UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
For the quarterly period ended:
For the transition period from ___________ to ____________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification Number) |
(Address of principal executive office and zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 issuer was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See 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 | ☐ |
| ☒ | 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of outstanding shares of the registrant’s common
stock as of September 30, 2024 was
Explanatory Note
Planet Green Holdings Corp. (the “Company”) is filing this Amendment No.1 on Form 10-Q/A for the six months ended June 30, 2024 (this “Form 10-Q/A”).
This Form 10-Q/A amends the Company’s Quarterly Report on Form 10-Q for the six months ended June 30, 2024, as filed with the Securities and Exchange Commission (“SEC”) on August 14, 2024 (the “Original Filing”). This Form 10-Q/A is being filed to restate the Company’s unaudited condensed consolidated financial statements for the six months ended June 30, 2024.
The Management identified an error related to the disposal of Allinyson Ltd. that incorrectly increased the gain on disposal and reduced the additional paid in capital. The restatement reflected the correction of the above error, which increased additional paid-in capital, decreased gain on disposal, accumulated deficit and accumulated other comprehensive income in connection with disposal of the Company’s wholly-owned subsidiary Allinyson Ltd, on April 1, 2024. These adjustments were evaluated by management in accordance with SEC Staff Accounting Bulletin Topic 1M, “Materiality” and management determined the effects of the restatement to be material.
The Company is filing this Form 10-Q/A to amend and restate the Original Filing with modification as necessary to reflect the restatement. The following items have been amended to reflect the restatement:
Part I, Item 1:
Part I, Item 2:
Part I, Item 4:
In addition, the Company’s Chief Executive Officer and Chief Financial Officer have provided new certifications dated as of the date of this Form 10-Q/A (Exhibits 31.1, 31.2, 32.1 and 32.2).
Except as otherwise described above and as otherwise set forth in this Form 10-Q/A, this Form 10-Q/A does not amend, modify or update any other information contained in the Original Filing. This Form 10-Q/A does not purport to reflect any information or events subsequent to the Original Filing, except as expressly described herein. Accordingly, this Form 10-Q/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Filing. Among other things, forward-looking statements and risk factor disclosure in the Original 10-Q have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the Original Filing, and such forward-looking statements and risk factors should be read in their historical context.
TABLE OF CONTENT
| PAGE | ||
| PART I - FINANCIAL INFORMATION | 1 | |
| ITEM 1 | FINANCIAL STATEMENTS | F-1 |
| ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 2 |
| ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 6 |
| ITEM 4 | CONTROLS AND PROCEDURES | 6 |
| PART II - OTHER INFORMATION | 7 | |
| ITEM 1 | LEGAL PROCEEDINGS | 7 |
| ITEM 1A | RISK FACTORS | 7 |
| ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 7 |
| ITEM 3 | DEFAULTS UPON SENIOR SECURITIES | 7 |
| ITEM 4 | MINE SAFETY DISCLOSURES | 7 |
| ITEM 5 | OTHER INFORMATION | 7 |
| ITEM 6 | EXHIBITS | 8 |
| SIGNATURES | 9 | |
i
Caution Regarding Forward-Looking Statements
This quarterly report on Form 10-Q/A contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to the factors described in the section captioned “Risk Factors” described on the Registration Statement on Form S-3 filed by the Company on September 17, 2021, and as subsequently amended, together with the other information contained in this report. If any of the events descripted in the risk factors occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.
In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” or the negative of such terms or other similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect.
Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
ii
PART I
Use of Certain Defined Terms
Except where the context otherwise requires and for the purposes of this report only:
| ● | “Anhui Ansheng” refers to Anhui Ansheng Petrochemical Equipment Co., Ltd., a company incorporated in China. | |
| ● | “Allinyson” refers to Allinyson Ltd., a company incorporated in the State of Colorado. | |
| ● | “Bless Chemical” refers to Bless Chemical Co., Ltd., a company incorporated in Hong Kong. | |
| ● | “Baokuan Hong Kong” refers to Baokuan Technology (Hong Kong) Limited, a company incorporated in Hong Kong. | |
| ● | “China” and “PRC” refer to the People’s Republic of China (excluding Hong Kong, Macau and Taiwan for the purposes of this report only). |
| ● | “Fast Approach” refers to Fast Approach Inc., a corporation incorporated under the laws of Canada. | |
| ● |
“Hubei Bulaisi” Refers to Hubei Bulaisi Technology Co., Ltd., a PRC limited liability company. | |
| ● | “Guangzhou Haishi” refers to Guangzhou Haishi Technology Co., Ltd., a PRC limited liability company. | |
| ● | “Jiayi Technologies” or “WFOE” refers to Jiayi Technologies (Xianning) Co., Ltd., a PRC limited liability company and a wholly foreign-owned enterprise, formerly known as Lucky Sky Petrochemical Technology (Xianning) Co. Ltd. |
| ● | “Jilin Chuangyuan” refers to Jilin Chuangyuan Chemical Co., Ltd., a PRC limited liability company. |
| ● | “Jingshan Sanhe” refers to Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd., a PRC limited company. |
| ● |
“Promising Prospect HK” refers to Promising Prospect HK Limited, formerly known as Lucky Sky Planet Green Holdings Co., Limited, a company incorporated in Hong Kong. | |
| ● | “PLAG,” “we,” “us”, “our,” “Planet Green” and the “Company” refer to Planet Green Holdings Corp., a Nevada corporation, and except where the context requires otherwise, our wholly-owned subsidiaries and VIEs. | |
| ● | “Promising Prospect BVI” refers to Promising Prospect Limited, formerly known as Planet Green Holdings Corporation, a British Virgin Islands company. |
| ● | “RMB” refers to Renminbi, the legal currency of China. |
| ● | “Shanghai Shuning” refers to Shanghai Shuning Advertising Co., Ltd., a PRC limited liability company. |
| ● | “Shandong Yunchu” Refers to Shandong Yunchu Supply Chain Co., Ltd., a PRC limited liability company. |
| ● | “U.S. dollar”, “$” and “US$” refer to the legal currency of the United States. |
| ● | “VIE” refers to variable interest entity. |
| ● | “Xianning Bozhuang” refers to Xianning Bozhuang Tea Products Co., Ltd., a PRC limited liability company. | |
| ● | “Shine Chemical” refers to Shine Chemical Co., Ltd., a company incorporated in British Islands. |
1
Item 1 - Financial Statements.
PLANET GREEN HOLDINGS CORP.
CONSOLIDATED FINANCIAL STATEMENTS
(Stated in US Dollars)
F-1
Planet Green Holdings Corp.
Condensed Consolidated Balance Sheets
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | (Unaudited) | |||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventories | ||||||||
| Advances to suppliers | ||||||||
| Other receivables | ||||||||
| Other receivables-related parties | ||||||||
| Prepaid expenses | ||||||||
| Assets classified as held for sale | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Construction in progress, net | ||||||||
| Long-term investments | ||||||||
| Goodwill | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Loans-current | $ | $ | ||||||
| Accounts payable | ||||||||
| Advance from customers | ||||||||
| Taxes payable | ||||||||
| Other payables and accrued liabilities | ||||||||
| Other payables-related parties | ||||||||
| Deferred income | ||||||||
| Liabilities directly associated with assets classified as held for sale | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Loans-noncurrent | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | $ | $ | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock: $ | ||||||||
| Common stock: $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ equity | $ | $ | ||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
| * |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
F-2
Planet Green Holdings Corp.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Research and development expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expenses) income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Other expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on disposal of equity investments | ( | ) | ( | ) | ||||||||||||
| Total other expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expenses | ( | ) | ( | ) | ||||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Discontinued operations: | ||||||||||||||||
| Income (loss) from discontinued operations | ( | ) | ( | ) | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Net loss attributable to non-controlling interest | ||||||||||||||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Earnings (loss) per common share of common stock - basic and diluted* | ||||||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| $ | $ | ( | ) | $ | $ | ( | ) | |||||||||
| * |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
F-3
Planet Green Holdings Corp.
