UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended:
For the transition period from ____________ to ____________
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification Number) |
(Address of principal executive office and zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The
number of outstanding shares of the registrant’s common stock as of October 29, 2021 was
TABLE OF CONTENTS
| PAGE | ||
| PART I - FINANCIAL INFORMATION | 1 | |
| ITEM 1 | FINANCIAL STATEMENTS | F-1 |
| ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 2 |
| ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 6 |
| ITEM 4 | CONTROLS AND PROCEDURES | 6 |
| PART II - OTHER INFORMATION | 6 | |
| ITEM 1 | LEGAL PROCEEDINGS | 6 |
| ITEM 1A | RISK FACTORS | 6 |
| ITEM 2 | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 8 |
| ITEM 3 | DEFAULTS UPON SENIOR SECURITIES | 8 |
| ITEM 4 | MINE SAFETY DISCLOSURES | 8 |
| ITEM 5 | OTHER INFORMATION | 8 |
| ITEM 6 | EXHIBITS | 9 |
| SIGNATURES | 10 | |
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 Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (the “SEC”).
In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” or the negative of such terms or other similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect.
Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
ii
PART I
Use of Certain Defined Terms
Except where the context otherwise requires and for the purposes of this report only:
| ● | “Anhui Ansheng” refers to Anhui Ansheng Equitpment Co., Ltd., a PRC limited liability company. | |
| ● | “Bless Chemical” refers to Bless Chemical Co., Ltd., 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). | |
| ● | “CAD” refers to Canadian dollar, the legal currency of Canada. | |
| ● | “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 company incorporated in China. | |
| ● | “Jiayi Technologies” or “WFOE” refers to Jiayi Technologies (Xianning) Co., Ltd, a PRC limited liability company and a wholly foreign-owned enterprise, formerly known as Lucky Sky Petrochemical Technology (Xianning) Co. Ltd. | |
| ● | “Jilin Chuangyuan” refers to Jilin Chuangyuan Chemical Co., Ltd., a PRC limited liability company. | |
| ● | “Jinshan Sanhe Luckysky” refers to Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd., a PRC limited company. | |
| ● | “Lucky Sky Planet Green HK” refers to Lucky Sky Planet Green Holdings Co., Limited, a company incorporated in Hong Kong. | |
| ● | “Lucky Sky HK” refers to Lucky Sky Holdings Corporations (HK) Limited, a company incorporated in Hong Kong and formerly known as JianShi Technology Holding Limited. | |
|
●
|
“PLAG,” “Planet Green,” “we,” “us”, “our” 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. | |
| ● | “Planet Green BVI” refers to Planet Green Holdings Corporation, a company incorporated in British Virgin Islands. |
| ● | “RMB” refers to Renminbi, the legal currency of China. | |
| ● | “Shine Chemical BVI” refers to Shine Chemical Co., Ltd., a company incorporated in British Virgin Islands. | |
| ● | “Shanghai Shuning” refers to Shanghai Shuning Advertising Co., Ltd, a PRC limited liability company. | |
| ● | “U.S. dollar”, “$” and “US$” refer to the legal currency of the United States. |
| ● | “VIE” refers to variable interest entity. | |
| ● | “Xianning Bozhuang” refers to Xianning Bozhuang Tea Products Co., Ltd., a PRC limited liability company. |
1
ITEM 1. FINANCIAL STATEMENTS
PLANET GREEN HOLDINGS CORP.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021 AND DECEMBER 31, 2020
(Stated in US Dollars)
F-1
PLANET GREEN HOLDINGS CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 2021 AND DECEMBER 31, 2020
(Stated in US Dollars)
| 30 September, | 31 December, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade receivables, net | ||||||||
| Note receivable | ||||||||
| Inventories | ||||||||
| Advances and prepayments to suppliers | ||||||||
| Other receivables and other current assets | ||||||||
| Related party receivable | ||||||||
| Total current assets | $ | $ | ||||||
| Non-current assets | ||||||||
| Plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Construction in progress, net | ||||||||
| Prepayment for real-estates investments | ||||||||
| Deferred tax assets | ||||||||
| Goodwill | ||||||||
| Right-of-use assets | ||||||||
| Total non-current assets | $ | $ | ||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders | ||||||||
| Current liabilities | ||||||||
| Short-term bank loans | $ | $ | ||||||
| Accounts payable | ||||||||
| Taxes payable | ||||||||
| Accrued liabilities and other payables | ||||||||
| Customers deposits | ||||||||
| Related party payable | ||||||||
| Lease payable-current portion | ||||||||
| Deferred income | ||||||||
| Total current liabilities | $ | $ | ||||||
| Lease payable- non-current | $ | $ | ||||||
| Long-term payables | ||||||||
| Total current liabilities | $ | $ | ||||||
| Total Liabilities | $ | $ | ||||||
| Stockholders | ||||||||
| Preferred Stock, $ | $ | $ | ||||||
| Common Stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Non-controlling interests | ||||||||
| Total Stockholders | $ | $ | ||||||
| Total Liabilities and Stockholders | $ | $ | ||||||
See Accompanying Notes to the Financial Statements
F-2
PLANET GREEN HOLDINGS CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Stated in US Dollars)
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Research & Developing Expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
| Interest income (expense), net | ( | ) | ( | ) | ||||||||||||
| Other income | ||||||||||||||||
| Other expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other (expenses) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Discontinued operations: | ||||||||||||||||
| Loss from discontinued operations | ( | ) | ||||||||||||||
| Loss on disposal | ( | ) | ( | ) | ||||||||||||
| Income tax expenses | - | - | ||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Net loss attributable to non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to common shareholders | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ||||||||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Less: Comprehensive loss attribute to non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Comprehensive loss attribute to common share holders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss per common shareholders - Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted weighted average shares outstanding | ||||||||||||||||
See Accompanying Notes to the Financial Statements
F-3
PLANET GREEN HOLDINGS CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Stated in US Dollars)
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | Non- | ||||||||||||||||||||||||||
| Number of | Common | Paid-in | Accumulated | Comprehensive | Controlling | |||||||||||||||||||||||
| Shares | Stock | Capital | Deficit | Income | Interests | Total | ||||||||||||||||||||||
| Balance, January 1, 2020 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Net income | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Issuance of shares for acquisition | ||||||||||||||||||||||||||||
| Issuance of common stock for cash | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Net income | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Issuance of shares for acquisition | ||||||||||||||||||||||||||||
| Issuance of common stock for cash | ||||||||||||||||||||||||||||
| Stock-based compensation and issue of employee benefit plan stock | ||||||||||||||||||||||||||||
| Acquiring subsidiaries | - | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
See Accompanying Notes to the Financial Statements
F-4
PLANET GREEN HOLDINGS CORP.
