UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:June 30, 2017March 31, 2023
[_]
☐ TRANSITION REPORT PURSUANT TO SECTION 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File No.Number: 001-34449
AMERICAN LORAIN CORPORATIONPLANET GREEN HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Nevada | 87-0430320 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification |
BeihuanZhong Road130-30 31st Ave, Suite 512
Flushing, NY 11354
Junan County(718) 799-0380Shandong, People’s Republic of China, 276600
(Address including zip code, of principal executive offices)office and zip code)
(86) 539-7317959(718) 799-0380
(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 | ||
Common Stock, par value $0.001 per share | PLAG | NYSE American |
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: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 registrantissuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]☒ No [ ]☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
Yes [X]☒ No [ ]☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant 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 [X]☒
The numbersnumber of outstanding shares outstanding of the issuer’s class ofregistrant’s common stock as of August 20, 2016May 15, 2023 was 38,259,490.72,081,930.
1
FORM 10-QFor the Quarterly Period Ended June 30, 2017
TABLE OF CONTENTSCONTENT
i
Caution Regarding Forward-Looking Statements
This quarterly report on Form 10-Q 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” in our Annual Reportdescribed on the Registration Statement on Form 10-K forS-3 filed by the year ended DECEMBER 31, 2016 filedCompany on September 17, 2021, and as subsequently amended, together with the Securitiesother information contained in this report. If any of the events descripted in the risk factors occur, our business, financial condition and Exchange Commission.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.
2
ii
PART I
Use of Certain Defined Terms
Except where the context otherwise requires and for the purposes of this report only:
1. “We,” “us” and “our” refer to ALN, and except where the context requires otherwise, our wholly-owned and majority-owned direct and indirect operating subsidiaries.
● | “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). |
2. “ALN” refers to American Lorain Corporation, a Nevada corporation (formerly known as Millennium Quest, Inc.).
● | “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. |
3. “Minerve” refers to Minerve*, a limited liability company organized under the laws of France that is majority- owned by JunanHongrun.
● | “Jilin Chuangyuan” refers to Jilin Chuangyuan Chemical Co., Ltd., a PRC limited liability company. |
4. “ILH” refers to International Lorain Holding, Inc., a Cayman Islands company that is wholly owned by ALN.
● | “Jingshan Sanhe” refers to Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd., a PRC limited company. |
5. “Junan Hongrun” refers to Junan Hongrun Foodstuff Co., Ltd.
● | “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. |
6. “Luotian Lorain” refers to Luotian Green Foodstuff Co., Ltd.
● | “RMB” refers to Renminbi, the legal currency of China. |
7. “Beijing Lorain” refers to Beijing Green Foodstuff Co., Ltd.
● | “Shanghai Shuning” refers to Shanghai Shuning Advertising Co., Ltd., a PRC limited liability company. |
8. “Shandong Lorain” refers to Shandong Green Foodstuff Co., Ltd.
● | “Shandong Yunchu” Refers to Shandong Yunchu Supply Chain Co., Ltd., a PRC limited liability company. |
9. “Dongguan Lorain” refers to Dongguan Green Foodstuff Co., Ltd.
● | “U.S. dollar”, “$” and “US$” refer to the legal currency of the United States. |
10. “Shandong Greenpia” refers to Shandong Greenpia Foodstuff Co., Ltd.
● | “VIE” refers to variable interest entity. |
11. “RMB” refers to Renminbi, the legal currency of China.
● | “Xianning Bozhuang” refers to Xianning Bozhuang Tea Products Co., Ltd., a PRC limited liability company. | |
● | “Shine Chemical” refers to Shine Chemical Co., Ltd., a company incorporated in British Islands. |
12. “U.S. dollar”, “$” and “US$” refer to the legal currency of the United States.
13. “China” and “PRC” refer to the People’s Republic of China (excluding Hong Kong and Macau).
*On August 8, 2015, the Company re-organized its French operations by merging the operations of Conserverie Minerve into its immediate parent and 100% shareholder Athena, and concurrently, Athena wound up and dissolved Conserverie Minerve. Athena subsequently changed its own legal name to Conservie Minerve to continue its business.
31
ITEM 1. Financial Statements1 FINANCIAL STATEMENTS
PLANET GREEN HOLDINGS CORP.
AMERICAN LORAIN CORPORATION
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2017
MARCH 31, 2023 AND DECEMBER 31, 20162022
(Stated in US Dollars)
4
Report of Independent Registered Public Accounting Firm
Notes to Unaudited Condensed Consolidated Financial Statements | F-6 to F-29 |
We have reviewed the
F-1
Planet Green Holdings Corp.
Unaudited Condensed Consolidated Balance Sheets
March 31, | December 31, | |||||||
2023 | 2022 | |||||||
Assets | (unaudited) | |||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 224,216 | $ | 93,487 | ||||
Accounts receivable, net | 3,568,558 | 2,996,638 | ||||||
Inventories | 3,957,324 | 4,153,680 | ||||||
Advances to suppliers | 6,375,614 | 5,417,449 | ||||||
Other receivables | 386,416 | 413,315 | ||||||
Other receivables-related parties | 352,835 | 180,578 | ||||||
Prepaid expenses | 512,541 | 579,826 | ||||||
Total current assets | 15,377,504 | 13,834,973 | ||||||
Non-current assets | ||||||||
Plant and equipment, net | 22,358,602 | 22,569,125 | ||||||
Intangible assets, net | 3,062,206 | 3,070,172 | ||||||
Construction in progress, net | 45,578 | 33,260 | ||||||
Long-term investments | 16,526,980 | 16,488,157 | ||||||
Goodwill | 4,724,698 | 4,724,699 | ||||||
Total non-current assets | 46,718,064 | 46,885,413 | ||||||
Total assets | $ | 62,095,568 | $ | 60,720,386 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Loans-current | $ | 3,638,110 | $ | 3,589,582 | ||||
Accounts payable | 3,825,117 | 3,528,057 | ||||||
Advance from customers | 3,525,116 | 2,624,070 | ||||||
Taxes payable | 1,217,827 | 1,083,493 | ||||||
Other payables and accrued liabilities | 5,410,343 | 4,412,833 | ||||||
Other payables-related parties | 4,249,288 | 4,282,841 | ||||||
Deferred income | 48,626 | 52,088 | ||||||
Total current liabilities | 21,914,427 | 19,572,964 | ||||||
Non-current liabilities | ||||||||
Other long-term liabilities | 257,355 | 273,757 | ||||||
Loans-noncurrent | 291,049 | 287,167 | ||||||
Total non-current liabilities | 548,404 | 560,924 | ||||||
Total liabilities | 22,462,831 | 20,133,888 | ||||||
Stockholders’ equity | ||||||||
Preferred stock: $0.001 par value, 5,000,000 shares authorized; none issued and outstanding as of March 31, 2023 and December 31,2022 | - | - | ||||||
Common stock: $0.001 par value, 200,000,000 shares authorized; 72,081,930 and 35,581,930 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | 72,082 | 72,082 | ||||||
Additional paid-in capital | 155,702,975 | 155,702,975 | ||||||
Accumulated deficit | (121,166,172 | ) | (119,880,801 | ) | ||||
Accumulated other comprehensive income | 5,023,852 | 4,692,242 | ||||||
Total stockholders’ equity | 39,632,737 | 40,586,498 | ||||||
Total liabilities and stockholders’ equity | $ | 62,095,568 | $ | 60,720,386 |
The accompanying interim consolidated balance sheetsnotes are an integral part of American Lorain Corporation (“the Company”) as of June 30, 2017 and December 31, 2016, and the related statements of income and cash flows for the six months ended June 30, 2017 and 2016. These interimthese unaudited condensed consolidated financial statementsstatements.
F-2
Planet Green Holdings Corp.
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss
For the Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
Net revenues | $ | 8,534,292 | $ | 11,979,355 | ||||
Cost of revenues | 8,287,866 | 10,816,396 | ||||||
Gross profit | 246,426 | 1,162,959 | ||||||
Operating expenses: | ||||||||
Selling and marketing expenses | 244,719 | 451,242 | ||||||
General and administrative expenses | 1,092,902 | 1,802,809 | ||||||
Research & Developing expenses | 68,719 | 8,925 | ||||||
Total operating expenses | 1,406,340 | 2,262,976 | ||||||
Operating (loss) income | (1,159,914 | ) | (1,100,017 | ) | ||||
Other (expenses) income | ||||||||
Interest income | 104 | 8,541 | ||||||
Interest expenses | (116,213 | ) | (165,767 | ) | ||||
Other income | 38,715 | 99,511 | ||||||
Other expenses | (439 | ) | (14,304 | ) | ||||
Total other (expenses) income | (77,833 | ) | (72,019 | ) | ||||
Loss before income taxes | (1,237,747 | ) | (1,172,036 | ) | ||||
Income tax expenses | 47,624 | 89,403 | ||||||
Net loss | (1,285,371 | ) | (1,261,439 | ) | ||||
Less: Net loss attributable to non-controlling interest | - | (31,662 | ) | |||||
Net loss attributable to common stockholders | $ | (1,285,371 | ) | $ | (1,229,777 | ) | ||
Net loss | (1,285,371 | ) | (1,261,439 | ) | ||||
Foreign currency translation adjustment | 331,610 | 166,157 | ||||||
Total comprehensive loss | (953,761 | ) | (1,095,282 | ) | ||||
Less: Comprehensive (loss) income attribute to non-controlling interest | - | (26,568 | ) | |||||
Comprehensive (loss) income attribute to common share holders | $ | (953,761 | ) | $ | (1,068,714 | ) | ||
Net loss per share of common stock - basic and diluted | $ | (0.02 | ) | $ | (0.03 | ) | ||
Basic and diluted weighted average shares outstanding | 72,081,930 | 41,648,597 |
The accompanying notes are the responsibilityan integral part of the Company's management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interimthese unaudited condensed consolidated financial statements for them to bestatements.
F-3
Planet Green Holdings Corp.
Unaudited Condensed Consolidated Statements of Changes in conformity with U.S. generally accepted accounting principles.Stockholders’ Equity
We have previously audited, in accordance with auditing standards ofFor the Public Company Accounting Oversight Board (United States), the balance sheets of American Lorain Corporation as of December 31, 2016,Three Months Ended March 31,2023 and the related statements of income, comprehensive income, retained earnings, and cash flows for the year then ended (not presented herein); and in our report dated October 30, 2017, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.2022
Accumulated | ||||||||||||||||||||||||||||
Additional | Other | Non- | Total | |||||||||||||||||||||||||
Common stock | Paid-in | Accumulated | Comprehensive | Controlling | Stockholders’ | |||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Income | Interests | Equity | ||||||||||||||||||||||
Balance, December 31, 2021 | 35,581,930 | $ | 35,582 | $ | 133,232,224 | $ | (94,072,383 | ) | $ | 7,711,057 | $ | 4,349,870 | $ | 51,256,350 | ||||||||||||||
Net loss | - | - | - | (1,229,777 | ) | - | (31,662 | ) | (1,261,439 | ) | ||||||||||||||||||
Issuance of common stock for cash | 7,000,000 | 7,000 | 6,993,000 | - | - | - | 7,000,000 | |||||||||||||||||||||
Acquiring non-controlling interests | - | - | (2,900,742 | ) | - | - | (2,349,258 | ) | (5,250,000 | ) | ||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | 161,062 | 5,094 | 166,156 | |||||||||||||||||||||
Balance, March 31, 2022 | 42,581,930 | $ | 42,582 | 137,324,482 | $ | (95,302,160 | ) | $ | 7,872,119 | $ | 1,974,044 | $ | 51,911,066 | |||||||||||||||
Balance, December 31, 2022 | 72,081,930 | $ | 72,082 | 155,702,975 | $ | (119,880,801 | ) | $ | 4,692,242 | $ | - | $ | 40,586,498 | |||||||||||||||
Net loss | - | - | - | (1,285,371 | ) | - | - | - | ||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | - | 331,610 | - | - | |||||||||||||||||||||
Balance, March 31, 2023 | 72,081,930 | $ | 72,082 | 155,702,975 | $ | (121,166,172 | ) | $ | 5,023,852 | $ | - | $ | 39,632,737 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had incurred substantial losses during the year and had working capital deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.statements.
AERICAN LORAIN CORPORATIONUNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETSAT JUNE 30, 2017 AND DECEMBER 31, 2016(Stated in US Dollars)
6/30/2017 | 12/31/2016 | |||||
(Audited) | ||||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 203,778 | $ | 426,054 | ||
Restricted cash | 829,623 | 971,471 | ||||
Trade receivables, net | 1,370,835 | 3,253,333 | ||||
Inventories | 23,596,047 | 11,840,748 | ||||
Advances and prepayments to suppliers | 12,476,063 | 29,873,479 | ||||
Other receivables and other current assets | 81,949 | 708,892 | ||||
Discontinued operations – assets held for sale | 15,663,385 | 19,745,847 | ||||
Total current assets | $ | 54,221,680 | $ | 66,819,824 | ||
Non-current assets | ||||||
Investment | - | 118,471 | ||||
Plant and equipment, net | 54,135,431 | 51,897,283 | ||||
Intangible assets, net | 12,700,888 | 12,586,515 | ||||
Construction in progress, net | 9,626,834 | 468,501 | ||||
Other assets and goodwill | 651,323 | - | ||||
Discontinued operations – long term assets held for sale | 13,365,560 | 16,362,855 | ||||
Total Assets | $ | 144,701,716 | $ | 148,253,449 | ||
Liabilities and Stockholders’ Equity | ||||||
Current liabilities | ||||||
Short-term bank loans | $ | 23,238,372 | $ | 22,667,482 | ||
Long-term debt – current portion | 29,895,631 | 28,948,300 | ||||
Capital lease – current portion | 1,031,990 | 1,007,185 | ||||
Accounts payable | 4,871,248 | 5,514,477 | ||||
Taxes payable | 522,779 | 248,807 | ||||
Accrued liabilities and other payables | 13,708,499 | 8,611,816 | ||||
Customers deposits | 6,139,865 | 1,347,136 | ||||
Discontinued operations - liabilities | 14,118,477 | 13,811,908 | ||||
Total current liabilities | $ | 93,526,861 | $ | 82,157,111 | ||
Stockholders’ Equity | ||||||
Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively | $ | - | $ | - | ||
Common Stock, $0.001 par value, 200,000,000 shares authorized; 38,274,490 and 38,274,490 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively | 38,275 | 38,275 | ||||
Additional paid-in capital | 57,852,249 | 57,852,249 | ||||
Statutory reserves | 25,103,354 | 25,103,354 | ||||
Retained earnings | (54,195,627 | ) | (36,396,455 | ) | ||
Accumulated other comprehensive income | 16,488,544 | 12,171,006 | ||||
Non-controlling interests | 5,888,060 | 7,327,909 | ||||
Total Stockholders’ Equity | $ | 51,174,855 | $ | 66,096,338 | ||
Total Liabilities and Stockholders’ Equity | $ | 144,701,716 | $ | 148,253,449 |
See Accompanying Notes to the Financial Statements
F-3
AMERICAN LORAIN CORPORATIONUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME (LOSS)FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016(Stated in US Dollars)
Three months ended June 30, | For the six months ended June 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Net revenues | $ | 1,278,053 | $ | 23,425,239 | $ | 3,184,525 | $ | 45,713,821 | ||||
Cost of revenues | 1,567,246 | 19,003,705 | 3,228,490 | 37,134,871 | ||||||||
Gross (loss) profit | (289,193 | ) | 4,421,534 | (43,965 | ) | 8,578,950 | ||||||
Operating expenses: | ||||||||||||
Selling and marketing expenses | - | 1,019,343 | 2,224,717 | 2,228,725 | ||||||||
General and administrative expenses | 262,072 | 629,746 | 6,177,278 | 1,221,057 | ||||||||
Total operating expenses | 262,072 | 1,649,089 | 8,401,995 | 3,449,782 | ||||||||
Operating (loss) income | (551,265 | ) | 2,772,445 | (8,445,960 | ) | 5,129,168 | ||||||
Other income (expenses): | ||||||||||||
Government subsidy | - | 359,399 | 580,705 | 864,106 | ||||||||
Interest income | 32 | 5,165 | 70 | 18,184 | ||||||||
Interest expense | (920,970 | ) | (828,245 | ) | (1,643,164 | ) | (1,909,107 | ) | ||||
Other income | 777,542 | 374,958 | 428,580 | 744,749 | ||||||||
Other expenses | (135,120 | ) | (2,894,596 | ) | (2,004,235 | ) | (6,900,419 | ) | ||||
(278,516 | ) | (2,983,319 | ) | (2,638,044 | ) | (7,182,487 | ) | |||||
(Loss) income before taxes from continuing operations | (829,781 | ) | (210,874 | ) | (11,084,004 | ) | (2,053,319 | ) | ||||
Provision for income taxes | - | - | - | 1,373,320 | ||||||||
Loss from continuing operations | (829,781 | ) | (210,874 | ) | (11,084,004 | ) | (3,426,639 | ) | ||||
Discontinued operations: | ||||||||||||
(Loss) income from discontinued operations | (1,200,173 | ) | 354,271 | (6,715,168 | ) | 836,068 | ||||||
Provision for income taxes | - | - | - | 209,127 | ||||||||
(Loss) income from discontinued operations, net of taxes | (1,200,173 | ) | 354,271 | (6,715,168 | ) | 626,941 | ||||||
Net (loss) income | $ | (2,029,954 | ) | $ | 143,397 | $ | (17,799,172 | ) | $ | (2,799,698 | ) | |
Net (loss attributable) income available to: | ||||||||||||
- Common shareholders | (1,763,776 | ) | 7,816 | (16,359,323 | ) | (3,067,153 | ) | |||||
- Non-controlling interests | (266,178 | ) | 135,581 | (1,439,849 | ) | 267,455 | ||||||
Other comprehensive income: | ||||||||||||
Foreign currency translation gain (loss) | 739,838 | (6,663,309 | ) | 3,069,946 | 6,334,063 | |||||||
Comprehensive (loss) income | $ | (1,290,116 | ) | $ | (6,519,912 | ) | $ | (14,729,226 | ) | $ | 3,534,365 | |
Loss per share from continuing operations | ||||||||||||
- Basic and diluted | (0.02 | ) | (0.01 | ) | (0.29 | ) | (0.09 | ) | ||||
(Loss) income per share from discontinued operations | ||||||||||||
- Basic and diluted | (0.02 | ) | 0.01 | (0.14 | ) | 0.01 | ||||||
(Loss) income per share | ||||||||||||
- Basic and diluted | (0.05 | ) | 0.00 | (0.43 | ) | (0.07 | ) | |||||
Basic and diluted weighted average shares outstanding | 38,274,490 | 38,259,490 | 38,274,490 | 38,259,490 |
See Accompanying Notes to the Financial Statements
F-4
Planet Green Holdings Corp.
