|
ITEM 1. Financial Statements
|
|
PLANET GREEN HOLDING CORP.
|
|
(FORMERLY KNOWN AS AMERICAN LORAIN CORPORATION)
|
|
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
|
|
(Stated in US Dollars)
|
|
F-1
PLANET GREEN HOLDINGS CORP.
|
(F/K/A AMERICAN LORAIN CORPORATION)
|
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
AT SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
|
(Stated in US Dollars)
|
|
|
2018
|
|
|
2017
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
109,355
|
|
$
|
85,493
|
|
Restricted cash
|
|
436,902
|
|
|
-
|
|
Short-term investments
|
|
3,815,541
|
|
|
-
|
|
Trade receivables, net
|
|
1,522,935
|
|
|
729,919
|
|
Inventories
|
|
6,448,871
|
|
|
10,593,403
|
|
Advances and prepayments to
suppliers
|
|
448,276
|
|
|
3,129,435
|
|
Other receivables and other current assets
|
|
2,771,309
|
|
|
1,612,682
|
|
Related party receivable
|
|
1,554,727
|
|
|
-
|
|
Prepaid taxes
|
|
406,649
|
|
|
-
|
|
Discontinued operations
current assets held for sale
|
|
-
|
|
|
790,550
|
|
Total current assets
|
$
|
17,514,565
|
|
$
|
16,941,482
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
Investments
|
|
6,891,240
|
|
|
-
|
|
Plant and equipment, net
|
|
8,806,837
|
|
|
36,663,290
|
|
Intangible assets, net
|
|
894,000
|
|
|
13,167,870
|
|
Construction in progress, net
|
|
1,262,727
|
|
|
819,301
|
|
Discontinued operations
long term assets held for sale
|
|
-
|
|
|
896,099
|
|
Total Assets
|
$
|
35,369,369
|
|
$
|
68,488,042
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Short-term bank loans
|
$
|
5,047,110
|
|
$
|
23,773,780
|
|
Long-term debt current
portion
|
|
-
|
|
|
30,511,656
|
|
Capital lease current portion
|
|
-
|
|
|
1,074,829
|
|
Accounts payable
|
|
1,899,367
|
|
|
4,150,604
|
|
Taxes payable
|
|
75,327
|
|
|
355,142
|
|
Accrued liabilities and other
payables
|
|
2,707,878
|
|
|
9,317,038
|
|
Customers deposits
|
|
416,896
|
|
|
485,295
|
|
Related party payable
|
|
9,240
|
|
|
-
|
|
Discontinued operations - liabilities
|
|
-
|
|
|
9,610,994
|
|
Total current liabilities
|
$
|
10,155,818
|
|
$
|
79,279,338
|
|
|
|
|
|
|
|
|
Stockholders
Equity/(Deficiency)
|
|
|
|
|
|
|
Preferred Stock, $0.001 par value, 5,000,000
shares authorized; 0 shares
issued and outstanding at September 30,
2018 and December 31, 2017, respectively
|
$
|
-
|
|
$
|
-
|
|
Common Stock, $0.001 par value, 200,000,000 shares authorized;
3,143,141 and 1,530,980 shares issued and outstanding as of September
30, 2018
and December 31, 2017, respectively
|
|
3,143
|
|
|
1,531
|
|
Additional paid-in capital
|
|
64,824,886
|
|
|
57,888,993
|
|
Statutory reserves
|
|
2,810,953
|
|
|
25,103,354
|
|
Accumulated deficit
|
|
(52,905,390
|
)
|
|
(99,628,547
|
)
|
Accumulated other
comprehensive income
|
|
7,887,909
|
|
|
13,588,726
|
|
Non-controlling interests
|
|
2,592,050
|
|
|
(7,745,353
|
)
|
Total Stockholders
Equity/(Deficiency)
|
$
|
25,213,551
|
|
$
|
(10,791,296
|
)
|
Total Liabilities and Stockholders Equity
|
$
|
35,369,369
|
|
$
|
68,488,042
|
|
See Accompanying Notes to the Financial Statements
F-2
PLANET GREEN HOLDINGS CORP.
|
(F/K/A AMERICAN LORAIN CORPORATION)
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
AND COMPREHENSIVE INCOME (LOSS)
|
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018
AND 2017
|
(Stated in US Dollars)
|
|
|
Three
months ended September
|
|
|
For the
nine months ended
|
|
|
|
30,
|
|
|
September
30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
744,131
|
|
$
|
875,574
|
|
$
|
2,461,448
|
|
$
|
4,060,100
|
|
|
|
|
|
|
252,268
|
|
|
|
|
|
|
|
Cost of revenues
|
|
574,278
|
|
|
|
|
|
1,617,308
|
|
|
3,480,759
|
|
Gross profit
|
|
169,853
|
|
|
623,306
|
|
|
844,140
|
|
|
579,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
8,953
|
|
|
34,330
|
|
|
61,945
|
|
|
4,491,272
|
|
General and administrative expenses
|
|
743,200
|
|
|
2,232,225
|
|
|
1,483,803
|
|
|
2,514,175
|
|
Total operating expenses
|
|
752,153
|
|
|
2,266,555
|
|
|
1,545,748
|
|
|
7,005,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
(582,300
|
)
|
|
(1,643,249
|
)
|
|
(701,608
|
)
|
|
(6,426,106
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government subsidy
|
|
-
|
|
|
7,037
|
|
|
-
|
|
|
587,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
-
|
|
|
214,185
|
|
|
245
|
|
|
1,308
|
|
Interest expense
|
|
(712,686
|
)
|
|
-
|
|
|
(713,409
|
)
|
|
(1,430,217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
6,280,690
|
|
|
9,089
|
|
|
2,956,428
|
|
Other expenses
|
|
(8,618,204
|
)
|
|
-
|
|
|
(8,634,106
|
)
|
|
(1,914,496
|
)
|
Gain (loss) from investment
|
|
56,703,834
|
|
|
-
|
|
|
56,714,094
|
|
|
-
|
|
|
|
47,372,944
|
|
|
6,501,912
|
|
|
47,375,913
|
|
|
200,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) before taxes
from continuing operations
|
|
46,790,644
|
|
|
4,858,663
|
|
|
46,674,305
|
|
|
(6,225,340
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
expense/(income)
|
|
(49,336
|
)
|
|
156,635
|
|
|
(49,336
|
)
|
|
156,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/income from continuing
operations
|
|
46,839,980
|
|
|
4,702,028
|
|
|
46,723,641
|
|
|
(6,381,976
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) from discontinued operations
|
|
-
|
|
|
(397,539
|
)
|
|
-
|
|
|
(7,112,707
|
)
|
Provision for income taxes
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
(Loss) from discontinued
|
|
-
|
|
|
(397,539
|
)
|
|
-
|
|
|
(7,112,707
|
)
|
operations, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
46,839,980
|
|
$
|
4,304,489
|
|
$
|
46,723,641
|
|
$
|
(13,494,683
|
)
|
Net income available (loss attributable) to:
|
|
|
|
|
|
|
|
|
|
|
|
|
- Common shareholders
|
|
46,839,980
|
|
|
4,570,667
|
|
|
46,723,641
|
|
|
(11,859.936
|
)
|
-
Non-controlling interests
|
|
-
|
|
|
(266,178
|
)
|
|
-
|
|
|
(1,634,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
gain (loss)
|
|
5,839,990
|
|
|
1,315,392
|
|
|
(5,700,817
|
)
|
|
4,381,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
$
|
52,679,970
|
|
$
|
5,619,881
|
|
$
|
41,022,824
|
|
$
|
(9,113,393
|
)
|
Income/(loss) per share from continuing
operations - Basic and diluted
|
$
|
17.26
|
|
$
|
3.07
|
|
$
|
20.39
|
|
$
|
(4.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share from discontinued
operations - Basic and diluted
|
$
|
-
|
|
$
|
(0.17
|
)
|
$
|
-
|
|
$
|
(4.65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share - Basic and diluted
|
$
|
17.26
|
|
$
|
2.81
|
|
$
|
20.39
|
|
$
|
(8.81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares
outstanding
|
|
2,713,632
|
|
|
1,530,980
|
|
|
2,291,075
|
|
|
1,530,980
|
|
See Accompanying Notes to the Financial Statements
F-3
PLANET GREEN HOLDINGS CORP.