Unaudited Condensed Statements of Cash Flows
For the nine months ended September 30, 2021 and 2020
(Stated in US Dollars)
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPFRATING ACTIVITIFS: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash (used in) provided by operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Bad debt expenses | ||||||||
| Loss on disposal of discontinued operations | ||||||||
| Note and account receivables | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepayments and deposit | ( | ) | ( | ) | ||||
| Other receivables | ||||||||
| Other receivables-Related party | ( | ) | ||||||
| Accounts payables | ( | ) | ||||||
| Advance from customer | ||||||||
| Other payables and accruals | ||||||||
| Related party payable | ||||||||
| Taxes payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of plant and equipment | ( | ) | ( | ) | ||||
| Decrease in cash from disposal of discontinued operations | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Payments of short-term loan - bank | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| EFFECT OF EXCHANGE RATE ON CASH | ||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | ||||||||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | $ | ||||||
| SUPPLEMENTARY OF CASH FLOW INFORMATION | ||||||||
| Interest received | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
| NON-CASH TRANSACTIONS OF INVESTMENT AND FINANCING ACTIVITIES | ||||||||
| Issuance of shares for acquisition | $ | $ | ||||||
| Issuance of common stock for employee compensation | $ | $ | - | |||||
F-5
PLANET
GREEN HOLDINGS CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2021 AND DECEMBER 31, 2020
(Stated in U.S. Dollars)
1. Organization and Principal Activities
Planet Green Holdings Corp. (the “Company” or “PLAG” or “Planet Green”) is a holding company incorporated in Nevada. We are engaged in various businesses through our subsidiaries and VIE entities in China and subsidiary in Canada.
Going Concern
The
accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going
concern; however, the Company has incurred a net loss of $
These factors raise substantial doubt on the Company’s ability to continue as a going concern. The accompanying 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.
2. Summary of Significant Accounting Policies
Method of accounting
Management has prepared the accompanying financial statements and these notes according to generally accepted accounting principles in the United States of America; the Company maintains its general ledger and journals with the accrual method accounting.
Principles of consolidation
The accompanying consolidated financial statements include the assets, liabilities, and results of operations of the Company, and its subsidiaries, which are listed below:
The accompanying consolidated financial statements reflect the activities of Planet Green Holdings Corp. and each of the following entities:
| Name | Place of incorporation | Ownership | ||
| Planet
Green Holdings Corporation (BVI) |
||||
| Lucky Sky Planet Green Holdings Co., Limited. | ||||
| Jiayi
Technologies (Xianning) Co., Ltd. |
||||
| Fast Approach Inc. | ||||
| Shanghai
Shuning Advertising Co., Ltd. |
||||
| Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd. | ||||
| Jilin Chuangyuan Chemical Co., Ltd. | ||||
| Xianning
Bozhuang Tea Products Co., Ltd. |
||||
| Shine Chemical Co., Ltd. | ||||
| Bless Chemical Co., Ltd. | ||||
| Hubei Bulaisi Technology Co., Ltd. | ||||
| Anhui
Ansheng Petrochemical Equipment Co., Ltd. |
F-6
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, 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 (“Shanghai Xunyang”).
On August 12, 2019, through Lucky Sky Holdings Corporations (H.K.) 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 Lucky Sky Holdings Corporations (H.K.) Limited sold
On May 29, 2020, the Planet Green BVI incorporated Lucky Sky Planet Green Holdings Co., Limited, a limited company incorporated in Hong Kong.
On June 5, 2020, the Planet Green BVI acquired all of the outstanding equity interests of Fast Approach Inc. It was incorporated under Canada’s laws and runs the operation of a demand-side platform and online advertising business.
On June 16, 2020, Lucky Sky Holdings Corporations (H.K.) transferred its 100% equity interest in Lucky Sky Petrochemical to Lucky Sky Planet Green HK.
On September 15, 2020, Lucky Sky Petrochemical terminated the VIE agreements with Shenzhen Lorain and Taishan Muren.
On
August 10, 2020, Planet Green BVI transferred its
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 issued an aggregate of
On March 9, 2021, Planet Green issued an aggregate of
On July 15, 2021, Planet Green issued an aggregate of
On August 1, 2021, Jiayi Technologies (Xianning) Co., Ltd terminated
the VIE agreements with Xianning Bozhuang Tea Products Co., Ltd. and acquired
On August 3, 2021, the Planet Green acquired
On September 1, 2021, Jingshan Sanhe Luckysky New Energy Technologies
Co., Ltd. has changed its major shareholder from Mr. Feng Chao to Hubei Bulaisi Technology Co., Ltd. and Hubei Bulaisi Technology Co.,
Ltd. became hold
F-7
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.
On
December 20, 2019, we sold
On December 20, 2019, through Lucky Sky Petrochemical, the Company entered into exclusive 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 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 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. terminated the VIE agreements with Xianning Bozhuang Tea Products 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
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.
Use of estimates
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclose the 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 when the estimates are made; however, actual results could differ materially from those estimates.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with three months or less original maturities 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 to sell 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 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 the impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and believes whether evidence indicating the cost 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 after year-end, and forecasted performance of the investee.
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.
F-9
Trade receivables
Trade 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 total amount is no longer probable. Bad debts are written off as incurred.
Inventories
Inventories consist of raw materials and finished goods stated at the lower of cost or market value. Finished goods are comprised of direct materials, direct labor, inbound shipping costs, and allocated overhead. The Company applies the weighted average cost method to its inventory.
Advances and prepayments to suppliers
The Company makes an advance payment to suppliers and vendors for the procurement of raw materials. Upon physical receipt and inspection of the raw materials from suppliers, the applicable amount is reclassified from advances and prepayments to suppliers to inventory.
Plant and equipment
Plant
and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the
straight-line method. The Company typically applies a salvage value of
| Buildings | ||
| Landscaping, plant, and tree | ||
| Machinery and equipment | ||
| Motor vehicles | ||
| Office equipment |
The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts, and any gain or loss are included in the Company’s results of operations. The costs of maintenance and repairs are recognized 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 | ||
| Software licenses | ||
| Trademarks |
Construction in progress and prepayments for equipment
Construction in progress and prepayments for equipment represent direct and indirect acquisition and construction costs for plants and fees of purchase and installation of related equipment. Amounts classified as construction in progress and prepayments for equipment are transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. Depreciation is not provided for assets classified in this account.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. The Company conducts an annual assessment of its goodwill for impairment. If the carrying value of its goodwill exceeds its fair value, then impairment has been incurred; accordingly, a charge to the Company’s operations results will be recognized during the period. Impairment losses on goodwill are not reversed. Fair value is generally determined using a discounted expected future cash flow analysis.