Unaudited Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, | ||||||||
2023 | 2022 | |||||||
CASH FLOWS FROM OPFRATING ACTIVITIFS: | ||||||||
Net loss | $ | (1,285,371 | ) | $ | (1,261,439 | ) | ||
Adjustments to reconcile net loss to cash (used in) provided by operating activities: | ||||||||
Depreciation | 528,762 | 580,306 | ||||||
Amortization | 49,604 | 62,176 | ||||||
Amortization of operating lease right-of-use assets | - | 104,692 | ||||||
Impairment of equipment | - | 3,591 | ||||||
Note and account receivables net | (533,622 | ) | 470,712 | |||||
Inventories | 253,397 | (225,068 | ) | |||||
Prepayments and deposit | (783,119 | ) | (2,712,763 | ) | ||||
Other receivables | 32,601 | (70,731 | ) | |||||
Accounts payables | 333,589 | 47,902 | ||||||
Advance from customer | 869,145 | 1,171,786 | ||||||
Other payables and accruals | 942,558 | (3,584,314 | ) | |||||
Taxes payable | 90,184 | 84,201 | ||||||
Deferred income | - | (3,758 | ) | |||||
Lease liability | - | 7,000 | ||||||
Net cash provided by (used in) operating activities | 497,729 | (5,325,707 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of plant and equipment | (23,234 | ) | (124,681 | ) | ||||
Purchase of intangible assets | - | (23,398 | ) | |||||
Net cash provided by (used) in investing activities | (23,234 | ) | (148,079 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Payments of short-term loan | - | (127,014 | ) | |||||
Changes in related party balances, net | (238,294 | ) | (1,327,669 | ) | ||||
Proceeds from issuance of common stock | - | 7,000,000 | ||||||
Net cash provided by (used in) financing activities | (238,294 | ) | 5,545,317 | |||||
Net decrease in cash and cash equivalents | 236,201 | 71,531 | ||||||
EFFECT OF EXCHANGE RATE ON CASH | (105,472 | ) | 110,064 | |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 93,487 | 1,131,408 | ||||||
CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 224,216 | $ | 1,313,003 | ||||
SUPPLEMENTARY OF CASH FLOW INFORMATION | ||||||||
Interest received | $ | 104 | $ | 8,541 | ||||
Interest paid | $ | 116,213 | $ | 165,767 | ||||
NON-CASH TRANSACTIONS | ||||||||
Operating lease right-of-use assets | $ | - | $ | 480,074 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
AMERICAN LORAIN CORPORATIONUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016(Stated in US Dollars)
For the six months ended June | ||||||
30, | ||||||
2017 | 2016 | |||||
Cash flows from operating activities | ||||||
Net income | $ | (11,084,004 | ) | $ | (2,799,697 | ) |
Depreciation of fixed assets | 1,390,539 | 1,848,602 | ||||
Amortization of intangible assets | 775,799 | 183,662 | ||||
Write down of assets from investment loss from deconsolidation | - | (13,279,243 | ) | |||
Increase in accounts and other receivables | 2,015,742 | 36,360,661 | ||||
Increase in inventories | (11,642,795 | ) | (10,147,552 | ) | ||
Decrease (increase) in advance to suppliers | 19,710,592 | (1,342,812 | ) | |||
Increase in prepayment | (1,110,935 | ) | (606,312 | ) | ||
Increase in deferred tax asset | - | (171,261 | ) | |||
Increase (decrease) in accounts and other payables | 6,421,792 | (18,520,860 | ) | |||
Increase in taxes payable | 273,241 | - | ||||
Increase in customer deposits | 4,808,727 | - | ||||
Decrease in related party payable | - | (1,755,216 | ) | |||
Net cash provided by (used in) operating activities | 11,558,698 | (10,230,028 | ) | |||
Cash flows from investing activities | ||||||
Increase in restricted cash | 182,447 | 6,835,147 | ||||
Purchase of plant and equipment | (2,292,600 | ) | (190,027 | ) | ||
Payment of construction in progress | (9,306,821 | ) | - | |||
Purchase of intangible assets | (561,114 | ) | - | |||
Increase in deposits | - | 6,119,983 | ||||
Net cash (used in) provided by investing activities | (11,978,088 | ) | 12,765,103 | |||
Cash flows from financing activities | ||||||
Repayment of bank borrowings | - | (6,256,305 | ) | |||
Proceeds from bank borrowings and debentures | 162,874 | 9,777,579 | ||||
Repayment of capital lease | - | (58,993 | ) | |||
Net cash provided by financing activities | $ | 162,874 | $ | 3,462,281 | ||
Net (decrease) increase of Cash and Cash Equivalents | (256,516 | ) | 5,997,356 | |||
Effect of foreign currency translation on cash and cash equivalents | 34,239 | 11,862,397 | ||||
Cash and cash equivalents–beginning of year | 426,054 | 20,664,487 | ||||
Cash and cash equivalents–end of year | $ | 203,777 | $ | 38,524,240 | ||
Supplementary cash flow information: | ||||||
Interest received | $ | 70 | $ | 18,519 | ||
Interest paid | $ | 513,825 | $ | 914,911 | ||
Income taxes paid | $ | 310,820 | $ | 2,857,667 |
See Accompanying Notes to the Financial Statements
F-4
AMERICAN LORAIN CORPORATION
PLANET GREEN HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2017 AND DECEMBER 31, 2016(Stated
1. Organization and Principal Activities
Planet Green Holdings Corp. (the “Company” or “PLAG”) is a holding company incorporated in US Dollars)
Nevada. The Company are engaged in various businesses through our subsidiaries and controlled entities in China.
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Place of | Attributable equity | Registered | ||
Name of Company | incorporation | interest % | capital | |
International Lorain Holding Inc. | Cayman Islands | 100.0 | $ 46,659,135 | |
Junan Hongrun Foodstuff Co., Ltd. | PRC | 100.0 | 44,861,741 | |
Shandong Lorain Co., Ltd. | PRC | 80.2 | 12,123,985 | |
Beijing Lorain Co., Ltd. | PRC | 100.0 | 1,540,666 | |
Luotian Lorain Co., Ltd. | PRC | 100.0 | 3,797,774 | |
Shandong Greenpia Foodstuff Co., Ltd. | PRC | 100.0 | 2,303,063 | |
Dongguan Lorain Co., Ltd. | PRC | 100.0 | 149,939 |
In 2014,
The accompanying unaudited condensed consolidated financial statements reflect the Company invested $2,100,000 in Athena/Minerve Group whereby the Company controlling shareholderactivities of Minerve. Minerve conducted operations in manufacturing, packagingPlanet Green Holdings Corp. and sales activities in France and import and storage operations in Portugal. During the years ended December 31, 2015, the financial position and results of operations of Minerve were accounted for as subsidiaries in the Company’s financial statements; however, during the year ended December 31, 2016, Minerve became insolvent and compelled into bankruptcy by creditors, and, ultimately liquidation. Accordingly, the Company lost control of Minerve and writteneach of the value of its investment in Minerve. All receivables due by Minerve to subsidiaries still controlled by the Company have been written off.following entities:
Place of | Attributable equity | Registered | ||||||||
Name of Company | incorporation | interest % | capital | |||||||
Promising Prospect BVI Limited (formerly known as Planet Green Holdings Corporation) | The British Virgin Islands | 100 | $ | 10,000 | ||||||
Promising Prospect HK Limited (formerly known as Lucky Sky Planet Green Holdings Co., Limited (H.K.)) | Hong Kong | 100 | 1 | |||||||
Jiayi Technologies (Xianning) Co., Ltd. | PRC | 100 | 2,000,000 | |||||||
Fast Approach Inc. | Canada | 100 | 79 | |||||||
Shanghai Shuning Advertising Co., Ltd. (a subsidiary of FAST) | PRC | 100 | - | |||||||
Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd. | PRC | 100 | 4,710,254 | |||||||
Xianning Bozhuang Tea Products Co., Ltd. | PRC | 100 | 6,277,922 | |||||||
Jilin Chuangyuan Chemical Co., Ltd. | PRC | VIE | 9,280,493 | |||||||
Bless Chemical Co., Ltd (a subsidiary of Shine Chemical) | Hong Kong | 100 | 10,000 | |||||||
Hubei Bryce Technology Co., Ltd. (a subsidiary of Bless Chemical) | PRC | 100 | 30,000,000 | |||||||
Shandong Yunchu Supply Chain Co., Ltd. | PRC | 100 | 5,000,000 | |||||||
Allinyson Ltd. | The United States | 100 | 100,000 | |||||||
Shine Chemical Co., Ltd. | The British Virgin Islands | 100 | 8,000 | |||||||
Guangzhou Haishi Technology Co., Ltd. | PRC | 100 | 156,250 | |||||||
Baokuan Technology (Hongkong) Limited | Hong Kong | 100 | 1,250 |
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-ownwholly own are accounted for as non-controlling interests.
Shandong Economic Development Investment
On May 18, 2018, the Company incorporated Planet Green Holdings Corporation, which is a limited company incorporated in the British Virgin Islands. On September 28, 2018, Planet Green BVI acquired JianShi Technology Holding Limited, a limited company incorporated in Hong Kong on February 21, 2012, and Shanghai Xunyang Internet Tech Co., Ltd., a wholly-owned foreign entity incorporated in Shanghai, PRC, state-owned entity, holds 19.8%on August 29, 2012 (“Shanghai Xunyang”).
On August 12, 2019, through Promising Prospect HK Limited, formerly known as JianShi Technology Holding Limited, Company established Lucky Sky Petrochemical Technology (Xianning) Co., Ltd., a wholly foreign-owned enterprise incorporated in Xianning City, Hubei Province, China.
On December 20, 2019, The Promising Prospect HK Limited sold 100% of equity interest in Shandong Lorain.Shanghai Xunyang.
Discontinued operations
On May 29, 2020, the Promising Prospect BVI Limited incorporated Lucky Sky Planet Green Holdings Co., Limited, a limited company incorporated in Hong Kong.
In 2017,
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 100% equity interest in Lucky Sky Petrochemical to Lucky Sky Planet Green Holdings Co., Limited (H.K.).
On September 15, 2020, Lucky Sky Petrochemical terminated the VIE agreements with Shenzhen Lorain and Taishan Muren.
F-6
On August 10, 2020, Promising Prospect BVI Limited transferred its 100% equity interest in Promising Prospect HK Limited to Rui Tang.
On December 9, 2020, Lucky Sky Petrochemical Technology (Xianning) Co., Ltd. changed its name to Jiayi Technologies (Xianning) Co., Ltd.
On January 6, 2021, Planet Green Holdings Corporation (Nevada) issued an aggregate of 2,200,000 shares of common stock of the Company discontinuedto the operationsequity holders of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd in Shandong Lorainexchange for the transfer of 85% of the equity interest of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd to the Jiayi Technologies (Xianning) Co., Ltd.
On March 9, 2021, Planet Green Holdings Corporation (Nevada) issued an aggregate of 3,300,000 shares of common stock of the Company to the equity holders of Jilin Chuangyuan Chemical Co., Ltd in exchange for the transfer of 75% of the equity interest of Jilin Chuangyuan Chemical Co., Ltd to the Jiayi Technologies (Xianning) Co., Ltd.
On July 15, 2021, Planet Green Holdings Corporation (Nevada) issued an aggregate of 4,800,000 shares of common stock of the Company to the equity holders of Anhui Ansheng Petrochemical Equipment Co., Ltd for the transfer to 66% of the equity interest if Anhui Ansheng Petrochemical Equipment Co., Ltd to the Jiayi Technologies (Xianning) Co., Ltd.
On August 1, 2021, Jiayi Technologies (Xianning) Co., Ltd. has terminated the VIE agreements with Xianning Bozhuang Tea Products Co., Ltd and Dongguan Lorain.acquired 100% equity of Xianning Bozhuang Tea Products Co., Ltd. As a result, Xianning Bozhuang Tea Products Co., Ltd has been wholly-owned subsidiaries of the Jiayi Technologies (Xianning) Co., Ltd.
On August 3, 2021, the Planet Green Holding Corp has acquired 8,000,000 ordinary shares of the Shine Chemical Co., Ltd. As a result, Shine Chemical Co., Ltd, Bless Chemical Co., Ltd. and Hubei Bryce Technology Co., Ltd have been wholly-owned subsidiaries of the Planet Green Holding Corp.
On September 1st, 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 85% shares of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd after the alteration of shareholders.
On December 9, 2021, Planet Green Holdings Corporation(Nevada) issued an aggregate of 5,900,000 shares of common stock to the equity holders of Shandong Yunchu Supply Chain Co., Ltd for the transfer to 100% of the equity interest of Shandong Yunchu Supply Chain Co., Ltd to the Jiayi Technologies (Xianning) Co., Ltd.
On April 8, 2022, Planet Green Holdings Corporation (Nevada) issued an aggregate of 7,500,000 shares of common stock to the equity holders of Allinyson Ltd. for the acquisition of 100% of the equity interest of Allinyson Ltd.
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 15% of the outstanding equity interests of Jingshan, and the Company shall pay to the Seller an aggregate of U.S. $3,000,000 in exchange for 15% of the issued and outstanding shares. Before the closing of this Share Purchase transaction, the Company owns 85% equity interest of Jingshan through the Purchaser. On September 14, 2022, the Company closed the Share Purchase transaction. As of September 30, 2022, Hubei Bryce Technology Co., Ltd. has hold 100% shares of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd. after the alteration of shareholders.
