Business Context and Reporting Period
Company: Code Chain New Continent Limited (trading symbol: CCNC; also referenced as GD Culture Group Ltd in metadata).
Filing Type: Form 8-K (Current Report).
Date of Report: May 28, 2021 (Event date); Signed June 1, 2021.
Context: The Company entered into an amendment to an asset purchase agreement regarding the acquisition of 10,000 Bitcoin mining machines from Sichuan RiZhanYun Jisuan Co., Ltd. The transaction involves payment via common stock and performance-based bonus shares.
Key Financial Metrics and Transaction Details
- Asset Purchase Price: RMB 40,000,000 (approx. US$6,160,000 based on April 8, 2021 exchange rate).
- Payment Method: Issuance of 1,587,800 shares of common stock valued at US$3.88 per share (April 8, 2021 closing bid).
- Performance Bonus (Bonus Shares): Potential issuance of shares valued at RMB 5,000,000 (US$770,000) if specific daily and monthly net profit thresholds are met.
- Profit Thresholds:
- Daily Net Profit: RMB 200,000 (US$30,800) per 10,000 machines.
- Monthly Net Profit: RMB 6,000,000 (US$924,000) per 10,000 machines.
- Issuance Cap: Total shares (Purchase Price + Bonus) shall not exceed 19.99% of total shares outstanding as of the Original Agreement date.
- Actual Issuance (June 1, 2021): 2,513,294 shares issued to Seller's designee (1,587,800 for purchase price + 925,494 Bonus Shares). Valued at US$2.51 per share (May 12, 2021 closing bid).
Material Changes and Transaction Structure
The filing details a material change in the payment structure of a previously disclosed asset acquisition. Originally, the purchase price was to be paid in cash or stock; the May 28, 2021 Amendment finalized the payment in stock.
Revenue Flow: Revenue and income from the mining assets are to be paid to the Company in cryptocurrency on a daily basis.
Performance Mechanism: The agreement includes a "Re-evaluated Month" provision. If profit targets are missed in a specific month, no bonus shares are issued for that month. However, at the end of the one-year Valuation Period (March 19, 2021 to March 19, 2022), aggregate profits from re-evaluated months are calculated, and bonus shares are issued pro rata based on the aggregate total.
Guidance, Risks, and Unusual Items
- Unregistered Sales: The issuance of 2,513,294 shares was made in reliance on Regulation S exemption, as the Seller is not a "U.S. Person."
- Valuation Risk: The value of the transaction is tied to the Company's stock price at specific dates (April 8 and May 12, 2021), creating variability in the effective cost of the assets.
- Operational Risk: Future share issuance is contingent on the profitability of Bitcoin mining operations, which is subject to cryptocurrency market volatility and mining difficulty.
- Financial Statements: This 8-K does not provide audited financial statements, revenue, profit, cash flow, or debt metrics for the Company. It focuses solely on the transaction terms.
Investor Verification Checklist
- Verify the current market price of CCNC stock to assess the dilution impact of the 2,513,294 shares issued.
- Confirm the operational status and profitability of the 10,000 Bitcoin mining machines to determine if future "Bonus Shares" will be triggered.
- Review the Company's total outstanding share count to ensure the 19.99% issuance cap is not breached by future performance bonuses.
- Monitor the cryptocurrency wallet deposits to verify the daily revenue flow from the assets as stipulated in the agreement.
- Check for any subsequent filings regarding the "Re-evaluated Month" calculations at the end of the Valuation Period.