|
(F/K/A AMERICAN LORAIN CORPORATION)
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND
2017
|
(STATED IN US DOLLARS)
|
|
|
For the
nine months ended
|
|
|
|
September
30,
|
|
|
|
2018
|
|
|
2017
|
|
Cash flows from operating
activities
|
|
|
|
|
|
|
Net income/(loss)
|
$
|
46,723,641
|
|
$
|
(6,381,976
|
)
|
Adjustments to reconcile net
income to net cash sourced (used) in operating activities:
|
|
|
|
|
|
|
Gain from disposal of investment and
subsidiaries
|
|
(61,185,851
|
)
|
|
-
|
|
Adjustment to retained
earnings as a result of disposal of subsidiaries
|
|
(97,172
|
)
|
|
-
|
|
Depreciation and amortization expense
|
|
55,495
|
|
|
2,294,448
|
|
Decrease in accounts and
other receivables
|
|
(1,211,552
|
)
|
|
1,937,550
|
|
Decrease in related party receivables
|
|
33,654,245
|
|
|
-
|
|
Decrease /(increase) in
inventories
|
|
(340,243
|
)
|
|
(10,723,104
|
)
|
Decrease/(increase) in advance to suppliers
|
|
(2,915
|
)
|
|
21,898,311
|
|
Decrease/(increase) in
prepayment
|
|
114,205
|
|
|
(535,226
|
)
|
Increase/(decrease) in accounts and other
payables
|
|
1,612,931
|
|
|
(1,081,393
|
)
|
Increase/(decrease) in taxes
payable
|
|
79,395
|
|
|
88,883
|
|
Increase/(decrease) in related party payable
|
|
(28,028,524
|
)
|
|
-
|
|
Increase in customer deposits
|
|
150,738
|
|
|
1,769,595
|
|
Net cash provided by (used in) operating
activities
|
|
(8,427,021
|
)
|
|
9,267,088
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Decrease/(increase) in
restricted cash
|
|
(460,569
|
)
|
|
-
|
|
Purchase of short-term investments
|
|
(3,815,541
|
)
|
|
|
|
Purchase of plant and
equipment
|
|
(2,401
|
)
|
|
-
|
|
Payment of construction in progress
|
|
-
|
|
|
(9,352,282
|
)
|
Sale of intangible assets
|
|
1,068,320
|
|
|
-
|
|
Payment for deposits
|
|
(2,216,906
|
)
|
|
-
|
|
Net cash (used in) provided
by investing activities
|
$
|
(5,427,097
|
)
|
$
|
(9,352,282
|
)
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
6,052,232
|
|
|
-
|
|
Increase in additional paid
in capital
|
|
9,469,423
|
|
|
|
|
Repayment of bank borrowings
|
|
-
|
|
|
(271,859
|
)
|
Proceeds from related party
receivables
|
|
(1,593,387
|
)
|
|
-
|
|
Net cash provided by financing activities
|
$
|
13,928,268
|
|
$
|
(271,859
|
)
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
25,564
|
|
|
(357,053
|
)
|
|
|
|
|
|
|
|
Effect of foreign currency translation on
cash and cash equivalents
|
|
(1,702
|
)
|
|
34,238
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsbeginning of year
|
|
85,493
|
|
|
426,054
|
|
|
|
|
|
|
|
|
Cash and cash equivalentsend of year
|
$
|
109,355
|
|
$
|
103,239
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
Interest received
|
$
|
245
|
|
$
|
70
|
|
Interest paid
|
$
|
-
|
|
$
|
513,825
|
|
Income taxes paid
|
$
|
-
|
|
$
|
310,820
|
|
|
|
|
|
|
|
|
NON-CASH TRANSACTIONS
|
|
|
|
|
|
|
Issuance of shares to purchase investment
|
$
|
1,400,000
|
|
$
|
-
|
|
See Accompanying Notes to the Financial Statements
F-4
PLANET GREEN HOLDINGS CORP.
|
(F/K/A AMERICAN LORAIN CORPORATION)
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
|
SEPTEMBER 30, 2018 AND DECEMBER 31, 2017
|
(Stated in US Dollars)
|
1.
|
Organization and Principal
Activities
|
Planet Green Holdings Corp. formerly
known as American Lorain Corporation (the Company or PLAG) is registered as
a corporation in the state of Nevada. The Company conducts its primary business
activities through its subsidiaries located in the Peoples Republic of China,
including its new acquired operating subsidiary Taishan Muren Agriculture Co.
Ltd. Those subsidiaries grow, develop, manufacture, and market fresh foods and
spices, convenience foods, chestnut products, and frozen foods.
2.
|
Summary of Significant Accounting
Policies
|
Method of accounting
Management has prepared the
accompanying financial statements and these notes in accordance 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:
|
|
|
Place of
|
|
|
Attributable equity
|
|
|
Registered
|
|
|
Name of Company
|
|
incorporation
|
|
|
interest %
|
|
|
capital
|
|
|
Planet Green Holdings
Corporation
|
|
British Virgin
Islands
|
|
|
100
|
|
$
|
10,000
|
|
|
JianShi Technology Holding Limited
|
|
Hong Kong
|
|
|
100
|
|
|
1,277
|
|
|
Shanghai Xunyang Internet
Technology Co. Ltd.
|
|
PRC
|
|
|
100
|
|
|
669,919
|
|
|
Beijing Lorain Co., Ltd.
|
|
PRC
|
|
|
VIE
|
|
|
1,540,666
|
|
|
Luotian Lorain Co., Ltd.
|
|
PRC
|
|
|
VIE
|
|
|
3,797,774
|
|
|
Shandong Greenpia Foodstuff Co., Ltd.
|
|
PRC
|
|
|
VIE
|
|
|
2,303,063
|
|
|
Taishan Muren Agriculture Co.
Ltd.
|
|
PRC
|
|
|
VIE
|
|
|
1,913,049
|
|
|
Lorain Foodstuff (Shenzhen) Co., Ltd.
|
|
PRC
|
|
|
VIE
|
|
|
500,000
|
|
Management has eliminated all
significant inter-company balances and transactions in preparing the
accompanying consolidated financial statements. Ownership interests of
subsidiaries that the Company does not wholly-own are accounted for as
non-controlling interests.
On May 18, 2018, the Company
incorporated Planet Green Holdings Corporation (Planet Green BVI), a limited
company incorporated in the British Virgin Islands. On September 28, 2018,
Planet Green BVI acquired JianShi Technology Holding Limited, a limited company,
incorporated in Hong Kong on February 21, 2012 and Shanghai Xunyang Internet
Tech Co. Ltd., a wholly-owned foreign entity incorporated in Shanghai, PRC on
August 29, 2012. The formation and acquisition of these companies was to
implement the Companys restructuring plans.
On September 28, 2018, the Company was
restructured by disposing its equity interest in International Lorain and its
subsidiaries to the former Chairman, Mr. Si Chen, and re-acquiring certain
equity interest in subsidiaries; namely, Shandong Greenpia, Beijing Lorain, and
Luotian Lorain, indirectly through Planet Green BVI. Please refer to Form 8-K
filed on October 2, 2018. The Company entered into exclusive arrangements with
Shandong Greenpia, Luotian Lorain, Taishan Muren, and Shenzhen Lorain and its
shareholders that give the Company the ability to substantially influence its daily
operations and financial affairs. The Company entered into exclusive
arrangements with Beijing Lorain; however, does not have significant influence
and is accounted for as equity method investment. The Company is the primary
beneficiary of Shandong Greenpia, Luotian Lorain, Taishan Muren, and Shenzhen
Lorain; therefore, it consolidates its accounts as a VIE.
Consolidation of Variable Interest
Entity
VIEs are entities that lack sufficient
equity to finance their activities without additional financial support from
other parties or whose equity holders lack adequate decision-making ability. Any
VIE with which the Company is involved must be evaluated to determine the
primary beneficiary of the risks and rewards of the VIE. Management makes
ongoing reassessments of whether the Company is the primary beneficiary of
Shenzhen Lorain.
On December 14, 2017, the Company
formed Shenzhen Lorain as a limited company under the laws of the PRC. Through
Shandong Greenpia, the Company entered into exclusive arrangements with Shenzhen
Lorain and its shareholders that give the Company the ability to substantially
influence Shenzhen Lorains daily operations and financial affairs and appoint
its senior executives. The Company is considered the primary beneficiary of
Shenzhen Lorain and it consolidates its accounts as a VIE. The Companys
arrangements with Shenzhen Lorain consist of the following agreements:
|
a.
|
Consultation and Service Agreement, dated December 14,
2017. Under this agreement entered into between Shandong Greenpia
Foodstuff Co., Ltd. and Lorain Foodstuff (Shenzhen) Co., Ltd.
|
|
b.
|
Business Cooperation Agreement, dated December 14, 2017.
Under this agreement entered into between Shandong Greenpia Foodstuff Co.,
Ltd. and Lorain Foodstuff (Shenzhen) Co., Ltd.
|
|
c.
|
Equity Pledge Agreement, dated December 14, 2017. Under
this agreement entered into between Mingyue Cai, Shandong Greenpia
Foodstuff Co., Ltd., and Lorain Foodstuff (Shenzhen) Co., Ltd.
|
|
d.
|
Equity Option Agreement, dated December 14, 2017. Under
this agreement entered into between Mingyue Cai, Shandong Greenpia
Foodstuff Co., Ltd., and Lorain Foodstuff (Shenzhen) Co., Ltd.
|
|
e.
|
Voting Rights Proxy and Financial Supporting Agreement
dated December 14, 2017. Under this agreement entered into between Mingyue
Cai, Shandong Greenpia Foodstuff Co., Ltd., and Lorain Foodstuff
(Shenzhen) Co., Ltd.
|
On September 27, 2018, the above
agreements were terminated due to the Companys restructuring and Shenzhen
Lorain was no longer a variable interest entity under Shandong Greenpia.
On September 27, 2018, through Shanghai
Xunyang Internet Technology Co. Ltd., the Company entered into exclusive
arrangements with Beijing Lorain Co., Ltd., Luotian Lorain Co., Ltd., Shandong
Greenpia Foodstuff Co., Ltd., Taishan Muren Agriculture Co. Ltd., and Lorain
Foodstuff (Shenzhen) Co., Ltd. and its shareholders that give the Company the
ability to substantially influence Shenzhen Lorains daily operations and
financial affairs and appoint its senior executives. The Company is considered
the primary beneficiary of these companies and it consolidates its accounts as a
VIE. The Companys arrangements with Beijing Lorain Co., Ltd., Luotian Lorain
Co., Ltd., Shandong Greenpia Foodstuff Co., Ltd., Taishan Muren Agriculture Co.
Ltd., and Lorain Foodstuff (Shenzhen) Co., Ltd. consist of the following
agreements:
|
a.
|
Consultation and Service Agreement, dated September 27,
2018. Under this agreement entered into between Shanghai Xunyang Internet
Technology Co. Ltd. and each respective entity; namely, Beijing Lorain
Co., Ltd., Luotian Lorain Co., Ltd., Shandong Greenpia Foodstuff Co.,
Ltd., Taishan Muren Agriculture Co. Ltd., and Lorain Foodstuff (Shenzhen)
Co., Ltd.
|
|
b.
|
Business Cooperation Agreement, dated September 27, 2018.