Consolidation of Variable Interest Entity
On September 27, 2018, through Shanghai Xunyang, the Company entered into exclusive VIE agreements with Beijing Lorain, Luotian Lorain, Shandong Greenpia, Taishan Muren, and Shenzhen Lorain and their shareholders that give the Company the ability to substantially influence those companies’ daily operations and financial affairs and appoint their senior executives. The Company is considered the primary beneficiary of these operating companies.
On May 14, 2019, through Shanghai Xunyang, the Company entered into a series of VIE agreements with Xianning Bozhuang and its equity holders to obtain control. It became the primary beneficiary of Xianning Bozhuang. The Company consolidated Xianning Bozhuang’s accounts as its VIE.
F-7
On December 20, 2019, the Company sold 100% of equity interest in Shanghai Xunyang and terminated its VIE agreements with Xianning Bozhuang, Shenzhen Lorain, and Taishan Muren.
On December 20, 2019, through Lucky Sky Petrochemical, the Company entered into exclusive VIE agreements (“VIE Agreements”) with Taishan Muren, Xianning Bozhuang, and Shenzhen Lorain, as well as their shareholders, which give the Company the ability to substantially influence those companies’ daily operations and financial affairs and appoint their senior executives. The Company is considered the primary beneficiary of these operating companies, and it consolidates their accounts as VIEs.
On September 6, 2020, it terminated its VIE agreements with Shenzhen Lorain and Taishan Muren.
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 their shareholders, which give the Company the ability to substantially influence those companies’ daily operations and financial affairs and appoint their senior executives. The Company is considered the primary beneficiary of these operating companies, and it consolidates their accounts as VIEs.
On July 15, 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 Anhui Ansheng Petrochemical Equipment Co., Ltd, as well as their shareholders, which give the Company the ability to substantially influence those companies’ daily operations and financial affairs and appoint their senior executives. The Company is considered the primary beneficiary of these operating companies, and it consolidates their accounts as VIEs.
On August 1, 2021, Jiayi Technologies (Xianning) Co., Ltd has terminated the VIE agreements with Xianning Bozhuang Tea Products Co., Ltd.
On December 16, 2022, Jiayi Technologies (Xianning) Co., Ltd terminated the VIE agreements with Xiaodong Cai and Anhui Ansheng Petrochemical Equipment Co., Ltd.
Each of the VIE Agreements 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 20 years. WFOE may terminate this agreement at any time by giving 30 day’s prior written notice. 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 20 years. WFOE may terminate this agreement at any time by giving 30 day’s prior written notice.
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.
F-8
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. Besides, shareholders of the operating entities are in the process of registering the equity pledge with the competent local authority.
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 20 years. WOFE has the right to extend each Voting Proxy Agreement by giving written notification.
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 one reportable segment.
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 $1,285,371 for the three months ended March 31, 2023. As of March 31, 2023, the Company had an accumulated deficit of $121,166,172, cash and cash equivalents of $224,216 a working capital deficit of $6,536,923; its net cash provided by operating activities for the three months ended March 31, 2023 was $497,729.
These factors raise substantial doubt on the Company’s ability to continue as a going concern. The accompanying unaudited condensed 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.
F-9
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected through December 31, 2023 or any future period.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K filed by the Company with the SEC on March 31, 2023.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the financial resultsstatements of these two subsidiariesthe Company and its consolidated subsidiaries. All inter-company balances and transactions are presented as discontinued operations.eliminated upon consolidation.
F-6
American Lorain CorporationNotes to Financial Statements
Use of estimatesEstimates
The preparation of theunaudited condensed consolidated 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 makes these estimates using the best information available atwhen the time the estimatescalculations are made; however, actual results could differ materially from those estimates. Significant estimates required to be made by management include but are not limited to add accounts that use significant estimates, such as the allowance for estimated uncollectible receivables, realizability of advance to suppliers, inventory valuations, etc.
Cash and cash equivalentsCash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.
Investment securities
The Company classifies securities it holds for investment purposes into trading or available-for-sale. Trading securities are bought and held principally for the purpose As of selling them in the near term. All securities not included in trading securities are classified as available-for-sale.
Trading and available-for-sale securities are recorded at fair value. Unrealized holding gains and losses on trading securities are included in the net income. Unrealized holding gains and losses, net of the related tax effect, on available for sale securities are excluded from net income and are reported as a separate component of other comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification basis.
A decline in the market value of any available-for-sale security below cost that is deemed to be other-than-temporary results in a reduction in carrying amount to fair value. The impairment is charged as an expense to the statement of income and comprehensive income and a new cost basis for the security is established. To determine whether impairment is other-than-temporary,March 31, 2023, the Company considers whether it has the abilityhad cash and intentcash equivalents (including restricted cash) of $224,216 compared to hold the investment until a market price recovery and considers whether evidence indicating the cost$93,487 as of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for the impairment, the severity and duration of the impairment, changes in value subsequent to year end, and forecasted performance of the investee.December 31, 2022.
Premiums and discounts are amortized or accreted over the life of the related available-for-sale security as an adjustment to yield using the effective-interest method. Dividend and interest income are recognized when earned.
Accounts Receivables
Trade receivables
TradeAccounts 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 collection of the fulltotal amount is no longer probable. Bad debts are written off as incurred.
Inventories
Inventories consist of raw materials and finished goods, which are stated at the lower of cost or market value. Finished goods are comprised of direct materials, direct labor, inbound shipping costs, and allocated overhead. The Company applies the weighted average cost method to its inventory.
Advances and prepaymentsPrepayments to suppliersSuppliers
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.
F-10
Plant and equipmentEquipment
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’sCompany typically applies a salvage value of 0% to 10%. The estimated useful lives of the plant and equipment are as follows:
F-7
American Lorain CorporationNotes to Financial Statements
Buildings | 20-40 years | |
Landscaping, plant, and tree | 30 years | |
Machinery and equipment | 1-10 years | |
Motor vehicles | 5-10 years | |
Office equipment | 5-20 years |
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts, and any gain or loss areis included in the Company’s results of operations. The costs of maintenance and repairs are recognized to expenses as incurred; significant renewals and betterments are capitalized.
Intangible Assets
Intangible assets are carried at cost less accumulated amortization. Amortization is provided over their useful lives, using the straight-line method. The estimated useful lives of the intangible assets are as follows:
Land use rights | 50 years | |
Software licenses | 2 years | |
Trademarks | 10 years |
Construction in progressProgress and prepaymentsPrepayments for equipmentEquipment
Construction in progress and prepayments for equipment represent direct and indirect acquisition and construction costs for plants and costsfees of acquisitionpurchase 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.
Land use rights
Land use rights are carried at cost and amortized on a straight-line basis over a specified period. Amortization is provided using the straight-line method over 40-50 years.
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 of operations 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.
Accounting for the impairmentImpairment of long-lived assetsLong-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 be the result of becomingbecome obsolete from a changedifference in the industry, introduction of new technologies, or if the Company has inadequate working capital to utilize the long-lived assets to generate the 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 at the lower of the carrying amount or fair value lessfewer costs to sell.selling.
F-8
American Lorain CorporationNotes to Financial Statements
Statutory reservesReserves
Statutory reserves are referringrefer to the amount appropriated from the net income in accordance withfollowing 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 10% of its profit. Such an appropriation is necessary until the reserve reaches a maximum that is equal to 50% of the enterprise’s PRC registered capital.
F-11
Foreign currency translationCurrency Translation
The accompanying financial statements are presented in United States dollars. The functional currenciescurrency of the Company areis the Renminbi (RMB) and the Euro (EUR). The Company’s assets and liabilities are translated into United States dollars from RMB and EUR at year-end exchange rates, and itsrates. Its revenues and expenses are translated at the average exchange rate during the period. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.
6/30/2017 | 12/31/2016 | 6/30/2016 | |||
Period/year end RMB: US$ exchange rate | 6.7768 | 6.9437 | 6.4479 | ||
Period/annual average RMB: US$ exchange rate | 6.8743 | 6.6430 | 6.5395 |
03/31/2023 | 12/31/2022 | 03/31/2022 | ||||||||||
Period-end US$: CAD$ exchange rate | 1.3521 | 1.3554 | 1.2484 | |||||||||
Period-end US$: RMB exchange rate | 6.8717 | 6.9646 | 6.3482 | |||||||||
Period-end US$: HK exchange rate | 7.8497 | 7.7967 | 7.8275 | |||||||||
Period average US$: CAD$ exchange rate | 1.3534 | 1.3012 | 1.2668 | |||||||||
Period average US$: RMB exchange rate | 6.8476 | 6.7261 | 6.3504 | |||||||||
Period average US$: HK exchange rate | 7.8389 | 7.8310 | 7.8062 |
The RMB is not freely convertible into foreign currencies, and all foreign exchange transactions must be conducted through authorized financial institutions.
Revenue recognitionRecognition
The Company adopted ASC 606 “Revenue Recognition.” It recognizes revenue in accordance to guidance found in Staff Accounting Bulletin (SAB) 104, where persuasive evidence of arrangement exists, the price has been fixed or is determinable, the delivery has been completed and no other significant obligationswhen control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company exists,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 collectabilityvegetables and tea products. The Company applies the following five steps to determine the appropriate amount of payment is reasonably assured. Payments received priorrevenue to allbe recognized as it fulfills its obligations under each of the foregoing criteria are recorded as customer deposits. Recorded revenue is derived from the value of goods invoiced less value-added tax (VAT).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. |
Advertising
All advertising costs are expensed as incurred.
Shipping and handlingHandling
All outbound shipping and handling costs are expensed as incurred.
Research and developmentDevelopment
All research and development costs are expensed as incurred.
F-12
Retirement benefitsBenefits
Retirement benefits in the form of mandatory government sponsoredgovernment-sponsored defined contribution plans are charged to the either expensesexpense as incurred or allocated to inventory as part of overhead.
Income taxes
Stock-Based Compensation
The Company records stock compensation expense for employees at fair value on the grant date and recognizes the expense one time because there is no employee’s requisite service period requirement.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes”, accounts for income tax using an asset and liability approach and allows for recognition ofrecognizes 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 ifassets. If it is more likely than not, these items will either expire before the Company is able tocan realize their benefits or thatuncertain future realization is uncertain.realization.
F-9
American Lorain CorporationNotes to Financial Statements
Comprehensive incomeIncome
The Company uses FASBFinancial Accounting Standards Board (“FASB”) ASC Topic 220, “Reporting Comprehensive Income”.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
Net Loss per shareShare of Common Stock
The Company computes earnings per share (“EPS”) in accordance withfollowing ASC Topic 260, “Earnings per share”.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 shareper-share basis from the potential conversion of convertible securities or the exercise of options and or warrants; the dilutive effectsimpacts of potentially convertible securities are calculated using the as-if method; the potentially dilutive effect of options or warrantswarranties are calculatedcomputed using the treasury stock method. Securities that are potentially anPotentially anti-dilutive effectsecurities (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.EPS calculation.
Financial instruments
Fair Value Measurement
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 disclosure ofdisclosing the Company’s fair value of financial instruments held by the Company.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 each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time 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 |
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
The
F-13
Long-term Investments
Investments in entities over which the Company analyzes all financial instrumentsdoes not have significant influence are recorded as equity investments and are accounted for either at fair value with featuresany 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 both liabilitiesthe post-acquisition profits or losses of equity investments is recognized in the Company’s unaudited condensed consolidated statements of comprehensive income; and the Company’s share of post-acquisition movements in equity under ASC 480, “Distinguishing Liabilities from Equity,”is recognized in equity in the Company’s condensed consolidated balance sheets. Unrealized gains on transactions between the Company and ASC 815.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.
Commitments and contingenciesContingencies
Liabilities for
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 contingencies arising from claims, assessments, litigation, finesa claim is probable, and penalties and other sources are recorded whenif it is reasonable to estimate the potential loss. The Company accrues costs associated with these matters when they become probable, that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Unaudited interim financial information
These unaudited interim condensed 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 statements have been prepared in accordance with GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flowsflows.
Recent Accounting Pronouncements
In February 2018, the FASB issued ASU 2018-02, which allows a reclassification from accumulated other comprehensive income to retained earnings for adjustments to tax effects that were originally recorded in other comprehensive income due to changes in the U.S. federal corporate income tax rate resulting from the enactment of the U.S. tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act. The Company does not expect this guidance will have a material impact on its consolidated financial statements.
F-14
On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting for share-based payment awards issued to employees and nonemployees. Under ASU No. 2018-07, the existing employee guidance will apply to nonemployee share-based transactions (as long as the transaction is not effectively a form of financing), with the exception of specific guidance related to the attribution of compensation cost. The cost of nonemployee awards will continue to be recorded as if the grantor had paid cash for the periods presented have been made.goods or services. In addition, the contractual term will be able to be used in lieu of an expected term in the option-pricing model for nonemployee awards. The results of operationsnew standard is effective for theus on January 1, 2019. Early adoption is permitted, including in interim periods, presented areand should be applied to all new awards granted after the date of adoption. The Company does not necessarily indicative ofexpect this guidance will have a material impact on its consolidated financial statements.
In August 2018, the resultsFASB issued ASU 2018-13, “Fair Value Measurement (Topic 820), – Disclosure Framework – Changes to be expectedthe Disclosure Requirements for Fair Value Measurement,” which makes several changes meant to add, modify or remove specific disclosure requirements associated with the year ending December 31, 2017.
F-10
American Lorain Corporation
movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. The amendments in this Update modify the disclosure requirements on fair value measurements based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The modifications are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company does not believe the adoption of this ASU would have a material effect on the Company’s condensed financial statements.
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 adopted this guidance on January 1, 2023. The adoption did not have significant impact on the Company’s unaudited condensed consolidated financial statements.
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.
F-15
3. 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 |
The carrying amount of VIE’s consolidated assets and liabilities are as follows:
3/31/2023 | 12/31/2022 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 144,376 | $ | 39,815 | ||||
Accounts receivable, net | 1,002,619 | 730,341 | ||||||
Inventories | 739,792 | 947,466 | ||||||
Advances to suppliers | 355,911 | 187,708 | ||||||
Other receivables | 73,003 | 65,531 | ||||||
Inter company receivable | 1,600,768 | 1,579,416 | ||||||
Total current assets | 3,916,469 | 3,550,277 | ||||||
Non-current assets | ||||||||
Plant and equipment, net | 8,966,940 | 9,115,598 | ||||||
Intangible assets, net | 1,946,641 | 1,932,386 | ||||||
Construction in progress, net | 21,247 | 20,963 | ||||||
Total non-current assets | 10,934,828 | 11,068,947 | ||||||
Total assets | $ | 14,880,402 | $ | 14,619,224 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities | ||||||||
Short-term bank loans | $ | 3,638,110 | $ | 3,589,582 | ||||
Accounts payable | 544,200 | 540,371 | ||||||
Advance from customers | 86,811 | 14,395 | ||||||
Taxes payable | 38,626 | 18,005 | ||||||
Other payables and accrued liabilities | 3,340,277 | 2,590,572 | ||||||
Intercompany Payable | 3,124,496 | 3,082,819 | ||||||
Other payables-related parties | 1,422,903 | 1,535,974 | ||||||
Long term payable-current portion | 227,770 | 287,167 | ||||||
Deferred income | 33,834 | 37,332 | ||||||
Total current liabilities | 12,457,027 | 11,696,217 | ||||||
Non-current liabilities | ||||||||
Long-term payables | 291,049 | 244,245 | ||||||
Total non-current liabilities | 291,049 | 244,245 | ||||||
Total Liabilities | 12,748,076 | 11,940,462 | ||||||
Paid-in capital | 9,280,493 | 9,280,493 | ||||||
Statutory Reserve | 29,006 | 29,006 | ||||||
Accumulated deficit | (6,360,593 | ) | (5,775,895 | ) | ||||
Accumulated other comprehensive income | (816,580 | ) | (854,842 | ) | ||||
Total stockholders’ equity | 2,132,326 | 2,678,762 | ||||||
Total liabilities and stockholders’ equity | $ | 14,880,402 | $ | 14,619,224 |
F-16
The summarized operating results of the VIE’s are as follows:
03/31/2023 | 03/31/2022 | |||||||
Operating revenues | $ | 2,193,521 | $ | 3,961,230 | ||||
Gross profit | (85,629 | ) | 627,333 | |||||
loss from operations | (507,486 | ) | (143,419 | ) | ||||
Net loss | (584,698 | ) | (282,176 | ) |
4. Business Combination
Acquisition of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd.
