Balance as of September 30, 2024		49,945,235	$	49,945	$	476,450,077	$	(30,641,615	)		2,602,667	$	(11,031,061	)	$	(3,918,173	)	$	433,511,840

*	On October 30, 2023, the Company completed a 50:1 reverse stock split of our common stock issued and outstanding. All shares and associated amounts have been retroactively restated to reflect the reverse stock split. See Note 13 - Reverse stock split of common stock.

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

BAIYU HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

	Common Stock				Additional paid-in		Accumulated			Surplus		Accumulated other comprehensive			Non- controlling			Total
	Shares		Amount		capital		Deficit			Reserve		Income (loss)			interests			Equity
Balance as of June 30, 2023		3,128,149	$	3,128	$	396,346,894	$	(42,403,327	)		2,602,667	$	(23,166,878	)	$	(2,029,933	)	$	331,352,551
Issuance of common stocks in connection with private placements (in Shares)		560,000		560		9,799,440		-			-		-			-			9,800,000
Issuance of common stocks pursuant to exercise of convertible promissory notes		64,906		65		449,935		-			-		-			-			450,000
Net income (loss)		-		-		-		1,062,214			-		-			(382,556	)		679,658
Foreign currency translation adjustments		-		-		-		-			-		2,156,075			-			2,156,075
Balance as of September 30, 2023		3,753,055	$	3,753	$	406,596,269	$	(41,341,113	)		2,602,667	$	(21,010,803	)	$	(2,412,489	)	$	344,438,284

Balance as of June 30, 2024		49,945,235	$	49,945	$	476,450,077	$	(34,181,077	)		2,602,667	$	(21,460,739	)	$	(3,551,968	)	$	419,908,905
Net income (loss)		-		-		-		3,539,462			-		-			(366,205	)		3,173,257
Foreign currency translation adjustments		-		-		-		-			-		10,429,678			-			10,429,678
Balance as of September 30, 2024		49,945,235	$	49,945	$	476,450,077	$	(30,641,615	)		2,602,667	$	(11,031,061	)	$	(3,918,173	)	$	433,511,840

*	On October 30, 2023, the Company completed a 50:1 reverse stock split of our common stock issued and outstanding. All shares and associated amounts have been retroactively restated to reflect the reverse stock split. See Note 13 - Reverse stock split of common stock.

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

BAIYU HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2024 and 2023

(Expressed in U.S. dollar)

	For the Nine Months Ended September 30,
	2024			2023
Cash Flows from Operating Activities:
Net income (loss)	$	7,752,844		$	(3,707,295	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation of plant and equipment		9,488			6,289
Amortization of intangible assets		6,634,441			6,002,628
Amortization of right of use assets		68,075			88,416
Amortization of discount on convertible promissory notes		66,667			200,000
Amortization of beneficial conversion feature relating to issuance of convertible promissory notes		92,552			713,292
Interest expense for convertible promissory notes		324,463			245,506
Deferred tax liabilities		(548,472	)		(569,635	)
Share-based payment stock to service providers		-			5,698,000
Inventories impairment		-			(16,818	)
Inventories		(18,323	)		195,620
Loans receivable from third parties		(58,674,429	)		-
Other current assets		(140,962	)		(9,754,421	)
Prepayments		(639,788	)		(3,297,177	)
Contract liabilities		2,137,342			2,747,384
Due from third parties		(2,150,700	)		(275,930	)
Due from related parties		353,636			(1,963,576	)
Accounts payable		603			425,930
Income tax payable		5,131,470			3,444,639
Other current liabilities		1,258,948			941,335
Lease liabilities		(70,505	)		(88,281	)
Due to third party loans payable		22,392			17,913
Net cash (used in)/provided by operating activities		(38,390,258	)		1,053,819
Cash Flows from Investing Activities:
Purchases of plant and equipment		-			(34,733	)
Payment made on loans to third parties		-			(122,971,023	)
Proceeds from loans of third parties		-			58,413,241
Investments in other investing activities		(5,494	)		(58,950	)
Net cash used in investing activities		(5,494	)		(64,651,465	)

Cash Flows from Financing Activities:
Repayments made on loans to third parties		-			69,995
Proceeds from issuance of common stock under ATM transaction		-			559,073
Proceeds from issuance of common stock under private placement transactions		36,900,000			42,350,000
Proceeds from convertible promissory notes		-			13,025,243
Net cash provided by financing activities		36,900,000			56,004,311

Effect of exchange rate changes on cash and cash equivalents		306,712			8,140,537

Net (decrease)/increase in cash and cash equivalents		(1,189,040	)		547,202
Cash and cash equivalents at beginning of period		1,516,358			893,057
Cash and cash equivalents at end of period	$	327,318		$	1,440,259

Supplemental Cash Flow Information
Cash paid for interest expenses	$	809		$	38,918

Supplemental disclosure of non-cash investing and financing activities
Right-of-use assets obtained in exchange for operating lease obligations		-			58,617
Issuance of common stocks in connection with conversion of convertible promissory notes	$	600,000		$	13,590,215

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

1. ORGANIZATION AND BUSINESS DESCRIPTION

BAIYU Holding, Inc. is a Delaware corporation, incorporated under the laws of the state of Delaware.

The Company primarily conducts business through Shenzhen Baiyu Jucheng Data Technology Co., Ltd., Shenzhen Qianhai Baiyu Supply Chain Co., Ltd., Hainan Jianchi Import and Export Co., Ltd., and Shenzhen Tongdow Internet Technology Co., Ltd. to offer the commodity trading business and supply chain management services to customers in the PRC. Supply chain management services consist of loan recommendation services and commodity product distribution services.

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

TD Internet of Things Technology Company Limited (“TD Internet Technology”) (Formerly Named: Tongdow Block Chain Information Technology Company Limited)	A Hong Kong company Incorporated on February 14, 2020 A holding company	100% owned by HC High BVI

Hainan Baiyu Cross-border E-commerce Co., Ltd. (“Hainan Baiyu”)	A Hong Kong company Incorporated on June 19, 2002 A holding company	WFOE, 100% owned by Tongdow HK

Zhong Hui Dao Ming Investment Management Limited (“ZHDM HK”)	A Hong Kong company Incorporated on June 19, 2002 A holding company	100% owned by HC High BVI

Hong Kong Tongyuan Energy Storage Smart Electric Co., Ltd (“Tongdow HK”) (Formerly Named: Tongdow E-trade Limited)	A Hong Kong company Incorporated on November 25, 2010 A holding company	100% owned by HC High BVI

Shanghai Jianchi Supply Chain Co., Ltd. (“Shanghai Jianchi”)	A PRC company and deemed a wholly foreign owned enterprise (“WFOE”) Incorporated on April 2, 2020 Registered capital of $10 million A holding company	WFOE, 100% owned by TD Internet Technology