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the Three Months Ended June 30, 2024 and 2023
| Accumulated | ||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | |||||||||||||||||||||
| Shares* | Amount | Capital | Deficit | Income | Total | |||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| * |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
F-4
Planet Green Holdings Corp.
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the Six Months Ended June 30, 2024 and 2023
| Accumulated | ||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | |||||||||||||||||||||
| Shares* | Amount | Capital | Deficit | Income | Total | |||||||||||||||||||
| Balance, January 1, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| * | Prior period results have been adjusted to reflect the reverse stock split effected on May 31, 2024 |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
F-5
Planet Green Holdings Corp.
Unaudited Condensed Consolidated Statements of Cash Flows
| For the Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPFRATING ACTIVITIFS: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Loss on disposal of equity investments | ||||||||
| Gain on disposal of subsidiary | ( | ) | ||||||
| Changes in operating assets and liabilities, net of effects of acquisitions and disposals: | ||||||||
| Accounts receivables, net | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepayments and deposit | ( | ) | ||||||
| Other receivables | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Advance from customer | ( | ) | ||||||
| Other payables and accrued liabilities | ||||||||
| Taxes payable | ( | ) | ||||||
| Deferred income | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of plant and equipment | ( | ) | ||||||
| Proceeds from disposal of equity method investments | ||||||||
| Net decrease in cash from disposal of subsidiaries | ( | ) | ||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from long-term loans | ( | ) | ||||||
| Changes in related party balances, net | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| EFFECT OF EXCHANGE RATE ON CASH | ||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR | ||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR | $ | $ | ||||||
| SUPPLEMENTARY OF CASH FLOW INFORMATION | ||||||||
| Interest received | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
F-6
PLANET GREEN HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
1. Organization and Principal Activities
Planet Green Holdings Corp. (the “Company” or “PLAG”) is a holding company incorporated in Nevada. We are engaged in various businesses through our subsidiaries and VIE entities in China.
On May 18, 2018, the Company incorporated Promising Prospect BVI Limited (“Planet Green BVI”), a limited company incorporated in the British Virgin Islands.
On September 28, 2018, Planet Green BVI acquired Lucky Sky HK through the Company’s restructuring plans.
On May 9, 2019, the Company issued an aggregate of
On August 12, 2019, through Lucky Sky HK, the Company established Lucky Sky Petrochemical, a wholly foreign-owned enterprise incorporated in Xianning City, Hubei Province, China. On December 9, 2020, Lucky Sky Petrochemical Technology (Xianning) Co., Ltd. changed its name to Jiayi Technologies (Xianning) Co., Ltd. (“Jiayi Technologies” or “WFOE”)
On May 29, 2020, the Promising Prospect BVI Limited incorporated Lucky Sky Planet Green Holdings Co., Limited, a limited company incorporated in Hong Kong.
On June 5, 2020, the Promising Prospect BVI Limited acquired all of the outstanding equity interests of Fast Approach Inc. It was incorporated under Canada’s laws and the operation of a demand-side platform targeting the Chinese education market in North America.
On June 16, 2020, Lucky Sky Holdings Corporations (H.K.) transferred
its
On August 10, 2020, Promising Prospect BVI Limited disposed of its
On January 6, 2021, Planet Green Holdings Corporation (Nevada) issued
an aggregate of
F-7
On March 9, 2021, Planet Green Holdings Corporation (Nevada) issued
an aggregate of
On July 15, 2021, Planet Green Holdings Corporation (Nevada) issued
an aggregate of
On August 3, 2021, the Planet Green Holding Corp has acquired
On September 1, 2021, Jingshan Sanhe
Luckysky New Energy Technologies Co., Ltd. has changed its major shareholder from Mr. Feng Chao to Hubei Bryce Technology Co., Ltd.
and Hubei Bryce Technology Co., Ltd. has hold
On December 9, 2021, Planet Green Holdings
Corporation (Nevada) issued an aggregate of
On April 8, 2022, Planet Green Holdings Corporation (Nevada) issued
an aggregate of
On September 14, 2022, Planet Green Holdings Corp. and Hubei Bulaisi
Technology Co., Ltd. a subsidiary of the Company, entered into a Share Purchase Agreement with Xue Wang, a shareholder of Jingshan Sanhe
Luckysky New Energy Technologies Co., Ltd., pursuant to which, among other things and subject to the terms and conditions contained therein, the
Purchaser agreed to effect share purchase from the Seller of
Consolidation of Variable Interest Entity
On March 9, 2021, through Jiayi Technologies (Xianning) Co., Ltd., formerly known as Lucky Sky Petrochemical Technology (Xianning) Co., Ltd., the Company entered into exclusive VIE agreements (“VIE Agreements”) with Jilin Chuangyuan Chemical Co., Ltd., as well as its shareholders, which gave the Company the ability to substantially influence those companies’ daily operations and financial affairs and appointment of its senior executives. The Company is considered the primary beneficiary of these operating companies, and it consolidates their accounts as VIEs.
F-8
The VIE Agreement is described in detail below
Consultation and Service Agreement
Under the Consultation and Service Agreement, WFOE has the exclusive
right to provide consultation and services to the operating entities in China in business management, human resource, technology, and
intellectual property rights. WFOE exclusively owns any intellectual property rights arising from the performance of this Consultation
and Service Agreement. The number of service fees and payment terms can be amended by the WFOE and operating companies’ consultation
and implementation. The duration of the Consultation and Service Agreement is
Business Cooperation Agreement
Pursuant to the Business Cooperation Agreement, WFOE has the exclusive right to provide complete technical support, business support, and related consulting services, including but not limited to specialized services, business consultations, equipment or property leasing, marketing consultancy, system integration, product research and development, and system maintenance. WFOE exclusively owns any intellectual property rights arising from the performance of this Business Cooperation Agreement. The rate of service fees may be adjusted based on the services rendered by WFOE in that month and the operational needs of the operating entities. The Business Cooperation Agreement shall maintain effective unless it was terminated or was compelled to release under applicable PRC laws and regulations. WFOE may terminate this Business Cooperation Agreement at any time by giving 30 day’s prior written notice.
Equity Pledge Agreements
According to the Equity Pledge Agreements among WFOE, operating entities, and each of operating entities’ shareholders, shareholders of the operating entities pledge all of their equity interests in the functional entities to WFOE to guarantee their performance of relevant obligations and indebtedness under the Technical Consultation and Service Agreement and other control agreements.
Equity Option Agreements
According to the Equity Option Agreements, WFOE has the exclusive right to require each shareholder of the operating companies to fulfill and complete all approval and registration procedures required under PRC laws for WFOE to purchase or designate one or more persons to buy, each shareholder’s equity interests in the operating companies, once or at multiple times at any time in part or in whole at WFOE’s sole and absolute discretion. The purchase price shall be the lowest price allowed by PRC laws. The Equity Option Agreements shall remain effective until all the equity interest owned by each operating entity shareholder has been legally transferred to WFOE or its designee(s).
Voting Rights Proxy Agreements
According to the Voting Rights Proxy Agreements, each shareholder irrevocably
appointed WFOE or WFOE’s designee to exercise all his or her rights as the shareholders of the operating entities under the Articles
of Association of each operating entity, including but not limited to the power to exercise all shareholder’s voting rights concerning
all matters to be discussed and voted in the shareholders’ meeting. The term of each Voting Rights Proxy Agreement is
F-9
Based on the foregoing contractual arrangements, The Company consolidates the accounts of Xianning Bozhuang Tea Products Co., Ltd, Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd. and Jilin Chuangyuan Chemical Co., Ltd. in accordance with Regulation S-X-3A-02 promulgated by the Securities Exchange Commission (“SEC”), and Accounting Standards Codification (“ASC”) 810-10, Consolidation.