On January 4, 2021, Planet Green Holdings Corporation (Nevada) and its wholly-owned subsidiary Jiayi Technologies (Xianning) Co., Ltd., formerly known as Lucky Sky Petrochemical Technology (Xianning) Co., Ltd., entered into a series of VIE agreements with Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd. and its equity holders to obtain control and become the primary beneficiary of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd. The Company consolidated Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd.’s accounts as its VIE. According to the VIE agreements, Planet Green Holdings Corporation (Nevada) issued an aggregate of 2,200,000 shares of common stock of the Company to the equity holders of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd. in exchange for the transfer of 85% of the equity interest of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd to the Jiayi Technologies (Xianning) Co., Ltd.
The Company’s acquisition of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd. was accounted for as a business combination following ASC 805. The Company has allocated the purchase price of Jingshan Sanhe based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. The Company estimated the fair values of the assets acquired and liabilities taken at the acquisition date following the business combination standard issued by the FASB with the valuation methodologies using level 3 inputs, except for other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, and intangible assets identified as the acquisition date and considering several other available factors. Acquisition-related costs incurred for the acquisitions are not material and expensed as incurred in general and administrative expenses.
The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd.:
| |||||
| $ | 4,730,000 |
Fair Value | ||||
Cash | $ | 114,162 | ||
Accounts receivable, net | - | |||
Inventories, net | 584,119 | |||
Advances to suppliers | 1,104,705 | |||
Other receivables | 536,090 | |||
Right-of-use assets | 1,044,933 | |||
Plant and equipment, net | 3,867,906 | |||
Deferred tax assets | 281,243 | |||
Goodwill | 923,313 | |||
Total assets | $ | 8,456,471 | ||
Short-term loan – bank | (440,522 | ) | ||
Lease payable-current portion | (406,376 | ) | ||
Accounts payable | (715,019 | ) | ||
Advance from customers | (627,128 | ) | ||
Other payables and accrued liabilities | (50,085 | ) | ||
Lease payable-non current portion | (818,446 | ) | ||
Income taxes payable | (217 | ) | ||
Total liabilities | (3,057,793 | ) | ||
Noncontrolling interest | (668,678 | ) | ||
Net assets acquired | $ | 4,730,000 |
Approximately $0.92 million of goodwill arising from the acquisition consists mainly of synergies expected from combining the operations of the Company and Jingshan Sanhe. None of the goodwill is expected to be deductible for income tax purposes.
F-17
Acquisition of Jilin Chuangyuan Chemical Co., Ltd.
On March 9, 2021, the Company and its wholly-owned subsidiary Jiayi Technologies (Xianning) Co., Ltd, formerly known as Lucky Sky Petrochemical Technology (Xianning) Co., Ltd., entered into a series of VIE agreements with Jilin Chuangyuan Chemical Co., Ltd and its equity holders to obtain control and become the primary beneficiary of Jilin Chuangyuan Chemical Co., Ltd. The Company consolidated Jilin Chuangyuan Chemical Co., Ltd’s accounts as its VIE. Under the VIE agreements, the Company issued an aggregate of 3,300,000 shares of common stock of the Company to the equity holders of Jilin Chuangyuan Chemical Co., Ltd in exchange for the transfer of 75% of the equity interest of Jilin Chuangyuan Chemical Co., Ltd to the Jiayi Technologies (Xianning) Co., Ltd. The significant terms of these VIE agreements are summarized in “Note 2 - Summary of Significant Accounting Policies” above.
The Company’s acquisition of Jilin Chuangyuan Chemical Co., Ltd was accounted for as a business combination following ASC 805. The Company has allocated the purchase price of Jilin Chuangyuan based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. The Company estimated the fair values of the assets acquired and liabilities taken at the acquisition date following the business combination standard issued by the FASB with the valuation methodologies using level 3 inputs, except for other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, and intangible assets identified as of the acquisition date and considering several other available factors. Acquisition-related costs incurred for the acquisitions are not material and expensed as incurred in general and administrative expenses.
The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Jilin Chuangyuan Chemical Co., Ltd.:
Total consideration at fair value | $ | 8,085,000 |
Fair Value | ||||
Cash | $ | 95,237 | ||
Accounts receivable, net | 868,874 | |||
Inventories, net | 581,569 | |||
Advances to suppliers | 388,349 | |||
Other receivables | 123,969 | |||
Other receivables-RP | 212,594 | |||
Plant and equipment, net | 11,109,220 | |||
Intangible assets, net | 2,149,910 | |||
Deferred tax assets | 415,154 | |||
Goodwill | 3,191,897 | |||
Total assets | $ | 19,136,773 | ||
Short-term loan – bank | (3,826,934 | ) | ||
Long term payable | (1,162,355 | ) | ||
Accounts payable | (575,495 | ) | ||
Advance from customers | (291,655 | ) | ||
Other payables and accrued liabilities | (2,815,356 | ) | ||
Other payables-RP | (765,387 | ) | ||
Income taxes payable | (1,073 | ) | ||
Total liabilities | (9,438,255 | ) | ||
Non controlling interest | (1,613,518 | ) | ||
Net assets acquired | $ | 8,085,000 |
Approximately $3.19 million of goodwill arising from the acquisition consists mainly of synergies expected from combining the operations of the Company and Jilin Chuangyuan Chemical Co., Ltd. None of the goodwill is expected to be deductible for income tax purposes.
F-18
Acquisition of Shandong Yunchu Trading Co., Ltd.
On December 9, 2021, the Company and its wholly-owned subsidiary Jiayi Technologies (Xianning) Co., Ltd, formerly known as Lucky Sky Petrochemical Technology (Xianning) Co., Ltd., entered into a Share Exchange Agreement with Shandong Yunchu Supply Chain Co., Ltd, and each of shareholders of Shandong Yunchu Supply Chain Co., Ltd. The Company issued an aggregate of 5,900,000 shares of common stock to the equity holders of Shandong Yunchu Supply Chain Co., Ltd for the transfer to 100% of the equity interest of Shandong Yunchu Supply Chain Co., Ltd to the Jiayi Technologies (Xianning) Co., Ltd.
The Company’s acquisition of Shandong Yunchu Supply Chain Co., Ltd was accounted for as a business combination following ASC 805. The Company has allocated the purchase price of Shandong Yunchu Supply Chain Co., Ltd based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. The Company estimated the fair values of the assets acquired and liabilities taken at the acquisition date following the business combination standard issued by the FASB with the valuation methodologies using level 3 inputs, except for other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, and intangible assets identified as of the acquisition date and considered several other available factors. Acquisition-related costs incurred for the acquisitions are not material and expensed as incurred in general and administrative expenses.
The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Shandong Yunchu Supply Chain Co., Ltd:
| |
| |
| |
| |
| |
| |
$ | |
5,420,920 |
|
| |
|
F-11
Fair Value | ||||
Cash and cash equivalents, and Restricted Cash | $ | 77,427 | ||
Trade receivable and Note receivable | 780,556 | |||
Inventories | - | |||
Related party receivable | 86,448 | |||
Other current assets | 4,899,559 | |||
Plant and equipment, net | - | |||
Intangible assets, net | - | |||
Goodwill | 4,724,698 | |||
Total assets | $ | 10,568,688 | ||
Short-term loan-bank | - | |||
Related party payable | - | |||
Accounts payable | (992,424 | ) | ||
Other current liabilities | (4,155,344 | ) | ||
Total liabilities | (5,147,768 | ) | ||
Non-controlling interest | - | |||
Net assets acquired | $ | 5,420,920 |
American Lorain CorporationNotes
Approximately $4.72 million of goodwill arising from the acquisition consists mainly of synergies expected from combining the operations of the Company and Shandong Yunchu Supply Chain Co., Ltd. None of the goodwill is expected to Financial Statementsbe deductible for income tax purposes.
F-19
Acquisition of Anhui Ansheng Petrochemical Equipment Co., Ltd.
On July 15, 2021, the Company and its wholly-owned subsidiary Jiayi Technologies (Xianning) Co., Ltd., formerly known as Lucky Sky Petrochemical Technology (Xianning) Co., Ltd., entered into a series of VIE agreements with Anhui Ansheng Petrochemical Equipment Co., Ltd and its equity holders to obtain control and become the primary beneficiary of Anhui Ansheng Petrochemical Equipment Co., Ltd. The Company consolidated Anhui Ansheng Petrochemical Equipment Co., Ltd.’s accounts as its VIE. Under the VIE agreements, the Company issued an aggregate of 4,800,000 shares of common stock of the Company to the equity holders of Anhui Ansheng Petrochemical Equipment Co., Ltd. in exchange for the transfer of 66% of the equity interest of Anhui Ansheng Petrochemical Equipment Co., Ltd. to the Jiayi Technologies (Xianning) Co., Ltd. The significant terms of these VIE agreements are summarized in “Note 2 - Summary of Significant Accounting Policies” above.
The Company’s acquisition of Anhui Ansheng Petrochemical Equipment Co., Ltd. was accounted for as a business combination following ASC 805. The Company has allocated the purchase price of Anhui Ansheng Petrochemical Equipment Co., Ltd. based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. The Company estimated the fair values of the assets acquired and liabilities taken at the acquisition date following the business combination standard issued by the FASB with the valuation methodologies using level 3 inputs, except for other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, and intangible assets identified as of the acquisition date and considered several other available factors. Acquisition-related costs incurred for the acquisitions are not material and expensed as incurred in general and administrative expenses.
The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Anhui Ansheng Petrochemical Equipment Co., Ltd.
Total consideration at fair value |
|
| |
7,926,000 | |
| |
| |
|
6/30/2017 | 12/31/2016 | |||||
Trade accounts receivable | $ | 2,091,580 | $ | 3,948,880 | ||
Less:Allowance for doubtful accounts | (720,745 | ) | (695,547 | ) | ||
$ | 1,370,835 | $ | 3,253,333 | |||
Allowance for doubtful accounts: | ||||||
Beginning balance | $ | (695,547 | ) | $ | (5,901,810 | ) |
Additions to allowance | (25,198 | ) | - | |||
Bad debt written-off | - | 5,206,263 | ||||
Ending balance | $ | (720,745 | ) | $ | (695,547 | ) |
Fair Value | ||||
Cash and cash equivalents, and Restricted Cash | $ | 288,122 | ||
Trade receivable and Note receivable | 944,704 | |||
Inventories | 3,236,008 | |||
Related party receivable | 2,500,117 | |||
Other current assets | 1,393,817 | |||
Plant and equipment, net | 4,036,649 | |||
Intangible assets, net | 635,738 | |||
Goodwill | 10,263,937 | |||
Total assets | $ | 23,299,092 | ||
Short-term loan-bank | (3,735,614 | ) | ||
Related party payable | (2,639,938 | ) | ||
Accounts payable | (1,966,099 | ) | ||
Other current liabilities | (3,902,896 | ) | ||
Total liabilities | (12,244,547 | ) | ||
Non controlling interest | (3,758,545 | ) | ||
Net assets acquired | $ | 7,296,000 |
F-20
Approximately $10.26 million of goodwill arising from the acquisition consists mainly of synergies expected from combining the operations of the Company and Anhui Ansheng Petrochemical Equipment Co., Ltd. None of the goodwill is expected to be deductible for income tax purposes.
On December 12, 2022, the Company disposed of the interest held of Anhui Ansheng Petrochemical Equipment Co., Ltd.
Acquisition of Allinyson Ltd.
On April 8, 2022, Planet Green Holdings Corp. (the “Company”) entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Allinyson Ltd., and each of shareholders of Allinyson Ltd.. The Company issued an aggregate of 7,500,000 shares of common stock to the equity holders of Allinyson Ltd. for the transfer to 100% of the equity interest of Allinyson Ltd. to the Company.
The Company’s acquisition of Allinyson Ltd. was accounted for as a business combination following ASC 805. The Company has allocated the purchase price of Allinyson Ltd. based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. The Company estimated the fair values of the assets acquired and liabilities taken at the acquisition date following the business combination standard issued by the FASB with the valuation methodologies using level 3 inputs, except for other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, and intangible assets identified as of the acquisition date and considered several other available factors. Acquisition-related costs incurred for the acquisitions are not material and expensed as incurred in general and administrative expenses.
The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Allinyson Ltd.
| ||
$ |
|
6/30/2017 | 12/31/2016 | |||||
Raw materials | $ | 11,277,890 | $ | - | ||
Packing material | 49,669 | - | ||||
Inventory of supplies | 19,129 | - | ||||
Finished goods | 12,249,359 | 11,840,748 | ||||
$ | 23,596,047 | $ | 11,840,748 |
| |
|
6/30/2017 | 12/31/2016 | |||||
At Cost: | ||||||
Buildings | $ | 61,019,750 | $ | 58,866,129 | ||
Machinery and equipment | 8,567,024 | 6,917,774 | ||||
Office equipment | 399,591 | 418,048 | ||||
Motor vehicles | 158,926 | 154,687 | ||||
$ | 70,145,291 | $ | 66,356,368 | |||
Less: Accumulated depreciation | (16,009,860 | ) | (14,459,355 | ) | ||
$ | 54,135,431 | $ | 51,897,283 |
Fair Value | ||||
Cash and cash equivalents, and Restricted Cash | $ | 246,322 | ||
Trade receivable and Note receivable | 372,538 | |||
Goodwill | 7,193,965 | |||
Total assets | $ | 7,812,825 | ||
Related party payable | (73,623 | ) | ||
Accounts payable | (273,000 | ) | ||
Other current liabilities | (36,702 | ) | ||
Total liabilities | (383,325 | ) | ||
Net assets acquired | $ | 7,429,500 |
F-21
Approximately $7.19 million of goodwill arising from the acquisition consists mainly of synergies expected from combining the operations of the Company and Allinyson Ltd. None of the goodwill is expected to be deductible for income tax purposes.
5. Account Receivable, Net
The Company extends credit terms of 15 to 60 days to the majority of its domestic customers, which include third-party distributors, supermarkets, and wholesalers.
03/31/2023 | 12/31/2022 | |||||||
Trade accounts receivable | $ | 3,939,811 | $ | 3,362,939 | ||||
Less: Allowance for doubtful accounts | (371,253 | ) | (366,301 | ) | ||||
$ | 3,568,558 | $ | 2,996,638 | |||||
Allowance for doubtful accounts | ||||||||
Beginning balance: | (366,301 | ) | (1,662,516 | ) | ||||
Additions to allowance | (4,952 | ) | (64,899 | ) | ||||
Bad debt written-off | - | 1,361,114 | ||||||
Ending balance | $ | (371,253 | ) | $ | (366,301 | ) |
6. Advances to Suppliers
Prepayments include investment deposits to guarantee investment contracts and advance payment to suppliers and vendors to procure raw materials. Prepayments consist of the following:
03/31/2023 | 12/31/2022 | |||||||
Payment to suppliers and vendors | $ | 6,375,614 | $ | 5,417,449 | ||||
Total | $ | 6,375,614 | $ | 5,417,449 |
7. Inventories
Inventories consisted of the following as of March 31, 2023 and December 31, 2022
03/31/2023 | 12/31/2022 | |||||||
Raw materials | $ | 1,830,780 | $ | 1,965,389 | ||||
Inventory of supplies | - | - | ||||||
Work in progress | 1,484,185 | 1,455,229 | ||||||
Finished goods | 844,251 | 932,261 | ||||||
Allowance for inventory reserve | (201,892 | ) | (199,199 | ) | ||||
Total | $ | 3,957,324 | $ | 4,153,680 |
8. Plant and Equipment
Plant and equipment consisted of the following as of March 31, 2023 and December 31, 2022.
03/31/2023 | 12/31/2022 | |||||||
At Cost: | ||||||||
Buildings | $ | 20,201,245 | $ | 19,924,811 | ||||
Machinery and equipment | 11,479,369 | 11,322,085 | ||||||
Office equipment | 775,701 | 765,413 | ||||||
Motor vehicles | 1,485,032 | 1,465,225 | ||||||
33,941,347 | 33,477,534 | |||||||
Less: Impairment | (769,465 | ) | (759,201 | ) | ||||
Less: Accumulated depreciation | (10,813,280 | ) | (10,149,207 | ) | ||||
22,358,602 | 22,569,125 | |||||||
Construction in progress | 45,578 | 33,260 | ||||||
$ | 22,404,180 | $ | 22,602,385 |
Depreciation expense for the sixthree months ended June 30, 2017March 31, 2023 and 20162022 was $1,390,539$664,073 and $1,848,602,$580,505, respectively.