Under this agreement entered into between Shanghai Xunyang Internet
Technology Co. Ltd. and each respective
entity;namely, Beijing Lorain Co., Ltd., Luotian Lorain Co., Ltd.,
Shandong Greenpia Foodstuff Co., Ltd., Taishan Muren Agriculture Co. Ltd., and
Lorain Foodstuff (Shenzhen) Co., Ltd.
|
|
c.
|
Equity Pledge Agreement, dated September 27, 2018. Under
this agreement entered into between International Lorain Holding, Inc.,
Shanghai Xunyang Internet Technology Co. Ltd., and Beijing Lorain Co.,
Ltd.
|
|
d.
|
Equity Pledge Agreement, dated September 27, 2018. Under
this agreement entered into between International Lorain Holding, Inc.,
Shanghai Xunyang Internet Technology Co. Ltd., and Luotian Lorain Co.,
Ltd.
|
|
e.
|
Equity Pledge Agreement, dated September 27, 2018. Under
this agreement entered into between International Lorain Holding, Inc.,
Shanghai Xunyang Internet Technology Co. Ltd., and Shandong Greenpia
Foodstuff Co.
|
|
f.
|
Equity Pledge Agreement, dated September 27, 2018. Under
this agreement entered into between Shenzhen Jiamingrui Xinnong Co., Ltd.,
Shanghai Xunyang Internet Technology Co. Ltd., and Taishan Muren
Agriculture Co. Ltd.
|
|
g.
|
Equity Pledge Agreement, dated September 27, 2018. Under
this agreement entered into between Mingyue Cai, Shanghai Xunyang Internet
Technology Co. Ltd., and Lorain Foodstuff (Shenzhen) Co., Ltd.
|
|
h.
|
Equity Option Agreement, dated September 27, 2018. Under
this agreement entered into between International Lorain Holding, Inc.,
Shanghai Xunyang Internet Technology Co. Ltd., and Beijing Lorain Co.,
Ltd.
|
|
i.
|
Equity Option Agreement, dated September 27, 2018. Under
this agreement entered into between International Lorain Holding, Inc.,
Shanghai Xunyang Internet Technology Co. Ltd., and Luotian Lorain Co.,
Ltd.
|
|
j.
|
Equity Option Agreement, dated September 27, 2018. Under
this agreement entered into between International Lorain Holding, Inc.,
Shanghai Xunyang Internet Technology Co. Ltd., and Shandong Greenpia
Foodstuff Co.
|
|
k.
|
Equity Option Agreement, dated September 27, 2018. Under
this agreement entered into between Shenzhen Jiamingrui Xinnong Co., Ltd.,
Shanghai Xunyang Internet Technology Co. Ltd., and Taishan Muren
Agriculture Co. Ltd.
|
|
l.
|
Equity Option Agreement, dated September 27, 2018. Under
this agreement entered into between Mingyue Cai, Shanghai Xunyang Internet
Technology Co. Ltd., and Lorain Foodstuff (Shenzhen) Co., Ltd.
|
|
m.
|
Voting Rights Proxy and Financial Supporting Agreement
dated September 27, 2018. Under this agreement entered into between
International Lorain Holding, Inc., Shanghai Xunyang Internet Technology
Co. Ltd., and Beijing Lorain Co., Ltd.
|
|
n.
|
Voting Rights Proxy and Financial Supporting Agreement
dated September 27, 2018. Under this agreement entered into between
International Lorain Holding, Inc., Shanghai Xunyang Internet Technology
Co. Ltd., and Luotian Lorain Co., Ltd.
|
|
o.
|
Voting Rights Proxy and Financial Supporting Agreement
dated September 27, 2018. Under this agreement entered into between
International Lorain Holding, Inc., Shanghai Xunyang Internet Technology
Co. Ltd., and Shandong Greenpia Foodstuff Co.
|
|
p.
|
Voting Rights Proxy and Financial Supporting Agreement
dated September 27, 2018. Under this agreement entered into between
Shenzhen Jiamingrui Xinnong Co., Ltd., Shanghai Xunyang Internet
Technology Co. Ltd., and Taishan Muren Agriculture Co. Ltd.
|
|
q.
|
Voting Rights Proxy and Financial Supporting Agreement
dated September 27, 2018. Under this agreement entered into between
Mingyue Cai, Shanghai Xunyang Internet Technology Co. Ltd., and Lorain
Foodstuff (Shenzhen) Co., Ltd.
|
As of September 30, 2018, the following
entities were de-consolidated from the structure as a result of the sale
agreement executed on September 28, 2018:
|
|
|
Place of
|
|
|
Attributable equity
|
|
|
Registered
|
|
|
Name of Company
|
|
incorporation
|
|
|
interest %
|
|
|
capital
|
|
|
International Lorain Holding
Inc.
|
|
Cayman Islands
|
|
|
100.0
|
|
$
|
46,659,135
|
|
|
Junan Hongrun Foodstuff Co., Ltd.
|
|
PRC
|
|
|
100.0
|
|
|
44,861,741
|
|
|
Shandong Lorain Co., Ltd.
|
|
PRC
|
|
|
80.2
|
|
|
12,123,985
|
|
|
Dongguan Lorain Co., Ltd.
|
|
PRC
|
|
|
100.0
|
|
|
149,939
|
|
Discontinued operations
In 2017, the Company discontinued the
operations in Shandong Lorain Co. Ltd. and Dongguan Lorain Co., Ltd. As a
result, the financial results of these two subsidiaries are presented as
discontinued operations.
In the first quarter of 2018, the
Companys board of directors resolved to discontinue the operations of Junan
Hongrun Foodstuff Co. Ltd.
As of September 30, 2018, the Company
disposed International Lorain Holding Inc. and its subsidiaries: Junan Hongrun
Foodstuff Co., Ltd., Shandong Lorain Co., Ltd., Dongguan Lorain Co., Ltd. as a
result of the sale agreement. Refer to Form 8-K filed on October 2, 2018.
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 disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Management makes these
estimates using the best information available at the time the estimates are
made; however, actual results could differ materially from those estimates.
F-5
Planet Green Holdings Corporation
|
(f/k/a American Lorain Corporation)
|
Notes to Financial Statements
|
Cash and cash equivalents
The Company considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.
Investment securities
The Company classifies securities it
holds for investment purposes into trading or available-for-sale. Trading
securities are bought and held principally for the purpose of selling them in
the near term. All securities not included in trading securities are classified
as available-for-sale.
Trading and available-for-sale
securities are recorded at fair value. Unrealized holding gains and losses on
trading securities are included in the net income. Unrealized holding gains and
losses, net of the related tax effect, on available for sale securities are
excluded from net income and are reported as a separate component of other
comprehensive income until realized. Realized gains and losses from the sale of
available-for-sale securities are determined on a specific-identification basis.
A decline in the market value of any
available-for-sale security below cost that is deemed to be other-than-temporary
results in a reduction in carrying amount to fair value. The impairment is
charged as an expense to the statement of income and comprehensive income and a
new cost basis for the security is established. To determine whether impairment
is other-than-temporary, the Company considers whether it has the ability and
intent to hold the investment until a market price recovery and considers
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 subsequent to 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.
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 collection of the full
amount is no longer probable. Bad debts are written off as incurred.
Inventories
Inventories consist of raw materials
and finished goods which are stated at the lower of cost or market value.
Finished goods are comprised of direct materials, direct labor, inbound shipping
costs, and allocated overhead. The Company applies the weighted average cost
method to its inventory.
Advances and prepayments to
suppliers
The Company makes 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 0% to 10%. The estimated useful lives of the plant and
equipment are as follows:
F-6
Planet Green Holdings Corporation
|
(f/k/a American Lorain Corporation)
|
Notes to Financial Statements
|
|
Buildings
|
|
20-40 years
|
|
|
Landscaping, plant and tree
|
|
30 years
|
|
|
Machinery and equipment
|
|
1-10 years
|
|
|
Motor vehicles
|
|
10 years
|
|
|
Office equipment
|
|
5 years
|
|
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 Companys results of
operations. The costs of maintenance and repairs are recognized to expenses as
incurred; significant renewals and betterments are capitalized.
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 costs of acquisition and installation of
related equipment. Amounts classified as construction in progress and
prepayments for equipment are transferred to plant and equipment when
substantially all the activities necessary to prepare the assets for their
intended use are completed. Depreciation is not provided for assets classified
in this account.
Land use rights
Land use rights are carried at cost and
amortized on a straight-line basis over a specified period. Amortization is
provided using the straight-line method over 40-50 years.
Goodwill
Goodwill represents the excess of the
purchase price over the fair value of the net identifiable assets acquired in a
business combination. The Company conducts an annual assessment of its goodwill
for impairment. If the carrying value of its goodwill exceeds its fair value,
then impairment has incurred; accordingly, a charge to the Companys results of
operations will be recognized during the period. Fair value is generally
determined using a discounted expected future cash flow analysis.
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 be the result of becoming obsolete from a change in the industry,
introduction of new technologies, or if the Company has inadequate working
capital to utilize the long-lived assets to generate the adequate profits.
Impairment is present if the carrying amount of an asset is less than its
expected future undiscounted cash flows.
If an asset is considered impaired, a
loss is recognized based on the amount by which the carrying amount exceeds the
fair market value of the asset. Assets to be disposed are reported at the lower
of the carrying amount or fair value less costs to sell.