F-10
Accounting for the impairment of long-lived assets
The Company annually reviews its long-lived assets for impairment or whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Impairment may become obsolete from a difference in the industry, introduction of new technologies, or if the Company has inadequate working capital to utilize the long-lived assets to generate adequate profits. Impairment is present if the carrying amount of an asset is less than its expected future undiscounted cash flows.
If an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the asset. Assets to be disposed of are reported lower the carrying amount or fair value fewer costs to selling.
Statutory reserves
Statutory
reserves are referring to the amount appropriated from the net income following laws or regulations, which can be used to recover losses
and increase capital, as approved, and are to be used to expand production or operations. PRC laws prescribe that an enterprise operating
at a profit must appropriate and reserve, on an annual basis, an amount equal to
Foreign currency translation
The accompanying financial statements are presented in United States dollars. The functional currencies of the Company are the Renminbi (RMB) and Canadian dollar (CAD). The Company’s assets and liabilities are translated into United States dollars from RMB at year-end exchange rates. Its revenues and expenses are translated at the average exchange rate during the period. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.
| 09/30/2021 | 12/31/2020 | 09/30/2020 | ||||||||||
| Period-end US$: CAD$ exchange rate | ||||||||||||
| Period-end US$: RMB exchange rate | ||||||||||||
| Period average US$: CAD$ exchange rate | ||||||||||||
| Period average US$: RMB exchange rate | ||||||||||||
The RMB is not freely convertible into foreign currencies, and all foreign exchange transactions must be conducted through authorized financial institutions.
Revenue recognition
The Company adopted ASC 606 “Revenue Recognition.” It recognized revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
The Company derives its revenues from selling high-grade synthetic fuel products, industrial formaldehyde solution, urea-formaldehyde pre-condensate (UFC), methylal, urea-formaldehyde glue for environment-friendly artificial board chemicals, and tea products. The Company applies the following five steps to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
| ● | identify the contract with a customer; |
| ● | identify the performance obligations in the contract; |
| ● | determine the transaction price; |
| ● | allocate the transaction price to performance obligations in the contract; and; |
| ● | Recognize revenue as the performance obligation is satisfied. |
Advertising
All advertising costs are expensed as incurred.
F-11
Shipping and handling
All outbound shipping and handling costs are expensed as incurred.
Research and development
All research and development costs are expensed as incurred.
Retirement benefits
Retirement benefits in the form of mandatory government-sponsored defined contribution plans are charged to either expense as incurred or allocated to inventory as part of overhead.
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 accounts for income tax using an asset and liability approach and recognizes deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets. If it is more likely than not, these items will either expire before the Company can realize their benefits or uncertain future realization.
Comprehensive income
The Company uses Financial Accounting Standards Board (“FASB”) ASC Topic 220, “Reporting Comprehensive Income.” Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except the changes in paid-in capital and distributions to stockholders due to investments by stockholders.
Earnings per share
The Company computes earnings per share (“EPS”) following ASC Topic 260, “Earnings per share.” Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS presents the dilutive effect on a per-share basis from the potential conversion of convertible securities or the exercise of options and or warrants; the dilutive impacts of potentially convertible securities are calculated using the as-if method; the potentially dilutive effect of options or warranties are computed using the treasury stock method. Potentially anti-dilutive securities (i.e., those that increase income per share or decrease loss per share) are excluded from diluted EPS calculation.
Financial instruments
The Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts and other payables, accrued liabilities, and short-term debt, have carrying amounts that approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosing the Company’s fair value of financial instruments. ASC Topic 825, “Financial Instruments,” defines fair value and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities qualify as financial instruments and are a reasonable estimate of their fair values because of the short period between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
| ● | Level 1 - | inputs to the valuation methodology used quoted prices for identical assets or liabilities in active markets. | |
| ● | Level 2 - | inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and information that are observable for the asset or liability, either directly or indirectly, for substantially the financial instrument’s full term. | |
| ● | Level 3 - | inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.
F-12
Lease
Lease terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception, therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Its leases generally do not provide a residual guarantee. The operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term.
The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested asset group and it includes the associated operating lease payments in the undiscounted future pre-tax cash flows.
As
of September 30, 2021, there were approximately $
Commitments and contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Recent accounting pronouncements
In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity required to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income required by GAAP. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued, and (2) for all other entities for reporting periods for which financial statements have not however been made available for issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not believe the adoption of this ASU would affect the Company’s financial statements.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820), – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which makes several changes meant to add, modify or remove specific disclosure requirements associated with the 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.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s balance sheets, statements of income, and comprehensive income and statements of cash flows.
3. Restricted Cash
Restricted cash represents interest-bearing deposits placed with banks to secure banking facilities in the form of loans and notes payable. The funds are restricted from immediate use and are designated for the settlement of loans or notes when they become due.
F-13
4. Variable interest entity (“VIE”)
A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. If any, the variable interest holder with a controlling financial interest in a VIE is deemed the primary beneficiary and must consolidate the VIE. WOFE is deemed to have the controlling financial interest and be the primary beneficiary of Anhui Ansheng Petrochemical Equipment Co., Ltd. and Jilin Chuangyuan Chemical Co., Ltd. because it has both of the following characteristics:
| 1) | The power to direct activities at Anhui Ansheng Petrochemical Equipment Co., Ltd. and 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 Anhui Ansheng Petrochemical Equipment Co., Ltd. and Jilin Chuangyuan Chemical Co., Ltd. that could potentially be significant to such entity. Under the Contractual Arrangements, Anhui Ansheng Petrochemical Equipment Co., Ltd. and Jilin Chuangyuan Chemical Co., Ltd. pay service fees equal to all of its net income to WFOE. At the same time, WFOE is obligated to absorb all of the Anhui Ansheng Petrochemical Equipment Co., Ltd.’s and Jilin Chuangyuan Chemical Co., Ltd.’s losses. The Contractual Arrangements are designed to operate Anhui Ansheng Petrochemical Equipment Co., Ltd. and Jilin Chuangyuan Chemical Co., Ltd. for the benefit of PLAG WFOE and ultimately, the Company. Accordingly, the accounts of Anhui Ansheng Petrochemical Equipment Co., Ltd. and Jilin Chuangyuan Chemical Co., Ltd. are consolidated in the accompanying consolidated financial statements. In addition, those financial positions and results of operations are included in the Company’s consolidated financial statements. |
The carrying amount of VIE’s consolidated assets and liabilities are as follows:
| 09/30/2021 | 12/31/2020 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Note and Accounts receivable, net | ||||||||
| Other receivables - third party | ||||||||
| Inventories, net | ||||||||
| Prepayments | ||||||||
| Related party receivable | ||||||||
| TOTAL CURRENT ASSETS | ||||||||
| Plan and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Construction in progress, net | ||||||||
| Deferred tax assets | ||||||||
| Total Non-Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| Short-term bank loans | $ | $ | ||||||
| Accounts payable | ||||||||
| Advance from customer | ||||||||
| Other payables and accrued liabilities | ||||||||
| Other payables - related party | ||||||||
| Taxes payable | ||||||||
| Deferred income | ||||||||
| TOTAL CURRENT LIABILITIES | ||||||||
| Long term payable | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| Paid-in capital | ||||||||
| Retained earnings | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ( | ) | ||||||
| Total Equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
F-14
5. 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.’s 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
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 considered several other available factors. Acquisition-related costs incurred for the acquisitions are not material and expensed as incurred in general and administrative expense.