Tongdow (Hainan) Data Technology Co., Ltd. (“Tondow Hainan”)	A PRC limited liability company Incorporated on July 16, 2020 Registered capital of $1,417,736 (RMB10 million)	A wholly owned subsidiary of Shanghai Jianchi

Hainan Jianchi Import and Export Co., Ltd. (“Hainan Jianchi”)	A PRC limited liability company Incorporated on December 21, 2020 Registered capital of $7,632,772 (RMB50 million) with registered capital of $0 (RMB0) paid-up	A wholly owned subsidiary of Shanghai Jianchi

Shenzhen Baiyu Jucheng Data Techonology Co., Ltd. (“Shenzhen Baiyu Jucheng”)	A PRC limited liability company Incorporated on December 30, 2013 Registered capital of $1,417,736 (RMB10 million) with registered capital fully paid-up	VIE of Hao Limo Technology (Beijing) Co., Ltd. before June 25, 2020, and a wholly owned subsidiary of Shanghai Jianchi

Shenzhen Qianhai Baiyu Supply Chain Co., Ltd. (“Qianhai Baiyu”)	A PRC limited liability company Incorporated on August 17, 2016 Registered capital of $4,523,857 (RMB30 million) with registered capital of $736,506 (RMB5 million) paid-up	A wholly owned subsidiary of Shenzhen Baiyu Jucheng

Shenzhen Tongdow Internet Technology Co., Ltd. (“Shenzhen Tongdow”)	A PRC limited liability company Incorporated on November 11, 2014 Registered capital of $1,628,320 (RMB10 million) with registered capital of $1,628,320 (RMB10 million) paid-up	VIE of Shenzhen Baiyu Jucheng

Yangzhou Baiyu Venture Capital Co. Ltd. (“Yangzhou Baiyu Venture”)	A PRC limited liability company Incorporated on April 19, 2021 Registered capital of $30 million with registered capital of $7 million paid-up	WFOE, 100% owned by Tongdow HK

Yangzhou Baiyu Cross-broder E-commerce Co., Ltd. (“Yangzhou Baiyu E-commerce”)	A PRC limited liability company Incorporated on May 14, 2021 Registered capital of $30 million (RMB200 million) with registered capital of $7 million (RMB48 million) paid-up	100% owned by Yangzhou Baiyu Venture

Zhejiang Baiyu Lightweight New Material Co., Ltd. (“Zhejiang Baiyu”)	A PRC limited liability company Incorporated on August 5, 2022 Registered capital of $1,483,569 (RMB10 million)	100% owned by Yangzhou Baiyu E-commerce

Baiyu International Supply Chain PTE. LTD	A Singapore company Incorporated on June 28, 2023	100% owned by HC High BVI

Beijing Baiyu Jucheng Technology Co., LTD	A PRC limited liability company Incorporated on January 19, 2024 Registered capital of $140,515 (RMB1 million)	100% owned by Qianhai Baiyu

Electra New Energy Vehicle Inc	A Delaware, USA corporation company incorporated on April 10, 2024	100% owned by HC High BVI

The following diagram illustrates our corporate structure as of September 30, 2024.

(1)	A variable interest entity.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation

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 September 30, 2024 and for the nine months ended September 30, 2024 and 2023 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, 2023 previously filed with the SEC on March 22, 2024.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s unaudited condensed consolidated financial position as of September 30, 2024 and its unaudited condensed consolidated results of operations for the nine months ended September 30, 2024 and 2023, and its unaudited condensed consolidated cash flows for the nine months ended September 30, 2024 and 2023, 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 period.

(b) 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.

(c) Foreign currency translation

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.

(d) Convertible promissory notes

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.

(e) Beneficial conversion feature

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 notes payable and may not be settled in cash upon conversion, is treated as a discount to the convertible 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.

(f) Recent accounting pronouncement

In November 2023, the FASB issued guidance to enhance disclosure of expenses of a public entity’s reportable segments. The new guidance requires a public entity to disclose: (1) on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss, (2) on an annual and interim basis, an amount for other segment items (the difference between segment revenue less the significant expenses disclosed under the significant expense principle and each reported measure of segment profit or loss), including a description of its composition, (3) on an annual and interim basis, information about a reportable segment’s profit or loss and assets previously required to be disclosed only on an annual basis, and (4) the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and how to allocate resources. The new guidance also clarifies that if the CODM uses more than one measure of a segment’s profit or loss, one or more of those measures may be reported and requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this update and all existing segment disclosures. The guidance is effective for the current fiscal year 2024 annual reporting, and in the first quarter of 2025 for interim period reporting, with early adoption permitted. Upon adoption, this guidance should be applied retrospectively to all prior periods presented. We do not expect the adoption of this accounting standard to have an impact on our Consolidated Financial Statements.

In December 2023, the FASB issued guidance to enhance transparency of income tax disclosures. On an annual basis, the new guidance requires a public entity to disclose: (1) specific categories in the rate reconciliation, (2) additional information for reconciling items that are equal to or greater than 5% of the amount computed by multiplying income (or loss) from continuing operations before income tax expense (or benefit) by the applicable statutory income tax rate, (3) income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes, with foreign taxes disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5% of total income taxes paid, (4) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, and (5) income tax expense (or benefit) from continuing operations disaggregated between federal (national), state and foreign. The guidance is effective for fiscal year 2025 annual reporting, with early adoption permitted, to be applied on a prospective basis, with retrospective application permitted. We do not expect the adoption of this accounting standard to have an impact on our Consolidated Financial Statements but will require certain additional disclosures.

In July 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in ASU 2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in ASU 2023-07 improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The adoption of this guidance did not have a material impact on its financial position, results of operations and cash flows.

In December 2023, the FASB issued ASU 2023-08: Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60). For annual and interim reporting periods, the amendments in this Update require that an entity, including an entity that is subject to industry-specific guidance, disclose the following information: (1) The name, cost basis, fair value, and number of units for each significant crypto asset holding and the aggregate fair values and cost bases of the crypto asset holdings that are not individually significant, (2) For crypto assets that are subject to contractual sale restrictions, the fair value of those crypto assets, the nature and remaining duration of the restriction(s), and the circumstances that could cause the restriction(s) to lapse.

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.

3. LOANS RECEIVABLE FROM THIRD PARTIES

	September 30, 2024		December 31, 2023
Loans receivable from third parties	$	301,335,694	$	240,430,865

As of September 30, 2024, the Company has fourteen loan agreements compared with thirteen loan agreements on December 31, 2023. The Company provided loans aggregating $109,311,498 for the purpose of making use of idle cash and maintaining long-term customer relationship and collected $51,521,185 during the nine months ended September 30, 2024. These loans will mature from July 2024 through July 2025, and charge an interest rate of 10.95% per annum on these customers. The company has the right to pledge account receivable or inventory.

Interest income of $20,113,673 and $14,481,640 was accrued for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and December 31, 2023, the Company recorded an interest receivable of $8,194,485 and $5,931,541 as reflected under “other current assets” in the condensed consolidated balance sheets.

