EXHIBIT 99.3
Planet Green Holding Corp.
Pro Forma Combined Financial Statements
March 31, 2019
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Contents | Page | ||
Pro Forma Combined Balance Sheet | 3 | ||
Pro Forma Combined Statement of Operations and Comprehensive Loss | 4 | ||
Notes to Financial Statements | 5 to 8 |
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Planet Green Holding Corp.
Pro Forma Combined Balance Sheet
As of March 31, 2019
PLAG | BZ | Adjustments | Combined | |||||||||||||
Assets | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 1,367,758 | $ | 16,887 | $ | 4,469,673 | $ | 5,854,318 | ||||||||
Accounts receivable | 1,044,381 | 2,009 | - | 1,046,390 | ||||||||||||
Other receivables and other current assets | 297 | 408,512 | - | 408,809 | ||||||||||||
Due from related parties | 1,944 | - | - | 1,944 | ||||||||||||
Inventory | 10,265 | 1,565,830 | - | 1,576,095 | ||||||||||||
Advances and prepayments to suppliers | 7,609,439 | 81,667 | - | 7,691,106 | ||||||||||||
Total current assets | 10,034,084 | 2,074,905 | 4,469,673 | 16,578,662 | ||||||||||||
Non-current assets | ||||||||||||||||
Property, plant and equipment, net | 1,330,474 | 3,925,197 | - | 5,255,671 | ||||||||||||
Construction in progress, net | 864,409 | - | - | 864,409 | ||||||||||||
Intangible assets | - | 1,672,556 | - | 1,672,556 | ||||||||||||
Other assets and goodwill | 1,507 | - | - | 1,507 | ||||||||||||
Total Non-Current Assets | 2,196,390 | 5,597,753 | - | 7,794,143 | ||||||||||||
Total Assets | $ | 12,230,474 | $ | 7,672,658 | $ | 4,469,673 | $ | 24,372,805 | ||||||||
Liabilities and Stockholders’ (Deficit) Equity | ||||||||||||||||
Current liabilities | ||||||||||||||||
Short term bank loans | $ | - | $ | 1,147,216 | $ | - | $ | 1,147,216 | ||||||||
Accounts payable | 475,147 | 1,963,079 | - | 2,438,226 | ||||||||||||
Taxes payable | 60,571 | 36,658 | - | 97,229 | ||||||||||||
Accrued liabilities and other payables | 492,528 | 3,307,055 | - | 3,799,583 | ||||||||||||
Due to related parties | 90,483 | - | - | 90,483 | ||||||||||||
Discontinued operations - liabilities | 3,643,696 | - | 3,643,696 | |||||||||||||
Customer deposits | - | 49,166 | - | 49,166 | ||||||||||||
Total current liabilities | 4,762,425 | 6,503,174 | - | 11,265,599 | ||||||||||||
Total Liabilities | $ | 4,762,425 | 6,503,174 | $ | 11,265,599 | |||||||||||
Stockholders’ Equity | ||||||||||||||||
Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2019 | $ | - | $ | - | $ | - | $ | - | ||||||||
Common Stock, $0.001 par value, 200,000,000 shares authorized; 6,577,765 shares issued as of March 31, 2019 | 5,498 | - | 1,080 | 6,578 | ||||||||||||
Registered capital | - | 1,845,235 | (1,845,235 | ) | - | |||||||||||
Additional paid in capital | 74,739,031 | - | 6,313,828 | 81,052,859 | ||||||||||||
Statutory reserves | 2,810,953 | - | - | 2,810,953 | ||||||||||||
Accumulated deficit | (79,031,187 | ) | (590,799 | ) | - | (79,621,986 | ) | |||||||||
Accumulated other comprehensive income (loss) | 9,984,943 | (84,952 | ) | - | 9,899,991 | |||||||||||
Total Stockholders’ Equity | 8,509,238 | 1,169,484 | 4,469,673 | 14,148,395 | ||||||||||||
Non-controlling interest | (1,041,189 | ) | - | - | (1,041,189 | ) | ||||||||||
Total Equity | $ | 7,468,049 | 1,169,484 | 4,469,673 | $ | 13,107,206 | ||||||||||
Total Liabilities & Stockholders’ Equity | $ | 12,230,474 | 7,672,658 | 4,469,673 | 24,372,805 |
See accompanying notes to the financial statements
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Planet Green Holding Corp.