Enterprise-Wide Disclosure
The Company’s chief operating decision-makers (i.e. chief executive
officer and her direct reports) review financial information presented on a consolidated basis, accompanied by disaggregated information
about revenues by business lines for purposes of allocating resources and evaluating financial performance. There are no segment managers
who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Based
on qualitative and quantitative criteria established by Accounting Standards Codification (“ASC”) 280, “Segment Reporting”,
the Company considers itself to be operating within
Going Concern
The accompanying unaudited condensed consolidated
financial statements have been prepared assuming that the Company will continue as a going concern; however, the Company has incurred
a net loss of $
These factors raise substantial doubt on the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management’s plan for the Company’s continued existence is dependent upon management’s ability to execute the business plan, develop the plan to generate profit; additionally, Management may need to continue to rely on private placements or certain related parties to provide funding for investment, for working capital and general corporate purposes. If management is unable to execute its plan, the Company may become insolvent.
2. Restatement of Previously Issued Financial Statements
On September 30, 2024, the Company’s management, in consultation with its advisors, concluded that the Company’s previously issued unaudited condensed consolidated financial statements contained within the Quarterly Report on Form 10-Q for the period ended June 30, 2024 should no longer be relied upon due to an error related to the disposal of the Company’s wholly-owned subsidiary Allinyson Ltd, on April 1, 2024, and that we would restate such financial statements to make the necessary accounting corrections. Details of the restated condensed consolidated financial statements for the three and six months ended June 30, 2024, are provided below (“Restatement Items”).
Restatement Items
The Company incorrectly recognized income
from discontinued operations in additional paid in capital in connection with disposal of Allinyson Ltd. The corrections resulted in
a $
F-10
As of June 30, 2024 (Unaudited) | ||||||||||||
| As Previously Reported | Restatement Adjustments | As Restated | ||||||||||
| Assets | ||||||||||||
| Current assets | ||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Restricted cash | ||||||||||||
| Accounts receivable, net | ||||||||||||
| Inventories | ||||||||||||
| Advances to suppliers | ||||||||||||
| Other receivables | ||||||||||||
| Other receivables-related parties | ||||||||||||
| Prepaid expenses | ||||||||||||
| Total current assets | ||||||||||||
| Non-current assets | ||||||||||||
| Plant and equipment, net | ||||||||||||
| Intangible assets, net | ||||||||||||
| Construction in progress, net | ||||||||||||
| Long-term investments | ||||||||||||
| Goodwill | ||||||||||||
| Total non-current assets | ||||||||||||
| Total assets | $ | $ | $ | |||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||
| Current liabilities | ||||||||||||
| Loans-current | $ | $ | $ | |||||||||
| Accounts payable | ||||||||||||
| Advance from customers | ||||||||||||
| Taxes payable | ||||||||||||
| Other payables and accrued liabilities | ||||||||||||
| Other payables-related parties | ||||||||||||
| Deferred income | ||||||||||||
| Total current liabilities | ||||||||||||
| Non-current liabilities | ||||||||||||
| Other long-term liabilities | ||||||||||||
| Loans-noncurrent | ||||||||||||
| Total non-current liabilities | ||||||||||||
| - | ||||||||||||
| Total liabilities | $ | $ | $ | |||||||||
| Commitments and contingencies | ||||||||||||
| Stockholders’ equity | ||||||||||||
| Preferred stock: $ | ||||||||||||
| Common stock: $ | ||||||||||||
| Additional paid-in capital | ||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive income | ( | ) | ||||||||||
| Total stockholders’ equity | $ | $ | $ | |||||||||
| Total liabilities and stockholders’ equity | $ | $ | $ | |||||||||
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
F-11
For the Three Months Ended June 30, 2024 (Unaudited) | ||||||||||||
| As Previously Reported | Restatement Adjustments | As Restated | ||||||||||
| Net revenues | $ | $ | $ | |||||||||
| Cost of revenues | ||||||||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Selling and marketing expenses | ||||||||||||
| General and administrative expenses | ||||||||||||
| Research and development expenses | ||||||||||||
| Total operating expenses | ||||||||||||
| Operating loss | ( | ) | ( | ) | ||||||||
| Other (expenses) income | ||||||||||||
| Interest income | ||||||||||||
| Interest expenses | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||
| Other expenses | ( | ) | ( | ) | ||||||||
| Total other expenses | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||||||
| Income tax expenses | ||||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ||||||||
| Discontinued operations: | ||||||||||||
| Income from discontinued operations | ( | ) | ||||||||||
| Net loss | ( | ) | ( | ) | ||||||||
| Less: Net loss attributable to non-controlling interest | ||||||||||||
| Net loss attributable to common shareholders | $ | $ | ( | ) | $ | ( | ) | |||||
| Net loss | ( | ) | ( | ) | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ||||||
| Total comprehensive loss | ( | ) | ( | ) | ||||||||
| Earnings (loss) per common share of common stock - basic and diluted | ||||||||||||
| $ | ( | ) | $ | $ | ( | ) | ||||||
| $ | $ | ( | ) | $ | ||||||||
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
F-12
For the Six Months Ended June 30, 2024 (Unaudited) | ||||||||||||
| As Previously Reported | Restatement Adjustments | As Restated | ||||||||||
| Net revenues | $ | $ | $ | |||||||||
| Cost of revenues | ||||||||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Selling and marketing expenses | ||||||||||||
| General and administrative expenses | ||||||||||||
| Research and development expenses | ||||||||||||
| Total operating expenses | ||||||||||||
| Operating loss | ( | ) | ( | ) | ||||||||
| Other (expenses) income | ||||||||||||
| Interest income | ||||||||||||
| Interest expenses | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||
| Other expenses | ( | ) | ( | ) | ||||||||
| Total other expenses | ( | ) | ( | ) | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||||||
| Income tax expenses | ||||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ||||||||
| Discontinued operations: | ||||||||||||
| Income from discontinued operations | ( | ) | ||||||||||
| Net loss | ( | ) | ( | ) | ||||||||
| Less: Net loss attributable to non-controlling interest | ||||||||||||
| Net loss attributable to common shareholders | $ | $ | ( | ) | $ | ( | ) | |||||
| Net loss | ( | ) | ( | ) | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ||||||
| Total comprehensive loss | ( | ) | ( | ) | ||||||||
| Earnings (loss) per common share of common stock - basic and diluted | ||||||||||||
| $ | ( | ) | $ | $ | ( | ) | ||||||
| $ | $ | ( | ) | $ | ||||||||
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
F-13
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | Non- | ||||||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Controlling | ||||||||||||||||||||||||
| Shares* | Amount | Capital | Deficit | Income | Interests | Total | ||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Net loss | - | |||||||||||||||||||||||||||
| Deconsolidation of discontinued operations | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Restatement Items | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| * | Prior period results have been adjusted to reflect the reverse stock split effected on May 31, 2024 |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
F-14
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | Non- | ||||||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Controlling | ||||||||||||||||||||||||
| Shares* | Stock | Capital | Deficit | Income | Interests | Total | ||||||||||||||||||||||
| Balance, January 1, 2023 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Net loss | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Net loss | - | |||||||||||||||||||||||||||
| Deconsolidation of discontinued operations | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Restatement Items | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| * | Prior period results have been adjusted to reflect the reverse stock split effected on May 31, 2024 |
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
F-15
For the Six Months Ended June 30, 2024 (Unaudited) | ||||||||||||
| As Previously Reported | Restatement Adjustments | As Restated | ||||||||||
| CASH FLOWS FROM OPFRATING ACTIVITIFS: | ||||||||||||
| Net loss | $ | $ | ( | ) | $ | ( | ) | |||||
| Adjustments to reconcile net income (loss) to cash (used in) provided by operating activities: | - | |||||||||||
| Depreciation | ||||||||||||
| Amortization | ||||||||||||
| Gain on disposal of subsidiary | ( | ) | ( | ) | ||||||||
| Changes in operating assets and liabilities, net of effects of acquisitions and disposals: | ||||||||||||
| Accounts receivables, net | ( | ) | ( | ) | ||||||||
| Inventories | ( | ) | ( | ) | ||||||||
| Prepayments and deposit | ||||||||||||
| Other receivables | ( | ) | ( | ) | ||||||||
| Accounts payable | ||||||||||||
| Advance from customer | ( | ) | ( | ) | ||||||||
| Other payables and accrued liabilities | ||||||||||||
| Taxes payable | ( | ) | ( | ) | ||||||||
| Deferred income | ( | ) | ( | ) | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
| Purchase of plant and equipment | ||||||||||||
| Net decrease in cash from disposal of subsidiaries | ( | ) | ( | ) | ||||||||
| Net cash (used in) provided by investing activities | ( | ) | ( | ) | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
| Proceeds from long-term loans | ||||||||||||
| Changes in related party balances, net | ( | ) | ( | ) | ||||||||
| Net cash provided by financing activities | ||||||||||||
| Net increase in cash and cash equivalents | ||||||||||||
| EFFECT OF EXCHANGE RATE ON CASH | ||||||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR | ||||||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF YEAR | $ | $ | $ | |||||||||
| SUPPLEMENTARY OF CASH FLOW INFORMATION | ||||||||||||
| Interest received | $ | $ | $ | |||||||||
| Interest paid | $ | $ | $ | |||||||||
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
F-16
3. Summary of Significant Accounting Policies
Basis of Presentation
Management has prepared the accompanying financial statements and these notes according to generally accepted accounting principles in the United States (“GAAP”). The Company maintains its general ledger and journals with the accrual method accounting.