Statutory reserves
Statutory reserves are referring to the
amount appropriated from the net income in accordance with laws or regulations,
which can be used to recover losses and increase capital, as approved, and are
to be used to expand production or operations. PRC laws prescribe that an
enterprise operating at a profit must appropriate and reserve, on an annual
basis, an amount equal to 10% of its profit. Such an appropriation is necessary
until the reserve reaches a maximum that is equal to 50% of the enterprises PRC
registered capital.
F-7
Planet Green Holdings Corporation
|
(f/k/a American Lorain Corporation)
|
Notes to Financial Statements
|
Foreign currency translation
The accompanying financial statements
are presented in United States dollars. The functional currencies of the Company
are the Renminbi (RMB). The Companys assets and liabilities are translated into
United States dollars from RMB at year-end exchange rates, and 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.
|
|
|
9/30/2018
|
|
|
12/31/2017
|
|
|
9/30/2017
|
|
|
Period/year end RMB: US$
exchange rate
|
|
6.8665
|
|
|
6.5067
|
|
|
6.6545
|
|
|
Period/annual average RMB:
|
|
|
|
|
|
|
|
|
|
|
US$ exchange rate
|
|
6.5137
|
|
|
6.6133
|
|
|
6.8057
|
|
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 recognizes revenue when
persuasive evidence of arrangement exists, the price has been fixed or is
determinable, the delivery has been completed and no other significant
obligations of the Company exists, and collectability of payment is reasonably
assured. Payments received prior to all of the foregoing criteria are recorded
as customer deposits. Recorded revenue is derived from the value of goods
invoiced less value-added tax (VAT).
Advertising
All advertising costs are expensed as
incurred.
Shipping and handling
All outbound shipping and handling
costs are expensed as incurred.
Research and development
All research and development costs are
expensed as incurred.
Retirement benefits
Retirement benefits in the form of
mandatory government sponsored defined contribution plans are charged to the
either expenses as incurred or allocated to inventory as part of overhead.
Income taxes
The Company accounts for income tax
using an asset and liability approach and allows for recognition of 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 is able to realize their benefits, or that future realization
is uncertain.
Comprehensive income
The Company uses 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) in accordance with 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
effects of potentially convertible securities are calculated using the as-if
method; the potentially dilutive effect of options or warrants are calculated
using the treasury stock method. Securities that are potentially an
anti-dilutive effect (i.e. those that increase income per share or decrease loss
per share) are excluded from the calculation of diluted EPS.
F-8
Planet Green Holdings Corporation
|
(f/k/a American Lorain Corporation)
|
Notes to Financial Statements
|
Financial instruments
The Companys financial instruments,
including cash and equivalents, accounts and other receivables, accounts and
other payables, accrued liabilities and short-term debt, have carrying amounts
that approximate their fair values due to their short maturities. ASC Topic 820,
Fair Value Measurements and Disclosures, requires disclosure of the fair value
of financial instruments held by the Company. ASC Topic 825, Financial
Instruments, defines fair value, and establishes a three-level valuation
hierarchy for disclosures of fair value measurement that enhances disclosure
requirements for fair value measures. The carrying amounts reported in the
consolidated balance sheets for receivables and current liabilities each qualify
as financial instruments and are a reasonable estimate of their fair values
because of the short period of time between the origination of such instruments
and their expected realization and their current market rate of interest. The
three levels of valuation hierarchy are defined as follows:
|
|
Level 1 - inputs to the valuation methodology
used quoted prices for identical assets or liabilities in active markets.
|
|
|
Level 2 - inputs to the valuation methodology include
quoted prices for similar assets and liabilities in active markets, and
inputs that are observable for the asset or liability, either directly or
indirectly, for substantially the full term of the financial instrument.
|
|
|
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.
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.
Unaudited interim financial
information
These unaudited interim condensed
consolidated financial statements have been prepared in accordance with GAAP for
interim financial reporting and the rules and regulations of the Securities and
Exchange Commission that permit reduced disclosure for interim periods.
Therefore, certain information and footnote disclosures normally included in
financial statements prepared in accordance with GAAP have been condensed or
omitted. In the opinion of management, all adjustments of a normal recurring
nature necessary for a fair presentation of the financial position, results of
operations and cash flows for the periods presented have been made. The results
of operations for the interim periods presented are not necessarily indicative
of the results to be expected for the year ending December 31, 2018.
The consolidated balance sheets and
certain comparative information as of December 31, 2017 are derived from the
audited consolidated financial statements and related notes for the year ended
December 31, 2017 (2017 Annual Financial Statements), included in the
Companys 2017 Annual Report on Form 10-K. These unaudited interim condensed
consolidated financial statements should be read in conjunction with the 2017
Annual Financial Statements.
Recent accounting pronouncements
In January 2017, the FASB issued
guidance which simplifies the accounting for goodwill impairment. The updated
guidance eliminates Step 2 of the impairment test, which requires entities to
calculate the implied fair value of goodwill to measure a goodwill impairment
charge. Instead, entities will record an impairment charge based on the excess
of a reporting units carrying amount over its fair value, determined in Step 1.
The Company is currently evaluating the impact on the financial statements of
this guidance.
In January 2017, the FASB amended the
existing accounting standards for business combinations. The amendments clarify
the definition of a business with the objective of adding guidance to assist
entities with evaluating whether transactions should be accounted for as
acquisitions (or disposals) of assets or businesses.
The Company is evaluated the timing and
the impact of the aforesaid guidance on the financial statements.
F-9
Planet Green Holdings Corporation
|
(f/k/a American Lorain Corporation)
|
Notes to Financial Statements
|
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 settlement of loans or notes when they become due.
4.
|
Short-term investments
|
On September 20, 2018, the Company
purchased a short-term debt investment in the amount of USD $3,815,541
(RMB26,200,000) issued by Shenzhen Zhongjin Guotai Equity Investment Fund
Management Co., Ltd. The investment bears a fixed return of 8% per annum. The
investment matures on December 19, 2018. The Board of Directors approved this
transaction as a part of the Companys cash management and short-term investment
strategy.
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; international customers are
typically extended 90 days credit.
|
|
|
9/30/2018
|
|
|
12/31/2017
|
|
|
Trade accounts receivable
|
$
|
2,031,180
|
|
$
|
1,534,856
|
|
|
Less
:
Allowance for doubtful
accounts
|
|
(508,245
|
)
|
|
(804,937
|
)
|
|
|
$
|
1,522,935
|
|
$
|
729,919
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful
accounts:
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
(804,937
|
)
|
$
|
(695,547
|
)
|
|
Additions to allowance
|
|
-
|
|
|
109,390
|
|
|
Bad debt written-off
|
|
296,692
|
|
|
-
|
|
|
Ending balance
|
$
|
(508,245
|
)
|
$
|
(804,937
|
)
|
Inventories consisted of the following
as of September 30, 2018 and December 31, 2017
|
|
|
9/30/2018
|
|
|
12/31/2017
|
|
|
Raw materials
|
$
|
2,455,404
|
|
$
|
2,846,507
|
|
|
Work in progress
|
|
195,257
|
|
|
-
|
|
|
Finished goods
|
|
3,798,210
|
|
|
7,746,896
|
|
|
|
$
|
6,448,871
|
|
$
|
10,593,403
|
|
The Companys investment is comprised
of 30% of equity interest in Beijing Lorain after the Companys restructuring.
Property, plant, and equipment
consisted of the following as of September 30, 2018 and December 31, 2017:
|
|
|
9/30/2018
|
|
|
12/31/2017
|
|
|
At Cost:
|
|
|
|
|
|
|
|
Buildings
|
$
|
10,119,295
|
|
$
|
47,004,352
|
|
|
Machinery
and equipment
|
|
1,299,557
|
|
|
6,096,099
|
|
|
Office equipment
|
|
62,581
|
|
|
433,451
|
|
|
Motor
vehicles
|
|
26,331
|
|
|
162,330
|
|
|
Biological assets
|
|
1,608,318
|
|
|
-
|
|
|
|
$
|
13,116,082
|
|
$
|
53,696,232
|
|
|
|
|
|
|
|
|
|
|
Less
: Accumulated
depreciation
|
|
(4,309,245
|
)
|
|
(17,032,942
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
8,806,837
|
|
$
|
36,663,290
|
|
Depreciation expense for the nine
months ended September 30, 2018 and 2017 was $250,591 and $1,497,637,
respectively.
9.
|
Other receivables and other current
assets
|
As of September 30, 2018, other
receivables and other current assets was primarily deposits paid to an unrelated
party to purchase land use rights and real property.
F-10
Planet Green Holdings Corporation
|
(f/k/a American Lorain Corporation)
|
Notes to Financial Statements
|
|
|
|
9/30/2018
|
|
|
12/31/2017
|
|
|
At Cost:
|
|
|
|
|
|
|
|
Land use rights
|
$
|
1,249,045
|
|
$
|
15,366,444
|
|
|
Less
: Accumulated
amortization
|
|
(355,045
|
)
|
|
(2,198,574
|
)
|
|
|
$
|
894,000
|
|
$
|
13,167,870
|
|
All land is owned by the government in
China. Land use rights represent the Companys purchase of usage rights for a
parcel of land for a specified duration of time, typically 50 years.
Amortization expense for the nine months ended September 30, 2018 and 2017 was
$24,291 and $796,811, respectively.