As of September 30, 2024 and December 31, 2023, there was no allowance recorded as the Company considers all of the loans receivable fully collectible.

4. INVENTORIES, NET

The Company’s inventories consist of aluminum ingots, etc., that were purchased from third parties for resale to third parties. Inventories consisted of the following:

	September 30, 2024		December 31, 2023
Aluminum ingots	$	278,129	$	259,806
Inventories, net	$	278,129	$	259,806

For the nine months ended September 30, 2024, the Company did not accrue or charge back any impairment as the impaired inventories have been sold.

5. OTHER CURRENT ASSETS

	September 30, 2024		December 31, 2023
Other current assets:
Deposit	$	40,608	$	35,888
Interest receivables		8,194,485		5,931,541
Prepayments		4,728,998		4,089,210
Others		107,682		78,190
Total	$	13,071,773	$	10,134,829

6. PLANT AND EQUIPMENT, NET

	September 30, 2024			December 31, 2023
Cost:
Office equipment	$	44,399		$	43,999
Accumulated depreciation:
Office equipment	$	(21,149	)	$	(11,909	)
Plant and equipment, net	$	23,250		$	32,090

Depreciation expense was $9,488, and currency translation difference was negative $248 for the nine months ended September 30, 2024. Depreciation expense was $6,289, and currency translation difference was negative $231 for the nine months ended September 30, 2023.

7. GOODWILL

Changes in the carrying amount of goodwill by segment for the nine months ended September 30, 2024, and years ended December 31, 2023 were as follows:

	Acquisition of Qianhai Baiyu			Contractual arrangement with Tongdow Internet Technology			Total

Balance as of December 31, 2022	$	65,022,402		$	95,191,148		$	160,213,550
Foreign currency translation adjustments		(1,084,211	)		(1,587,258	)		(2,671,469	)
Balance as of December 31, 2023		63,938,191			93,603,890			157,542,081
Foreign currency translation adjustments	$	593,134		$	868,332		$	1,461,466
Balance as of September 30, 2024		64,531,325			94,472,222			159,003,547

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. No impairment loss or other changes were recorded, except for the influence of foreign currency translation for the nine months ended September 30, 2024 and the year ended December 31, 2023.

8. INTANGIBLE ASSETS

	September 30, 2024			December 31, 2023
Customer relationships	$	18,727,200		$	18,555,071
Software copyright		47,452,121			47,015,968
Total		66,179,321			65,571,039

Less: accumulative amortization		(26,473,836	)		(20,285,422	)
Intangible assets, net	$	39,705,485		$	45,285,617

The Company’s intangible assets consist of customer relationships and software copyrights. Customer relationships are generally recorded in connection with acquisitions at their fair value, one kind of software copyright was purchased in March 2021 and the other kind of software copyright was recorded in connection with the contractual arrangement with Shenzhen Tongdow Internet Technology Co., Ltd. in October 2022. Intangible assets with estimable lives are amortized, generally on a straight-line basis, over their respective estimated useful lives: 6.2 years for customer relationships, 6.83 years for one kind of software copyright purchased in March 2021 and 10 years for the other kind of software copyright recorded in connection with the contractual arrangement with Shenzhen Tongdow Internet Technology Co., Ltd, to their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Amortization expense for the nine months ended September 30, 2024 and 2023 was $6,634,441 and $6,002,628, respectively. The currency translation difference was negative $446,027 and $514,654 for the nine months ended September 30, 2024 and 2023, respectively.

No impairment loss was made against the intangible assets during the nine months ended September 30, 2024.

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

Period ending September 30, 2024:	Amount
current year	$	6,000,233
2025		8,000,310
2026		6,481,888
2027		4,616,921
2028		4,274,966
Thereafter		10,331,167
Total:	$	39,705,485

9. BANK BORROWINGS

Bank borrowings represent the amounts due to Baosheng County Bank that are due within one year. As of September 30, 2024 and December 31, 2023, bank loans consisted of the following:

	September 30, 2024		December 31, 2023
Short-term bank loans:
Loan from Baosheng County Bank	$	997,492	$	988,324
Loan from Bank of Communications		-		69,324
Total	$	997,492	$	1,057,648

In August 2022, Qianhai Baiyu entered into five loan agreements with Baosheng County Bank to borrow a total amount of RMB7.0 million as working capital for a one-year term, maturing in August 2023. In August 2023, the company and the bank renewed the contract, extending the loan term to August 2025. The five loans bear a fixed interest rate of 7.8% per annum and are guaranteed by Shenzhen Herun Investment Co., Ltd, Li Hongbin and Wang Shuang.

In August 2023, Qianhai Baiyu entered into a loan agreement with the Bank of Communications, borrowing a total of RMB 0.49 million as one-year working capital. This loan carried a fixed interest rate of 4.15% per annum and was fully repaid on April 2, 2024.

10. LEASES

The Company leases an office space under non-cancelable operating leases, with a term of 24 months. The Company considers renewal or termination options that are reasonably certain to be exercised when determining the lease term and the 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 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 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:

	September 30, 2024		December 31, 2023

Right-of-use assets, net	$	15,300	$	83,375

Lease Liabilities-current	$	16,186	$	86,691
Total	$	16,186	$	86,691

The weighted average remaining lease terms and discount rates for the operating lease were as follows as of September 30, 2024:

Remaining lease term and discount rate:
Weighted average remaining lease term (years)
Weighted average discount rate	4.75	%

For the nine months ended September 30, 2024 and 2023, the Company charged total amortization of right-of-use assets of $68,075 and $88,416 respectively. For the three months ended September 30, 2024 and 2023, the Company charged total amortization of right-of-use assets of $22,355 and $7,737 respectively.

The following is a schedule, by fiscal quarter, of maturities of lease liabilities as of September 30, 2024:

Period ended September 30, 2024:	Amount
current year	$	18,139
Total lease payments		18,139
Less: imputed interest		1,953
Present value of lease liabilities		16,186

11. OTHER CURRENT LIABILITIES

	September 30, 2024		December 31, 2023
Accrued payroll and benefit	$	1,828,464	$	3,210,615
Other tax payable		5,457,777		3,352,643
Accrued expenses		550,911		14,949
Others		145		142
Total	$	7,837,297	$	6,578,349

12. CONVERTIBLE PROMISSORY NOTES

	September 30, 2024		December 31, 2023
Convertible promissory notes – principal	$	2,443,358	$	3,043,358
Convertible promissory notes – discount		-		(159,219	)
Convertible promissory notes – interest		1,724,946		1,400,483
Convertible promissory notes, net	$	4,168,304	$	4,284,622