F-12
F-22
American Lorain Corporation9. Intangible Assets
03/31/2023 | 12/31/2022 | |||||||
At Cost: | ||||||||
Land use rights | 3,093,001 | 3,051,744 | ||||||
Software licenses | 67,811 | 67,464 | ||||||
Trademark | 929,360 | 916,963 | ||||||
$ | 4,090,172 | $ | 4,036,171 | |||||
Less: Accumulated amortization | (1,027,966 | ) | (966,000 | ) | ||||
$ | 3,062,206 | $ | 3,070,171 |
Amortization expense for the three months ended March 31, 2023 and 2022 was $61,966 and $62,196, respectively.
Notes to Financial Statements10. Long-term Investment
|
6/30/2017 | 12/31/2016 | |||||
At Cost: | ||||||
Land use rights | 15,246,440 | 14,208,013 | ||||
Utilities rights | 45,903 | 44,800 | ||||
$ | 15,292,343 | $ | 14,252,813 | |||
Less: Accumulated amortization | (2,591,455 | ) | (1,666,298 | ) | ||
$ | 12,700,888 | $ | 12,586,515 |
| |
| |
| |
| |
|
Short-term Bank Loans | 6/30/2017 | 6/30/2016 | |||||
Loan from Industrial and Commercial Bank of China, | �� | ||||||
• Interest rate at 6.955% per annum; due 4/20/2016* | 3,685,036 | 3,596,461 | |||||
• Interest rate at 4.30% per annum; due 4/30/2017* | 1,106,717 | 1,080,116 | |||||
• Interest rate at 4.30% per annum; due 6/29/2017* | 1,162,791 | 1,134,842 | |||||
• Interest rate at 4.30% per annum; due 6/29/2017* | 1,106,717 | 1,080,116 | |||||
• Interest rate at 4.30% per annum; due 8/2/2017 | 973,911 | 950,502 | |||||
Loan from China Minsheng Bank Corporation, Linyi Branch | |||||||
•Interest rate at 5.98% per annum due 9/22/2016* | 1,474,147 | 1,440,154 | |||||
Loan from Agricultural Bank of China, Luotian Branch | |||||||
• Interest rate at 5.65% per annum due 4/22/2017* | 1,499,390 | 1,440,154 | |||||
Luotian Sanliqiao Credit Union, | |||||||
• Interest rate at 9.72% per annum due 1/14/2017* | 1,499,390 | 1,440,154 | |||||
• Interest rate at 9.72% per annum due 2/4/2017* | 449,817 | 432,046 | |||||
• Interest rate at 9.72% per annum due 9/7/2017 | 449,817 | 432,046 |
F-13
American Lorain CorporationNotes to Financial Statements
• Interest rate at 9.72% per annum due 12/7/2017 | 89,963 | - | |||||
Bank of Ningbo, | |||||||
• Interest rate at 7.80% per annum due 10/27/2016* | 1,180,498 | 1,152,124 | |||||
Hankou Bank, Guanggu Branch, | |||||||
• Interest rate at 6.85% per annum due 10/24/2016* | 1,537,797 | 1,347,047 | |||||
Postal Savings Bank of China, | |||||||
• Interest rate at 9.72% per annum due 7/27/2016* | 383,662 | 374,440 | |||||
China Construction Bank, | |||||||
• Interest rate at 6.18% per annum due 11/29/2016* | 737,811 | 720,077 | |||||
Huaxia Bank, | |||||||
• Interest rate at 5.66% per annum due 5/19/2017* | 1,475,623 | 1,440,154 | |||||
City of Linyi Commercial Bank, Junan Branch, | |||||||
• Interest rate at 8.4% per annum due 2/16/2016* | 1,474,140 | 1,438,707 | |||||
• Interest rate at 8.4% per annum due 11/24/2016* | 2,951,245 | 2,880,310 | |||||
Hubei Jincai Credit and Financial Services Co. Ltd. | |||||||
• Interest rate at 9.00% per annum due 1/12/2017* | - | 288,032 | |||||
$ | 23,238,472 | $ | 22,667,482 |
| |
| |
| |
|
6/30/2017 | 12/31/2016 | ||||||
Debenture issued by 5 private placement holders underwritten byGuoyuan Securities Co., Ltd. | |||||||
• Interest rate at 10% per annum due 8/28/2016 | $ | 9,138,531 | $ | 8,921,756 | |||
Debenture issued by 2 private placement holders underwritten byDaiwa SSC Securities Co. Ltd. | |||||||
• Interest rate at 9.5% per annum due 11/8/2015 | 15,132,100 | 14,401,544 | |||||
Loans from Deutsche Investitions-und EntwicklungsgesellschaftmbH (“DEG”) | |||||||
• Interest rate at 5.510% per annum due 3/15/2015 | 1,875,000 | 1,875,000 | |||||
• Interest rate at 5.510% per annum due 9/15/2015 | 1,875,000 | 1,875,000 | |||||
• Interest rate at 5.510% per annum due 3/15/2016 | 1,875,000 | 1,875,000 | |||||
$ | 29,895,631 | $ | $28,948,300 |
The Company began repaying its loanentered into an investment agreement with DEGXianning Xiangtian Energy Holdings Group Co., Ltd. to acquire 40% of the equity interests in semi-annual installments on December 15, 2012.the company, with total consideration of $13.62 million, which was paid in 2022. The investment was accounted for under the equity method because the Company can exercise significant influence over the company as the investee but does not own a majority of the equity interests in or control the company. As of March 31, 2023, the carrying amount of this equity method investment reflected the Company’s proportionate share of the equity in the investee company.
Besides, the Company made an initial investment of $2.91 million in return for a limited partner interest in Shandong Ningwei New Energy Technology Co., Ltd. The Company accounted for the investment using the cost method, as the investment did not have a readily determinable fair value.
As of March 31, 2023 and December 31, 2016,2022, the balance of long term investment was $16,526,980 and 2015,$16,488,157.
11. Other Payable
As of March 31, 2023 and December 31, 2022, the balance of other payable was $5,410,343 and $4,412,833. Other payables – third parties are those non-trade payables arising from transactions between the Company had not repaid any principal. The loanand certain third parties.
12. Advance from Customer
For our operation, the proceeds received from sales are initially recorded as advances from customers, which was collateralized withusually related to unsatisfied performance obligations at the end of an applicable reporting period. As of March 31, 2023, and December 31, 2022, the outstanding balance of the advance from customers was $3,525,116 and $2,624,070 respectively. Due to the generally short-term duration of the relevant contracts, most of the performance obligations are satisfied in the following terms:reporting period.
13. Related Parties Transaction
F-14
American Lorain CorporationNotes to Financial Statements
| ||
| ||
| ||
|
| |
| |
| |
|
6/30/2017 | 12/31/2016 | ||||||
Value added tax | $ | 242,866 | $ | 10,562 | |||
Corporate income tax | 16,549 | 16,151 | |||||
Employee payroll tax withholdings | 14,597 | 13,684 | |||||
Property tax | 88,638 | 72,245 | |||||
Stamp duty | 165 | 161 | |||||
Land use tax | 158,761 | 134,827 | |||||
Local tax | 1,203 | 1,176 | |||||
$ | 522,779 | $ | 248,807 |
| |
| |
| |
| |
| |
|
6/30/2017 | 6/30/2016 | |||||
Loss attributed to PRC continuing operations | $ | (9,251,090 | ) | $ | (1,805,155 | ) |
Loss attributed to U.S. operations | (1,832,914 | ) | (48,000 | ) | ||
Income before tax | (11,084,004 | ) | (1,853,155 | ) | ||
PRC Statutory Tax at 25% Rate | - | 558,135 | ||||
Effect of tax exemption granted | - | - | ||||
Income tax | $ | - | $ | 558,135 | ||
Per Share Effect of Tax Exemption | ||||||
6/30/2017 | 6/30/2016 | |||||
Effect of tax exemption granted | $ | $ | - | |||
Weighted-Average Shares Outstanding Basic | 38,274,490 | 38,259,490 | ||||
Per share effect | $ | $ | - |
F-15As of March 31, 2023 and December 31, 2022, the outstanding balance due from related parties was $352,835 and $180,578, respectively. Significant related parties comprised much of the total outstanding balance as of March 31, 2023are stated below:
American Lorain CorporationNotes to Financial Statements
The differenceoutstanding balance of $266,436 was due from Mr. Chen Xing, the management of the Shandong Yunchu;
The outstanding balance of $35,178 was due from Mr. Xiong Haiyan, the management of the Jingshan Sanhe;
The outstanding balance of $29,105 was due from Mr. Bin Zhou, Chief Executive Officer and Chairman of the Company;
The outstanding balance of $22,116 was due from Mr. Lu Jun, the management of the Jingshan Sanhe.
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 March 31, 2023 and December 31, 2022, the outstanding balance due to related parties was $4,249,288 and $4,282,841, respectively. Significant parties comprised much of the total outstanding balance as of March 31, 2023 are stated below:
The outstanding balance of $1,177,996 was due to Anhui Ansheng Petrochemical Equipment Co. Ltd., a former subsidiary of the company.
The outstanding balance of $999,753 was due to Ms. Yan Yan, the spouse of the legal representative of Jilin Chuangyuan Chemical Co., Ltd.;
The outstanding balance of $1,129,959 was due to Mr. Bin Zhou, Chief Executive Officer and Chairman of the Company;
The outstanding balance of $492,607 was due to Meihekou Chuangtai Chemical Co. Ltd., which has the same legal representative, Chen Yongsheng, as the subsidiary of Jilin Chuangyuan Chemical Co., Ltd.
The outstanding balance of $869,894 was due to a couple of executives of the subsidiaries of the Company;
The balance was advanced for working capital of the Company, non-interest bearing, and unsecured unless further disclosed.
F-23
14. Goodwill
Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the Company’s acquisitions of interests in its subsidiaries and VIEs. If the carrying amount of the goodwill exceeds its implied fair market value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of the goodwill. The changes in the carrying amount of goodwill by entities are as follows:
Ansheng | Baokuan | Fast | JSSH | JLCY | SDYC | |||||||||||||||||||
Balance as of December 31, 2021 | $ | 1,026,337 | $ | - | $ | - | $ | - | $ | 3,191,897 | $ | 4,724,698 | ||||||||||||
Goodwill acquired | - | 7,193,965 | - | - | - | - | ||||||||||||||||||
Goodwill impairment | (7,193,965 | ) | - | - | (3,191,897 | ) | - | |||||||||||||||||
Disposal of subsidiaries | (1,026,337 | ) | - | - | - | - | - | |||||||||||||||||
Balance as of December 31, 2022 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 4,724,698 | ||||||||||||
Goodwill acquired | - | - | - | - | - | - | ||||||||||||||||||
Goodwill impairment | - | - | - | - | - | - | ||||||||||||||||||
Balance as of March 31, 2023 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 4,724,698 |
15. Bank Loans
The outstanding balances on short-term bank loans consisted of the following:
Lender | Maturities | Weighted average interest rate | 03/31/2023 | 12/31/2022 | ||||||||||
Rural Credit Cooperatives of Jilin Province, Jilin Branch | Due in November 2023 | 7.83 | % | 3,638,110 | 3,589,582 |
Buildings and land use rights in the amount of $10,178,520 are used as collateral for Jiling Branch. The short-term bank loan which is denominated in Renminbi was primarily obtained for general working capital.
Interest expense for the three months ended March 31, 2023 and 2022 was $ 71,467 and $ 103,797 respectively.
F-24
16. Equity
On May 9, 2019, the Company and its wholly owned subsidiary Shanghai Xunyang Internet Technology Co., Ltd. (“Subsidiary”) entered into a Share Exchange Agreement with Xianning Bozhuang Tea Products Co., Ltd. (“Target”) and each of the shareholders of Target (collectively, “Sellers”). Such transaction closed on May 14, 2019. Under the Share Exchange Agreement, the Subsidiary acquired all outstanding equity interests of Target, a company that produces tea products and sells such products in China. Pursuant to the Share Exchange Agreement, the Company issued an aggregate of 1,080,000 shares of common stock of the Company to the Sellers in exchange for the transfer of all of the equity interest of the Target to the Subsidiary.
On June 17, 2019, the Company entered into a securities purchase agreement, under which five individuals residing in the PRC agreed to purchase an aggregate of 1,300,000 shares of the Company’s common stock, par value $0.001 per share, for an aggregate purchase price of $5,460,000, representing a purchase price of $4.20 per share. The transaction closed on June 19, 2019.
On February 10, 2020, the Company entered into a securities purchase agreement with Mengru Xu and Zhichao Du, according to which Ms. Xu and Mr. Du agreed to invest an aggregate of $3.51 million in the Company in exchange for an aggregate of 1,350,000 shares of common stock, representing a purchase price of approximately $2.60 per share. On February 28, 2020, the Company closed the transaction.
On June 5, 2020, the Company issued an aggregate of 1,800,000 shares of its common stock to acquire all the outstanding equity interest of Fast Approach Inc., a corporation incorporated under the laws of Canada and in the business of operating a demand side platform targeting the Chinese education market in North America.
On December 30, 2020, the Company issued a total of 782,165 ordinary shares to six employees of the Company. Total fair value of these ordinary shares was approximately $1.75 million and the compensation expenses are to be recognized in the fiscal year 2020 because there is no employee’s requisite service period requirement.
On January 4, 2021, the Company issued an aggregate of 2,200,000 shares of its common stock to the original shareholders of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd. in exchange for the transfer of 85% of the equity interests of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd. to the Company.
On January 26, 2021, 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 2,700,000 shares of the Company’s common stock, par value $0.001 per share, for an aggregate purchase price of $6,750,000, representing a purchase price of $2.50 per Share.
On March 9, 2021, the Company issued an aggregate of 3,300,000 shares of common stock of the Company to the original shareholder of Jilin Chuangyuan Chemical Co., Ltd. in exchange for the transfer of 75% of the equity interest of Jilin Chuangyuan Chemical Co., Ltd. to the Company.
On April 26, 2021, the Company has entered into a Share Purchase Agreement with three investors, Pursuant to the agreement, the Company will receive gross proceeds of $7,600,000 in the aggregate, in exchange for the issuance of an aggregate of 4,000,000 shares of the Company’s common stock, representing a purchase price of approximately $1.90 per share.
On July 15, 2021, the Company has issued an aggregate of 4,800,000 shares of common stock of the Company to the equity holders of Anhui Ansheng Petrochemical Equipment Co., Ltd. in exchange for the transfer of 66% of the equity interest of Anhui Ansheng Petrochemical Equipment Co., Ltd. to the Company.
F-25
On July 30, 2021, the Company issued a total of 872,000 ordinary shares to seven employees of the Company. Total fair value of these common shares was approximately $1.16 million. The compensation expenses are to be recognized in the fiscal year 2021 because there is no employee’s requisite service period requirement.
On December 30, 2021, The Company issued an aggregate of 5,900,000 shares of common stock to the equity holders of A Shandong Yunchu Supply Chain Co., Ltd for the transfer to 100% of the equity interest of Shandong Yunchu Supply Chain Co., Ltd to the Jiayi Technologies (Xianning) Co., Ltd.
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 7,000,000 shares of the Company’s common stock, par value $0.001 per share, for an aggregate purchase price of $7,000,000, representing a purchase price of $1.00 per Share.
On April 8, 2022, Planet Green Holdings Corporation (Nevada) issued an aggregate of 7,500,000 shares of common stock to the equity holders of Allinyson Ltd. for the acquisition of 100% of the equity interest of Allinyson Ltd.
On May 19, 2022, the Company entered into a Securities Purchase Agreement, pursuant to which two investors agreed to purchase an aggregate of 10,000,000 shares of the Company’s common stock, par value $0.001 per share, for an aggregate purchase price of $4,100,000, representing a purchase price of $0.41 per Share.