Principles of Consolidation
| Name of Company | Place of incorporation | Attributable equity interest % | Registered capital | |||||||
| Promising Prospect BVI Limited | $ | |||||||||
| Promising Prospect HK Limited | | |||||||||
| Jiayi Technologies (Xianning) Co., Ltd. | | |||||||||
| Fast Approach Inc. | | |||||||||
| Shanghai Shuning Advertising Co., Ltd. (a subsidiary of Fast Approach Inc.) | ||||||||||
| Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd. | | |||||||||
| Xianning Bozhuang Tea Products Co., Ltd. | | |||||||||
| Jilin Chuangyuan Chemical Co., Ltd. | | |||||||||
| Bless Chemical Co., Ltd (a subsidiary of Shine Chemical) | | |||||||||
| Hubei Bryce Technology Co., Ltd. (a subsidiary of Bless Chemical) | | |||||||||
| Shandong Yunchu Supply Chain Co., Ltd. | | |||||||||
| Shine Chemical Co., Ltd. | | |||||||||
Management has eliminated all significant inter-company balances and transactions in preparing the accompanying consolidated financial statements. Ownership interests of subsidiaries that the Company does not wholly own are accounted for as non-controlling interests.
Reclassifications
Certain amounts on the prior-years’ consolidated balance sheets and statement of operations were reclassified to reflect discontinued operations, with no effect on ending stockholders’ equity.
Noncontrolling Interests
The noncontrolling interests of the Company represent the ownership stakes held by minority shareholders in the Company’s subsidiaries, and are presented separately from the equity attributable to the Company’s shareholders on the consolidated balance sheets. Noncontrolling interests in the Company’s results are disclosed on the consolidated statement of operations and comprehensive loss as allocations of total income or loss for the year between noncontrolling interest holders and the Company’s shareholders.
Use of Estimates
The financial statements preparation requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Management evaluates estimates, including the allowance for credit losses of accounts receivable, amounts due from related parties and equity investments, the useful lives of our property and equipment, impairment of long-lived assets, long-term investments and goodwill, etc. Management bases the estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates.
F-17
Cash and Cash Equivalents
The Company considers all highly liquid investments
purchased with original maturities of three months or less to be cash equivalents. As of June 30, 2024, the Company had cash and cash
equivalents of $
Accounts Receivable, Net
Accounts receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate for doubtful accounts is made when the amount is not expected to be collected. Delinquent amount balances are written off against the allowance for doubtful amounts after the management has determined that the likelihood of collection is not probable.
Inventories
Inventories consist of raw materials and finished goods, stated at the lower of cost or market value. Finished goods are comprised of direct materials, direct labor, inbound shipping costs, and allocated overhead. An annual impairment test will be performed on inventory, and any excess of the recoverable amount over the carrying amount will be recognized as impairment losses in the current period.
Advances and Prepayments to Suppliers
The Company makes an advance payment to suppliers and vendors for the procurement of raw materials. Upon physical receipt and inspection of the raw materials from suppliers, the applicable amount is reclassified from advances and prepayments to suppliers to inventory. At the end of each fiscal year, we undertake a thorough examination of prepaid expenses and contractual terms, analyze the causes of delayed receipt of corresponding valuable goods, calculate recoverable amounts using a probability-weighted average method for unrecoverable amounts, and make provisions for impairment as deemed necessary.
Plant and Equipment
Plant and equipment are carried at cost less accumulated depreciation.
Depreciation is provided over their estimated useful lives, using the straight-line method. The Company typically applies a salvage value
of
| Buildings | ||||
| Machinery and equipment | ||||
| Motor vehicles | ||||
| Office equipment |
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts, and any gain or loss is included in the Company’s results of operations. The costs of maintenance and repairs are recognized as incurred; significant renewals and betterments are capitalized.
F-18
Intangible Assets
| Land use rights | ||||
| Software licenses | ||||
| Trademarks |
Construction in Progress and Prepayments for Equipment
Construction in progress and prepayments for equipment represent direct and indirect acquisition and construction costs for plants and fees of purchase and installation of related equipment. Amounts classified as construction in progress and prepayments for equipment are transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. Depreciation is not provided for assets classified in this account.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. The Company conducts an annual assessment of its goodwill for impairment. If the carrying value of its goodwill exceeds its fair value, then impairment has been incurred; accordingly, a charge to the Company’s operations results will be recognized during the period. Impairment losses on goodwill are not reversed. Fair value is generally determined using a discounted expected future cash flow analysis.
Impairment of Long-lived Assets
The Company annually reviews its long-lived assets for impairment or whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Impairment may become obsolete from a difference in the industry, introduction of new technologies, or if the Company has inadequate working capital to utilize the long-lived assets to generate adequate profits. Impairment is present if the carrying amount of an asset is less than its expected future undiscounted cash flows.
If an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed of are reported lower the carrying amount or fair value fewer costs to selling.
Statutory Reserves
Statutory reserves refer to the amount appropriated from the net income
following laws or regulations, which can be used to recover losses and increase capital, as approved, and are to be used to expand production
or operations. PRC laws prescribe that an enterprise operating at a profit must appropriate and reserve, on an annual basis, an amount
equal to
F-19
Foreign Currency Translation
The accompanying financial statements are presented in United States
dollars. The functional currency of the Company is the Renminbi (RMB). The Company’s assets and liabilities are translated into
United States dollars from RMB at year-end exchange rates. Its revenues and expenses are translated at the average exchange rate during
the period.
| 06/30/2024 | 12/31/2023 | 06/30/2023 | ||||||||||
| Period-end US$: CDN exchange rate | ||||||||||||
| Period-end US$: RMB exchange rate | ||||||||||||
| Period-end US$: HK exchange rate | ||||||||||||
| Period average US$: CDN exchange rate | ||||||||||||
| Period average US$: RMB exchange rate | ||||||||||||
| Period average US$: HK exchange rate | ||||||||||||
The RMB is not freely convertible into foreign currencies, and all foreign exchange transactions must be conducted through authorized financial institutions.
