Business Context and Reporting Period
This Form 6-K is filed by Golden Bull Limited (trading as Bit Digital, Inc.) for the month of August 2019, dated August 13, 2019. The registrant operates an online finance marketplace platform (P2P lending) in China. The filing details a significant operational restructuring involving the closure of its Shanghai Pudong office and relocation to new facilities in Shanghai Chongming and Chengdu to reduce costs and manage disruptions caused by lender protests.
Key Financial Metrics and Operational Data
The filing does not provide traditional financial statements (revenue, profit, cash flow, or debt) for the period. Instead, it reports key operating metrics for the P2P platform and specific liability exposures.
- Defaulted Loans: Approximately RMB 95,000,000 (approx. USD 13,500,000) as of the report date.
- Loan Volume (Q2 2019): $11 million (down from $55 million in Q1 2019).
- Loans Facilitated (Q2 2019): 460 (down from 2,155 in Q1 2019).
- Borrowers (Q2 2019): 459 (down from 1,506 in Q1 2019).
- Employees: 15 in Chengdu (operations) and 6 in Shanghai Chongming (customer service).
Material Changes Versus Prior Period
There has been a sharp deterioration in operational metrics compared to the first quarter of 2019 and the prior year.
- Volume Decline: Loan volume dropped by approximately 80% from Q1 2019 ($55M) to Q2 2019 ($11M). The number of loans facilitated fell by roughly 79%.
- Default Crisis: Since May 2019, malicious defaults have surged, totaling approximately $13.5 million. This has led to lender protests and threats at company offices.
- Operational Shift: The company moved its principal operations from a prime location in Pudong to lower-cost locations in Chongming and Chengdu to mitigate rental expenses and avoid further disruption from lender gatherings.
- Industry Impact: The decline is attributed to stricter Chinese government regulations on P2P lending and a loss of lender confidence following defaults and the cessation of operations by a peer (China Rapid Finance).
Outlook, Risks, and Unusual Items
New Business Initiatives:
- Car Leasing: A subsidiary, Shanghai Youwang, was established in April 2018. Vehicle delivery was delayed due to new Chinese emission standards implemented in July 2019. Operations are now expected to launch in Q1 2020. No substantive operations exist as of the report date.
- IoT Technology: A second subsidiary, Shanghai Xingjiuhao, is in the planning stage for IoT production and consulting. No operations have begun.
Risks and Contingencies:
- Collection Limitations: The company acts only as a facilitator and cannot legally seize collateral or take direct legal action against defaulters. It relies on assisting lenders with collection efforts, which is hindered by PRC regulations limiting aggressive collection tactics.
- Operational Disruption: Lender protests have physically disrupted business operations, necessitating the office relocation.
- Regulatory Environment: Increasingly strict regulations in China continue to negatively impact the P2P industry's overall performance.
Investor Verification Checklist
- Verify the current status of the $13.5 million in defaulted loans and the effectiveness of the company's collection assistance measures.
- Confirm the timeline for the launch of the car leasing business, given the delays caused by new emission standards.
- Assess the liquidity position of the company, as the filing does not disclose cash reserves or ability to fund operations amidst declining P2P revenue.
- Monitor for further regulatory actions by Chinese authorities regarding P2P platforms and potential impacts on the company's license to operate.
- Review the financial impact of the office relocation and reduced staff on future operating expenses.