Business Context and Reporting Period
This Form 6-K filing by Golden Bull Limited (trading as Bit Digital, Inc.) covers the month of October 2019. The Company operates a peer-to-peer (P2P) lending platform through its variable interest entity, Shanghai Dianniu Internet Finance Information Service Co., Ltd. ("Dianniu"). The filing details a severe regulatory investigation, significant leadership turnover, and a new equity financing effort.
Key Financial Metrics
The filing does not provide specific revenue, profit, cash flow, margin, or debt figures for the reporting period. However, it discloses the following financial details regarding a new financing transaction:
- Equity Offering: The Company entered into a Securities Purchase Agreement to sell 6,500,000 ordinary shares.
- Share Price: $0.40 per share.
- Gross Proceeds: $2,600,000.
- Use of Proceeds: Acquisitions, general corporate purposes, working capital, or new business.
- Liquidity Status: Bank accounts of Dianniu and related personnel have been frozen by government authorities due to an ongoing investigation.
Material Changes and Recent Developments
The Company faces critical operational and legal challenges that materially impact its business continuity:
- Regulatory Investigation: The Shanghai Public Security Bureau completed its investigation into Dianniu for suspected illegal collection of public deposits. Criminal enforcement measures were taken against 17 suspects, with 6 detained. The Company's CFO and a Director are believed to be among those detained, and the CEO is the subject of an online manhunt.
- Operational Disruption: The Chengdu office of Dianniu has been shut down by authorities. The Shanghai office remains open solely to assist lenders with collections and cooperate with authorities.
- Leadership Turnover:
- Removed: Jing Leng (CFO), Erxin Zeng (CEO), Xiaohui Liu (Director), and Hui Shen (Director).
- Appointed: Erke Huang (CFO and Director), Min Hu (CEO and Director), and Ping Liu (Director and Chairwoman).
- Litigation: The Company is a party to lawsuits filed by lenders seeking recovery of defaulted loans. The Company intends to file motions to dismiss these claims due to lack of standing, as it acts only as a facilitator and does not control funds.
Outlook, Risks, and Management Commentary
Management expects to discontinue its P2P business in the near future. The Company plans to launch a new business utilizing proceeds from the aforementioned equity and debt financing. Significant risks include the ongoing criminal investigation, the freezing of assets, the inability to pursue legal action against defaulted borrowers, and the uncertainty surrounding the completion of the private placement pending Nasdaq approval.
Investor Verification Checklist
- Verify the current status of the criminal investigation and whether the CEO (Erxin Zeng) or other key executives have been apprehended.
- Confirm whether the $2.6 million private placement has closed and if Nasdaq has approved the listing of the new shares.
- Assess the extent of frozen assets and the Company's ability to access working capital to fund operations or the new business venture.
- Monitor the outcome of the lawsuits filed by lenders (Guiyu Sun, Chao Shang, Jiangong Li, Zaiying Liu) regarding the Company's liability for defaulted loans.
- Review the Company's specific plan for the "new business" intended to replace the P2P lending platform.