Revenue Recognition
The Company adopted ASC 606 “Revenue Recognition.” It recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The Company derives its revenues from selling explosion-proof skid-mounted refueling device, SF double-layer buried oil storage tank, high-grade synthetic fuel products, industrial formaldehyde solution, urea-formaldehyde pre-condensate (UFC), methylal, urea-formaldehyde glue for environment-friendly artificial board chemicals, food products like frozen fruits, beef & mutton products and vegetables and tea products. The Company recognizes product revenue at a point in time when the control of the products has been transferred to customers. The Company applies the following five steps to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| ● | identify the contract with a customer; |
| ● | identify the performance obligations in the contract; |
| ● | determine the transaction price; |
| ● | allocate the transaction price to performance obligations in the contract; and; |
| ● | Recognize revenue as the performance obligation is satisfied. |
F-20
Advertising
All advertising costs are expensed as incurred.
Shipping and Handling
All outbound shipping and handling costs are expensed as incurred.
Research and Development
All research and development costs are expensed as incurred.
Retirement Benefits
Retirement benefits in the form of mandatory government-sponsored defined contribution plans are charged to either expense as incurred or allocated to inventory as part of overhead.
Income Taxes
The Company accounts for income tax using an asset and liability approach and recognizes deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets. If it is more likely than not, these items will either expire before the Company can realize their benefits or uncertain future realization.
Comprehensive Income
The Company uses Financial Accounting Standards Board (“FASB”) ASC Topic 220, “Reporting Comprehensive Income.” Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except the changes in paid-in capital and distributions to stockholders due to investments by stockholders.
Earnings Per Share
The Company computes earnings per share (“EPS”) following ASC Topic 260, “Earnings per share.” Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per-share basis from the potential conversion of convertible securities or the exercise of options and or warrants; the dilutive impacts of potentially convertible securities are calculated using the as-if method; the potentially dilutive effect of options or warranties are computed using the treasury stock method. Potentially anti-dilutive securities (i.e., those that increase income per share or decrease loss per share) are excluded from diluted EPS calculation.
F-21
Fair Value Measurements of Financial Instruments
The Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts and other payables, accrued liabilities, and short-term debt, have carrying amounts that approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosing the Company’s fair value of financial instruments. ASC Topic 825, “Financial Instruments,” defines fair value and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities qualify as financial instruments and are a reasonable estimate of their fair values because of the short period between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
| ● | Level 1 - inputs to the valuation methodology used quoted prices for identical assets or liabilities in active markets. |
| ● | Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and information that are observable for the asset or liability, either directly or indirectly, for substantially the financial instrument’s full term. |
| ● | Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
Lease
Effective December 31, 2018, the Company
adopted ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that do not require us to reassess: (1)
whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and
(3) initial direct costs for any expired or existing leases. For lease terms of
Lease terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception, therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Its leases generally do not provide a residual guarantee. The operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term.
The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested asset group and it includes the associated operating lease payments in the undiscounted future pre-tax cash flows.
As of June 30, 2024, the lease agreement with JSSH has lapsed and the company does not have any current lease agreements exceeding 12 months.
F-22
Equity Investments
In January 2016, the FASB issued ASU 2016-01 (“ASU 2016-01”), Recognition and Measurement of Financial Assets and Financial Liabilities, which, among other things, generally requires companies to measure investments in other entities, except those accounted for under the equity method, at fair value and to recognize any changes in fair value in net income. ASU 2016-01 also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, and the guidance should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The guidance related to equity investments without readily determinable fair values (including disclosure requirements) is applied prospectively to equity investments that exist as of the date of adoption. ASU 2016-01, which the Company adopted on January 1, 2018, did not have a material impact on the consolidated financial statements.
Investments in entities over which the Company does not have significant influence are recorded as equity investments and are accounted for either at fair value with any changes recognized in net income, or for those without readily determinable fair values, at cost less impairment, adjusted for subsequent observable price changes. Under the equity method, the Company’s share of the post-acquisition profits or losses of equity investments is recognized in the Company’s consolidated statements of comprehensive income; and the Company’s share of post-acquisition movements in equity is recognized in equity in the Company’s consolidated balance sheets. Unrealized gains on transactions between the Company and an entity in which the Company has recorded an equity investment are eliminated to the extent of the Company’s interest in the entity. To the extent of the Company’s interest in the investment, unrealized losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. When the Company’s share of losses in an entity in which the Company has recorded an equity investment equals or exceeds its interest in the entity, the Company does not recognize further losses, unless the Company has incurred obligations or made payments on behalf of the equity investee.
Commitments and Contingencies
From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The majority of these claims and proceedings related to or arise from commercial disputes. The Company first determine whether a loss from a claim is probable, and if it is reasonable to estimate the potential loss. The Company accrues costs associated with these matters when they become probable, and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Also, the Company disclose a range of possible losses, if a loss from a claim is probable but the amount of loss cannot be reasonably estimated, which is in line with the applicable requirements of Accounting Standard Codification 450. The Company’s management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate would have a material adverse impact on the Company’s consolidated financial position, results of operations and cash flows.
F-23
Recent Accounting Pronouncements
In May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. ASU 2019-05 is effective for the Company for annual and interim reporting periods beginning January 1st, 2020. The Company has implemented the new standard, and as of June 30, 2024, there was no material effect of this current standard on its consolidated financial statements and related disclosures.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
4. Variable Interest Entity (“VIE”)
A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. If any, the variable interest holder with a controlling financial interest in a VIE is deemed the primary beneficiary and must consolidate the VIE. PLAG WOFE is deemed to have the controlling financial interest and be the primary beneficiary of Jilin Chuangyuan Chemical Co., Ltd because it has both of the following characteristics:
| 1) | The power to direct activities at Jilin Chuangyuan Chemical Co., Ltd. that most significantly impact such entity’s economic performance, and |
| 2) | The obligation to absorb losses and the right to receive benefits from Jilin Chuangyuan Chemical Co., Ltd that could potentially be significant to such entity. Under the Contractual Arrangements, Jilin Chuangyuan Chemical Co., Ltd pay service fees equal to all of its net income to PLAG WFOE. At the same time, PLAG WFOE is obligated to absorb all of the Jilin Chuangyuan Chemical Co., Ltd.’s losses. The Contractual Arrangements are designed to operate Jilin Chuangyuan Chemical Co., Ltd for the benefit of PLAG WFOE and ultimately, the Company. Accordingly, the accounts of Jilin Chuangyuan Chemical Co., Ltd are consolidated in the accompanying consolidated financial statements. In addition, those financial positions and results of operations are included in the Company’s consolidated financial statements. |
F-24
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade accounts receivable, net | ||||||||
| Inventories | ||||||||
| Advances to suppliers | ||||||||
| Other receivables | ||||||||
| Intercompany receivable | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Construction in progress, net | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Advance from customers | ||||||||
| Taxes payable | ||||||||
| Other payables and accrued liabilities | ||||||||
| Intercompany payable | ||||||||
| Other payables-related parties | ||||||||
| Long term payable-current portion | ||||||||
| Deferred income | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Long-term payables | | | ||||||
| Total non-current liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| Stockholders’ equity | ||||||||
| Paid-in capital | ||||||||
| Statutory Reserve | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ( | ) | ||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
F-25
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Operating revenues | $ | $ | $ | $ | ||||||||||||
| Gross profit | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
5. Accounts Receivable, Net
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Trade accounts receivable | $ | $ | ||||||
| Less: Allowance for credit losses | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| Allowance for credit losses | ||||||||
| Beginning balance: | ( | ) | ( | ) | ||||
| Additions to allowance | ( | ) | ||||||
| Bad debt written-off | ||||||||
| Ending balance | $ | ( | ) | $ | ( | ) | ||
6. Advances and Prepayments to Suppliers
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Payment to suppliers and vendors | ||||||||
| Allowance for credit losses | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
7. Inventories
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Allowance for inventory reserve | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
F-26
8. Plant and Equipment, Net
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| At Cost: | ||||||||
| Buildings | $ | $ | ||||||
| Machinery and equipment | ||||||||
| Office equipment | ||||||||
| Motor vehicles | ||||||||
| Less: Impairment | ( | ) | ( | ) | ||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Construction in progress | ||||||||
| $ | $ | |||||||
Depreciation expense for the six months ended
June 30, 2024 and June 30, 2023 was $
9. Intangible Assets
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| At Cost: | ||||||||
| Land use rights | ||||||||
| Software licenses | ||||||||
| Trademark | ||||||||
| $ | $ | |||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Amortization expense for the three months ended
June 30, 2024 and June30, 2023 was $
10. Long-term Investment
In 2020, the Company made an initial investment of $
As of June 30, 2024 and December 31, 2023, the balance of long-term
investments stood at $
F-27
11. Other Payable
As of June 30, 2024 and December 31, 2023,
the balance of other payable was $
12. Advance From Customer
For our operation, the proceeds received from sales are initially recorded
as advance from customers, which was usually related to unsatisfied performance obligations at the end of an applicable reporting period.