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.:
| Total consideration at fair value | $ |
| Fair Value | ||||
| Cash | $ | |||
| Accounts receivable, net | ||||
| Inventories, net | ||||
| Advances to suppliers | ||||
| Other receivables | ||||
| Right-of-use assets | ||||
| Plant and equipment, net | ||||
| Deferred tax assets | ||||
| Goodwill | ||||
| Total assets | $ | |||
| Short-term loan - bank | ( | ) | ||
| Lease Payable-current portion | ( | ) | ||
| Accounts payable | ( | ) | ||
| Advance from customers | ( | ) | ||
| Other payables and accrued liabilities | ( | ) | ||
| Lease Payable-non current portion | ( | ) | ||
| Income taxes payable | ( | ) | ||
| Total liabilities | ( | |||
| Noncontrolling interest | ( | ) | ||
| Net assets acquired | $ | |||
Approximately
$
F-15
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
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 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 Jilin Chuangyuan Chemical Co., Ltd.
| Total consideration at fair value | $ |
| Fair Value | ||||
| Cash | $ | |||
| Accounts receivable, net | ||||
| Inventories, net | ||||
| Advances to suppliers | ||||
| Other receivables | ||||
| Other receivables-RP | ||||
| Plant and equipment, net | ||||
| Intangible assets, net | ||||
| Deferred tax assets | ||||
| Goodwill | ||||
| Total assets | $ | |||
| Short-term loan - bank | ( | ) | ||
| Long term payable | ( | ) | ||
| Accounts payable | ( | ) | ||
| Advance from customers | ( | ) | ||
| Other payables and accrued liabilities | ( | ) | ||
| Other payables-RP | ( | ) | ||
| Income taxes payable | ( | ) | ||
| Total liabilities | ( | ) | ||
| Non controlling interest | ( | ) | ||
| Net assets acquired | $ | |||
Approximately
$
F-16
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
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 | $ |
| Fair Value | ||||
| Cash and cash equivalents, and Restricted Cash | $ | |||
| Trade receivable and Note receivable | ||||
| Inventories | ||||
| Related party receivable | ||||
| Other current assets | ||||
| Plant and equipment, net | ||||
| Intangible assets, net | ||||
| Goodwill | ||||
| Total assets | $ | |||
| Short-term loan-bank | ( | ) | ||
| Related party payable | ( | ) | ||
| Accounts payable | ( | ) | ||
| Other current liabilities | ( | ) | ||
| Total liabilities | ( | ) | ||
| Non controlling interest | ( | ) | ||
| Net assets acquired | $ | |||
Approximately
$
F-17
6. Trade Receivables
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
| 09/30/2021 | 12/31/2020 | |||||||
| Trade accounts receivable | $ | $ | ||||||
| Less: Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| Allowance for doubtful accounts | ||||||||
| Beginning balance: | ( | ) | ||||||
| Additions to allowance | ( | ) | ( | ) | ||||
| Bad debt written-off | ||||||||
| Ending balance | $ | ( | ) | $ | ( | ) | ||
7. Advances and prepayments to suppliers
Prepayments include investment deposit to guarantee its investment contracts and advance payment to suppliers and vendors for the procurement of raw materials. Prepayments consist of the following:
| 09/30/2021 | 12/31/2020 | |||||||
| Investment deposit | $ | $ | ||||||
| Payment to suppliers and vendors | ||||||||
| Total | $ | $ | ||||||
8. Inventories
Inventories consisted of the following as of September 30, 2021 and December 31, 2020
| 9/30/2021 | 12/31/2020 | |||||||
| Raw materials | $ | $ | ||||||
| Inventory of supplies | ||||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
9. Plant and Equipment
Plant, and equipment consisted of the following as of September 30, 2021 and December 31, 2020:
| 09/30/2021 | 12/31/2020 | |||||||
| At Cost: | ||||||||
| Buildings | $ | $ | ||||||
| Machinery and equipment | ||||||||
| Office equipment | ||||||||
| Motor vehicles | ||||||||
| Less: Impairment | ( | ) | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Construction in progress | ||||||||
| $ | $ | |||||||
Depreciation
expense for the nine months ended September 30, 2021 and 2020 was $
F-18
10. Intangible Assets
| 09/30/2021 | 12/31/2020 | |||||||
| At Cost: | ||||||||
| Land use rights | ||||||||
| Software licenses | ||||||||
| Trademark | ||||||||
| $ | $ | |||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Amortization
expense for the nine months ended September 30, 2021 and 2020 was $
11. Prepayment for real-estates investments
The
Company purchased a real-estates, a commercial complex, for investments purpose. The company paid $
12. Other payable
As
of September 30, 2021, the balance of other payable was $
13. Related Parties Transaction
As
of September 30, 2021 and December 31, 2020, the outstanding balance due from related parties was $
As
of September 30, 2021 and December 31, 2020, the outstanding balance due to related parties was $
14. Goodwill
The changes in the carrying amount of goodwill by reportable segment are as follows:
| Balance as of December 31, 2019 | Ansheng | JSSH | JLCY | |||||||||||||
| Goodwill acquired through acquisition | $ | - | $ | $ | - | $ | - | |||||||||
| Goodwill impairment | - | ( | ) | - | - | |||||||||||
| Balance as of December 31, 2020 | ||||||||||||||||
| Goodwill acquired through acquisition | - | - | ||||||||||||||
| Balance as of September, 2021 | $ | $ | $ | |||||||||||||
F-19
15. Bank Loans
The outstanding balances on short-term bank loans consisted of the following:
| Lender | Maturities | Weighted average interest rate | 09/30/2021 | 12/31/2020 | ||||||||||
| Rural Credit Cooperatives of Jilin Province, Jilin Branch | % | - | ||||||||||||
| Anhui Langxi Rural Commercial Bank Co., Ltd. | % | - | ||||||||||||
| Langxi County Sichuang Science and Technology Pioneer Park Development Co., Ltd. | % | - | ||||||||||||
| Industrial and Commercial Bank Of China, Jingshan Branch | % | - | ||||||||||||
| Fast-Government of Canada | % | - | ||||||||||||
| - | ||||||||||||||
Buildings
and land use rights in the amount of $
The short-term bank loan from Anhui Langxi Rural Commercial Bank Co., Ltd., which Langxi County Sme Financing Guarantee Co., Ltd. undertook the guarantee responsibility, was a credit loan.