On May 6, 2022, the Company entered into a securities purchase agreement with Streeterville Capital, LLC (“Streeterville”), a Utah limited liability company, pursuant to which the Company issued Streeterville a convertible promissory note in the original principal amount of $3,320,000, convertible into shares of Common Stock, $0.001 par value per share, of the Company, for $3,000,000 in gross proceeds. By written consent dated May 10, 2022, as permitted by Section 228 of the Delaware General Corporation Law and Section 8 of Article II of our bylaws, the stockholders who have the authority to vote a majority of the outstanding shares of Common Stock approved the following corporate actions: (i) the entry into a purchase agreement dated as of May 6, 2022 by and between the Company and Streeterville, pursuant to which the Company issued the note dated as of May 6, 2022 to Streeterville and (ii) the issuance of shares of Common Stock in excess of 19.99% of the currently issued and outstanding shares of Common Stock of the Company upon the conversion of the note. The Company settled a convertible promissory note of $375,000 on November 16, 2022, and issued 445,749 shares of the Company’s Common Stock on November 17, 2022. The Company settled convertible promissory notes of $200,000 on January 18, 2023, $200,000 on February 3, 2023, $175,000 on February 8, 2023, $250,000 on February 15, 2023, $250,000 on March 8, 2023, $125,000 on March 24, 2023,$150,000 on September 14, 2023, $200,000 on October 7, 2023 and $175,000 on November 8, 2023, respectively, and issued 4,719, 4,688, 4,102, 5,860, 5,591, 2,913, 3,496, 131,585 and 115,137 shares of the Company’s common stock on January 19, 2023, February 6, 2023, February 8, 2023, February 15, 2023, March 15, 2023, March 29, 2023, September 14, 2023, October 7, 2023 and November 8, 2023, respectively for the year ended December 31, 2023.

On March 13, 2023, the Company entered into a securities purchase agreement with Streeterville, pursuant to which the Company issued Streeterville a convertible promissory note in the original principal amount of $3,320,000, convertible into shares of Common Stock, $0.001 par value per share, of the Company, for $3,000,000 in gross proceeds. By written consent dated March 6, 2023, as permitted by Section 228 of the Delaware General Corporation Law and Section 8 of Article II of our bylaws, the stockholders who have the authority to vote a majority of the outstanding shares of Common Stock approved the following corporate actions: (i) the entry into a purchase agreement, with terms substantially the same as the agreement attached in the aforesaid purchase agreement, by and between the Company and Streeterville, pursuant to which the Company issued an unsecured convertible promissory to Streeterville; and (ii) the issuance of shares of Common Stock in excess of 19.99% of the currently issued and outstanding shares of Common Stock of the Company upon the conversion of the note. The Company settled convertible promissory notes of $300,000 on September 7, 2023, $200,000 on October 10, 2023, $175,000 on October 13, 2023, $150,000 on November 16, 2023, $150,000 on December 5, 2023, and $150,000 on December 29, 2023, respectively, and issued 41,829, 41,736, 36,920, 109,075, 109,075, and 137,644, shares of the Company’s common stock on September 12, 2023, October 11, 2023, October 13, 2023, November 20, 2023, December 7, 2023, and December 29, 2023, respectively, for the year ended December 31, 2023. The Company settled convertible promissory notes of $150,000 on February 1, 2024, $150,000 on February 15, 2024 and $150,000 on April 18, 2024, respectively, and issued 160,174, 152,620 and 159,547 shares of the Company’s common stock on February 1, 2024, February 10, 2024, and April 23, 2024, respectively, for the nine months ended September 30, 2024.

The above two unsettled convertible promissory notes, issued on May 6, 2022 and March 13, 2023, have 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 $375,000 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 $913,000 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 year ended December 31, 2023, the Company recognized the amortization of beneficial conversion feature $218,750 and $820,448 to profit with respect to these two unsettled convertible promissory notes. For the nine months ended September 30, 2024, the Company has recognized the amortization of beneficial conversion feature of $nil and $92,552 to profit for the above two unsettled convertible promissory notes.

13. EQUITY

Common stock issued in private placements

On January 9, 2023, the Company entered into a certain securities purchase agreement with Ms. Huiwen Hu, an affiliate of the Company, and certain other purchasers who are non-U.S. Persons (as defined in Regulation S under the Securities Act of 1933, as amended), pursuant to which the Company agreed to sell an aggregate of 700,000 shares of its common stock, at a purchase price of $60.5 per share (“January 2023 PIPE”). The gross proceeds to the Company from the January 2023 PIPE were $42.35 million. Since Ms. Huiwen Hu is an affiliate of the Company, the January 2023 PIPE has been approved by the Audit Committee as well as the Board of Directors of the Company.

On July 31, 2023, the Company entered into a certain securities purchase agreement with Mr. Wenhao Cui, an affiliate of the Company, and certain other purchasers who are non-U.S. Persons (as defined in Regulation S under the Securities Act of 1933, as amended), pursuant to which the Company agreed to sell an aggregate of 560,000 shares of its common stock, at a purchase price of $17.50 per share (“August 2023 PIPE”). The gross proceeds to the Company from the January 2023 PIPE were $9.8 million.

On November 16, 2023, the Company entered into a certain securities purchase agreement with certain purchasers who are non-U.S. Persons (as defined in Regulation S under the Securities Act of 1933, as amended), pursuant to which the Company agreed to sell an aggregate of 15,000,000 shares of its common stock, at a purchase price of $2.09 per share (“November 2023 PIPE”). The gross proceeds to the Company from the November 2023 PIPE were $31.35 million.

Solely for accounting purposes, the number of shares and the purchase price per share discussed above have been retroactively restated to reflect the reverse stock split. Please refer to “Note 13 - Reverse Stock Split of Common Stock” for further details.

On June 7, 2024, the Company entered into a certain securities purchase agreement with certain purchasers who are non-U.S. Persons (as defined in Regulation S under the Securities Act of 1933, as amended), pursuant to which the Company agreed to sell an aggregate of 30,000,000 shares of its common stock, at a purchase price of $1.23 per share (“June 2024 PIPE”). The gross proceeds to the Company from the June 2024 PIPE were $36.90 million.

Common stock issued pursuant to the conversion of convertible promissory notes

Solely for accounting purposes, the number of shares and the purchase price per share have been retroactively restated to reflect the reverse stock split. Please refer to “Note 13 - Reverse Stock Split of Common Stock” for further details.

Reverse stock split of common stock

On October 30, 2023, The Company completed a 1-for-50 reverse stock split, where every fifty (50) shares of the Company’s pre-split issued and outstanding common stock, par value $0.001 per share, were combined into one (1) share of the Company’s post-split common stock, without any change in par value per share.

The reverse stock split applied to the issued shares of the Company on the date of the reverse stock split and does not have any retroactive effect on the Company’s shares prior to that date. However, for accounting purposes only, references to our ordinary shares in this quarterly report are stated as having been retroactively adjusted and restated to give effect to the reverse stock split, as if the reverse stock split had occurred by the relevant earlier date.

Share Issuances to Service Providers

For the nine months ended September 30, 2023, the Company issued under its 2023 Stock Incentive Plan a total of 220,000 shares of common stock to certain service providers, and recorded $5,698,000 in stock-based compensation expenses.