On July 20, 2022, the Company acquired 30% equity interest of the Xianning Xiangtian Energy Holdings Group Co., Ltd. and the Company issued 12,000,000 shares of common stock to the Sellers.
As of March 31, 2023, there were 72,081,930 shares of common stock outstanding.
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. federal statutorycorporate tax rate decreased from 34% to 21%. As the Company has a December 31 fiscal year-end, the lower corporate income tax rate will be phased in, resulting in a U.S. statutory federal rate of 21% for the Company’s fiscal year ending December 31, 2022 and 2021, respectively. Accordingly, the Company has remeasured the Company’s deferred tax assets on net operating loss carryforwards (“NOLs”) in the U.S at the lower enacted cooperated tax rate of 21%. However, this remeasurement has no effect on the Company’s income tax expenses as the Company has provided a 100% valuation allowance on its deferred tax assets previously.
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 December 31, 2022 which the Company has foreign cumulative losses at December 31, 2022.
F-26
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 16.5% in Hong Kong. The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax law, Lucky Sky Planet Green Holdings Co., Limited (H.K.) is exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.
PRC
The Company PRC subsidiaries and VIEs and their controlled entities are governed by the income tax laws of the PRC and the Company’s effectiveincome 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 was as follows of June 30, 2017 and 2016:25% after appropriate tax adjustments.
6/30/2017 | 6/30/2016 | |||||
U.S. federal statutory income tax rate | 35% | 35% | ||||
Lower rates in PRC, net | -10% | -10% | ||||
Non-deductible GAAP expenses in the PRC | -27.22% | -55% | ||||
The Company’s effective tax rate | -2.22% | -30% |
| |
|
For the six months ended | ||||||
June 30, | ||||||
2017 | 2016 | |||||
Basic and diluted (loss) earnings per share numerator: | ||||||
(Loss) income from continuing operations (attributable) available to common stockholders | $ | (11,084,004 | ) | (3,119,155 | ) | |
(Loss) income from discontinued operations (attributable) available to common stockholders | (5,275,319 | ) | 176,056 | |||
(Loss) income (attributable) available to common stockholders | (16,359,323 | ) | (2,943,095 | ) | ||
Basic and diluted (loss) earnings per share denominator: | ||||||
Original Shares: | 38,274,490 | 38,259,490 | ||||
Additions from Actual Events | ||||||
-Issuance of Common Stock | ||||||
Basic Weighted Average Shares Outstanding | 38,274,490 | 38,259,490 | ||||
(Loss) income per share from continuing operations - Basic and diluted | (0.29 | ) | (0.09 | ) | ||
Loss per share from discontinued operations - Basic and diluted | (0.14 | ) | 0.01 | |||
Loss per share - Basic and diluted | (0.43 | ) | (0.07 | ) | ||
Weighted Average Shares Outstanding - Basic and diluted | 38,274,490 | 38,259,490 |
| |
|
The minimum future lease payments for these properties at June 30, 2017 are as follows:
F-16
American Lorain CorporationNotes to Financial Statements
Period | Greenhouse 1 | Greenhouse 2 | Greenhouse 3 | |||||||
Year 1 | $ | 74,420 | $ | 89,258 | $ | 10,711 | ||||
Year 2 | 74,420 | 89,258 | 10,711 | |||||||
Year 3 | 74,420 | 89,258 | 10,711 | |||||||
Year 4 | 74,420 | 89,258 | 10,711 | |||||||
Year 5 | 74,420 | 89,258 | 10,711 | |||||||
Year 5 and thereafter | 843,427 | 1,019,029 | 123,177 | |||||||
$ | 1,215,527 | $ | 1,465,319 | $ | 176,732 |
The outstanding lease commitmentsSignificant components of the income tax expense consisted of the following for the three greenhousesmonths ended March 31, 2023 and 2022:
3/31/2023 | 3/31/2022 | |||||||
Loss attributed to PRC operations | $ | (923,175 | ) | $ | (696,122 | ) | ||
Loss attributed to U.S. operations | (364,073 | ) | (387,369 | ) | ||||
Income attributed to Canada operations | 49,501 | (88,545 | ) | |||||
Income attributed to BVI | - | - | ||||||
Loss before tax | $ | (1,237,747 | ) | $ | (1,172,036 | ) | ||
PRC Statutory Tax at 25% Rate | (230,794 | ) | (174,031 | ) | ||||
Effect of tax exemption granted | - | - | ||||||
Valuation allowance | 278,418 | 263,434 | ||||||
Income tax | $ | 47,624 | $ | 89,403 | ||||
Per Share Effect of Tax Exemption | ||||||||
Effect of tax exemption granted | $ | - | $ | - | ||||
Weighted-Average Shares Outstanding Basic | 72,081,930 | 41,648,597 | ||||||
Per share effect | $ | - | $ | - |
F-27
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 Decembernet 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.
Reconciliation of effective income tax rate from continuing operations is as follows for the three months ended March 31, 2017 was $2,857,577.2023 and 2022:
03/31/2023 | 03/31/2022 | |||||||
U.S. federal statutory income tax rate | 21 | % | 21 | % | ||||
Higher (lower) rates in PRC, net | 4 | % | 4 | % | ||||
Non-recognized deferred tax benefits in the PRC | (28.85 | )% | (25.08 | )% | ||||
The Company’s effective tax rate | (3.85 | )% | (0.08 | )% |
18. Loss Per Share of Common Stock
Components of basic and diluted earnings per share were as follows:
For the Three Months Ended | ||||||||
March 31, | ||||||||
2023 | 2022 | |||||||
Loss from operations attributable to common stockholders | $ | (1,285,371 | ) | $ | (1,229,777 | ) | ||
Loss per share of common stock - Basic and diluted | $ | (0.02 | ) | $ | (0.03 | ) | ||
Basic and diluted weighted average shares outstanding | 72,081,930 | 41,648,597 |
F-28
19. Concentrations
Customers Concentrations:
The following table sets forth information about each customer that accounted for 10% or more of the Company’s revenues for the three months ended March 31, 2023 and 2022.
For the periods ended | ||||||||||||||||
Customers | March 31, 2023 | March 31, 2022 | ||||||||||||||
Amount $ | % | Amount $ | % | |||||||||||||
A | - | - | 1,441,054 | 12 | ||||||||||||
B | 830,000 | 10 | - | - | ||||||||||||
C | 1,953,391 | 23 | - | - |
Suppliers Concentrations
The following table sets forth information about each supplier that accounted for 10% or more of the Company’s purchase for the three months ended March 31, 2023 and 2022.
For the periods ended | ||||||||||||||||
Suppliers | March 31, 2023 | March 31, 2022 | ||||||||||||||
Amount $ | % | Amount $ | % | |||||||||||||
A | 1,464,234 | 18 | 1,612,681 | 12 | ||||||||||||
B | - | - | 4,205,805 | 32 | ||||||||||||
C | - | - | 1,516,012 | 12 | ||||||||||||
D | 1,446,791 | 17 | - | - | ||||||||||||
E | 1,185,146 | 14 | - | - | ||||||||||||
F | 1,129,868 | 14 | - | - |
20. Risks
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The following is a schedule showing the future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of June 30, 2017:
As of December 31, 2016, the present value of minimum lease payments due within one year is $1,031,990. The Company recorded impairment on the leased assets that underlie these lease obligations; the Company’s management believes it is appropriate to account for all remaining lease obligations as current given that these leased assets are no longer generating long term benefits to the Company.
F-17
American Lorain CorporationNotes to Financial Statements
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Results of Operations | ||||||
For the six | For the six | |||||
months ended | months ended | |||||
6/30/2017 | 6/30/2016 | |||||
Sales | $ | 35,178,846 | $ | 66,032,083 | ||
Cost of Sales | 29,629,863 | 57,390,872 | ||||
Gross Profit | 5,548,982 | 8,641,211 | ||||
Operating Expenses | 24,576,521 | 9,539,844 | ||||
Other Income (Expenses) | (29,705,992 | ) | (7,557,485 | ) | ||
Earnings before Taxes | (48,733,531 | ) | (8,456,119 | ) | ||
Taxes | 454,416 | 1,153,151 | ||||
Net Income | $ | (49,187,947 | ) | $ | (9,609,269 | ) |
F-18
American Lorain CorporationNotes to Financial Statements
Financial Position | ||||||
At | At | |||||
6/30/2017 | 12/31/2016 | |||||
Current Assets | $ | 19,745,847 | $ | 70,570,853 | ||
Non-Current Assets | 16,362,855 | 32,051,046 | ||||
Total Assets | $ | 36,108,702 | $ | 102,621,899 | ||
Current Liabilities | $ | 13,811,908 | $ | 43,165,043 | ||
Total Long Term Liabilities | - | 326,591 | ||||
Total Liabilities | $ | 13,811,908 | $ | 43,491,634 | ||
Net Assets | $ | 22,296,795 | $ | 59,130,265 | ||
Total Liabilities & Net Assets | $ | 36,108,702 | $ | 102,621,899 |
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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 | ||
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. | ||
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F-19
21. Subsequent Events
Management has evaluated subsequent events and transactions that occurred after the balance sheet date up to the date the unaudited condensed consolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent event that would have required adjustment or disclosure in the unaudited condensed consolidated financial statements.
F-29
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations OverviewMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are an integrated food manufacturing company headquartered in Shandong Province, China. We develop, manufactureFlushing, New York City. After a series of acquisitions and sell the following types of food products:
Chestnut products;
Convenience foods (including ready-to-cook, or RTC, foods, and ready-to-eat, or RTE, foods meals); and
Frozen food products.
We conduct our production activities in China. Our products are sold in the Chinese domestic markets as well as exported to foreign countries and regions such as Japan and South Korea. We have developed brand equity for our chestnut products in China, Japan and South Korea overdispositions during the past 18 years. We produced 214 products in 2016. We derive most ofthree years, our revenues from sales in China, South Koreaprimary business, which is carried out by Shandong Yunchu, Jingshan Sanhe, Jilin Chuangyuan, Fast Approach Inc. and Japan.Xianning Bozhuang, is:
Recent Development
Domestic sales in the second quarter of 2017 and 2016 was $2.6 million and $40.3 million respectively, accounting for 74.98% of our sales in this reporting period in 2017 as compared to 88.2% over the same period of last year. The reasons for the decrease in revenues in China decreased are:
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Outside China, sales decreased by approximately $4.5 million. We liquidated our French operations
● | To distribute beef and mutton products. |
● | To sell formaldehyde, urea-formaldehyde glue, methylal, and clean fuel oil |
● | Online advertising services and mobile games; |
Results of Operations
The following discussion should be read in 2016 following an investigationconjunction with respectthe company’s unaudited consolidated financial statement for the three months ended March 31, 2023, and 2022 and related notes to the origin of canned chestnuts sold by Conserverie Minerve (“Minerve”, a former subsidiary of Athena) issued Centre Technique Conservation of Produits Agricoles (“CTCPA”), an industry trade association for canned, preserved and dehydrated food products in France. CTCPA stated that only chestnuts based on the European or Japanese cultivars can be used in canned chestnut products sold in France according to CTCPA policies and that canned chestnut products must also have received certification from the International Featured Standards (“IFS”), a qualified third party certification agency in Europe that certifies food products, especially for retail industry.that.
Three months ended | Increase / | Increase / | ||||||||||||||
March 31, | Decrease | Decrease | ||||||||||||||
(In Thousands of USD) | 2023 | 2022 | ($) | (%) | ||||||||||||
Net revenues | 8,534 | 11,979 | (3,445 | ) | (29 | ) | ||||||||||
Cost of revenues | 8,288 | 10,816 | (2,528 | ) | (23 | ) | ||||||||||
Gross profit | 246 | 1,163 | (917 | ) | (79 | ) | ||||||||||
Operating expenses: | ||||||||||||||||
Selling and marketing expenses | 245 | 451 | (206 | ) | (46 | ) | ||||||||||
General and administrative expenses | 1,092 | 1,803 | (711 | ) | (39 | ) | ||||||||||
Research & Developing expenses | 69 | 9 | 60 | 667 | ||||||||||||
Operating income (loss) | (1,160 | ) | (1,100 | ) | (60 | ) | 5 | |||||||||
Interest income (expense) | (116 | ) | (157 | ) | 41 | (26 | ) | |||||||||
Other income (expense) | 38 | 85 | (47 | ) | (55 | ) | ||||||||||
(Loss) income before tax | (1,238 | ) | (1,172 | ) | (66 | ) | 6 | |||||||||
Income tax expense/(income) | (48 | ) | (89 | ) | 41 | (46 | ) | |||||||||
Loss from continuing operations | (1,286 | ) | (1,261 | ) | (25 | ) | 2 | |||||||||
Net (loss) income | (1,286 | ) | (1,261 | ) | (25 | ) | 2 |
2
As a result of such liquidation, our exports have decreased substantially due to weak demand in the international market. Revenue from sales in international markets decreased by approximately $29.1 million, or approximately 67.12% Net Revenues. We mainly relied on Athena, our French subsidiary, to sell our products in European market. But since we suffered a significant loss from the result of investigation of CTCPA during 2015 and 2016, we decided to shut down the operation of Athena. As a result, the export amount of chestnuts to Europe markets decreased markedly by 95.40% in the second quarter of 2017.
Frozen foods are sold primarily to selected export markets in Europe and supermarkets and wholesale customers in China. Those sales contributed approximately 35.2% inOur net revenues for the quarterthree months ended March 31, 2023 amounted to $8.53 million, which represents a decrease of approximately $3.45 million, or 29%, from $11.98 million for the three months ended March 31, 2022. This decrease was attributable to the disposal of the subsidiary Anhui Ansheng Petrochemical Equipment Co. Ltd. in December 2022.
Cost of Revenues. During the three months ended March 31, 2023, we experienced a decrease in cost of revenue of $2.53 million or 23%, in comparison to the three months ended March 31, 2023, from approximately $10.82 million to $8.29 million. This decrease was mainly due to the disposal of the subsidiary Anhui Ansheng Petrochemical Equipment Co. Ltd. in December 2022.
Gross Profit. Our gross profit decreased by $0.92 million, or 79% to $0.25 million for the three months ended March 31, 2023 from $1.16 million for the three months ended March 31, 2022. This decrease was mainly due to the aforementioned reasons, attributable to the disposal of the subsidiary Anhui Ansheng Petrochemical Equipment Co. Ltd. in December 2022.
Operating Expenses
Selling and Marketing Expenses. Our selling and marketing expenses decreased by $0,21 million, or 46%, to $0.25 million for the three months ended March 31, 2023 from $0.45 million for the three months ended March 31, 2022. The selling and marketing expenses mainly come from transportation and storage cost of $0.12 million and the sales staff salaries cost of $0.06 million.
General and Administrative Expenses. We experienced a decrease in general and administrative expense of $0.71 million from $1.80 million to approximately $1.09 million for the three months ended March 31, 2023, compared to 31.6% in the second quarter of 2017.
5
Seasonality
Chestnut season in China lasts from Septemberthree months ended March 31, 2022. This expense decrease was mainly due to January. We purchase and produce raw chestnuts during these months and store them in our refrigerated storage facilities throughout the year. Once we obtain a purchase order during the restdisposal of the year, we removesubsidiary Anhui Ansheng Petrochemical Equipment Co. Ltd. in December 2022. In addition to that, the chestnutsmain reason was the decline in third party service fees. The General and Administrative Expenses mainly come from storage, process themthird party service fees of $0.35 million; administrative staff salary costs of $0.17 million and ship them within one daydepreciation; amortization expense of production. Since most chestnuts are produced$0.29 million and soldother daily sporadic management costs.
Net Loss
Our net loss increased by $0.03 million, or 2%, to a net loss of $1.29 million for the three months ended March 31, 2023 from $1.26 million in net loss for the fourth quarter, the Company generally performs best in the fourth quarter.
Uncertainties that Affect our Financial Condition
We spend a significant amountthree months ended March 31, 2022. This increase was mainly due to losses of cash on our operations, principally to procure raw materials for our products. Many of our suppliers, including chestnut, vegetable and fruit farmers, and suppliers of packaging materials, require that we prepay for their supplies in cash or pay on the same day that such supplies are delivered to us. However, somedisposal of the suppliers with whomsubsidiary, Anhui Ansheng Petrochemical Equipment Co., Ltd.