As of June 30, 2024 and December 31, 2023, the outstanding balance of the Advance from customers was $
13. Related Parties Transaction
As of June 30, 2024 and December 31, 2023, the outstanding balance
due from related parties was $
| As of June 30, | As of December 31, | |||||||||
| Amounts due from related parties: | 2024 | 2023 | ||||||||
| Mr. Chen Xing | $ | $ | ||||||||
| Mr. Lu Jun | $ | $ | ||||||||
| Mr. Xiong Hai Yan | $ | $ | ||||||||
| Mr. Yang Yong | $ | $ | ||||||||
These above nontrade receivables arising from transactions between the Company and certain related parties, such as loans to these related parties. These loans are unsecured, non-interest bearing and due on demand.
As of June 30, 2024 and December 31, 2023,
the outstanding balance due to related parties was $
| As of June 30, | As of December 31, | |||||||||
| Amounts due to related parties: | 2024 | 2023 | ||||||||
| Ms. Yan Yan | $ | $ | ||||||||
| Mr. Bin Zhou | $ | $ | ||||||||
| Hubei Shuang New Energy Technology Co., Ltd. | $ | $ | ||||||||
| Shandong Ningwei New Energy Technology Co., Ltd. | $ | $ | ||||||||
| Anhui Ansheng equipment Co., Ltd. | $ | $ | ||||||||
| Senior managements | $ | $ | ||||||||
F-28
14. Goodwill
| SDYC | ||||
| Balance as of December 31, 2022 | $ | |||
| Goodwill acquired | ||||
| Goodwill impairment | ||||
| Disposal of subsidiaries | ||||
| Balance as of December 31, 2023 | $ | |||
| Goodwill acquired | ||||
| Goodwill impairment | ||||
| Balance as of June 30, 2024 | $ | |||
As of June 30, 2024 and December 31, 2023, the carrying amount of the
Company’s goodwill was $
15. Bank Loans
| Lender | Maturities | Weighted average interest rate | 06/30/2024 | 12/31/2023 | ||||||||||
| Rural Credit Cooperatives of Jilin Province, Jilin Branch | % | $ | $ | |||||||||||
| Tonghua Dongchang Yuyin Village Bank Co., Ltd. | % | $ | $ | |||||||||||
| Jingshan City branch of Postal Saving Bank of China | % | $ | $ | |||||||||||
| Hubei Jingshan Rural Commercial Bank Co. Ltd. | % | $ | $ | - | ||||||||||
Buildings and land use rights in the amount
of $
F-29
The loan from Tonghua Dongchang Yuyin
Village Bank, as a three years long-term debt, was denominated in Renminbi and was primarily obtained for general working capital.
On June 15, 2022, Mr. Chen Yongsheng and Mr. Cai Xiaodong pledged
The loan from the Jingshan City branch of Postal Savings Bank of China was obtained to support general working capital, with a comprehensive guarantee provided by Mr. Zhou Bin, the Company’s COO, and Hubei Bryce Technology Co., Ltd., which is under the company’s control.
Interest expense for six months ended June 30, 2024 and 2023 was $
16. Equity
On January 13, 2022, the Company entered into a Securities Purchase
Agreement, pursuant to which three individuals residing in the People’s Republic of China agreed to purchase an aggregate of
On April 8, 2022, Planet Green Holdings Corporation (Nevada) issued
an aggregate of
On May 19, 2022, the Company entered into a Securities Purchase Agreement,
pursuant to which two investors agreed to purchase an aggregate of
On July 20, 2022, the Company acquired
On May 31, 2024, every
As of June 30, 2024 and 2023, the number of common stock issued was
17. Income Taxes
United States
On December 22, 2017, the “Tax Cuts and Jobs Act” (the
“Act”) was enacted. Under the provisions of the Act, the U.S. corporate tax rate decreased from
F-30
Additionally, the Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The change in rate has caused the Company to remeasure all U.S. deferred income tax assets and liabilities for temporary differences and NOLs and recorded one time income tax payable to be paid in 8 years. However, this one-time transition tax has no effect on the Company’s income tax expenses as the Company has no undistributed foreign earnings prior to March 31, 2024 which the Company has foreign cumulative losses at June 30, 2024.
British Virgin Islands
Planet Green Holdings Corporation BVI is incorporated in the British Virgin Islands and is not subject to tax on income or capital gains under current British Virgin Islands law. In addition, upon payments of dividends by these entities to their shareholders, no British Virgin Islands withholding tax will be imposed.
Hong Kong
Lucky Sky Planet Green Holdings Co., Limited (H.K.) is incorporated
in Hong Kong and is subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted
in accordance with relevant Hong Kong tax laws. The applicable tax rate is
PRC
The Company PRC subsidiaries and VIEs and their controlled entities
are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable
tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under
the Enterprise Income Tax Laws of the PRC, Chinese enterprises are subject to income tax at a rate of
| 6/30/2024 | 6/30/2023 | |||||||
| Loss attributed to PRC operations | $ | ( | ) | $ | ( | ) | ||
| Loss attributed to U.S. operations | ( | ) | ( | ) | ||||
| Income attributed to Canada operations | ||||||||
| Loss before tax | $ | ( | ) | $ | ( | ) | ||
| PRC Statutory Tax at 25% Rate | ( | ) | ( | ) | ||||
| Valuation allowance | ||||||||
| Income tax | $ | $ | ||||||
| Per Share Effect of Tax Exemption | ||||||||
| Weighted-Average Shares Outstanding Basic | ||||||||
| Per share effect | $ | $ | ||||||
F-31
The Company evaluated the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.
| 6/30/2024 | 6/30/2023 | |||||||
| U.S. federal statutory income tax rate | % | % | ||||||
| Higher (lower) rates in PRC, net | % | % | ||||||
| Non-recognized deferred tax benefits in the PRC | ( | )% | ( | )% | ||||
| The Company’s effective tax rate | % | % | ||||||
18. Earnings (Loss) Per Share of Common Stock
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net loss from operations attributable to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted (loss) earnings per share denominator: | ||||||||
| Original Shares at the beginning: | ||||||||
| Basic Weighted Average Shares Outstanding | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| $ | $ | ( | ) | |||||
F-32
19. Concentrations
Customers Concentrations:
| For the six months ended | ||||||||||||||||
| Customers | June 30, 2024 | June 30, 2023 | ||||||||||||||
| Amount $ | % | Amount $ | % | |||||||||||||
| A | ||||||||||||||||
| B | ||||||||||||||||
| C | ||||||||||||||||
| D | ||||||||||||||||
| E | ||||||||||||||||
Suppliers Concentrations
| For the six months ended | ||||||||||||||||
| Suppliers | June 30, 2024 | June 30, 2023 | ||||||||||||||
| Amount $ | % | Amount $ | % | |||||||||||||
| A | ||||||||||||||||
| B | ||||||||||||||||
| C | ||||||||||||||||
| D | ||||||||||||||||
| E | ||||||||||||||||
| F | ||||||||||||||||
| G | ||||||||||||||||
| H | ||||||||||||||||
F-33
20. Risks
A. Credit risk
The Company’s deposits are made with banks located in the PRC. They do not carry federal deposit insurance and may be subject to loss of the banks become insolvent.
