Related Party Transactions

6 Months Ended

Jun. 30, 2023

Related Party Transactions [Abstract]

Related Party Transactions

Note 8 – Related Party Transactions

Purchase

In order to reduce the purchase cost and enhance the purchase power, the Company purchases the main raw materials from Yongliansen Import and Export Trading Company (“Yongliansen”) and Shanghai Haozong Rubber & Plastic Technology Co., Ltd. (“Shanghai Haozong”), and also purchases equipment and rubber products under indirect supply model from Shanghai Huaxin Economic and Trade Co., Ltd. (“Shanghai Huaxin”) during the three months ended June 30, 2023 and 2022. The Company’s founder holds minor equity interests of the three suppliers directly or indirectly and one of the Company directors, Mr. Jun Tong holds 30% ownership of Shanghai Haozong.

For six months ended June 30, 2023 and 2022, the Company purchased raw materials from Yongliansen (“Vendor C”) in the total amount of $441,441 and $1,121,791, respectively. For three months ended June 30, 2023 and 2022, the total purchase amounts from Yongliansen were $72,052 and $543,838, respectively. As of June 30, 2023 and December 31, 2022, the Company advanced Yongliansen $50,691 and $10,353, respectively, mainly for raw material purchases.On November 30, 2020, RLSP advanced RMB 15 million or $2,068,595 as a deposit (the “Deposit”) to Yongliansen in order to lock-down our premium customer position among all customers of Yongliansen and maintain a long-term business relationship. The Deposit bears no interest and due on demand. Due to less procurement of raw materials made from Yongliansen in 2022, RLSP requested Yongliansen to refund the Deposit, and Yongliansen agreed to fully refund RLSP by December 31, 2022. On December 15, 2022, RLSP and Yongliansen entered into a Payment Agreement, among which Yongliansen requested to extend the repayment date of the Deposit to September 30, 2023, and RLSP has agreed to grant such extension request.

For six months ended June 30, 2023 and 2022, the Company purchased $3,864,667 and $3,793,171 rubber products from Shanghai Haozong (“Vendor A”), respectively, and purchased $1,956,561 and $1,236,093 rubber products from Shanghai Haozong for the three months ended June 30, 2023 and 2022, respectively. As of June 30, 2023 and December 31, 2022, $2,406,182 and $2,384,035 accounts payable due to Shanghai Haozong, respectively.

For six months ended June 30, 2023 and 2022, RLSP purchased $nil and $6,348 rubber products and equipment from Shanghai Huaxin (“Vendor B”), respectively, and purchased $nil and $6,348 for the three months ended June 30, 2023 and 2022, respectively. As of June 30, 2023 and December 31, 2022, $4,595,664 and $5,135,351 payable were due to Shanghai Huaxin, respectively, including $nil and $38,119 retainage payable, respectively.

On December 25, 2021, RLSP signed a Payment Extension Agreement with Shanghai Huaxin regarding outstanding account payable balance, which was amended on August 14, 2022. Under the amended Payment Extension Agreement, RLSP and Shanghai Huaxin both agreed that the $6,835,124 accounts payable as of June 30, 2022 shall be paid based on the agreed-upon payment schedule, of which $746,480 accounts payable should be paid before December 31, 2022. During the six months ended December 31, 2022, the Company has paid RMB 11,350,337 or about USD $1,626,379. For the six months ended June 30, 2023, RLSP has paid RMB2,095,000 or about USD 300,522. The remaining balance of $4,595,664 shall be paid by the end of December 31, 2023 per the Payment Extension Agreement.

Sales under Indirect Supply Model

In order to stabilize customer relationships and maintain long-term orders, we authorized two related parties - Shanghai Xinsen (“Customer B”) and Hangzhou Xinsen (“Customer C”) as our distributors. The Company’s President, Ms. Xingxiu Hua, held 90% ownership of Shanghai Xinsen and Shanghai Xinsen holds 70% ownership of Hangzhou Xinsen, or Ms. Hua owns 63% ownership of Hangzhou Xinsen, respectively. Effective on October 1, 2022, Ms. Hua reduced her ownership of Shanghai Xinsen to 15%, and so accordingly reduced her indirect ownership of Hangzhou Xinsen to 10.5%. Xinsen Group is a rubber product trading expert with 20 years of experience in the auto parts market, who charges 1% of the total sales amount before VAT tax as sales commission before June 30, 2023, and subsequently 0.25% effective from October 1, 2022 after the renegotiation between RLSP and Xinsen Group. Sales commission incurred in each period is recorded as part of selling expense of the Company.

For six months ended June 30, 2023 and 2022, RLSP had indirect sales through Xinsen Group that were sold to two certified first-tier suppliers of the Auto Manufacturers $3,358,311 and $3,719,213 respectively. For three months ended June 30, 2023 and 2022, the total indirect sales through Xinsen Group to the same downstream two customers were $1,910,202 and $1,205,594, respectively. As of June 30, 2023, and December 31, 2022, the accounts receivable due from Shanghai Xinsen were $4,164,544 and $4,665,735 respectively. Since the end of 2021, Shanghai Xinsen received some payments from their customers in the form of bank notes with expiration period between three to six months. However, RLSP does not accept bank notes as payments and agreed to temporarily extend the payment terms to four months from two months after negotiated with Shanghai Xinsen. RLSP held advances from Hangzhou Xinsen in the amounts of $17,989 and $18,912 as of June 30, 2023 and December 31, 2022, respectively.

Others

As of June 30, 2023 and December 31, 2022, the Company’s founder and officer funded the Company and RLSP in the total amount of $2,391,554 and $2,524,366 for its daily operation, respectively. The payable amounts bear no interest rate and due on demand. During the six months ended June 30, 2023 and 2022, the Company transferred cash in the amount of $194,000 and $188,565 respectively to RLSP as capital contribution for its daily operation, within the current existing approved registered capital amount of RLSP in China. The cash transfer has been approved by Agricultural Bank of China, Fenghua Branch, which is authorized by the State Administration of Foreign Exchange (the “SAFE”).