Pro Forma Combined Statement of Operations and Comprehensive Income
For the three months ended March 31, 2019
PLAG | BZ | Adjustments | Combined | |||||||||||||
Net revenues | $ | 1,078,245 | $ | 5,235 | $ | - | $ | 1,083,480 | ||||||||
Cost of revenues | 779,988 | 10,201 | - | 790,189 | ||||||||||||
Gross profit (loss) | 298,257 | (4,966 | ) | - | 293,291 | |||||||||||
Operating expenses: | ||||||||||||||||
Selling and marketing expenses | 110 | 9,263 | - | 9,373 | ||||||||||||
General and administrative expenses | 234,569 | 190,748 | - | 425,317 | ||||||||||||
Total operating expenses | 234,679 | 200,011 | - | 434,690 | ||||||||||||
Operating income (loss) | 63,578 | (204,977 | ) | - | (141,399 | ) | ||||||||||
Other income (expenses): | ||||||||||||||||
Interest income | 161 | - | 161 | |||||||||||||
Interest expense | - | (86,443 | ) | - | (86,443 | ) | ||||||||||
Other income | - | 100,756 | - | 100,756 | ||||||||||||
Total other income and (expenses) | 161 | 14,313 | - | 14,474 | ||||||||||||
Earnings before tax | 63,739 | (190,664 | ) | - | (126,925 | ) | ||||||||||
Income tax | 56,043 | - | - | 56,043 | ||||||||||||
Net income (loss) | $ | 7,696 | (190,664 | ) | $ | - | $ | (182,968 | ) | |||||||
Other comprehensive income: | ||||||||||||||||
Foreign currency translation income | 192,660 | 46,710 | - | 239,370 | ||||||||||||
Comprehensive Income (Loss) | $ | 200,356 | (143,954 | ) | - | 56,402 | ||||||||||
Loss per share | ||||||||||||||||
Basic and diluted earnings per share | - | - | - | $ | (0.03 | ) | ||||||||||
Basic and diluted weighted average shares outstanding | - | - | - | 6,577,765 |
See accompanying notes to the financial statements
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Planet Green Holding Corp.
Notes to Financial Statements
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Planet Green Holdings Corp., formerly known as American Lorain Corporation, (the “Company” or “PLAG”) is registered as a corporation in the state of Nevada. The Company conducts its primary business activities through its subsidiaries located in the People’s Republic of China, including its new acquired operating subsidiary Xianning Bozhuang Tea Products Co., Ltd., (“BZ”). BZ is registered as a limited liability company in Xianning City, Huibei Province, People’s Republic of China. The Company’s primary business activities are to produce tea products and sell such products in China.
Taishan Muren Agriculture Co. Ltd., the other operating subsidiary grows herbs and spices, sells sauces and other products developed from these herbs and spices, and offers a variety of food and beverage products, including packaged sauce, tea and brown rice syrup, to consumers and foodservice businesses.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
These pro forma combined financial statements, accompanying notes, and related disclosures have been prepared on an as-if basis assuming that the reverse takeover transaction between the Company and BZ has been in effect since the beginning of the period present in the results of operations by combining the historical financial statements of the entities and eliminating any intercompany balances. Goodwill would not be recognized in this transaction, and the carrying values of the Company and BZ are their respective historical values. Actual results combined results may have differed from those presented herein.
These financial statements have been prepared using the accrual basis of accounting in accordance with the generally accepted accounting principles (“GAAP”) in the United States. The Company’s fiscal year end is December 31 and the financial statements are presented in US dollars
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Basis of pro forma combined financial statements
These pro forma combined financial statements include the accounts of the Company and the entities listed below. All intercompany accounts and transactions have been eliminated.