On August 8, 2015, the Company
re-organized its French operations by merging the operations of Conserverie
Minerve into its immediate parent Athena, and concurrently, Athena wound up and
dissolved Conserverie Minerve. Athena subsequently changed its own legal name to
Conserverie Minerve and to continue its business. At the date of acquisition,
the net liability of Conserverie Minerve was $3,255,911(EUR 2,968,089); the
purchase consideration paid for the Athena (aka Conserverie Minerve) was
$2,100,000. The acquisition of Athena and its then subsidiaries gave rise to
goodwill in the amount of $6,786,928. As of December 31, 2015, the surviving
business entity, Conserverie Minerve, on a post merged basis, recognized net
operating losses during the year ended December 31, 2015. As of December 31,
2015, the Company was unable to determine if the Conserverie Minerve would be
able to generate future profit and positive operating cash flows to justify the
carrying value of goodwill in the amount of $6,786,928; accordingly, the Company
elected to write-off the goodwill that it had recognized during its acquisition
of Conserverie Minerve. Conserverie Minerve had a goodwill of its own that had
accumulated over the years as result of its acquisition of subsidiaries; at
December 31, 2015, the outstanding balance was $3,219,172. As mentioned in Note
2 - Summary of Significant Accounting Policies-Principles of Consolidation,
Conserverie Minerve has been liquidated and the Company no longer has any
interest in Conserverie Minerve; accordingly, all remaining goodwill was written
off during the year ended December 31, 2017.
Bank loans include bank overdrafts,
short-term bank loans, and current portion of long-term loan, which consisted of
the following as of September 30, 2018 and December 31, 2017:
|
Short-term Bank Loans
|
|
9/30/2018
|
|
|
12/31/2017
|
|
|
|
|
|
|
|
|
|
|
Loan from Industrial and
Commercial Bank of China,
|
|
|
|
|
|
|
|
Interest rate at 6.955% per annum; due 4/20/2016
|
|
-
|
|
|
3,838,005
|
|
|
Interest rate at 4.30% per annum; due 4/30/2017
|
|
-
|
|
|
1,152,658
|
|
|
Interest rate at 4.30% per annum; due 5/30//2017
|
|
-
|
|
|
1,211,059
|
|
|
Interest rate at 4.30% per annum; due 6/29/2017
|
|
-
|
|
|
1,152,658
|
|
|
Interest rate at 4.30% per annum; due 8/2/2017
|
|
-
|
|
|
1,014,339
|
|
|
|
|
|
|
|
|
|
|
Loan from China Minsheng Bank Corporation,
Linyi Branch
|
|
|
|
|
|
|
|
Interest rate at 5.98% per annum due 9/22/2016
|
|
-
|
|
|
1,535,340
|
|
|
|
|
|
|
|
|
|
|
Loan from Agricultural
Bank of China, Luotian Branch
|
|
|
|
|
|
|
|
Interest rate at 5.65% per annum due 4/22/2017
|
|
1,456,339
|
|
|
1,536,877
|
|
|
|
|
|
|
|
|
|
|
Luotian Sanliqiao Credit Union,
|
|
|
|
|
|
|
|
Interest rate at 9.72% per annum due 1/14/2017
|
|
1,456,339
|
|
|
1,536,877
|
|
|
Interest rate at 9.72% per annum due 2/4/2017
|
|
436,902
|
|
|
461,063
|
|
|
Interest rate at 9.72% per annum due 9/7/2017
|
|
87,380
|
|
|
92,213
|
|
|
|
|
|
|
|
|
|
|
Bank of Ningbo,
|
|
|
|
|
|
|
|
Interest rate at 7.80% per annum due 10/27/2016
|
|
-
|
|
|
1,229,502
|
|
|
|
|
|
|
|
|
|
|
Hankou Bank, Guanggu Branch,
|
|
|
|
|
|
|
|
Interest rate at 6.85% per annum due 10/24/2016
|
|
1,318,883
|
|
|
1,391,820
|
|
|
|
|
|
|
|
|
|
|
Postal Savings Bank of
China,
|
|
|
|
|
|
|
|
Interest rate at 9.72% per annum due 7/27/2016
|
|
392,951
|
|
|
399,588
|
|
|
|
|
|
|
|
|
|
|
China Construction Bank,
|
|
|
|
|
|
|
|
Interest rate at 6.18% per annum due 11/29/2016
|
|
-
|
|
|
768,439
|
|
|
|
|
|
|
|
|
|
|
Huaxia Bank,
|
|
|
|
|
|
|
|
Interest rate at 5.66% per annum due 5/19/2017
|
|
-
|
|
|
1,536,877
|
|
|
|
|
|
|
|
|
|
|
City of Linyi Commercial Bank, Junan
Branch,
|
|
|
|
|
|
|
|
Interest rate at 8.4% per annum due 2/16/2016
|
|
-
|
|
|
1,535,334
|
|
|
Interest rate at 8.4% per annum due 11/24/2016
|
|
-
|
|
|
3,073,756
|
|
|
|
|
|
|
|
|
|
|
Hubei Jincai Credit and Financial Services
Co. Ltd.
|
|
|
|
|
|
|
|
Interest rate at 9.00% per annum due 1/12/2017
|
|
291,267
|
|
|
307,375
|
|
|
|
$
|
5,047,110
|
|
$
|
23,773,780
|
|
F-11
Planet Green Holdings Corporation
|
(f/k/a American Lorain Corporation)
|
Notes to Financial Statements
|
The short-term loans, which are
denominated in Renminbi and Euros, were primarily obtained for general working
capital. If not otherwise specifically indicated above, short-term bank loans
are guaranteed either by other companies within the group, or by personnel in
senior management positions within the group. As of September 30, 2018, all
short-term loans have been in default and have not been repaid. The Company is
in negotiations to renew these loans or modify the repayment terms and principal
amount due.
As of September 30, 2018, as a result
of the disposal of International Lorain Holding Inc. and its subsidiaries: Junan
Hongrun Foodstuff Co., Ltd., Shandong Lorain Co., Ltd., Dongguan Lorain Co.,
Ltd., the Company is no longer liable for certain bank loans as they have been
transferred to Mr. Si Chen, the former chairman.
13.
|
Current Portion Long Term
Debt
|
Current portions of notes payable,
debentures, and long-term debt consisted of the following as of September 30,
2018 and December 31, 2017:
|
|
|
9/30/2018
|
|
|
12/31/2017
|
|
|
Debenture issued by 5
private placement holders
underwritten by Guoyuan Securities Co.,
Ltd.
|
|
|
|
|
|
|
|
Interest rate at 10% per annum due 8/28/2016
|
$
|
-
|
|
$
|
9,517,882
|
|
|
|
|
|
|
|
|
|
|
Debenture issued by 2 private placement
holders
underwritten by Daiwa SSC Securities Co. Ltd.
|
|
|
|
|
|
|
|
Interest rate at 9.5% per annum due 11/8/2015
|
|
-
|
|
|
15,368,774
|
|
|
Loans from Deutsche Investitions-und
Entwicklungsgesellschaft mbH (DEG)
|
|
|
|
|
|
|
|
Interest rate at 5.510% per annum due 3/15/2015
|
|
-
|
|
|
1,875,000
|
|
|
Interest rate at 5.510% per annum due 9/15/2015
|
|
-
|
|
|
1,875,000
|
|
|
Interest rate at 5.510% per annum due 3/15/2016
|
|
-
|
|
|
1,875,000
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
$
|
30,511,656
|
|
The Company began repaying principal
and interest on the loan with DEG in semi-annual installments on December 15,
2012. As of September 30, 2018 and December 31, 2017, the Company had not repaid
any principal nor interest. The loan was collateralized with the following
terms:
|
(a.)
|
A first ranking mortgage in the amount of about
USD $12,000,000 on the Companys land and building in favor of DEG.
|
|
(b.)
|
A share pledge, by Mr. Si Chen (a major shareholder, and
Chairman and CEO of the Company) as the sponsor of the loan, to secure
approximately USD $12,000,000 of the loan. The Company defaulted on its
loan with DEG; accordingly, on December 7, 2016, DEG exercised its rights
to foreclose on 10,794,066 shares pledged by Mr. Si Chen. The loan remains
outstanding.
|
|
(c.)
|
The total amount of the first ranking mortgage as
indicated in the Loan Agreement (Article 12(1)(a)) and the value of the
pledged shares by Mr. Si Chen (Loan Agreement (Article 12(1)(a))) should
be at least USD 24,000,000 in aggregate.
|
|
(d.)
|
A personal guarantee by Mr. Si Chen in form and
substance satisfactory to DEG.
|
F-12
As a result of disposal of
International Lorain and the subsidiaries, The Company is in default of the
debentures that were issued by Guoyuan Securities and Daiwa SSC Securities and
negotiating with the debenture holders to extend repayment terms.
As of September 30, 2018, as a result
of the disposal of International Lorain Holding Inc. and its subsidiaries: Junan
Hongrun Foodstuff Co., Ltd., Shandong Lorain Co., Ltd., Dongguan Lorain Co.,
Ltd., the Company is no longer liable for certain bank loans as they have been
transferred to Mr. Si Chen, the former chairman.
On December 28, 2017, the Company
entered into a securities purchase agreement, pursuant to which Yi Li and Beili
Zhu, each an individual residing in the Peoples Republic of China, agreed to
invest an aggregate of $1.275 million in the Company in exchange for an
aggregate of 300,000 shares of the Companys common stock, representing a purchase price of $4.25 per share. The transaction
closed on January 23, 2018.
On April 14, 2018, the Company entered
into a securities purchase agreement, pursuant to which Zongqi Shi, Aidi Zhang,
Qiong Chen, Yi Li, Beili Zhu, Yanbo Wang, Jinhui Chen and Guoyang Zeng, each an
individual residing in the Peoples Republic of China, agreed to invest an
aggregate of $1.629 million in the Company in exchange for an aggregate of
362,000 shares of the Companys common stock, representing a purchase price of $4.50 per share. The transaction closed on August 10,
2018.