Since the Company’s inception, the age of account receivables has been less than one year, indicating that the Company is subject to the minimal risk borne from credit extended to customers.
B. Interest risk
The Company is subject to interest rate risk when short-term loans become due and require refinancing.
C. 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 changes in the political, economic, and legal environments in the PRC.
21. Contingencies
The Group records accruals for certain of its outstanding legal proceedings or claims when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. The Group evaluates, on a quarterly basis, developments in legal proceedings or claims that could affect the amount of any accrual, as well as any developments that would make a loss contingency both probable and reasonably estimable. The Group discloses the amount of the accrual if it is material.
When a loss contingency is not both probable and estimable, the Group does not record an accrued liability but discloses the nature and the amount of the claim, if material. However, if the loss (or an additional loss in excess of the accrual) is at least reasonably possible, then the Group discloses an estimate of the loss or range of loss, unless it is immaterial or an estimate cannot be made. The assessment of whether a loss is probable or reasonably possible, and whether the loss or a range of loss is estimable, often involves complex judgments about future events. Management is often unable to estimate the loss or a range of loss, particularly where (i) the damages sought are indeterminate, (ii) the proceedings are in the early stages, or (iii) there is a lack of clear or consistent interpretation of laws specific to the industry-specific complaints among different jurisdictions. In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including eventual loss, fine, penalty or business impact, if any. The Company has analyzed its operations subsequent to June 30, 2024 to the date these consolidated financial statements were issued, and has determined that it does not have any material contingency events to disclose.
22. Subsequent Events
The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the dates of the balance sheets, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. The Company has analyzed its operations subsequent to June 30, 2024 to the date these financial statements were issued, and has determined that it does not have any material events to disclose.
F-34
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We are headquartered in Flushing, New York. After a series of acquisitions and dispositions in 2024 and 2023, our primary business, which is carried out by Shandong Yunchu, Jingshan Sanhe, Jilin Chuangyuan, Fast Approach Inc and Xianning Bozhuang, is:
| ● | To sell black tea product cultivation, packaging, and sales; |
| ● | To sell high-grade synthetic fuel products; |
| ● | To sell formaldehyde, urea-formaldehyde glue, methylal, and clean fuel oil; |
| ● | Online advertising services. |
Results of Operations
Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023.
The following discussion should be read in conjunction with the company’s unaudited condensed consolidated financial statement for the three months ended June 30, 2024, and 2023 and related notes to that.
| Three months ended | Increase / | Increase / | ||||||||||||||
| June 30, | Decrease | Decrease | ||||||||||||||
| (In Thousands of USD) | 2024 | 2023 | ($) | (%) | ||||||||||||
| Net revenues | 1,945 | 4,363 | (2,418 | ) | (55 | ) | ||||||||||
| Cost of revenues | 1,878 | 4,239 | (2,361 | ) | (56 | ) | ||||||||||
| Gross profit | 67 | 124 | (57 | ) | (46 | ) | ||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing expenses | 34 | 243 | (209 | ) | (86 | ) | ||||||||||
| General and administrative expenses | 1,223 | 983 | 240 | 24 | ||||||||||||
| Research & Developing expenses | 32 | 65 | (33 | ) | (51 | ) | ||||||||||
| Operating loss | (1,222 | ) | (1,167 | ) | (55 | ) | 5 | |||||||||
| Interest expense | (191 | ) | (129 | ) | (62 | ) | 48 | |||||||||
| Other income (expense) | (697 | ) | 60 | (757 | ) | (1,262 | ) | |||||||||
| Loss on disposal of equity investments | - | (10,849 | ) | 10,849 | (100 | ) | ||||||||||
| Loss before tax | (2,110 | ) | (12,085 | ) | 9,975 | (83 | ) | |||||||||
| Income tax expense | - | (31 | ) | 31 | (100 | ) | ||||||||||
| Loss from continuing operations | (2,110 | ) | (12,116 | ) | 10,006 | (83 | ) | |||||||||
| Net income from discontinuing operations | 389 | (84 | ) | 473 | (563 | ) | ||||||||||
| Net loss | (1,721 | ) | (12,200 | ) | 10,479 | (86 | ) | |||||||||
Net Revenues. Our net revenues for the three months ended June 30, 2024 amounted to $1.95 million, which represents a decrease of approximately $2.42 million, or 55%, from $4.36 million for the three months ended June 30, 2023. The decrease in revenue can be attributed to the stagnant sales of high-grade synthetic fuel products, which decreased from $2.09 million to $0.04 million during the current period, as well as a decline in food product sales from $2.01 million to $1.00 million.
Cost of Revenues. During the three months ended June 30, 2024, we experienced a decrease in cost of revenue of $2.36 million or 56%, in comparison to the three months ended June 30, 2023, from approximately $4.24 million to $1.88 million. This change was mainly due to a decrease in sales of revenue, as discussed above.
Gross Profit. Our gross profit for the three months ended June 30, 2024 decreased by $0.06 million, representing a 46% decrease to $0.07 million compared to $0.12 million for the same period in 2023. The decrease was attributed to a decrease in sales of revenue, as discussed above .
Operating Expenses
Selling and Marketing Expenses. Our selling and marketing expenses decreased by $0.21 million, or 86%, to $0.03 million for the three months ended June 30, 2024 from $0.24 million for the three months ended June 30, 2023. This decrease was mainly due to the aforementioned reasons, attributable to a decrease in sales of revenue. The selling and marketing expenses mainly come from transportation and storage cost and the sales staff salaries cost decline.
2
General and Administrative Expenses. Our general and administrative expenses for the three months ended June 30, 2024 increased slightly by $0.24 million, or 24%, to $1.22 million compared to the previous year’s $0.98 million for the same period. The increase was primarily due to a reclassification of selling and marketing expenses to general and administrative expenses as a result of staff function realignment.
Net Income
Our net loss for the three months ended June 30, 2024 decreased by $10.48 million, or 86%, to $1.72 million from $12.20 million in the same period in 2023. This decrease was primarily attributed to the loss on disposal of equity investments.
Six Months Ended June 30, 2024 Compared to Six months Ended June 30, 2023.
The following discussion should be read in conjunction with the company’s audited consolidated financial statement for the six months ended June 30, 2024, and 2023 and related notes to that.
| Six months ended | Increase / | Increase / | ||||||||||||||
| June 30, | Decrease | Decrease | ||||||||||||||
| (In Thousands of USD) | 2024 | 2023 | ($) | (%) | ||||||||||||
| Net revenues | 3,476 | 11,921 | (8,445 | ) | (71 | ) | ||||||||||
| Cost of revenues | 3,046 | 11,582 | (8,536 | ) | (74 | ) | ||||||||||
| Gross profit | 430 | 339 | 91 | 27 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing expenses | 75 | 487 | (412 | ) | (85 | ) | ||||||||||
| General and administrative expenses | 2,426 | 2,073 | 353 | 17 | ||||||||||||
| Research & Developing expenses | 78 | 134 | (56 | ) | (42 | ) | ||||||||||
| Operating loss | (2,149 | ) | (2,355 | ) | 206 | (9 | ) | |||||||||
| Interest expense | (314 | ) | (246 | ) | (68 | ) | 28 | |||||||||
| Other income (expense) | (694 | ) | 98 | (792 | ) | (808 | ) | |||||||||
| Loss on disposal of equity investments | - | (10,849 | ) | 10,849 | (100 | ) | ||||||||||
| Loss before tax | (3,157 | ) | (13,352 | ) | 10,195 | (76 | ) | |||||||||
| Income tax expense | - | (79 | ) | 79 | (100 | ) | ||||||||||
| Loss from continuing operations | (3,157 | ) | (13,431 | ) | 10,274 | (76 | ) | |||||||||
| Net income from discontinuing operations | 355 | (54 | ) | 409 | (757 | ) | ||||||||||
| Net loss | (2,801 | ) | (13,485 | ) | 10,684 | (79 | ) | |||||||||
Net Revenues. As of June 30, 2024, our net revenue for the six months ended was $3.48 million, representing a decrease of approximately $8.45 million or 71% from the same period last year’s $11.92 million. During the corresponding period in the previous fiscal year, over 56% of our total revenue was derived from selling various food products to restaurants. However, this segment has been significantly impacted by COVID-19 and the company management is strategically realigning new supply markets to effectively mitigate this adverse impact, resulting in sales declining from $7.30 million in 2023 to $1.00 million dollars in 2024. The sales of high-grade synthetic fuel products have remained stagnant in the current period, decreasing from $4.28 million to $0.06 million.