There were no issuances of securities from the 2023 Stock Incentive Plan for the nine months ended September 30, 2024 and as such, no stock-based compensation expense was recognized for the period.

Common stocks issued for exercise of warrants by holders of warrants

Warrants

A summary of warrants activity for the nine months ended September 30, 2024 was as follows:

	Number of shares		Weighted average life		Weighted average exercise price		Intrinsic Value

Balance of warrants outstanding as of December 31, 2023		77,093		3.70 years	$	7.15		-
Granted		-		-		-		-
Exercised		-		-	$	-		-
Balance of warrants outstanding as of September 30, 2024		77,093		3.70 years	$	7.15		-

As of September 30, 2024, the Company had 77,093 shares of warrants, among which 1,093 shares of warrants were issued to two individuals in private placements, and 76,000 shares of warrants were issued in three private placements closed on September 22, 2021.

In connection with 76,000 shares of warrants, the Company issued warrants to investors to purchase a total of 76,000 ordinary shares with a warrant term of five (5) years. The warrants have an exercise price of $28.75 per share.

The Warrants ended on September 30, 2024 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.

14. INCOME PER SHARE

Basic income 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 September 30, 2024, the principal amount and interest expense of convertible promissory notes are $2,443,358 and $1,724,946. Total obligations of $4,168,304 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 nine months ended September 30, 2024 and 2023 respectively:

	For the Nine Months Ended September 30,
	2024		2023
Net income (loss)	$	7,752,844	$	(3,707,295	)

Weighted Average Shares Outstanding-Basic		16,671,646		3,074,862
Weighted Average Shares Outstanding-Diluted		22,035,982		4,006,649
Net income (loss) per share - basic and diluted
Net income (loss) per share – basic	$	0.47	$	(1.21	)
Net income (loss) per share – diluted	$	0.35	$	(0.93	)

15. INCOME TAXES

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 nine months ended September 30, 2024, 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 September 30, 2024 and December 31, 2023, the Company had deferred tax assets of $11,691,760 and $11,294,960, respectively. The Company maintains a full valuation allowance on its net deferred tax assets as of September 30, 2024 and December 31, 2023.

The Company does not anticipate any significant increase in 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 nine months ended September 30, 2024 and 2023, the Company had current income tax expenses of $3,744,060 and $3,444,639, respectively, and deferred income tax expense of $554,652 and benefit of $569,559 in the connection of intangible assets generated from acquisitions.

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 to be 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 September 30, 2024 and December 31, 2023, and the Company does not believe that its unrecognized tax benefits will change over the next twelve months.

16. RELATED PARTY TRANSACTIONS AND BALANCES

1)	Nature of relationships with related parties

Name		Relationship with the Company
Guangzhou Chengji Investment Development Co., Ltd. (“Guangzhou Chengji”)		Controlled by Mr. Weicheng Pan, who is a former independent director of the Company.
Yunfeihu International E-commerce Group Co., Ltd (“Yunfeihu”)		An affiliate of the Company, over which an immediate family member of Chief Executive Officer owns equity interest and plays the 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
Beijing Tongdow E-commerce Co., Ltd. (“Beijing TD”)		Wholly owned by TD E-commerce, which is controlled by an immediate family member of Chief Executive Officer of the Company
Shanghai Tongdow Supply Chain Management Co., Ltd. (“Shanghai TD”)		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 Lishunwu E-commerce Co., Ltd. (Formerly named: Yangzhou Tongdow E-commerce Co., Ltd.) (“Yangzhou TD”)		Controlled by an immediate family member of Chief Executive Officer of the Company
Ningbo Xinwurong Supply Chain Management Co., Ltd. (Formerly named: Tongdow (Zhejiang) Supply Chain Management Co., Ltd.) (“Zhejiang 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
Shenzhen Tiantian Haodian Technology Co., Ltd. (“TTHD”)		Wholly owned by Shenzhen Meifu
Hainan Tongdow International Trade Co., Ltd. (“Hainan TD”)		Controlled by an immediate family member of Chief Executive Officer of the Company
Yunfeihu modern logistics Co., Ltd. (“Yunfeihu Logistics”)		Controlled by an immediate family member of Chief Executive Officer of the Company
Shenzhen Tongdow Jingu Investment Holding Co., Ltd. (“Shenzhen Jingu”)		Controlled by an immediate family member of Chief Executive Officer of the Company
Tongdow E-commerce Group Co., Ltd. (“TD E-commerce”)		Controlled by an immediate family member of Chief Executive Officer of the Company
Katie Ou		Shareholder of BAIYU Holdings Inc.

2)	Balances with related parties

-	*Due to related party*

	September 30, 2024		December 31, 2023
TD E-commerce	$	38,474,692	$	38,121,056
Total due to related party	$	38,474,692	$	38,121,056

The amount due to related parties is non-trade in nature, unsecured, non-interest bearing and is not expected to be repaid in the next twelve months.

17. COMMITMENTS AND CONTINGENCIES

1)	Commitments

a non-cancellable operating leases

The following table sets forth our contractual obligations as of September 30, 2024:

	Payment due by September 30
	Total		2024		2025		2026
Operating lease commitments for property management expenses under lease agreements	$	1,662	$	1,662	$	-	$	-

2)	Contingencies

None.

18. Risks and uncertainties

(1) Credit risk

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 of the balance sheet dates. As of September 30, 2024, approximately $82,591 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.

(2) Liquidity risk

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.

(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 significantly affected.

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

	September 30,		December 31,
	2024		2023
Balance sheet items, except for equity accounts		7.0176		7.0827

	For the nine months ended September 30,
	2024		2023
Items in the statements of operations and comprehensive income (loss), and statements of cash flows		7.2043		7.0148

(4) Economic and political risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

(5) Risks related to industry

The Company sells precious products to customers through our industrial relationship. Sales contracts are entered into with each 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 all the remaining benefits from the precious metal products substantially before they are sold to its customers. The Company has a single performance obligation to sell metal products to the buyers. The Company estimates the amount of variable consideration, including sales return using the expected value method and includes variable consideration in the transaction price to the extent that it is probable that a significant reversal will not occur. Revenue for precious metal trading under the 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 the economic environment in general and specific to the precious metal industry and 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.

19. SUBSEQUENT EVENTS

The Company has reviewed its operations for potential disclosure or financial statement impacts related to events occurring after September 30, 2024, but prior to the release of the unaudited consolidated financial statements contained in this quarterly report on Form 10-Q were issued.

On October 4, 2024, the Company received a notification letter from the staff at the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that the Staff has determined to delist the Company’s common stock from Nasdaq pursuant to Nasdaq Listing Rule 5101 and IM-5101-1. On October 7, 2024, the Company filed a request for hearing to appeal the Staff’s determination.

On October 28, 2024, BMYA New Energy Technology Inc., a subsidiary of the Company, entered into a Supplementary Agreement to the Purchase and Sale Contract with Feng’s Auto Parts Inc., which clarifies certain commercial arrangements between the parties under that certain Contracts of Purchase and Sale entered into by and between the parties dated August 23, 2024.