On April 24, 2018, the Company entered
into a securities purchase agreement, pursuant to which Xiupin Cai, an
individual residing in the Peoples Republic of China, agreed to invest an
aggregate of $1,800,000 million in the Company in exchange for an aggregate of
400,000 shares of the Companys common stock, representing a
purchase price of $4.50 per share. The transaction
closed on August 10, 2018.
On July 12, 2018, the Company entered
into a securities purchase agreement, pursuant to which Yunpeng Zhang and
Zhongquan Sun, individuals residing in the Peoples Republic of China, agreed to
invest an aggregate of $750,000 in the Company in exchange for an aggregate of
150,000 shares of the Companys common stock, par value $0.001 per share,
representing a purchase price of $5.00 per share. The
transaction closed on August 2, 2018.
On September 25, 2018, the Company and
Shanghai Xunyang Internet Technology Co., Ltd., a subsidiary of the Company,
entered into a Share Exchange Agreement with Taishan Muren Agriculture Co. Ltd.,
a limited liability company registered in China, and Shenzhen Jiamingrui New
Agriculture Co., Ltd., a limited liability company registered in China, the sole
shareholder of the Taishan Muren Agriculture Co. Ltd., pursuant to which, among
other things and subject to the terms and conditions contained therein, the
Subsidiary agreed to effect an acquisition of Taishan Muren Agriculture Co. Ltd.
by acquiring from Shenzhen Jiamingrui New Agriculture Co., Ltd. all outstanding
equity interests of Taishan Muren Agriculture Co. Ltd.
Pursuant to the Share Exchange
Agreement, in exchange for the transfer of all of the outstanding shares of
Taishan Muren Agriculture Co. Ltd, the Company agreed to issue 400,000 shares, a
post-reverse stock split amount, of the Companys common stock to Shenzhen
Jiamingrui New Agriculture Co., Ltd. The share issuance was accounted for as of
September 30, 2018 although the shares for subsequently issued on October 1,
2018.
On September 28, 2018, the Company
filed a Certificate of Amendment with the Secretary of State of the State of
Nevada to effect a reverse stock split of its common stock at a ratio of
twenty-five-for-one (25-for-1). The financing transactions listed above are
presented as of the reverse stock split had already taken place.
There were 3,143,141 shares of common
stock outstanding as of September 30, 2018, which includes the 400,000 shares
issued to Shenzhen Jiamingrui New Agriculture Co., Ltd. for the acquisition of
Taishan Muren Agriculture Co. Ltd.
For the nine months ended September 30,
2017 and 2018, the Company had not issued shares as stock compensation to
employees.
All of the Companys continuing
operations are located in the PRC. The corporate income tax rate in the PRC is
25%.
The following tables provide the
reconciliation of the differences between the statutory and effective tax
expenses following as of September 30, 2018 and 2017:
|
|
|
9/30/2018
|
|
|
9/30/2017
|
|
|
Loss attributed to PRC
continuing operations
|
$
|
(283,668
|
)
|
$
|
(6,163,090
|
)
|
|
Income/(loss) attributed to U.S. operations
|
|
46,439,953
|
|
|
(62,250
|
)
|
|
Income/(loss) before tax
|
$
|
46,723,641
|
|
$
|
(6,225,340
|
)
|
|
|
|
|
|
|
|
|
|
PRC Statutory Tax at 25% Rate
|
|
-
|
|
|
-
|
|
|
Effect of tax exemption granted
|
|
-
|
|
|
-
|
|
|
Income tax
|
$
|
(49,336
|
)
|
$
|
156,636
|
|
Per Share Effect of Tax
Exemption
|
|
|
9/30/2018
|
|
|
9/30/2017
|
|
|
Effect of tax exemption
granted
|
$
|
-
|
|
$
|
-
|
|
|
Weighted-Average Shares Outstanding Basic
|
|
2,291,075
|
|
|
1,530,380
|
|
|
Per share effect
|
$
|
-
|
|
$
|
-
|
|
The difference between the U.S. federal
statutory income tax rate and the Companys effective tax rate was as follows of
September 30, 2018 and 2017:
|
|
|
9/30/2018
|
|
|
9/30/2017
|
|
|
U.S. federal statutory income
tax rate
|
|
21%
|
|
|
35%
|
|
|
Higher (lower) rates in PRC, net
|
|
4%
|
|
|
-10%
|
|
|
Non-recognized deferred tax
benefits in the PRC
|
|
-25%
|
|
|
-27.54%
|
|
|
The Companys effective tax rate
|
|
0%
|
|
|
-2.54%
|
|
F-13
16.
|
Earnings/(Loss) Per Share
|
Components of basic and diluted
earnings per share were as follows:
|
|
|
For the
nine months ended
|
|
|
|
|
September
30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
Basic and diluted (loss)
earnings per share numerator:
|
|
|
|
|
|
|
|
Income/(loss) from continuing operations
(attributable) available to common stockholders
|
$
|
46,723,641
|
|
|
(6,381,976
|
)
|
|
(Loss) income from
discontinued operations (attributable) available to common stockholders
|
|
-
|
|
|
(5,477,960
|
)
|
|
(Loss) income (attributable) available to
common stockholders
|
|
46,723,641
|
|
|
(11,859,936
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted (loss) earnings per share
denominator:
|
|
|
|
|
|
|
|
Original Shares:
|
|
1,530,980
|
|
|
1,530,980
|
|
|
Additions from Actual Events
-Issuance
of Common Stock
|
|
2,752,941
|
|
|
-
|
|
|
Basic Weighted Average Shares
Outstanding
|
|
2,291,075
|
|
|
1,530,980
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) per share from
continuing operations - Basic and diluted
|
|
20.39
|
|
|
(4.16
|
)
|
|
|
|
|
|
|
|
|
|
Income/(loss) per share from
discontinued operations - Basic and diluted
|
|
-
|
|
|
(4.65
|
)
|
|
|
|
|
|
|
|
|
|
Income/(loss) per share -
Basic and diluted
|
|
20.39
|
|
|
(8.81
|
)
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Outstanding - Basic and diluted
|
|
2,291,075
|
|
|
1,530,980
|
|
F-14
Planet Green Holdings Corporation
|
(f/k/a American Lorain Corporation)
|
Notes to Financial Statements
|
For the year ended December 31, 2016,
the Company entered into four operating lease agreements leasing two plots of
land where biological assets are grown, two offices, and farming facilities. For
the year ended December 31, 2017, Taishan Muren Agriculture Co. Ltd. entered
into three operating lease agreements leasing three additional plots of land
where biological assets are grown.
The leases entered and expires as
follows:
|
Lease
|
Date Commenced
|
Date of expiration
|
|
Lease #1
|
March 1, 2016
|
February 28, 2031
|
|
Lease #2
|
March 1, 2016
|
February 28, 2031
|
|
Lease #3
|
March 1, 2016
|
February 28, 2031
|
|
Lease #4
|
November 1, 2016
|
November 1, 2019
|
|
Lease #5
|
January 1, 2017
|
February 28, 2031
|
|
Lease #6
|
January 1, 2017
|
February 28, 2031
|
|
Lease #7
|
January 1, 2018
|
February 28, 2031
|
The minimum future lease payments for
these properties at September 30, 2018 are as follows:
|
Period
|
|
Lease Payable
|
|
|
Year 1
|
$
|
220,631
|
|
|
Year 2
|
|
220,485
|
|
|
Year 3
|
|
220,456
|
|
|
Year 4
|
|
220,456
|
|
|
Year 5
|
|
220,456
|
|
|
Thereafter
|
|
1,635,050
|
|
|
|
$
|
2,737,534
|
|
The outstanding lease commitments for
the leases listed above as of September 30, 2018 was $2,737,534.
F-15
American Lorain Corporation
|
Notes to Financial Statements
|
The Companys 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 Companys 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.
The company is subject to interest
rate risk when short term loans become due and require refinancing.
|
C.
|
Economic and political risks
|
The Companys operations are conducted
in the PRC. Accordingly, the Companys business, financial condition, and
results of operations may be influenced by changes in the political, economic,
and legal environments in the PRC.
The Companys operations in the PRC
are subject to special considerations and significant risks not typically
associated with companies in North America and Western Europe. These include
risks associated with, among others, the political, economic and legal
environment and foreign currency exchange. The Companys results may be
adversely affected by changes in the political and social conditions in the PRC,
and by changes in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency conversion, remittances abroad, and rates
and methods of taxation, among other things.
The Company has procured environmental
licenses required by the PRC government. The Company has both a water treatment
facility for water used in its production process and secure transportation to
remove waste off site. In the event of an accident, the Company has purchased
insurance to cover potential damage to employees, equipment, and local
environment.
F-16
Management monitors changes in prices
levels. Historically inflation has not materially impacted the companys
financial statements; however, significant increases in the price of raw
materials and labor that cannot be passed to the Companys customers could
adversely impact the Companys results of operations.
On August 8, 2018, the Company entered
into an amended and restated securities purchase agreement with Yimin Jin, the
Companys chief strategy officer and director, and Hongxiang Yu, the Companys
chairman, chief executive officer and president (collectively, the
purchasers), pursuant to which the purchasers agreed to invest an aggregate of
$10 million in the Company in exchange for an aggregate of 2,352,942 shares (on
a post-reverse stock split basis) of the Companys common stock, representing a
purchase price of approximately $4.25 per share.
On October 16, 2018, the Company closed
the Financing, which was approved at the Company's 2018 annual meeting of
stockholders held on September 26, 2018. At the closing, the Company received
gross proceeds of $10,000,000 in the aggregate, in exchange for the issuance of
the shares.