The
production facilities and its equipment in the amount of $
Loan from Industrial and Commercial Bank Of China, Jingshan Branch was line of credit obtained for general working capital.
F-20
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. Pursuant to 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
On
June 17, 2019, the Company entered into a securities purchase agreement, pursuant to which five individuals residing in the PRC agreed
to purchase an aggregate of
On
February 10, 2020, the Company entered into a securities purchase agreement with Mengru Xu and Zhichao Du, pursuant to which Ms. Xu and
Mr. Du agreed to invest an aggregate of $
On
June 5, 2020, the Company issued an aggregate of
On
December 30, 2020, the Company issued a total of
On
January 4, 2021, the Company issued an aggregate of
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
On
March 9, 2021, the Company issued an aggregate of
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 $
On
July 15, 2021, the Company has issued an aggregate of
On
July 30, 2021, the Company issued a total of
As
of September 30, 2021, there were
F-21
17. Income Taxes
All
of the Company’s continuing operations are located in the PRC. The corporate income tax rate in the PRC is
The following tables provide the reconciliation of the differences between the statutory and effective tax expenses for the nine months ended September 30, 2021 and 2020:
| 09/30/2021 | 09/30/2020 | |||||||
| Loss attributed to PRC operations | $ | ( | ) | $ | ( | ) | ||
| Loss attributed to U.S. operations | ( | ) | ( | ) | ||||
| Income attributed to Canada operations | ( | ) | ( | ) | ||||
| Loss before tax | $ | ( | ) | $ | ( | ) | ||
| PRC Statutory Tax at 25% Rate | ( | ) | ( | ) | ||||
| Effect of tax exemption granted | ||||||||
| Valuation allowance | ||||||||
| Income tax | $ | $ | ||||||
| Per Share Effect of Tax Exemption | ||||||||
| Effect of tax exemption granted | $ | $ | ||||||
| Weighted-Average Shares Outstanding Basic | ||||||||
| Per share effect | $ | $ | ||||||
The difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows as of September 30, 2021 and 2020:
| 09/30/2021 | 09/30/2020 | |||||||
| U.S. federal statutory income tax rate | % | % | ||||||
| Higher (lower) rates in PRC, net | % | % | ||||||
| Non-recognized deferred tax benefits in the PRC | ( | )% | ( | )% | ||||
| The Company’s effective tax rate | % | % | ||||||
18. Earnings/(Loss) Per Share
Components of basic and diluted earnings per share were as follows:
| For the nine months ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Loss from operations attributable to common stockholders | $ | ( | ) | ( | ) | |||
| Basic and diluted (loss) earnings per share denominator: | ||||||||
| Original Shares: | ||||||||
| Additions from Actual Events -issuance of common stock for acquisition | ||||||||
| Additions from Actual Events -issuance of common stock for cash | ||||||||
| Additions from Actual Events -issuance of common stock for acquisition | ||||||||
| Additions from Actual Events -issuance of common stock for cash | ||||||||
| Additions from Actual Events -issuance of common stock for acquisition | ||||||||
| Additions from Actual Events -issuance of common stock for employee compensation | ||||||||
| Basic Weighted Average Shares Outstanding | ||||||||
| Income/(loss) per share - Basic and diluted | $ | ( | ) | ( | ) | |||
| Weighted Average Shares Outstanding- Basic and diluted | ||||||||
F-22
19. Concentrations
Customers Concentrations:
The
following table sets forth information as to each customer that accounted for
| For the periods ended | ||||||||||||||||
| Customers | September 30, 2021 | September 30, 2020 | ||||||||||||||
| Amount $ | % | Amount $ | % | |||||||||||||
| A | ||||||||||||||||
| B | ||||||||||||||||
| C | ||||||||||||||||
| D | ||||||||||||||||
| E | ||||||||||||||||
Suppliers Concentrations
The
following table sets forth information as to each supplier that accounted for
| For the periods ended | ||||||||||||||||
| Suppliers | September 30, 2021 | September 30, 2020 | ||||||||||||||
| Amount $ | % | Amount $ | % | |||||||||||||
| A | ||||||||||||||||
| B | ||||||||||||||||
| C | ||||||||||||||||
| D | ||||||||||||||||
20. Lease commitments
Effective
December 31, 2018, the Company adopted ASU 2016-02, “Leases” (Topic 842), and elected the package of practical expedients
that does not require us to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification
for any expired or existing leases and (3) initial direct costs for any expired or existing leases. The Company adopted the practical
expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. The impact of the adoption
on December 31, 2018 increased the right-of-uses and lease liabilities by approximately $
The
Company had a land, facilities and factory lease agreement with a
The
weighted average remaining lease term of its existing leases is
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
For
the three months ended September 30, 2021 and 2020, rent expenses amounted to $
For
the nine months ended September 30, 2021 and 2020, rent expenses amounted to $
The five-year maturity of the Company’s lease obligations is presented below:
| Twelve months ended December 31, | Operating lease amount | |||
| 2021 | $ | |||
| 2022 | ||||
| 2023 | ||||
| Total lease payment | ||||
| Less: interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
F-23
21. Segment reporting
The Company follows ASC 280, Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance. The Company’s management evaluates performance and determines resource allocations based on a number of factors, the primary measure being income from operations.
The Company’s main business segment and operations are Jingshan Sanhe, Anhui Ansheng, Jilin Chuangyuan, Xianning Bozhuang and Fast Approach. The Company’s consolidated results of operations and consolidated financial position from continuing operations are almost all attributable to Jingshan Sanhe, Anhui Ansheng, Jilin Chuangyuan, Xianning Bozhuang and Fast Approach. Accordingly, management believes that the consolidated balance sheets and statement of operations provide the relevant information to assess Jingshan Sanhe, Anhui Ansheng, Jilin Chuangyuan, Xianning Bozhuang and Fast Approach’s performance.
| Segment reporting | 09/30/2021 | 12/31/2020 | ||||||
| Fast Approach and Shanghai Shuning | $ | $ | ||||||
| Xianning Bozhuang | ||||||||
| Jingshan Sanhe | ||||||||
| Anhui Ansheng | ||||||||
| Jilin Chuangyuan | ||||||||
| Jiayi Technologies (Xianning) Co., Ltd. | ||||||||
| Planet Green Holdings Corporation (BVI) | ||||||||
| Planet Green Holdings Corporation (Nevada) | ||||||||
| Lucky Sky Planet Green Holdings Co., Limited (H.K.). | ||||||||
| Total Assets | $ | $ | ||||||
22. Risks
| A. | Credit risk |
| The Company’s deposits are made with banks located in the PRC. They do not carry federal deposit insurance and may be subject to loss of the banks become insolvent. | |
| Since the Company’s inception, the age of account receivables has been less than one year indicating that the Company is subject to minimal risk borne from credit extended to customers. | |
| B. | Interest risk |
| The Company is subject to interest rate risk when short term loans become due and require refinancing. | |
| C. | Economic and political risks |
The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by changes in the political, economic, and legal environments in the PRC. |
23. Subsequent Events
The Company evaluates subsequent events that have occurred after the balance sheet date but before the financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the dates of the balance sheets, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. The Company has analyzed its operations subsequent to September 30, 2021 to the date these unaudited condensed consolidated financial statements were issued, and has determined that it does not have any material events to disclose.