The Company has determined that there are no other items to disclose or require adjustments.

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

Overview

As of September 30, 2024, the Company primarily had two business lines, which are the commodities trading business and supply chain management services.

Commodities trading business

The commodities 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 nine months ended September 30, 2024, the Company recorded revenue of $91,714,259 from its commodities trading business and $2,811 from its supply chain management services, respectively.

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

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 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 nine months ended September 30, 2024, the Company generated revenue from supply chain management services of $2,811 from three third-party customers, compared with a commodity distribution services revenue of $64,037 with four third-party customers for the same period in 2023.

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 metal 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 commenced our commodities trading business in late November 2019. Over the past five years, we have expanded our operations and diversified our product offerings. Our future success depends on our ability to sustain growth and maintain profitability. Our limited operating history makes it difficult to evaluate our business and future prospects. Our future prospects may face risks and challenges typically encountered by a company with a limited operating history in an emerging and rapidly evolving industry, including, among other things,

●

Profitability: Maintaining and enhancing our profitability through efficient operations and cost management;

●

Competitive Position: Strengthening our competitive position in the commodities trading industry in China by leveraging our established networks and market knowledge.

●

Strategic Implementation: Effectively implementing our growth strategies and adapting to market competition and customer preferences, including potential expansion into new geographical markets.; and

●

Human Resources: Successfully recruiting, training, and retaining qualified managerial and other personnel to support our growth and operational needs.

Our business requires a significant amount of capital, particularly for the purchase of bulk commodities and expansion into new markets where we currently do not have operations. We continue to seek opportunities to optimize our operations, improve financial performance, and manage risks associated with our business.

Results of Operations

Three Months Ended September 30, 2024 as Compared to Three Months Ended September 30, 2023

	For the Three Months Ended September 30,						Change
	2024			2023			Amount			%
Revenues
- Sales of commodity products – third parties	$	37,162,036		$	33,883,096		$	3,278,940			10	%
- Supply chain management services		-			28,630			(28,630	)		(100	)%
Total Revenues		37,162,036			33,911,726			3,250,310			10	%

Cost of revenues
- Commodity product sales – third parties		(37,220,150	)		(33,916,806	)		(3,303,344	)		10	%
- Supply chain management services		-			(18,157	)		18,157			(100	)%
Total operating cost		(37,220,150	)		(33,934,963	)		(3,285,187	)		10	%

Gross loss		(58,114	)		(23,237	)		(34,877	)		150	%

Operating expenses
Selling, general, and administrative expenses		(2,416,176	)		(3,034,313	)		618,137			(20	)%
Total operating expenses		(2,416,176	)		(3,034,313	)		618,137			(20	)%

Other income (expense), net
Interest income		7,354,682			5,124,728			2,229,954			44	%
Interest expense		(115,082	)		(129,716	)		14,634			(11	)%
Amortization of beneficial conversion feature relating to convertible promissory notes		-			(228,250	)		228,250			(100	)%
Other income, net		4,308			8,227			(3,919	)		(48	)%
Total other income, net		7,243,908			4,774,989			2,468,919			52	%

Net income before income taxes		4,769,618			1,717,439			3,052,179			178	%

Income tax expenses		(1,596,361	)		(1,037,781	)		(558,580	)		54	%
Net income	$	3,173,257		$	679,658		$	2,493,599			367	%

Revenue

For the three months ended September 30, 2024, we generated 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 $3,250,310 or 10%, from $33,911,726 for the three months ended September 30, 2023 to $37,162,036 for the three months ended September 30, 2024, among which revenue from commodity trading and supply chain management accounted for 99.99% and 0.01% of our total revenue for the three months ended September 30, 2024. This increase was mainly driven by an expanded our customer base and favorable pricing conditions in the commodities market.

(1)	Revenue from sales of commodity products

For the three months ended September 30, 2024, the Company sold non-ferrous metals to fourteen third-party customers at fixed prices compared with thirteen third-party customers for the same period in 2023, and earned revenues when the product ownership was transferred to its customers. The Company earned revenues of $37,162,036 from sales of commodity products for the three months ended September 30, 2024, compared to $33,883,096 for the three months ended September 30, 2023, representing an increase of $3,278,940, or 10%. This increase was primarily due to the Company’s expanded customer base, growing from thirteen to fourteen third-party customers, along with an increase in the sales volume of non-ferrous metals.

(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 September 30, 2024, the Company provided nil commodity distribution services and other related services to third-party customers, compared with $28,630 provided to the third-party customers for the same period ended September 30, 2023. This decrease was primarily due to the Company’s ongoing business plan to expand into electric vehicle industry, resulting in reduction in commodity distribution services to third-party customers.

Cost of revenue

Our cost of revenue primarily includes the cost of revenue associated with commodity product sales and the cost of revenue associated with management services of the supply chain. Total cost of revenue increased by $3,285,187 or 10% from $33,934,963 for the three months ended September 30, 2023 to $37,220,150 for the three months ended September 30, 2024. The increased cost of revenue is in line with the increase in revenue.

Cost of revenue associated with commodity trading

For the three months ended September 30, 2024, the Company purchased non-ferrous metal products of $37,220,150 from 11 third-party vendors.

For the three months ended September 30, 2023, the Company purchased non-ferrous metal products of $33,916,806 from 11 third-party vendors.

Selling, general, and administrative expenses

Selling, general and administrative expenses decreased from $3,034,313 for the three months ended September 30, 2023 to $2,416,176 for the three months ended September 30, 2024, representing a decrease of $618,137, or 20%. Selling, general and administrative expenses primarily consisted of salary and employee benefits, office rental expenses, amortizations of intangible assets and convertible notes, professional service fees and finance offering related fees. The decrease was mainly attributable to cost-reduction initiatives and improved operational efficiencies implemented during the period.

Interest income

Interest income was primarily generated from loans made to third parties and related parties. For the three months ended September 30, 2024, interest income was $7,354,682 representing an increase of $2,229,954, or 44% from $5,124,728 for the three months ended September 30, 2023. The increase was due to the growth of loans made to third party vendors for the three months ended September 30, 2024. The balance of loan receivables was $301,335,694 as of September 30, 2024 which was $99.38 million higher than that as of September 30, 2023.

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

For the three months ended September 30, 2024, the item represented the amortization of beneficial conversion feature of nil relating to the convertible promissory notes.

For the three months ended September 30, 2023, the item represented the amortization of beneficial conversion feature of $228,250 relating to the convertible promissory notes.

Net income (loss)

As a result of the foregoing, net income for the three months ended September 30, 2024 was $3,173,257, representing an increase of $2,493,599 from $679,658 for the three months ended September 30, 2023.