F-17
ITEM 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations Overview
Overview
Historically, we have been an integrated food manufacturing
company headquartered in China. We have developed, manufactured and sold the
following types of food products:
|
|
Chestnut products;
|
|
|
Convenience foods (including ready-to-cook, or
RTC, foods, and, ready-to-eat, or RTE, foods); and
|
|
|
Frozen food products.
|
We conduct our production activities in China. Our products are
sold in the Chinese domestic markets.
Following our recent restructuring and acquisition, which are
described below under Recent Developments, we still maintain certain of our
old operations and also grow various spice plants and fruit trees, and sell such
products, in China.
Recent Developments
Financings
On July 12, 2018, the Company entered
into a securities purchase agreement with Yunpeng Zhang and Zhongquan Sun, who
agreed to invest an aggregate of $750,000 in the Company in exchange for an
aggregate of 150,000 shares of the Companys common stock, representing a
purchase price of $5.00 per share. This financing closed on August 2, 2018.
On
August 8, 2018, the Company entered into an amended and restated securities
purchase agreement with Yimin Jin, the Companys chief strategy officer and
director, and Hongxiang Yu, the Companys chairman, chief executive officer and
president (collectively, the
Purchasers
), pursuant to which the
Purchasers agreed to invest an aggregate of $10 million in the Company in
exchange for an aggregate of 2,352,942 shares (on a post-reverse stock split
basis) of the Companys common stock (the
Shares
), representing a
purchase price of approximately $4.25 per share (the
Financing
). On
October 16, 2018, the Company closed the Financing, which was approved at the
Company's 2018 annual meeting of stockholders held on September 26, 2018. At the
closing, the Company received gross proceeds of $10,000,000 in the aggregate, in
exchange for the issuance of the Shares.
Sale Transaction
On
August 8, 2018, the Company, Si Chen, and the Companys direct and indirect
subsidiaries, Planet Green Holdings Corp., 100% owned by the Company (
Planet
Green
), Junan Hongrun Foodstuff Co., Ltd. (
Junan
), Shandong Lorain
Co., Ltd. (
Shandong Lorain
), International Lorain Holdings, Inc., 100%
owned by the Company (
ILH
), Shandong Greenpia Foodstuff Co., Ltd.
(
Shandong Greenpia
), Beijing Lorain Co., Ltd. (
Beijing Lorain
)
and Luotian Lorain Co., Ltd. (
Luotian Lorain
) entered into a share
exchange agreement (the
Sale Agreement
). The Sale Agreement provided
for:
|
|
the sale of 100% of the equity interest in ILH
by the Company to Mr. Chen (the
Disposition
); and
|
|
|
the purchase of (A) 50% of the issued and outstanding
shares of Shandong Greenpia, (B) 30% of Beijing Lorain and (C) 100% of the
issued and outstanding shares of Luotian Lorain (collectively, the Planet
Green Shares) by Planet Green from ILH (the
Exchange
and,
collectively with the Disposition, the
Sale
Transaction
).
|
On
September 26, 2018, the Companys stockholders approved the Sale Transaction and
related proposals at the Annual Meeting. On September 28, 2018, the Company
closed the Sale Transaction.
Acquisition Transaction
On
September 25, 2018, the Company and Shanghai Xunyang Internet Technology Co.,
Ltd. (
Xunyang
), a subsidiary of the Company, entered into a Share
Exchange Agreement (the
Acquisition Agreement
) with Taishan Muren
Agriculture Co. Ltd., a limited liability company registered in China
(
Target
), and Shenzhen Jiamingrui New Agriculture Co., Ltd., a limited
liability company registered in China (the
Seller
), the sole
shareholder of the Target, pursuant to which, among other things and subject to
the terms and conditions contained therein, Xunyang agreed to effect an
acquisition of Target by acquiring from the Seller all outstanding equity
interests of Target (the
Acquisition Transaction
). Target grows various
spice plants and fruit trees and sells such products in China.
Pursuant
to the Acquisition Agreement, in exchange for the transfer of all of the
outstanding shares of Target to the Subsidiary, the Company agreed to
issue 400,000 shares of the Companys common stock to the Seller. On September
28, 2018, the Company closed the Acquisition Transaction.
Management Changes
On
September 26, 2018, at the Annual Meeting, the Companys stockholders elected
Hongxiang Yu, Yimin Jin, Yuguo Zhang, Yilei Shao and Guangming Fang to serve as
directors of the Company for a one-year term, expiring at the Companys 2019
annual meeting. Hongxiang Yu was also elected to serve as the Chairman of the
Companys board of directors (the
Board
). As of September 26, 2018, Si
Chen and Maoquan Wei are no longer members of the Board.
On
September 27, 2018, Si Chen resigned as the Companys Chief Executive Officer
and President, and Yunqiang Sun resigned as the Companys Chief Financial
Officer.
On
September 27, 2018, the Board appointed Hongxiang Yu to serve as the Chief
Executive Officer and President of the Company and Yu Li as the Chief Financial
Officer.
Reverse Stock Split
On
September 28, 2018, the Company filed a Certificate of Amendment (the
Certificate of Amendment
) to its Articles of Incorporation (as amended,
the
Charter
) with the Secretary of State of the State of Nevada to: (i)
change the Companys name from American Lorain Corporation to Planet Green
Holdings Corp. and (ii) effect a reverse stock split of its common stock at a
ratio of twenty-five-for-one (25-for-1).
Results of Operations
Three Months Ended September 30, 2018 Compared to Three
Months Ended September 30, 2017
The following table summarizes the results of our operations
during the three-month periods ended September 30, 2018 and September 30, 2017,
respectively and provides information regarding the dollar and percentage
increase or (decrease) from the three-month period ended September 30, 2018
compared to the three month period ended September 30, 2017.
(All amounts, other than percentages, stated in thousands of
U.S. dollars)
|
|
Three
months ended
|
|
|
Increase /
|
|
|
Increase /
|
|
|
|
September
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
|
|
|
Decrease
|
|
(In Thousands of USD)
|
|
2018
|
|
|
2017
|
|
|
($)
|
|
|
(%)
|
|
Net revenues
|
|
744
|
|
|
876
|
|
|
(132
|
)
|
|
(15.1
|
) %
|
Cost of revenues
|
|
574
|
|
|
252
|
|
|
322
|
|
|
127.8
|
%
|
Gross profit (loss)
|
|
170
|
|
|
623
|
|
|
(453
|
)
|
|
(72.7
|
) %
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
9
|
|
|
34
|
|
|
(25
|
)
|
|
(73.5
|
) %
|
General and administrative expenses
|
|
743
|
|
|
2,232
|
|
|
(1,489
|
)
|
|
(66.7
|
) %
|
Operating (loss) Income
|
|
(582
|
)
|
|
(1,643
|
)
|
|
(1,061
|
)
|
|
(64.6
|
) %
|
Government subsidy income
|
|
-
|
|
|
7
|
|
|
(7
|
)
|
|
(100.0%
|
)%
|
Interest and other income
|
|
-
|
|
|
6,495
|
|
|
(6,495
|
)
|
|
(100.0
|
) %
|
Other expenses
|
|
(8,618
|
)
|
|
-
|
|
|
8,618
|
|
|
100.0
|
%
|
Interest expense
|
|
(713
|
)
|
|
-
|
|
|
713
|
|
|
100.0
|
%
|
Gain from investment
|
|
56,704
|
|
|
-
|
|
|
56,704
|
|
|
100
|
%
|
Income before tax from
continuing operations
|
|
46,791
|
|
|
4,859
|
|
|
41,932
|
|
|
863.0
|
%
|
Income tax expense/(income)
|
|
(49
|
)
|
|
157
|
|
|
(206)
|
|
|
131.2
|
%
|
Net income from continuing
operations
|
|
46,840
|
|
|
4,702
|
|
|
42,138
|
|
|
896.2
|
%
|
Net (loss) income from discontinued
operations
|
|
-
|
|
|
(398
|
)
|
|
(398
|
)
|
|
(100.0
|
) %
|
Net Income
|
|
46,840
|
|
|
4,304
|
|
|
42,536
|
|
|
988.3
|
%
|
Non-controlling interests
|
|
-
|
|
|
(266
|
)
|
|
(266
|
)
|
|
(100.0
|
) %
|
Net income of common
stockholders
|
|
46,840
|
|
|
4,571
|
|
|
42,269
|
|
|
924.7
|
%
|
Revenue
Net Revenues
. Our net revenue for the three months ended
September 30, 2018 amounted to $0.7 million, which represents a decrease of
approximately $0.2 million, or 22.2%, from the three-month period ended on
September 30, 2017, in which our net revenue was $0.9 million. This decrease was
attributable to the disposal of certain of our historical subsidiaries.
Cost of Revenues.
During the three months ended
September 30, 2018, we experienced an increase in cost of revenue of $0.3
million, in comparison to the three months ended September 30, 2017, from
approximately $0.3 million to $0.6 million, reflecting an increase of 50.0% .
This increase was related to our new subsidiary, Taishan Muren Agriculture Co.
Ltd.
Gross Profit
. Our gross profit decreased $0.4 million,
or 66.7%, to $0.2 million for the three months ended September 30, 2018 from
$0.6 million for the three months ended September 30, 2017, attributable to the
disposal of certain of our historical subsidiaries.
Operating Expenses
Selling and Marketing Expenses
. Our selling and
marketing expenses decreased $0.025 million, or 73.5%, to $0.009 million during
the three months ended September 30, 2018, as compared to $0.034 million during
the three months ended September 30, 2017. The decrease of our selling and
marketing expenses is mainly due to the decrease of sales activities.
General and Administrative Expenses.