Going Concern and Capital Resources
In assessing our liquidity, we have a long-standing business relationship allow us to pay on credit. We fund the majority ofmonitor and analyze our cash-on-hand and operating and capital expenditure commitments. Our liquidity needs meet our working capital requirements, out of cash flow generated from operations. If we fail to generate sufficient sales, or if our suppliers stop offering us credit on favorable terms, we may not have sufficient liquidity to fund our operating costsexpenses, and our business could be adversely affected.
We funded approximately 60% of our working capital from the proceeds of short-term loans from Chinese banks in the second quarter of 2017, as compared to 45.6% over the same period last year. We expect to continue to fund our working capital requirements with such loans in the future. Such loans are generally secured by our fixed assets, receivables and/or guarantees by third parties. Our balance of short-term bank loans as of June 30, 2017 was approximately $23.2 million. The term of almost all such loans is one year or less. Historically, we have rolled over such loans on an annual basis. However, commencing in 2010, the Chinese government began implementing more stringent credit policies to curb inflation and soaring property prices. These new policies could negatively impact our ability to obtain or roll over these short term loans, and hence our possession of sufficient available funds to pay all of our borrowings upon maturity. Failure to roll over our short-term borrowings at maturity or to service our debt could result in the imposition of penalties, including increases in rates of interest, legal actions against us by our creditors, or even insolvency. We can provide no assurances that we will be able to enter into any future financing or refinancing agreements on terms favorable to us, especially considering the current instability of the capital markets.
The financial statements have been prepared on a going-concern basis. The going-concern basis assumes that assets will be realized and liabilities will be settled in the ordinary course of business in the amounts disclosed in the financial statements. Our ability to continue as a going concern is greatly dependent on our ability to realize its non-cash current assets such as receivables and inventory into cash in order to settle its currentexpenditure obligations. For the six months ended June 30, 2017, the Company incurred a substantial loss of $17,799,172. As of June 30, 2017, the Company had a working capital deficit of approximately $39,305,182. These conditions raise substantial doubt as to whether the Company may continue as a going concern.
Our primary capital needs have been to fund the working capital requirements necessitated by our sales growth and loans. In addition, we obtained long term loans, private placement financing and convertible promissory note during the period 2011 to 2015. In 2016 and the reporting period in 2017,the fiscal period ended March 31, 2023, our primary sources of financing have been cash generated from operations.
3
As of March 31, 2023, we had cash and cash equivalents (including restricted cash) of $0.22 million and a working capital deficit of $6,536,923. For the three months ended March 31, 2023, we have incurred a net loss of $1,285,371. These factors raise substantial doubt on our ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. We expect to continue to finance our operations and short-term loansworking capital needs in 2023 from banks in China. However,cash generated from operations and, if ourneeded, private financings. Suppose available liquidity is not sufficientinsufficient to meet our operating and loan obligations as they come due,due. In that case, our plans include obtainingpursuing alternative financing arrangements or further reducing expenditures as necessary to meet our cash requirements. ThereHowever, there is no assurance that if required, we will be able to raise additional capital on favorable terms or reduce discretionary spending to provide the required liquidity. Currently, the capital markets for small capitalization companies are extremely difficult and banking institutions have become stringent in their lending requirements. Accordingly, weliquidity if needed. We cannot be sure of the availability or terms of any third-party financing.
Our business, operating results and financial condition will be adversely affected in the event of unfavorable economic conditions, including the ongoing global economy and capital markets disruptions. For example, we may experience declines in revenues, profitability and cash flows as a result of reduced orders, delays in receiving orders, delays or defaults in payment or other factors caused by the economic problems of our customers and prospective customers. We may experience supply chain delays, disruptions or other problems associated with financial constraints faced by our suppliers and subcontractors. In addition, changes and volatility in the equity, credit and foreign exchange markets and in the competitive landscape make it increasingly difficult for us to predict our revenues and earnings into the future.
6
Results of Operations
Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016
The following table summarizes the results of our operations during the three month periods ended June 30, 2017 and June 30, 2016, respectively and provides information regarding the dollar and percentage increase or (decrease) from the three month period ended June 30, 2017 compared to the three month period ended June 30, 2016.
(All amounts, other than percentages, stated in U.S. dollar)
Three months ended June 30, | Increase/ | Increase/ | ||||||||||
(Decrease) | (Decrease) | |||||||||||
(In Thousands of U.S. Dollars) | 2017 | 2016 | ($) | (%) | ||||||||
Net revenues | 1,278 | 23,425 | (22,147 | ) | (94.5% | ) | ||||||
Cost of revenues | 1,567 | 19,004 | (17,437 | ) | (91.9% | ) | ||||||
Gross profit | (289 | ) | 4,422 | (4,711 | ) | (106.5% | ) | |||||
Operating expenses | ||||||||||||
Selling and marketing expenses | - | 1,019 | (1,019 | ) | (100.0% | ) | ||||||
General and administrative expenses | 262 | 630 | (368 | ) | (58.4% | ) | ||||||
Operating expense | 262 | 1,649 | (1,387 | ). | (84.1% | ) | ||||||
Government subsidy income | - | 359 | (359 | ) | (100.0% | ) | ||||||
Interest and other income | 778 | 380 | 398 | 104.7% | ||||||||
Other expenses | (135 | ) | (2,895 | ) | (2,760 | ) | (96.5% | ) | ||||
Interest expense | (921 | ) | (828 | ) | 93 | 11.2% | ||||||
Income/(Loss) before taxation from continuing operations | (830 | ) | (211 | ) | 619 | 293.3% | ||||||
Income taxes | - | - | - | - | ||||||||
Income/(Loss) before taxation from discontinued operations | (1,200 | ) | 354 | (1,554 | ) | (439.0% | ) | |||||
Income taxes | - | - | - | - | ||||||||
Loss from discontinued operations, net of taxes | (1,200 | ) | 354 | (1,554 | ) | (439.0% | ) | |||||
Net loss | (2,030 | ) | 143 | (2,173 | ) | (1,519.6 | ) | |||||
Non-controlling interests | (266 | ) | 136 | (402 | ) | (295.6% | ) | |||||
- | ||||||||||||
Net loss of common stockholders | (1,764 | ) | 8 | (1,772 | ) | (2,215,00% | ) |
Revenue
Net Revenues. Our net revenue for the three months ended June 30, 2017 amounted to $1.3 million, which represents a decrease of approximately $22 million, or 94.5%, from the three month period ended on June 30, 2016, in which our net revenue was $23.4 million. The overall decrease was primarily attributable to the decrease in sales in the convenience and frozen food segments, as reflected in the following table:
Three months ended | Increase/ | Increase/ | ||||||||||
(In thousands of U.S. Dollars) | 6/30/2017 | 6/30/2016 | (Decrease) | (Decrease) | ||||||||
Chestnut | 584 | 11,713 | (11,129 | ) | (95.0% | ) | ||||||
Convenience food | 252 | 4,685 | (4,433 | ) | (94.6% | ) | ||||||
Frozen food | 442 | 7,028 | (6,586 | ) | (93.7% | ) | ||||||
Total | 1,278 | 23,425 | (22,147 | ) | (94.5% | ) |
Cost of Revenues.During the three months ended June 30, 2017, we experienced a decrease in cost of revenue of $17.4 million, in comparison to the three months ended June 30, 2016, from approximately $19.0 million to $1.6 million, reflecting a decrease of approximately 91.9% . The decrease of cost of revenues was due to the decrease of net revenue.
Gross Profit. Our gross profit decreased $4.7 million, or 106.5%, to $0.3 million loss for the three months ended June 30, 2017 from $4.4 million for the same period in 2016, it is mainly attributes to the reason that we ceased to sell convenience foods products since 2016, shut Athena Group and Dongguan Lorain, the cost of chestnuts slightly increased and the sales of chestnuts in China declined.
7
Operating Expenses
Selling and Marketing Expenses. Our selling and marketing expenses decreased 100% during the second quarter of 2017, as compared to the same period in 2016. The following table shows the main expense items:
Main Items Selling and Marketing Expenses in the ThreeMonths Ended June 30, 2017
The selling and marketing expense to net revenue ratio for the three months ended March 31, 2017 and 2016 was 0% and 4.35%, respectively. We suspended to pay our employees during the second quart of 2017 due to our materially loss in our operation.
General and Administrative Expenses. We experienced a decrease in general and administrative expenses of $0.3 million, from approximately $0.6 million for the three months ended June 30, 2016, to $0.3 million for the three months ended June 30, 2017. It was noted that the general and administrative expenses incurred by PRC subsidiaries was remain stable as compared to the same period of 2016, while that incurred by our French subsidiaries decreased due to our expense decreased for the shut-down of Athena Group..
Government Subsidy Income
Government subsidy income decreased from approximately $0.3 million for the three months ended June 30, 2016 to $0 million for the three months ended June 30, 2017. The decease of government subsidy income due to (i) a later subsidy application to the related government authorities in the second quarter of 2017, and (ii) the reasons for subsidy application are less than those in the first quarter of 2016.
Loss Before Taxation
Loss before taxation increased $2.1 million to $2.0 million for the three months ended March 31, 2017 from $0.1 million income for the same period of 2016, it is mainly attributes to the reason that we ceased to sell convenience foods products since 2016, shut Athena Group and Dongguan Lorain, the cost of chestnuts slightly increased and the sales of chestnuts in China declined.
Income Taxes
There is income tax due to no profit loss for the three months ended June 30, 2017.
8
Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
The following table summarizes the results of our operations during the six month periods ended June 30, 2017 and June 30, 2016, respectively, and provides information regarding the dollar and percentage increase or (decrease) from the six month period ended June 30, 2017 compared to the six month period ended June 30, 2016.
(All amounts, other than percentages, stated in U.S. dollar)
Six months ended June 30, | Increase/ | Increase/ | ||||||||||
(Decrease) | (Decrease) | |||||||||||
(In Thousands of U.S. Dollars) | 2017 | 2016 | ($) | (%) | ||||||||
Net revenues | 3,185 | 45,714 | (42, 409 | ) | (92.8% | ) | ||||||
Cost of revenues | 3,228 | 37,135 | (33,907 | ) | (91.3% | ) | ||||||
Gross profit | (44 | ) | 8,579 | (8,563 | ) | (99.8% | ) | |||||
Operating expenses | 8,402 | 3,450 | 4,952 | 143.5% | ||||||||
Selling and marketing expenses | 2,225 | 2,229 | (4 | ) | (0.2% | ) | ||||||
General and administrative expenses | 6,177 | 1,221- | 4,956 | 405.9% | ||||||||
Total operating expenses | 8,402 | 3,450 | 4,952 | 143.5% | ||||||||
Government subsidy income | 581 | 864 | (283 | ) | (32.8% | ) | ||||||
Interest and other income | 429 | 763 | (334 | ) | (43.8% | ) | ||||||
Other expenses | 2,004 | 6,900 | (4,896 | ) | (71.0% | ) | ||||||
Interest expense | 1,643 | 1,909 | (266 | ) | (13.9% | ) | ||||||
(Loss)/ income before taxation from continuing operations | (11,084 | ) | (2,053 | ) | 9,031 | 433.9% | ||||||
Income taxes | - | 1,5373- | (1,373 | ) | (100% | ) | ||||||
(Loss)/ income before taxation from discontinued operations | (6,715 | ) | 836 | (7,551 | ) | (903.2 | ) | |||||
Income taxes | - | 209 | (209 | ) | (100% | ) | ||||||
Net (loss) income | (17,799 | ) | (2,800 | ) | 14,999 | 535.7% | ||||||
Non-controlling interests | (1,440 | ) | 267 | (1,707 | ) | (639.3% | ) | |||||
Net loss to common shareholders | (16,359 | ) | (3,067 | ) | 13,292 | 433.4% |
Revenue
Net revenues. Our net revenues for the six months ended June 30, 2017 totaled $3.2 million, which represents a decrease of approximately $42.4 million, or 92.8%, from the six month period ended on June 30, 2016, in which our net revenue was $45.7 million. The overall decrease was mainly attributable to the decrease in sales in our convenience food and frozen food segments, as reflected in the following table:
Six months ended | Increase/ | Increase/ | ||||||||||
(In thousands of U.S. dollars) | 6/30/2017 | 6/30/2016 | (Decrease) | (Decrease) | ||||||||
Chestnut | 1,748 | 22,857 | 21,109 | (92.4% | ) | |||||||
Convenience food | 531 | 10,257 | (9,726 | ) | (94.8% | ) | ||||||
Frozen food | 906 | 12,560 | (11,693 | ) | (93.1% | ) | ||||||
Total | 3,185 | 45,714 | (42, 409 | ) | (92.8% | ) |
Net revenue decreased in the six months ended June 30, 2017, is mainly attributable to the fact (i) the sales of our chestnuts products significantly decreasing due to intense market competition and lower market demand; (ii) we stop providing meals ready- to-eat, or MRE since the end of 2016; and (iii) the main markets of our frozen food are Japan, Korea and Europe which are suffered sharply sales decreasing for lower market demand and Athena wound up.
Cost of Revenues. During the six months ended June 30, 2017, we experienced a decrease in cost of revenue of $33.9 million, in comparison to the six months ended June 30, 2016, from approximately $37.1 million to $3.2 million, reflecting a decrease of 91.3% . The decrease of cost of revenues was mainly due to the decrease of raw materials and third party products cost.
Gross Profit. Our gross profit decreased $8.6 million, or 99.8%, to $0.4 million loss for the six months ended June 30, 2017 from $8.6 million for the same period in 2016, it is mainly attributes to the reason that we ceased to sell convenience foods products since 2016, shut Athena Group and Dongguan Lorain, the cost of chestnuts slightly increased and the sales of chestnuts in China declined.
9
Operating Expenses
Selling and Marketing Expenses. Our selling and marketing expenses decreased $0.04 million during the six months ended June 30, 2017, as compared to the same period over last year. The following table reflects the main expense items:
Main Items in Selling and Marketing Expense in the SixMonths Ended June 30, 2017
The selling and marketing expense to net revenue ratio for the six months ended June 30, 2017 and 2016 was 69.9% and 4.9%, respectively. All of the bad debt loss incurred from Beijing Lorain, the reason of which are mainly due to other receivables that become bad debt include (i) raw materials we paid for but the suppliers did not provide the raw materials ordered by us and refused to refund the advance payment, or we did not agree on the quality of the raw materials and (ii) advance payments made by our procurement department for raw materials, and such salesmen left the company before we could confirm that the goods had been warehoused.
General and Administrative Expenses. We experienced a increase in general and administrative expense of $5 million from approximately $1.2 million to $6.2 million for the six months ended June 30, 2017, compared to the same period in 2016. It was noted that the general and administrative expenses incurred by PRC subsidiaries was increased as compared to the same period of 2016 due to the cost to maintain our operation.
Government Subsidy Income
Government subsidy income decreased from approximately $0.9 million for the six months ended June 30, 2016 to $0.6 million for the three months ended June 30, 2017. It represents grants received mostly from the Junan County, Beijing and Luotian government to assist us in our research and business development.
Loss Before Taxation
Loss before taxation increased $15 million to $3 million for the six months ended March 31, 2017 from $18 million income before taxation for the same period of 2016. The increase was mainly attributable to the fact that the sales of our domestic companies has a significate decrease due to intense market competition and lower market demand.
Income Taxes
There is income tax due to no profit loss for the six months ended June 30, 2017.
10
Liquidity and Capital Resources
As of June 30, 2017, we had cash and cash equivalents (including restricted cash) of $1.0 million. Our cash and cash equivalents decreased by approximately $0.4million from December 31, 2016 primarily due to cash less provided byalternative financing activities and investment activities, partially offset by cash used in operating activities. arrangements.
The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.