Nine Months Ended September 30, 2024 as Compared to Nine Months Ended September 30, 2023

	For the Nine Months Ended September 30,						Change
	2024			2023			Amount			%
Revenues
- Sales of commodity products – third parties	$	91,714,259		$	102,937,623		$	(11,223,364	)		(11	)%
- Supply chain management services		2,811			64,037			(61,226	)		(96	)%
Total Revenues		91,717,070			103,001,660			(11,284,590	)		(11	)%

Cost of revenues
- Commodity product sales – third parties		(91,856,394	)		(103,107,066	)		11,250,672			(11	)%
- Supply chain management services		(16	)		(41,540	)		41,524			(100	)%
Total operating cost		(91,856,410	)		(103,148,606	)		11,292,196			(11	)%

Gross loss		(139,340	)		(146,946	)		7,606			(5	)%

Operating expenses
Selling, general, and administrative expenses		(7,487,247	)		(14,108,225	)		6,620,978			(47	)%
Total operating expenses		(7,487,247	)		(14,108,225	)		6,620,978			(47	)%

Other income (expense), net
Interest income		20,113,780			14,482,016			5,631,764			39	%
Interest expenses		(344,680	)		(352,938	)		8,258			(2	)%
Amortization of beneficial conversion feature relating to convertible promissory notes		(92,552	)		(713,292	)		620,740			(87	)%
Other income, net		1,595			7,130			(5,535	)		(78	)%
Total other income, net		19,678,143			13,422,916			6,255,227			47	%

Net income (loss) before income taxes		12,051,556			(832,255	)		12,883,811			1548	%

Income tax expenses		(4,298,712	)		(2,875,040	)		(1,423,672	)		50	%
Net income (loss)	$	7,752,844		$	(3,707,295	)	$	11,460,139			309	%

Revenue

For the nine months ended September 30, 2024, 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 decreased by $11,284,590 or 11%, from $103,001,660 for the nine months ended September 30, 2023 to $91,717,070 for the nine months ended September 30, 2024, among which revenue from sales of commodity products and supply chain management accounted for 99.99% and 0.01%, respectively. The decrease was mainly affected by the market environment: the industry was in a situation of both weak supply and weak demand, and the internal competition was also fierce.

(1)	Revenue from sales of commodity products

For the nine months ended September 30, 2024, the Company sold non-ferrous metals to fourteen third-party customers at fixed prices compared with thirteen third-party customers for the same period in 2023, and earned revenues when the product ownership was transferred to its customers. The Company earned revenues of $91,714,259 from sales of commodity products for the nine months ended September 30, 2024 compared with $102,937,623 for the nine months ended September 30, 2023, with a decrease of $11,223,364 or 11%. The decrease of revenue from sales of commodity products is mainly due to the decrease in the average unit sales price of zinc ingots from $3.32 per kilogram for the nine months ended September 30, 2023 to $2.76 per kilogram for the nine months ended September 30, 2024. And based on a downward trend in FY2024, the annual consumption of zinc plating in China is declining year by year.

(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 and distribution services.

For the nine months ended September 30, 2024, the Company recorded revenue of $2,811 from supply chain management services to third-party customers compared with $64,037 to third-party customers for the same period in 2023. The decrease in revenue from sales of commodity products is mainly due to the downsizing of the zinc plating market, as well as less customers in the fierce competition.

Cost of revenue

Our cost of revenue primarily includes the cost of revenue associated with commodity product sales and the cost of revenue associated with management services of the supply chain. Total cost of revenue decreased by $11,292,196 or 11% from $103,148,606 for the nine months ended September 30, 2023 to $91,856,410 for the nine months ended September 30, 2024. The decreased cost of revenue is in line with the decrease in revenue.

Cost of revenue associated with commodity trading

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

For the nine months ended September 30, 2024, the Company purchased non-ferrous metal products of $91,856,394 from 11 third-party vendors.

For the nine months ended September 30, 2023, the Company purchased non-ferrous metal products of $103,107,066 from 11 third-party vendors.

Selling, general, and administrative expenses

Selling, general and administrative expenses decreased from $14,108,225 for the nine months ended September 30, 2023 to $7,487,247 for the nine months ended September 30, 2024, representing a decrease of $6,620,978, or 47%. Selling, general and administrative expenses primarily consisted of salary and employee benefits, office rental expenses, amortizations of intangible assets and convertible notes, professional service fees and finance offering related fees. The decrease was mainly attributable to stock-based compensation expenses of $5,698,000 resulting from the issuance of a total of 11,000,000 shares of common stock to service providers for the nine months ended September 30, 2023 in comparison to zero in such expenses for the nine months ended September 30, 2024.

Interest income

Interest income was primarily generated from loans made to third parties and related parties. For the nine months ended September 30, 2024, interest income was $20,113,780 representing an increase of $5,631,764, or 39% from $14,482,016 for the nine months ended September 30, 2023. The increase was due to the growth of loans made to third party vendors for the nine months ended September 30, 2024.

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

For the nine months ended September 30, 2024, the item represented the amortization of beneficial conversion feature of $92,552 relating to the convertible promissory notes.

For the nine months ended September 30, 2023, the item represented the amortization of beneficial conversion feature of $713,292 relating to the convertible promissory notes.

Net income (loss)

As a result of the foregoing, net income for the nine months ended September 30, 2024 was $7,752,844, representing an increase of $11,460,139 from a net loss of $3,707,295 for the nine months ended September 30, 2023.

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.

As reflected in the accompanying unaudited consolidated financial statements, for the nine months ended September 30, 2024, the Company reported cash outflows of $38,390,258 from operating activities. As of September 30, 2024, the Company has working capital of approximately $274.95 million.

During the nine months ended September 30, 2024, the cash used in investing activities was $5,494.

The Company expects to use the proceeds from the equity financing as working capital to expand its commodities 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 nine months ended September 30, 2024 and 2023, respectively:

	For the Nine Months Ended September 30,
	2024			2023
Net Cash (Used in)/Provided by Operating Activities	$	(38,390,258	)	$	1,053,819
Net Cash Used in Investing Activities		(5,494	)		(64,651,465	)
Net Cash Provided by Financing Activities		36,900,000			56,004,311
Effect of exchange rate changes on cash and cash equivalents		306,712			8,140,537
Net (decrease)/increase in cash and cash equivalents		(1,189,040	)		547,202
Cash and cash equivalents at beginning of period		1,516,358			893,057
Cash and cash equivalents at end of period	$	327,318		$	1,440,259

Net Cash Used in Operating Activities

During the nine months ended September 30, 2024, we had a cash outflow from operating activities of $38,390,258, a decrease of $39,444,077 from a cash inflow of $1,053,819 for the nine months ended September 30, 2023. We incurred a net income for the nine months ended September 30, 2024 of $7,752,844, an increase of $11,460,139 from the nine months ended September 30, 2023, during which we recorded a net loss of $3,707,295.

In addition to the change in profitability, the decrease in net cash used in operating activities was the result of several factors, including:

●

Non-cash effects adjustments include amortization of beneficial conversion feature of convertible promissory notes of $92,552, amortization of intangible assets of $6,634,441, accrual convertible interest expense of $324,463 and amortization of discount on convertible promissory notes of $66,667.