F-24
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW
We are headquartered in Flushing, NY. After a series of acquisitions and dispositions in 2021 and 2020, our primary business, which is carried out by Jingshan Sanhe, Jilin Chuangyuan, Anhui Ansheng, Fast Approach Inc. and Xianning Bozhuang, is:
| ● | To manufacture and distribute tea products; |
| ● | To manufacture and sell high-grade synthetic fuel products; |
| ● | To manufacture and sell formaldehyde, urea-formaldehyde glue, methylal, and clean fuel oil; |
| ● | To manufacture and sell the barrier and explosion-proof skid-mounted refueling devices, SF double-layer buried oil storage tank; |
| ● | To provide demand side platform and online advertising services; |
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 $5,058,376 for the nine months ended September 30, 2021. As of September 30, 2021, the Company had an accumulated deficit of $89,064,309; its net cash used in operating activities for the nine months ended September 30, 2021 was $13,006,187.
The Company plans to continue its expansion and investments, which will require continued improvements in revenue, net income, and cash flows.
Results of Operations
Three months ended September 30, 2021 Compared to three months ended September 30, 2020
| Three months ended | Increase / | Increase / | ||||||||||||||
| September 30, | Decrease | Decrease | ||||||||||||||
| (In Thousands of USD) | 2021 | 2020 | ($) | (%) | ||||||||||||
| Net revenues | 8,484 | 1,204 | 7,280 | 605 | ||||||||||||
| Cost of revenues | 7,133 | 515 | 6,618 | 1,285 | ||||||||||||
| Gross profit | 1,351 | 689 | 662 | 96 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing expenses | 454 | 57 | 397 | 696 | ||||||||||||
| General and administrative expenses | 3,237 | 705 | 2,532 | 359 | ||||||||||||
| Operating loss | (2,340 | ) | (73 | ) | (2,267 | ) | 3,105 | |||||||||
| Interest income (expenses), net | 139 | 3 | (142 | ) | (981 | ) | ||||||||||
| Other income | 118 | 79 | 39 | 50 | ||||||||||||
| Other expenses | (39 | ) | (34 | ) | 5 | 15 | ||||||||||
| Loss on disposal | - | (8,170 | ) | 8,170 | (100 | ) | ||||||||||
| (Loss) income before tax | (2,400 | ) | (8,195 | ) | 5,795 | (71 | ) | |||||||||
| Income tax expense/(income) | - | - | - | - | ||||||||||||
| Net loss | (2,400 | ) | (8,195 | ) | 5,795 | (71 | ) | |||||||||
The following table summarizes the results of our operations during the three-month periods ended September 30, 2021 and September 30, 2020, respectively, and provides information regarding the dollar and percentage increase or (decrease) from the three-month period ended September 30, 2021 compared to the three month period ended September 30, 2020:
Net Revenues. Our net revenues for the three months ended September 30, 2021 amounted to $8.48 million, which represents an increase of approximately $7.28million, or 605%, from $1.20 million for the three months ended September 30, 2020. This increase was attributable to the acquisition of certain subsidiaries and VIEs.
2
Cost of Revenues. During the three months ended September 30, 2021, we experienced an increase in cost of revenue of $6.62 million or 1285%, in comparison to the three months ended September 30, 2020, from approximately $0.5 million to $7.13 million. This increase was related to the acquisition of certain subsidiaries and VIEs.
Gross Profit. Our gross profit increased by $0.66 million, or 96%, to $1.35 million for the three months ended September 30, 2021 from $0.7 million for the three months ended September 30, 2020. This increase was mainly due to the reasons mentioned above, attributable to the acquisition of certain subsidiaries and VIEs.
Operating Expenses
Selling and Marketing Expenses. Our selling and marketing expenses increased by $0.39 million, or 650%, to $ 0.45 million for the three months ended September 30, 2021 from $0.06 million for the three months ended September 30, 2020. This increase was mainly due to our effort to expand our business.
General and Administrative Expenses. We experienced an increase in general and administrative expense of $2.53 million from $0.71 million to approximately $3.24 million for the three months ended September 30, 2021, compared to the three months ended September 30, 2020. This cost increase was mainly due to the cost incurred by issuing stock under the incentive stock plan.
Net Loss
Our net loss decreased by $5.80 million, or 71%, to a net loss of $2.40 million for three months ended September 30, 2021 from $8.20 million in net loss for the three months ended September 30, 2020. Such loss was primarily the result of the disposal of certain subsidiaries and VIEs.
Nine Months Ended September 30, 2021 Compared to nine months Ended September 30, 2020
The following table summarizes the results of our operations during the nine-month periods ended September 30, 2021 and September 30, 2020, respectively, and provides information regarding the dollar and percentage increase or (decrease) from the nine month period ended September 30, 2021 compared to the nine month period ended September 30, 2020:
| Nine months ended | Increase / | Increase / | ||||||||||||||
| September 30, | Decrease | Decrease | ||||||||||||||
| (In Thousands of USD) | 2021 | 2020 | ($) | (%) | ||||||||||||
| Net revenues | 15,597 | 2,472 | 13,125 | 531 | ||||||||||||
| Cost of revenues | 13,750 | 1,622 | 12,128 | 748 | ||||||||||||
| Gross profit | 1,847 | 850 | 997 | 117 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing expenses | 974 | 84 | 890 | 1,060 | ||||||||||||
| General and administrative expenses | 5,905 | 1,253 | 4,652 | 371 | ||||||||||||
| Operating loss | (5,032 | ) | (487 | ) | (4,545 | ) | 933 | |||||||||
| Interest income (expenses), net | (343 | ) | 7 | (350 | ) | (5,000 | ) | |||||||||
| Other income | 357 | 81 | 276 | 341 | ||||||||||||
| Other expenses | (41 | ) | (184 | ) | 143 | (78 | ) | |||||||||
| Loss on disposal | - | (8,321 | ) | 8,321 | (100 | ) | ||||||||||
| (Loss) income before tax | (5,059 | ) | (8,904 | ) | 3,845 | (43 | ) | |||||||||
| Income tax expense/(income) | - | - | - | - | ||||||||||||
| Net loss | (5,059 | ) | (8,904 | ) | 3,845 | (43 | ) | |||||||||
Net Revenues. Our net revenues for the nine months ended September 30, 2021 amounted to $15.6 million, which represents an increase of approximately $13.1 million, or 531%, from $2.47 million for the nine months ended September 30, 2020. This increase was attributable to the acquisition of certain subsidiaries and VIEs.