Cash FlowFlows Data:
Six Months Ended | ||||||
June 30, | ||||||
(In Thousands of U.S. Dollars) | 2017 | 2016 | ||||
Net cash provided by/(used in) operating activities | 11,559 | (10,230 | ) | |||
Net cash provided by/(used in) investing activities | (11,978 | ) | 12,765 | |||
Net cash provided by (used in) financing activities | 163 | 3,462 | ||||
Net cash flow | (257 | ) | 5,997 |
For the three months ended March 31 | ||||||||
(In thousands of U.S. dollars) | 2023 | 2022 | ||||||
Net cash flows used in operating activities | 498 | (5,326 | ) | |||||
Net cash flows used in investing activities | (23 | ) | (148 | ) | ||||
Net cash flows provided by financing activities | (238 | ) | 5,545 |
Operating Activities
Net cash provided by operating activities was $11.6 million for the sixthree months ended June 30, 2017 andMarch 31, 2023 was approximately $0.5 million, while net cash used in operating activities for the six months ended June 30, 2016same period in 2022 amounted to $5.33 million. Net Cash increase in operating activities was approximately $10.2 million. The increase was primarilymainly due to thea decrease of $ 1.93 million in prepayments and an increase of customer deposits increase of $4.8$4.53 million in other payables and no write down of assets from investment loss from deconsolidation.accruals.
Investing Activities
Net cash used in investing activities for the sixthree months period ended June 30, 2017March 31, 2023 was approximately $12.0$0.02 million, representing a decrease of $24.8$0.13 million in net cash used in investing activities from $12.8$0.15 million provided by investment activities for the same period of 2016. The difference was primarily a result of no increase in deposits and increase payment of construction in progress and purchase of intangible assets of $9.3 million and $0.6 million, respectively.2022.
Financing Activities
Net cash provided by financing activities for the sixthree months period ended June 30, 2017March 31, 2023, was $0.2$0.24 million, representing a decrease of $3.3$5.79 million from $3.5 millionin net cash provided by financing activities duringfrom $5.55 million for the same period of 2022. This is mainly due to the repayment of related party loans, resulting in a change of approximately $1.09 million, and there was no issuance of common stock for cash transaction in 2023 as compared to the same period in 2016. The decrease2022, leading to a difference of the net cash generated from financing activities was primarily a result of lower proceeds from bank borrowings and debentures and no repayment of capital lease.$7.00 million.
Loan Facilities
As of June 30, 2017, the amounts and maturity dates for our short-term bank loans are as set forth in the Note 10 to the Financial Statements included herein. The total amounts outstanding under such loans were $23.2 million as of June 30, 2017, compared with $22.7 million as of December 31, 2016.
Critical Accounting Policies
The preparation of unaudited condensed consolidated 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 ourthe unaudited condensed consolidated financial statements, including the notes thereto,to that, and related disclosures of commitments and contingencies, if any.
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We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation ofpreparing unaudited condensed consolidated financial statements, including the following:
Restatement of prior financial statements --The Company has discovered errorsthose outlined in the timing of revenues recognized during the year ended December 31, 2016. The Company recognizes revenue upon shipping of products to its customers where title of the goods passes upon departure from the Company’s facilities; however, in certain instances, contractual terms dictate that the customers are afforded seven days after the receipt of goods at their premises to inspect the goods for defects or spoilage and notify the Company. If the Company is not contacted within those seven days, the Company’s obligationNote 2 to the customer are considered fully discharged and revenue should be recognized. Given the timing of these seven days, the Company believes that certain sales transactions have been erroneously recognized during the year ended December 31, 2015. The Company has rectified this error and the impact of the Company’s financial position and result of operations are detailed below.
Method of Accounting -- We maintain our general ledger and journals with the accrual method accounting for financial reporting purposes. Accounting policies adopted by us conform to generally accepted accounting principles in the United States and have been consistently applied in the presentation of our financial statements, which are compiled on the accrual basis of accounting.
Use of estimates -- The preparation of the financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 makes these estimates using the best information available at the time the estimates are made; however, actual results could differ materially from those estimates.
The use of estimates is critical to the carrying value of asset accounts such as accounts receivable, inventory, fixed assets, and intangible assets. We use estimates to account for the related bad debt allowance, inventory impairment charges, depreciation and amortization of our assets. In the food processing industry these accounts have a significant impact on the valuation of our balance sheet and the results of our operations.
Principles of consolidation -- Ourunaudited condensed consolidated financial statements which include information about our company and our subsidiaries, are compiled in accordance with generally accepted accounting principles in the United States. All significant inter-company accounts and transactions have been eliminated. Ownership interests of non-controlling investors are recorded as non-controlling interests.included herein.
As of June 30, 2017, the details pertaining to our subsidiaries were as follows:
Attributable | ||||
Place of | equity | Registered | ||
Name of Company | incorporation | interest % | capital | |
International Lorain Holding Inc. | Cayman Islands | 100 | $ 46,659,135 | |
Junan Hongrun Foodstuff Co., Ltd. | PRC | 100 | 44,861,741 | |
Shandong Lorain Co., Ltd. | PRC | 80.2 | 12,123,985 | |
Beijing Lorain Co., Ltd. | PRC | 100 | 1,540,666 | |
Luotian Lorain Co., Ltd. | PRC | 100 | 3,797,774 | |
Shandong Greenpia Foodstuff Co., Ltd. | PRC | 100 | 2,303,063 | |
Dongguan Lorain Co., Ltd. | PRC | 100 | 149,939 |
In 2014, the Company invested $2,100,000 in Athena/Minerve Group whereby the Company controlling shareholder of Minerve. Minerve conducted operations in manufacturing, packaging and sales activities in France and import and storage operations in Portugal. During the years ended December 31, 2015, the financial position and results of operations of Minerve were accounted for as subsidiaries in the Company’s financial statements; however, during the year ended December 31, 2016, Minerve became insolvent and compelled into bankruptcy by creditors, and, ultimately liquidation. Accordingly, the Company lost control of Minerve and written of the value of its investment in Minerve. All receivables due by Minerve to subsidiaries still controlled by the Company have been written off. The Company’s consolidated financial statements at December 31, 2015 have been recast to provide improved comparability for the Company’s continuing operations.
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.
Shandong Economic Development Investment Corporation, which is a PRC state-owned entity, holds 19.8% equity interest in Shandong Lorain.
Accounting for the Impairment of Long-Lived Assets -- The long-lived assets held and used by us are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets.
If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the reporting period, there was no impairment loss.
Revenue recognition -- Our revenue recognition policies are in compliance with Staff Accounting Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, we have no other significant obligations and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.
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Our revenue consists of invoiced value of goods, net of a value-added tax. The Company allows its customers to return products if they are defective. However, this rarely happens and amounts returned have been de minimis.
Recent Accounting Pronouncements
In January 2017, the FASB issued guidance which simplifies the accounting for goodwill impairment. The updated guidance eliminates Step 2 of the impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, determined in Step 1. The Company is currently evaluating the impact on the financial statements of this guidance.
In January 2017, the FASB amended the existing accounting standards for business combinations. The amendments clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The Company is currently evaluating the impact on the financial statements of this guidance.
In November 2016, the FASB issued guidance, which addresses the presentation of restricted cash in the statement of cash flows. The guidance requires entities to show the changes in the total of cash, cash equivalents, restricted cash, and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The Company is currently evaluating the timing and the impact of this guidance on the financial statements.
In October 2016, the FASB issued guidance, which amends the existing accounting for Intra-Entity Transfers of Assets Other Than Inventory. The guidance requires an entity to recognize the income tax consequences of intra-entity transfers, other than inventory, when the transfer occurs The Company is currently evaluating the timing and the impact of this guidance on the financial statements.
In August 2016, the FASB issued guidance, which amends the existing accounting standards for the classification of certain cash receipts and cash payments on the statement of cash flows. The Company is currently evaluating the timing and the impact of this guidance on the financial statements.
In June 2016, the FASB issued guidance, which requires credit losses on financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, not based on incurred losses. Further, credit losses on available-for-sale debt securities should be recorded through an allowance for credit losses limited to the amount by which fair value is below amortized cost. The Company is currently evaluating the timing and the impact of this guidance on the financial statements.
In February 2016, the FASB issued guidance, which amends the existing accounting standards for leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification. Under the new guidance, a lessee will be required to recognize assets and liabilities for all leases with lease terms of more than twelve months. The Company is currently evaluating the timing and the impact of this guidance on the financial statements.
In January 2016, the FASB issued guidance, which amends the existing accounting standards for the recognition and measurement of financial assets and financial liabilities. The updated guidance primarily addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The Company is currently evaluating the timing and the impact of this guidance on the financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance arrangements.
Correction of Error
The Company discovered errors in the timing of revenues recognized during the year ended December 31, 2015. The Company recognizes revenue upon shipping of products to its customers where title of the goods passes upon departure from the Company’s facilities; however, in certain instances, contractual terms dictate that the customers are afforded seven days inspection period after the receipt of goods at their premises to inspect the goods for defects or spoilage and notify the Company. If the Company is not contacted within those seven days, the Company’s obligation to the customer are considered fully discharged and revenue should be recognized. Given the timing of these seven days inspection period, the Company believes that certain sales transactions have been erroneously recognized during the year ended December 31, 2015. The Company has corrected this error and adjusted for the impact upon the Company’s financial position and result of operations as detailed below, which include the regrouping of amounts attributable to Discontinued Operations.
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4
The effect of correction of these errors on results of operations for the above mentioned financial statements is as follows for 2015.
As previously reported | Adjustment | Restated | ||||||||
Sales | $ | 215,315,437 | $ | (8,571,793 | ) | $ | 206,743,644 | |||
Cost of sales | 179,197,430 | (7,076,892 | ) | 172,120,538 | ||||||
Gross profit | 36,118,006 | (1,494,900 | ) | 34,623,106 | ||||||
Operating income | 14,052,920 | (1,494,900 | ) | 12,558,020 | ||||||
Total other expense | (10,728,224 | ) | - | (10,728,224 | ) | |||||
Loss before tax | 3,324,696 | (1,494,900 | ) | 1,829,796 | ||||||
Net loss | $ | (1,191,239 | ) | $ | (1,494,900 | ) | $ | (2,686,139 | ) |
The effect of correction of these errors on retained earnings and significant asset and liability accounts is as follows:
As previously reported | Adjustment | Restated | ||||||||
Accounts receivable | 62,532,017 | (9,269,327 | ) | 53,262,690 | ||||||
Inventory | 43,712,048 | 6,779,018 | 50,491,066 | |||||||
Total current asset | 191,049,927 | (2,449,159 | ) | 188,600,768 | ||||||
Total asset | 309,537,530 | (2,449,159 | ) | 307,088,371 | ||||||
Taxes payable | 5,863,261 | (1,017,181 | ) | 4,846,080 | ||||||
Total current liabilities | 97,003,426 | (1,017,181 | ) | 95,986,245 | ||||||
Total liabilities | 107,569,431 | (1,017,181 | ) | 106,552,250 | ||||||
Retained earnings | 101,389,920 | (1,370,586 | ) | 100,019,334 | ||||||
Total stockholders’ equity | 201,968,099 | (1,431,978 | ) | 200,536,121 | ||||||
Total liabilities and | ||||||||||
stockholders’ equity | 309,537,531 | (2,449,160 | ) | 307,088,371 |
ITEM Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.applicable.
ITEM 4.
Item 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a(15(e) under the Exchange Act)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, reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms,forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and our 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 as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluatedcarried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2017.March 31, 2023. Based on thatupon his evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2017, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed,(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective.
As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
We do not expect that our disclosure controls and procedures werewill prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not effective due toabsolute, assurance that the continuing material weakness in our internal control over financial reporting.
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The material weakness and significant deficiency identified by our management as of June 30, 2017 relates to the abilityobjectives of the Companydisclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to record transactions and provide disclosures in accordance with U.S. GAAP. We did not have sufficient and skilled accounting personnel with an appropriate level of experience in the application of U.S. GAAP commensurate with our financial reporting requirements. For example, our staff members do not hold licenses such as Certified Public Accountant or Certified Management Accountant in the U.S., have not attended U.S. institutions for training as accountants, and have not attended extended educational programs that would provide sufficient relevant education relating to U.S. GAAP. Our staff will require substantial training to meet the demands of a U.S. public company and our staff’s understandingtheir costs. Because of the requirementsinherent limitations in all disclosure controls and procedures, no evaluation of U.S. GAAP-based reportingdisclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is inadequate.
We plan to provide U.S. GAAP training sessions to our accounting team. The training sessionsbased partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will be organized to help our corporate accounting team gain experiencesucceed in U.S. GAAP reporting and to enhance their awareness of new and emerging pronouncements withachieving its stated goals under all potential impact over our financial reporting. We plan to continue to recruit experienced and professional accounting and financial personnel and participate in educational seminars, tutorials, and conferences and employ more qualified accounting staff in future.future conditions.
C
hangesChanges in Internal Controls overControl Over Financial Reporting.Reporting
During the three months ended June 30, 2017,most recently completed fiscal quarter, there werehas been no changeschange in our internal control over financial reporting identified(as defined in connection withRules 13a-15(f) and 15d-15(f) under the evaluation performed during the period covered by this reportExchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations Over Internal Controls.
Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;5
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There is a lawsuit currently pending in the Linyi City Intermediate People’s Court of Shandong Province, which was initially filed by Shandong Lorain, a subsidiary of the Company, against Junan Hengji Real Estate Development Co., Ltd. ("Junan Hengji") in November 2013 at Linyi City Intermediate People's Court of Shandong Province (the "Linyi Court"). Shandong Lorain added Jiangsu Hengan Industrial Investment Group Co., Ltd. ("Heng An Investment") as a co-defendant after the case was first filed at the Linyi Court.
In December 2010, Shandong Lorain and Junan Hengji entered into a cooperative development agreement (the "Agreement") and in March 2011, Heng An Investment, an affiliated company of Junan Hengji, also entered into the Agreement with Shandong Lorain to jointly develop the project with Junan Hengji. Pursuant to the Agreement, Junan Henji and Heng An Investment are required to pay Shandong Lorain a total of RMB 20 million (approximately $3,225,806) fixed return according to the development status of the project developed by Junan Hengji and Heng An Investment. The payment was due but unpaid. In deciding to bring suit, Shandong Lorain and the Company evaluated the potential claims against Junan Hengji and Heng An Investment, disputes between the parties with respect to out-of-pocket expenses paid by Junan Hengji, as well as the litigation fee that is required to be paid to the court based upon the amount claimed. Ultimately, Shandong Lorain decided to file the lawsuit with Linyi Court to claim a fixed return of RMB 10 million (approximately $1,499,390).None
In January 2014, the Linyi Court held its first trial session. During the trial, Heng An Investment filed a counterclaim against Shandong Lorain for repayment of out-of-pocket expenses which would offset the entire fixed return plus additional unpaid expenses of RMB 4,746,927 (approximately $765,633). Shandong Lorain responded that Heng An Investment does not have standing to file the counter-claim because the out-of-pocket payments were made by Junan Hengji. In November 2014, the court held a second trial session and completed its discovery process. On March 21, 2015, Shandong Lorain received the Linyi Court's decision that rejected Shandong Lorain's claim for RMB 10,000,000 against Junan Hengji and Heng An Investment. On April 3, 2015, Shandong Lorain appealed the decision to the Supreme Court of Shandong Province.
In November 2015, the Supreme Court of Shandong Province vacated the decision of the Linyi Court and remanded the case back to the Linyi Court for a retrial. The retrial took place on April 25, 2016, at the Linyi City Intermediate People’s Court, and the decision thereon is currently pending. The Company is confident that Shandong Lorain will prevail on retrial.
ITEM 1A. RISK FACTORS
Not applicable.
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
None
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicableapplicable.
ITEM 5. OTHER INFORMATION
None
16None.
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ITEM 6. EXHIBITS
The following exhibits are filed as part of this Report.report.
Exhibit No. | Description | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document.* | |
101.CAL | ||
Inline XBRL Taxonomy Extension Calculation Linkbase | ||
101.DEF | ||
Inline XBRL Taxonomy Extension Definition Linkbase | ||
101.LAB | ||
101.PRE | ||
Inline XBRL Taxonomy Extension Presentation Linkbase | ||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).* |
* Filed herewith.
* | Filed herewith. |
17
** | 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.
Date: December 11, 2017
Date: May 15, 2023 | By: | /s/ |
Bin Zhou, Chief | ||
(Principal | ||
18
EXHIBIT INDEX
/s/ Lili Hu | ||
| ||
* Filed herewith.
19Pursuant 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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