Place of | Attributable equity | Registered | ||||||||
Name of Company | incorporation | interest % | capital | |||||||
Planet Green Holdings Corporation | British Virgin Islands | 100 | $ | 10,000 | ||||||
JianShi Technology Holding Limited | Hong Kong | 100 | 1,277 | |||||||
Shanghai Xunyang Internet Technology Co. Ltd. | PRC | 100 | 669,919 | |||||||
Beijing Lorain Co., Ltd. | PRC | VIE | 1,540,666 | |||||||
Luotian Lorain Co., Ltd. | PRC | VIE | 3,797,774 | |||||||
Shandong Greenpia Foodstuff Co., Ltd. | PRC | VIE | 2,303,063 | |||||||
Taishan Muren Agriculture Co. Ltd. | PRC | VIE | 1,913,049 | |||||||
Lorain Foodstuff (Shenzhen) Co., Ltd. | PRC | VIE | 80,000 | |||||||
Xianning Bozhuang Tea Products Co., Ltd. | PRC | VIE | 1,845,235 |
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.
On May 18, 2018, the Company incorporated Planet Green Holdings Corporation (“Planet Green BVI”), 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 on August 29, 2012. The formation and acquisition of these companies was to implement the Company’s restructuring plans.
On September 28, 2018, the Company was restructured by disposing its equity interest in International Lorain and its subsidiaries to the former Chairman, Mr. Si Chen, and re-acquiring certain equity interest in certain of these subsidiaries,; namely, Shandong Greenpia, Beijing Lorain, and Luotian Lorain, indirectly through Planet Green BVI. Please refer to Form 8-K filed on October 2, 2018. The Company entered into exclusive arrangements with Shandong Greenpia, Luotian Lorain, Taishan Muren, and Shenzhen Lorain and its shareholders that give the Company the ability to substantially influence its daily operations and financial affairs. The Company entered into exclusive arrangements with Beijing Lorain; however, the Company does not have significant influence over Beijing Lorain and Beijing Lorain is accounted for as equity method investment.
In December 2018, the Company’s management determined that it would discontinue the operations of Shandong Greenpia and Luotian Lorain. Accordingly, the Company has recorded full impairment related to the value of those assets.
In December 2018, the Company was no longer able to exercise significant influence over Beijing Lorain, and management did not believe that the Company would be able recover the value of its investment; accordingly, the Company recognized full impairment of its investment in Beijing Lorain.
Consolidation of Variable Interest Entity
VIEs are entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision-making ability. Any VIE with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. Management makes ongoing reassessments of whether the Company is the primary beneficiary.
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On December 14, 2017, the Company formed Shenzhen Lorain as a limited company under the laws of the PRC. Through Shandong Greenpia, the Company entered into exclusive VIE agreements with Lorain Food (Shenzhen) Co., Ltd. (“Shenzhen Lorain”) and its shareholders that give the Company the ability to substantially influence Shenzhen Lorain’s daily operations and financial affairs and appoint its senior executives. The Company is considered the primary beneficiary of Shenzhen Lorain and it consolidates its accounts as a VIE. On September 27, 2018, the agreements were terminated due to the Company’s restructuring and Shenzhen Lorain was no longer a variable interest entity under Shandong Greenpia.
On September 27, 2018, through Shanghai Xunyang Internet Technology Co. Ltd., the Company entered into exclusive arrangements with Beijing Lorain Co., Ltd., Luotian Lorain Co., Ltd., Shandong Greenpia Foodstuff Co., Ltd., Taishan Muren Agriculture Co. Ltd., and Lorain Foodstuff (Shenzhen) Co., Ltd. and its shareholders that give the Company the ability to substantially influence Shenzhen Lorain’s daily operations and financial affairs and appoint its senior executives. The Company is considered the primary beneficiary of these companies and it consolidates its accounts as a VIE.
On May 9, 2019, through Shanghai Xunyang Internet Technology Co. Ltd., the Company entered into exclusive arrangements with Xianning Bozhuang Tea Products Co., Ltd.,and its shareholders that give the Company the ability to substantially influence Xianning Bozhuang Tea Products Co., Ltd. daily operations and financial affairs and appoint its senior executives. The Company is considered the primary beneficiary of these companies and it consolidates its accounts as a VIE.