Cost of Revenues. During the nine months ended September 30, 2021, we experienced an increase in cost of revenue of $13.8 million or 748%, in comparison to the nine months ended September, 2020, from approximately $1.62 million to $12.1 million. This increase was related to the acquisition of certain subsidiaries and VIEs.
Gross Profit. Our gross profit increased by $1.00million, or 117%, to $1.85 million for the nine months ended September 30, 2021 from $0.85million for the nine months ended September 30, 2020. This increase was mainly due to the reasons mentioned above, attributable to the acquisition of certain subsidiaries and VIEs.
3
Operating Expenses
Selling and Marketing Expenses. Our selling and marketing expenses increased by $0.89 million, or 1060%, to $0.97 million for the nine months ended September 30, 2021 from $0.08 million for the nine months ended September 30, 2020. This increase was mainly due to our effort to expand our business.
General and Administrative Expenses. We experienced an increase in general and administrative expense of $4.65 million from $1.25 million to approximately $5.90 million for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. This cost increase was mainly due to the increase in intermediary service fees.
Net Loss
Our net loss decreased by $3.85 million, or 43%, to a net loss of $5.06 million for nine months ended September 30, 2021 from $8.9 million in net loss for the nine months ended September 30, 2020. Such decrease was primarily the result of the acquisition of certain subsidiaries and VIEs
Liquidity and Capital Resources
In assessing our liquidity, we monitor and analyze our cash-on-hand and our operating and capital expenditure commitments. Our liquidity needs are to meet our working capital requirements, operating expenses, and capital expenditure obligations. In the reporting period in the fiscal year 2021, our primary sources of financing have been cash generated from operations and private placements.
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 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.
Management anticipates that our existing capital resources and anticipated cash flows from operations are adequate to satisfy our liquidity requirements for the next 12 months. Our primary capital needs have been to fund our working capital requirements. In the past, our primary sources of financing have been cash generated from operations and private placements.
As of September 30, 2021, we had cash and cash equivalents (including restricted cash) of $0.76 million compared to $3.42 million as of December 31, 2020. The debt to assets ratio was 32.7% and 33.0% as of September 30, 2021 and December 31, 2020, We expect to continue to finance our operations and working capital needs in 2021 from cash generated from operations and, if needed, private financings. Suppose available liquidity is not sufficient to meet our operating and loan obligations as they come due. In that case, our plans include pursuing alternative financing arrangements or reducing expenditures as necessary to meet our cash requirements. However, there is no assurance that we will raise additional capital or reduce discretionary spending to provide liquidity if needed. We cannot be sure of the availability or terms of any alternative financing arrangements.
The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.
4
Cash Flows Data:
| For the nine months ended September 30, | ||||||||
| (In thousands of U.S. dollars) | 2021 | 2020 | ||||||
| Net cash flows used in operating activities | (13,006,187 | ) | (5,143,910 | ) | ||||
| Net cash flows used in investing activities | (42,350 | ) | (416,196 | ) | ||||
| Net cash flows provided by financing activities | 9,812,118 | 3,661,475 | ||||||
Operating Activities
Net cash used in operating activities was $13.01 million and $5.14 million for the nine months ended September 30, 2021 and 2020, respectively. The increase in net cash used in operating activities was mainly due to an increase of $3.94 million in inventories, an increase of $6.12 million in the prepayments and other current assets, the net effect of acquisition of subsidiaries and decrease net loss from $8.90 million to $5.06 million.
Investing Activities
Net cash used in investing activities for nine months ended September 30, 2021 was $0.04 million, representing a decrease of $0.4 million in net cash used in investing activities from $0.41 million for the same period of 2020. This is mainly due to there is no significant purchase of fixed assets in 2021.
Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2021, was $9.81 million, representing an increase of $6.30 million in net cash provided by financing activities from $3.66 million for the same period of 2020. This is mainly due to the proceeds from issuance of common stock.
Critical Accounting Policies
The preparation of financial statements in conformity with the United States generally accepted accounting principles requires our management to make assumptions, estimates, and judgments that affect the amounts reported in the financial statements, including the notes to that, and related disclosures of commitments contingencies, if any.
We consider our critical accounting policies to require the more significant judgments and estimates in the preparation of financial statements, including those outlined in Note 2 to the financial statements included herein.
The Company has evaluated the timing and the impact of the guidance above on the financial statements.
As of September 30, 2021, there were no other recently issued accounting standards not yet adopted that would or could have a material effect on the Company’s consolidated financial statements.
Off-Balance Sheet Arrangements
We do not have any off-balance arrangements.
5
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to 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, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2021. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2021, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were not effective due to the continuing material weakness in our internal control over financial reporting. We have not identified additional material weaknesses since such time.
The material weakness and significant deficiency identified by our management as of September 30, 2021 related to the ability of the Company to record transactions and provide disclosures in accordance with GAAP. We did not have sufficient and skilled accounting personnel with an appropriate level of experience in the application of 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 United States, have not attended United States institutions for training as accountants, and have not attended extended educational programs that would provide sufficient relevant education relating to GAAP. Our staff will require substantial training to meet the demands of a U.S. public company and our staff’s understanding of the requirements of GAAP-based reporting is inadequate.
We have commenced providing GAAP training sessions to our accounting team. The training sessions are organized to help our corporate accounting team gain experience in GAAP reporting and to enhance their awareness of new and emerging pronouncements with 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.
Changes in Internal Controls over Financial Reporting.
During the nine months ended September 30, 2021, there were no changes in our internal control over financial reporting identified in connection with the evaluation performed during the period covered by this report 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; | |
| (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. |
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.
6
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
We are a smaller reporting company and accordingly we are not required to provide information required by this Item.
Notwithstanding the foregoing, the Company provides additional risk factor disclosures set forth below for investors to consider in connection with reviewing our businesses and considering investing in our securities.
We are a holding company with no material operations of our own, we conduct a substantial majority of our operations through our subsidiaries established in the PRC and operated as variable interest entities (VIE). We control and receive the economic benefits of our VIE’s business operations through certain contractual arrangements. If the PRC government deems that the VIE arrangements in relation to our VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.