●

A decrease of $58,674,429 of loan receivables due to increase of funds lending to upstream industries.

●

An increase of $2,137,342 of advances from customers due to increase of revenue.

●

An increase of $5,131,470 of income tax payable due to increase of net income.

Net Cash Used in Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2024 was $5,494 as compared to net cash used in investing activities of $64,651,465 for the nine months ended September 30, 2023.

The cash used in investing activities for the nine months ended September 30, 2023 was mainly for the loans disbursed to third parties of $122,971,023, partly offset by the collected loans from third partis of $58,413,241.

Net Cash Provided by Financing Activities

During the nine months ended September 30, 2024, the cash provided by financing activities was mainly attributable to cash raised of $36,900,000 from the issuance of 30,000 shares of common stock.

During the nine months ended September 30, 2023, the cash provided by financing activities was mainly attributable to cash raised of $42,350,000 from certain private placements by the issuance of 35,000,000 shares of common stocks, cash raised of $559,073 from a registered direct offering by the issuance of 689,306 shares of common stocks, cash raised of $3,000,000 from issuance of unsecured senior convertible promissory notes in the aggregate principal amount of $3,320,000, and cash raised of $9,800,000 from certain private placements by the issuance of 28,000,000 shares of common stock.

Off-balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of September 30, 2024.

Contractual Obligations

As of September 30, 2024, the Company had one lease arrangement with an unrelated third party. The lease term is 24 months, which will expire in November 2024. As of the date of this report, the Company cannot reasonably assess whether it will renew the lease term. The lease commitment was as following table:

			Less than
	Total		1 year		1-2 years		Thereafter
Contractual obligations:
Operating lease	$	1,662	$	1,662	$	-	$	-
Total	$	1,662	$	1,662	$	-	$	-

Critical Accounting Policies

Please refer to Note 2 of the Condensed Consolidated Financial Statements included in this Form 10-Q 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 September 30, 2024.

Certain personnel primarily responsible for preparing our financial statements require additional requisite levels of knowledge, experience and training in the application of U.S. GAAP commensurate with our financial reporting requirements. The management thought that in light of the inexperience of our accounting staff with respect to the requirements of U.S. GAAP-based reporting and SEC rules and regulations, we did not maintain effective controls and did not implement adequate and proper supervisory review to ensure that significant internal control deficiencies can be detected or prevented.

Management’s assessment of the control deficiency over accounting and finance personnel as of September 30, 2024 includes:

●

our lack of sufficient financial reporting and accounting personnel with appropriate knowledge of the U.S. GAAP and the SEC reporting requirements to properly address complex U.S. GAAP accounting issues and to prepare and review consolidated financial statements and related disclosures to fulfill U.S. GAAP and SEC financial reporting requirements.

●

our lack of comprehensive accounting policies and procedures manual in accordance with U.S. GAAP. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control for purposes of identifying and reporting material weaknesses and other deficiencies in our internal control over financial reporting. Had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional deficiencies may have been identified.

Following the identification of the material weaknesses and control deficiencies, we have taken the following remedial measures: engaging an external consulting firm to assist us with the assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal control.

We plan to take additional remedial measures, including (i) hiring more qualified accounting personnel with relevant U.S. GAAP and SEC reporting experience and qualifications to strengthen the financial reporting function and to set up a financial and system control framework; and (ii) implementing regular and continuous U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel.

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 is also based partly on 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 September 30, 2024 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

None.

ITEM 1A. RISK FACTORS

As of the date of this report, there have been no material changes to the risk factors disclosed in our annual report on Form 10-K filed with the SEC on March 22, 2024.

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

Common stock issued pursuant to the conversion of convertible promissory notes

The Company settled convertible promissory notes issued on October 4, 2021 of $125,000 on December 30, 2022, $125,000 on January 10, 2023, $125,000 on January 18, 2023, $250,000 on February 2, 2023, $250,000 on March 2, 2023, respectively, and issued 148,399, 147,824, 147,475, 292,987, and 279,567 shares of the Company’s common stock on January 6, 2023, January 12, 2023, January 18, 2023, February 3, 2023, and March 2, 2023, respectively for the three months ended September 30, 2023.

The Company settled convertible promissory notes issued on May 6, 2022 of $200,000 on January 18, 2023, $200,000 on February 3, 2023, $175,000 on February 8, 2023, $250,000 on February 15, 2023, $250,000 on March 8, 2023, and $125,000 on March 24, 2023, respectively, and issued 235,960, 234,389, 205,090, 292,987, 279,567 and 145,660 shares of the Company’s common stock on January 19, 2023, February 6, 2023, February 8, 2023, February 15, 2023, March 15, 2023, and March 29, 2023, respectively for the three months ended September 30, 2023.

The Company settled convertible promissory notes issued on March 13, 2023 of $300,000 on September 7, 2023, $200,000 on October 10, 2023, $175,000 on October 13, 2023, $150,000 on November 16, 2023, $150,000 on December 5, 2023, and $150,000 on December 29, 2023, respectively, and issued 41,829, 41,736, 36,920, 109,075, 109,075, and 137,644, shares of the Company’s common stock on September 12, 2023, October 11, 2023, October 13, 2023, November 20, 2023, December 7, 2023, and December 29, 2023, respectively, for the year ended December 31, 2023. The Company settled convertible promissory notes of $150,000 on February 1, 2024, $150,000 on February 15, 2024, and $150,000 on April 18, 2024 respectively, and issued 160,174, 152,620 and 159,547 shares of the Company’s common stock on February 1, 2024, February 10, 2024 and April 23, 2024, respectively, for the nine months ended September 30, 2024.

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 herein by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on June 7, 2019
3.8*		Certificate of Amendment to the Certificate of Incorporation of Registrant, incorporated herein by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on March 12, 2020
3.9*		Certificate of Amendment to Certificate of Incorporation of Registrant, incorporated herein by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on April 21, 2021
3.10*		Certificate of Amendment to Certificate of Incorporation of Registrant, incorporated herein by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on August 17, 2022
3.11*		Certificate of Amendment of Certificate of Incorporation, filed with the Secretary of State of Delaware on October 19, 2023, incorporated herein by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on October 20, 2023
10.1*		Supplementary Agreement to the Purchase and Sale Contract entered into by and between BMYA New Energy Technology Inc. and Feng’s Auto Parts Inc., dated October 28, 2024, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on October 30, 2024
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		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Previously filed

**	Filed herewith

***	The certifications attached as Exhibit 32.1 and 32.2 accompanying this Quarterly Report on Form 10-Q, are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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.

	BAIYU HOLDINGS, INC.

Date: November 13, 2024	By:	/s/ Renmei Ouyang
	Name:	Renmei Ouyang
	Title:	Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Wenhao Cui
	Name:	Wenhao Cui
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

SEC Form 10-Q filed by BAIYU Holdings Inc.