Cost of Revenues. During the six months ended June 30, 2024, we experienced a decrease in cost of revenue of $8.54 million or 74%, in comparison to the six months ended June 30, 2023, from approximately $11.58 million to $3.05 million. This change was mainly due to a decrease in revenue, as discussed above.
Gross Profit. Our gross profit for the six months ended June 30, 2024 increased by $0.09 million, representing a 27% increase to $0.43 million compared to $0.34 million for the same period in 2023. The substantial growth is primarily attributed to the significant increase in advertising revenue from the Fast branch, which operates at an approximate gross profit rate of 100%.
Operating Expenses
Selling and Marketing Expenses. Our selling and marketing expenses decreased by $0.41 million, or 85%, to $0.08 million for the six months ended June 30, 2024 from $0.49 million for the six months ended June 30, 2023. This decrease was mainly due to the aforementioned reasons, attributable to a decrease in sales of revenue.
General and Administrative Expenses. Our general and administrative expenses for the six months ended June 30, 2024 increased slightly by $0.35 million, or 17%, to $2.43 million compared to the previous year’s $2.07 million for the same period. The increase was primarily due to a reclassification of selling and marketing expenses to general and administrative expenses as a result of staff function realignment.
3
Net Loss
Our net loss for the six months ended June 30, 2024 decreased by $10.69 million, or 79%, to $2.80 million from $13.49 million in the same period in 2023. This decrease was primarily attributed to the loss on disposal of equity investments.
Liquidity and Capital Resources
In assessing our liquidity, we monitor and analyze our cash-on-hand and operating and capital expenditure commitments. Our liquidity needs meet our working capital requirements, operating expenses, and capital expenditure obligations. In the reporting period at June 30, 2024, our primary sources of financing have been cash generated from operations and private placements.
As of June 30, 2024, we had cash and cash equivalents of $558,933 compared to $270,317 as of December 31, 2023. The debt to assets ratio was 60.86% and 54.40% as of June 30, 2024 and December 31, 2023, respectively. We expect to continue to finance our operations and working capital needs in 2024 from cash generated from operations and, if needed, private financings. Suppose available liquidity is insufficient to meet our operating and loan obligations as they come due. In that case, our plans include pursuing alternative financing arrangements or reducing expenditures as necessary to meet our cash requirements. However, there is no assurance that we will raise additional capital or reduce discretionary spending to provide liquidity if needed. We cannot be sure of the availability or terms of any alternative financing arrangements.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, the Company has incurred a net loss of $3,156,608 from continuing operations for the six months ended June 30, 2024. As of June 30, 2024 the Company had an accumulated deficit of $143,526,095, a working capital deficit of $8,092,472, its net cash used in operating activities for the six months ended June 30, 2024 was $660,867.
These factors raise substantial doubt on the Company’s ability to continue as a going concern. The accompanying unaudited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management’s plan for the Company’s continued existence is dependent upon management’s ability to execute the business plan, develop the plan to generate profit; additionally, Management may need to continue to rely on private placements or certain related parties to provide funding for investment, for working capital and general corporate purposes. If management is unable to execute its plan, the Company may become insolvent.
The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.
Cash Flows Data:
| For the
six months ended June 30 | ||||||||
| (In thousands of U.S. dollars) | 2024 | 2023 | ||||||
| Net cash flows used in operating activities | (661 | ) | (2,240 | ) | ||||
| Net cash flows (used in) provided by investing activities | (160 | ) | 2,749 | |||||
| Net cash flows provided by financing activities | 941 | 34 | ||||||
Operating Activities
Net cash used in operating activities decreased by $1.57 million to $0.66 million during the six months ended June 30, 2024, from $2.24 million during the six months ended June 30, 2023. This decrease was primarily due to changes in net operating assets and liabilities of $1.98 million and was partially offset by an increase in net loss excluding non-cash expenses, gains and losses of $0.40 million.
4
Investing Activities
Net cash provided by investing activities for the six months ended June 30, 2024 decreased to $0.16 million from the $2.74 million provided by investing activities for the same period in 2023. This decrease is primarily due to a reduction in plant and equipment purchases compared to the six months ended June 30, 2023.
Financing Activities
The net cash provided by financing activities increased by $0.91 million to $0.94 million during the six-month period ended June 30, 2024, compared to $0.03 million for the same period in 2023. This increase can be attributed to a rise in bank loans obtained for operational purposes.
Critical Accounting Policies
The preparation of financial statements in conformity with the United States generally accepted accounting principles requires our management to make assumptions, estimates, and judgments that affect the amounts reported in the financial statements, including the notes to that, and related disclosures of commitments contingencies, if any.
We consider our critical accounting policies to require the more significant judgments and estimates in preparing financial statements, including those outlined in Note 2 to the financial statements included herein.
The Company has evaluated the timing and the impact of the guidance above on the financial statements.
As of June 30, 2024, there were no other recently issued accounting standards not yet adopted that would or could have a material effect on the Company’s consolidated financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance arrangements.
5
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934. As a result, pursuant to Item 305(e) of Regulation S-K, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief executive officer and chief financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2024. Based upon their evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of June 30, 2024.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.
We have identified a material weakness in our internal control over financial reporting as of June 30, 2024, relating to ineffective review and approval procedures over journal entries and financial statement preparation which resulted in errors not being timely identified in prior period financial statements, such as the overstatement of income of our discontinued operation and other errors in connection with the disposal of Allinyson Ltd., our wholly-owned subsidiary, on April 1, 2024. We concluded that the failure to timely identify such accounting errors constituted material weakness as defined in the SEC regulations. As such, management determined that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of June 30, 2024.
To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance our system of evaluating and implementing the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over the time, and we can offer no assurance that these initiatives will ultimately have the intended effects, or that any additional material weaknesses or of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. Even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, other than as discussed above, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 27, 2023, Daqi Cui, a former employee, filed a complaint against the Company in Queens County, the Supreme Court of the State of New York, asserting claims of breach of employment contract, seeking $609,145.05 in damages as well as attorneys’ fees and costs. On November 6, 2023, the Company filed a motion to move the case to the United States District Courthouse, Eastern District of New York for an Order to dismiss with prejudice.
ITEM 1A. RISK FACTORS
Risk Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in the Company’s registration statement on Form S3/A as filed with the SEC on April 18, 2023. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Company’s registration statement Form S3/A as filed with the SEC on April 18, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
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ITEM 6. EXHIBITS
The following exhibits are filed as part of this report.
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| PLANET GREEN HOLDINGS CORP. | ||
| Date: September 30, 2024 | By: | /s/ Bin Zhou |
| Bin Zhou, Chief Executive Officer and Chairman (Principal Executive Officer) | ||
| Date: September 30, 2024 | By: | /s/ Lili Hu |
Lili Hu, Chief Financial Officer (Principal Financial and Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed by the following persons in the capacities and on the dates indicated.
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