Planet Green is a Nevada company established in 1986 and is headquartered in Flushing, New York. We are a diversified technology, consumer products and chemical products company with presence in North America and China through its subsidiaries and VIE entities.
On July 30, 2021, the Chairman of the SEC issued a statement highlighting potential issues resulting from recent China regulatory changes and guidance that may impact investors’ investments in China based entities. According to the SEC Chairman, the People’s Republic of China provided new guidance to and placed restrictions on China-based companies raising capital offshore, including through associated offshore shell companies. These developments include China government-led cybersecurity reviews of certain companies raising capital through offshore entities. This is relevant to U.S. investors. In a number of sectors in China, companies are not allowed to have foreign ownership and cannot directly list on exchanges outside of China. To raise money on such exchanges, many China-based operating companies are structured as Variable Interest Entities (VIEs). In such an arrangement, a China-based operating company typically establishes an offshore shell company in another jurisdiction, such as the Cayman Islands, to issue stock to public shareholders. For U.S. investors, this arrangement creates “exposure” to the China-based operating company, though only through a series of service contracts and other contracts. To be clear, though, neither the investors in the shell company’s stock, nor the offshore shell company itself, has stock ownership in the China-based operating company.”
On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020 and replaced three existing laws on foreign investments in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law and the Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic invested enterprises in China. The Foreign Investment Law establishes the basic framework for the access to, and the promotion, protection and administration of foreign investments in view of investment protection and fair competition.
According to the China Foreign Investment Law, “foreign investment” refers to investment activities directly or indirectly conducted by one or more natural persons, business entities, or otherwise organizations of a foreign country (collectively referred to as “foreign investor”) within China, and the investment activities include the following situations: (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within China; and (iv) investments in other means as provided by laws, administrative regulations, or the State Council. The “variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. Under the Foreign Investment Law, variable interest entities that are controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors. Therefore, for any companies with a VIE structure in an industry category that is included in the “negative list” as restricted industry, the VIE structure may be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality (either PRC companies or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as FIEs and any operation in the industry category on the “negative list” without market entry clearance may be considered as illegal.
7
The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, cyber security, environmental regulations, land use rights, property and other matters. The central or local governments of jurisdictions such a China may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations or require us to relinquish ownership rights in some or all of our VIEs.
Although the Company is currently not required to obtain permission from any of the PRC federal or local government to obtain permission and has not received any denial to list its securities on any U.S. securities exchange, it is uncertain when and whether the Company will be required to obtain permission from the PRC government to continue to list on U.S. exchanges in the future.
We rely on contractual arrangements with our VIEs and their shareholders for a large portion of our business operations. These arrangements may not be as effective as direct ownership in providing operational control. Any failure by our VIEs or their shareholders to perform their obligations under such contractual arrangements would have a material and adverse effect on our business.
We have relied and expect to continue relying on contractual arrangements with our VIEs and their shareholders to operate our businesses in China and generate revenues.
These contractual arrangements may not be as effective as direct ownership in providing us with control over our VIEs. For example, our VIEs and their shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of our VIEs, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of our VIEs, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by our VIEs and their shareholders of their obligations under the contracts to exercise control over our VIEs. The shareholders of our consolidated VIEs may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the contractual arrangements with our VIEs.
If our VIEs or their shareholders fail to perform their respective obligations under the contractual arrangements, we may have difficulty in enforcing any rights the Company may have under the VIE Agreements in PRC and have to incur substantial costs and expend additional resources to enforce such arrangements. For example, if the shareholders of our VIEs refuse to transfer their equity interest in our VIEs to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. In addition, if any third parties claim any interest in such shareholders’ equity interests in our VIEs, our ability to exercise shareholders’ rights or foreclose the share pledge according to the contractual arrangements may be impaired. If these or other disputes between the shareholders of our VIEs and third parties were to impair our control over our VIEs, our ability to consolidate the financial results of our VIEs would be affected, which would in turn result in a material adverse effect on our business, operations and financial condition.
There are uncertainties under the PRC laws relating to the procedures for U.S. regulators to investigate and collect evidence from companies located in the PRC.
According to Article 177 of the newly amended PRC Securities Law which became effective in March 2020 (the “Article 177”), the securities regulatory authority of the PRC State Council may collaborate with securities regulatory authorities of other countries or regions in order to monitor and oversee cross border securities activities. Article 177 further provides that overseas securities regulatory authorities are not allowed to carry out investigation and evidence collection directly within the territory of the PRC, and that any Chinese entities and individuals are not allowed to provide documents or materials related to securities business activities to overseas agencies without prior consent of the securities regulatory authority of the PRC State Council and the competent departments of the PRC State Council.
8
Our principal business operations are conducted in the PRC. In the event that the U.S. regulators carry out investigation on us and there is a need to conduct investigation or collect evidence within the territory of the PRC, the U.S. regulators may not be able to carry out such investigation or evidence collection directly in the PRC under the PRC laws. The U.S. regulators may consider cross-border cooperation with securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory authority of the PRC., although there can be no assurance that such cooperation will be granted. From time to time, the Company may receive requests from certain U.S. agencies to investigate or inspect the Company’s operations or to otherwise provide information. While the Company will be compliant with these requests from these regulators, there is no guarantee that such requests will be honored by those entities who provide services to us or with whom we associate, especially as those entities are located in China. Furthermore, an on-site inspection of our facilities by any of these regulators may be limited or entirely prohibited. Such inspections, though permitted by the Company and its affiliates, are subject to the capricious nature of Chinese enforcers and may therefore be impossible to facilitate. A result, U.S. investors may not have available to them certain protections otherwise available to investors in U.S. based public companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 15, 2021, the Company and Jiayi Technologies, a subsidiary of the Company, entered into a share exchange agreement with Anhui Ansheng Petrochemical, and each of shareholders of Ansheng Petrochemical, pursuant to which, the Company issued an aggregate of 4,800,000 shares of common stock, par value $0.001 per share, of the Company, in in exchange for the acquisition of 66% of the outstanding equity interests of Anhui Ansheng.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
9
ITEM 6. EXHIBITS
The following exhibits are filed as part of this report.
| * | Filed herewith. |
| ** | Furnished herewith. |
| *** | Previously filed as an exhibit to the company’s Form 8-K filed with the Securities and Exchange Commission on July 16, 2021. |
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SIGNATURES
Pursuant to the requirements 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: November 15, 2021 | |
| PLANET GREEN HOLDINGS CORP. | |
| /s/ Bin Zhou | |
| Bin Zhou | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| /s/ Lili Hu | |
| Lili Hu | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
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