As of March 31, 2019, the following entities were de-consolidated from the structure as a result of the sale agreement executed on September 28, 2018:
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 | |||||||
Dongguan Lorain Co., Ltd. | PRC | 100.0 | 149,939 |
Discontinued operations
In 2017, the Company discontinued the operations in Shandong Lorain Co. Ltd. and Dongguan Lorain Co., Ltd. As a result, the financial results of these two subsidiaries are presented as discontinued operations.
In the first quarter of 2018, the Company’s board of directors resolved to discontinue the operations of Junan Hongrun Foodstuff Co. Ltd.
As of September 30, 2018, the Company disposed International Lorain Holding Inc. and its subsidiaries: Junan Hongrun Foodstuff Co., Ltd., Shandong Lorain Co., Ltd., Dongguan Lorain Co., Ltd. as a result of the sale agreement.
In the fourth quarter of 2018, the Company’s board of directors resolved to discontinue the operations of Beijing Lorain Co, Ltd., Luotian Lorain Co., Ltd., and Shandong Greenpia Foodstuff Co., Ltd.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results may materially differ from these estimates.
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Foreign currency translation and re-measurement
The Company translates its foreign operations to the U.S. dollar in accordance with ASC 830, “Foreign Currency Matters”.
The reporting currency for the Company and its subsidiaries is the US dollar. The Company and Planet Green Holdings Corporation’s functional currency is the U.S. dollar. JianShi Technology Holding Limited, Shanghai Xunyang Internet Technology Co. Ltd., Beijing Lorain Co., Ltd., Luotian Lorain Co., Ltd., Shandong Greenpia Foodstuff Co., Ltd., Taishan Muren Agriculture Co. Ltd., and Lorain Foodstuff (Shenzhen) Co., Ltd., and Xianning Bozhuang Tea Products Co., Ltd. use the Chinese Renminbi (“RMB”) as their functional currency.
The Company’s subsidiaries, whose records are not maintained in that company’s functional currency, re-measure their records into their functional currency as follows:
● | Monetary assets and liabilities at exchange rates in effect at the end of each period | |
● | Nonmonetary assets and liabilities at historical rates | |
● | Revenue and expense items at the average rate of exchange prevailing during the period |
Gains and losses from these re-measurements were not significant and have been included in the Company’s results of operations.
The Company’s subsidiaries, whose functional currency is not the U.S. dollar, translate their records into the U.S. dollar as follows:
● | Assets and liabilities at the rate of exchange in effect at the balance sheet date | |
● | Equities at the historical rate | |
● | Revenue and expense items at the average rate of exchange prevailing during the period |
Adjustments arising from such translations are included in accumulated other comprehensive income in shareholders’ equity.
3/31/2019 | ||||
Period-end RMB: US$ exchange rate | 6.7119 | |||
Period average RMB: US$ exchange rate | 6.7442 |
The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US Dollars at the rates used in translation.
NOTE 3 – PRO FORMA ADJUSTMENTS
Entry No. | Description | Dr. | Cr. | |||||||
1 | Registered capital | 1,845,235 | ||||||||
Cash | 4,469,673 | |||||||||
Additional paid in capital | 6,313,828 | |||||||||
Common stock | 1,080 | |||||||||
Issuance of shares under share exchange agreement and recapitalization of the Company |
NOTE 4 – GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as a going-concern basis. The going-concern basis assumes that assets are realized, and liabilities are settled in the ordinary course of business at amounts disclosed in the financial statements. The Company’s ability to continue as a going concern depends upon its ability to market and sell its products to generate positive operating cash flows. For the three months ended March 31, 2019, the combined Company recognized net loss of $182,968. As of March 31, 2019, the combined Company had an accumulated deficit of approximately $ 79,621,986. These conditions raise a substantial doubt as to whether the Company may continue as a going concern.
If the Company is not able to generate positive operating cash flows, it may become insolvent.
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