We experienced a
decrease in general and administrative expense of $1.5 million from $2.2 million
to approximately $0.7 million for the three months ended September 30, 2018,
compared to the three months ended September 30, 2017. General and
administrative expenses incurred by PRC subsidiaries to maintain our operation
in China decreased during such periods due to the disposal of certain of our
historical subsidiaries.
Other Expenses
Other expenses, consisting of related party account receivable,
was approximately $8.6 million for the three months ended September 30, 2018,
compared to $0 million during the three months ended September 30, 2017. Such
increase was attributable to the reorganization and disposal of several
subsidiaries which contains a huge amount of related party account receivable.
Interest Expense
Interest expense, consisting of interest payments with respect
to our outstanding loans, was $0.7 million for the three months ended September
30, 2018, compared to $0 million during the three months ended September 30,
2017. Such increase was attributable to our interest repayments on outstanding
loans.
Gain From Investment
Gain from investment, representing a gain resulting from a
recent corporate restructuring, was approximately $56.7 million for the three
months ended September 30, 2018, compared to $0 million during the three months
ended September 30, 2017.
Net Income
Net income increased to $46.8 million for the three months
ended September 30, 2018 from $4 million for the three months ended September
30, 2017. Such gain was primarily the result of a corporate restructuring
involving the disposition of investments in certain subsidiaries which resulted
in a substantial gain.
Nine Months Ended September 30, 2018 Compared to Nine Months
Ended September 30, 2017
The following table summarizes the results of our operations
during the nine-month period ended September 30, 2018 and September 30, 2017,
respectively, and provides information regarding the dollar and percentage
increase or (decrease) from the nine-month period ended September 30, 2018
compared to the nine-month period ended September 30, 2017.
(All amounts, other than percentages, stated in thousands of
U.S. dollars)
|
|
Nine months
ended
|
|
|
Increase /
|
|
|
Increase /
|
|
|
|
September
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
|
|
|
Decrease
|
|
(In Thousands of USD)
|
|
2018
|
|
|
2017
|
|
|
($)
|
|
|
(%)
|
|
Net revenues
|
|
2,461
|
|
|
4,060
|
|
|
(1,599
|
)
|
|
(39.4
|
) %
|
Cost of revenues
|
|
1,617
|
|
|
3,480
|
|
|
(1,863
|
)
|
|
(53.5
|
) %
|
Gross profit (loss)
|
|
844
|
|
|
579
|
|
|
265
|
|
|
45.8
|
%
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
62
|
|
|
4,491
|
|
|
(4,429
|
)
|
|
(98.6
|
) %
|
General and administrative expenses
|
|
1,484
|
|
|
2,514
|
|
|
(1,030
|
)
|
|
(41.0
|
) %
|
Operating (loss) Income
|
|
(702
|
)
|
|
(6,426
|
)
|
|
(5,724
|
)
|
|
(89.1
|
) %
|
Government subsidy income
|
|
-
|
|
|
588
|
|
|
(588
|
)
|
|
(100.0
|
) %
|
Interest and other income
|
|
9
|
|
|
2,958
|
|
|
(2,949
|
)
|
|
(99.7
|
) %
|
Other expenses
|
|
(8,634
|
)
|
|
(1,914
|
)
|
|
6,720
|
|
|
351.1
|
%
|
Interest expense
|
|
(713
|
)
|
|
(1,430
|
)
|
|
(717
|
)
|
|
(50.1
|
) %
|
Gain from investment
|
|
56,714
|
|
|
-
|
|
|
56,714
|
|
|
100
|
%
|
Income/(Loss) before tax from
continuing operations
|
|
46,674
|
|
|
(6,225
|
)
|
|
52,899
|
|
|
849.8
|
%
|
Income tax expense/(income)
|
|
(49
|
)
|
|
157
|
|
|
206
|
|
|
131.2-
|
%
|
Net (loss)/income from
continuing operations
|
|
46,724
|
|
|
(6,382
|
)
|
|
53,106
|
|
|
832.1
|
%
|
Net (loss) /income from discontinued
operations
|
|
-
|
|
|
(7,113
|
)
|
|
(7,113
|
)
|
|
(100.0
|
) %
|
Net income (loss)
|
|
46,724
|
|
|
(13,495
|
)
|
|
60,219
|
|
|
446.2
|
%
|
Non-controlling interests
|
|
-
|
|
|
(1,635
|
)
|
|
1,635
|
|
|
100.0
|
%
|
Net income of common
stockholders
|
|
46,724
|
|
|
(11,860
|
)
|
|
58,584
|
|
|
494.0
|
%
|
Revenue
Net Revenues
. Our net revenue for the nine months ended
September 30, 2018 amounted to $2.5 million, which represents a decrease of
approximately $1.6 million, or 39.0%, from the nine-month period ended on
September 30, 2017, in which our net revenue was $4.1 million. This decrease was
attributable to the disposal of, and decreased revenue generated by, certain of
our historical subsidiaries.
Cost of Revenues.
During the nine months ended September
30, 2018, we experienced a decrease in cost of revenue of $1.9 million, in
comparison to the nine months ended September 30, 2017, from approximately $3.5
million to $1.6 million, reflecting a decrease of 54.3% . This decrease was
attributable to the decrease in sales.
Gross Profit
. Our gross profit increased $0.2 million,
or 33.3%, to $0.8 million for the nine months ended September 30, 2018 from $0.6
million for the same period in 2017, attributable to lower cost of revenue.
Operating Expenses
Selling and Marketing Expenses
. Our selling and
marketing expenses decreased $4.44 million, or 98.7%, to $0.06 million during
the third quarter of 2018, as compared to $4.5 million during the same period
last year. Our selling and marketing expenses during such period in 2018
consisted primarily of daily sales expenses.
General and Administrative Expenses.
We experienced a
decrease in general and administrative expense of $1.0 million from $2.5 million
to approximately $1.5 million for the nine months ended September 30, 2018,
compared to the same period in 2017. General and administrative expenses
incurred by PRC subsidiaries to maintain our operation in China decreased during
such periods due to the disposal of certain of our subsidiaries.
Government Subsidy Income
Government subsidy income was $0 million for the nine months
ended September 30, 2018 compared to $0.6 million during the same period in
2017. Due to poor performance of our historical operations, we were ineligible
to receive subsidies during such period.
Other Expenses
Other expenses, consisting of related party account receivable,
was approximately $8.6 million for the nine months ended September 30, 2018,
compared to $1.9 million during the nine months ended September 30, 2017. Such
increase was attributable to the reorganization and disposal of several
subsidiaries which contains a huge amount of related party account receivable.
Interest Expense
Interest expense, consisting of interest payments with respect
to our outstanding loans, was $0.7 million for the nine months ended September
30, 2018, compared to $1.4 million during the same period in 2017. Such
reductions were attributable to our less loan comparing to the same period of
last year.
Gain From Investment
Gain from investment, representing a gain resulting from a
recent corporate restructuring, was approximately $56.7 million for the nine
months ended September 30, 2018, compared to $0 million during the nine months
ended September 30, 2017.
Net Income
Net income increased to $46.7 million for the nine months ended
September 30, 2018 from a net loss of $13.5 million for the same period of 2017.
The main reasons for the increase of income were the gain form our investment on
new subsidiary, Taishan Muren.
Liquidity and Capital Resources
In the reporting period in 2018, our primary sources of
financing have been cash generated from operations and private placements of our
securities. In addition to the financing transactions described under Recent
Developments above, we raised funds in the following three private placements
during the first quarter of 2018:
|
|
On April 14, 2018, the Company entered into a securities
purchase agreement with the investors name therein, who agreed to invest
an aggregate of $1.629 million in the Company in exchange for an aggregate
of 362,000 shares of the Companys common stock, representing a purchase
price of $4.50 per share.
|
|
|
On April 24, 2018, the Company entered into a securities
purchase agreement with Xiuping Cai, who agreed to invest an aggregate of
$1.8 million in the Company in exchange for an aggregate of 400,000
shares of the Companys common stock, representing a purchase price of
$4.50 per share.
|
|
|
On July 12, 2018, the Company entered into a securities
purchase agreement with Yunpeng Zhang and Zhongquan Sun, who agreed to
invest an aggregate of $750,000 in the Company in exchange for an
aggregate of 150,000 shares of the Companys common stock, representing
a purchase price of $5.00 per share.
|
As a result of our recent corporate restructuring, our
historical bank loans that have been in default were transferred to Si Chen and
are no longer liabilities of ours.
On September 20, 2018, the Company purchased a short-term debt
investment in the amount of USD $3,815,541 (RMB26,200,000) issued by Shenzhen
Zhongjin Guotai Equity Investment Fund Management Co., Ltd. The investment bears
a fixed return of 8% per annum. The investment matures on December 19, 2018. The
Board of Directors approved this transaction as a part of the Companys cash
management and short-term investment strategy.
As of September 30, 2018, we had cash and cash equivalents
(including restricted cash) of $0.1 million. Our cash and cash equivalents
increased by approximately $0.006 million from September 30, 2017. The following
table provides detailed information about our net cash flow for all financial
statement periods presented in this report.
Cash Flow (In thousands)
|
|
For the
Nine Months Ended
|
|
|
|
September
30,
|
|
|
|
2018
|
|
|
2017
|
|
Net cash (used in)/provided
by operating activities
|
|
(8,427
|
)
|
|
9,267
|
|
Net cash provided by/ (used in) investing
activities
|
|
(5,427
|
)
|
|
(9,352
|
)
|
Net cash provided by/ (used
in) financing activities
|
|
13,928
|
|
|
(272
|
)
|
Net cash flow
|
|
25
|
|
|
(357
|
)
|
Operating Activities
Net cash used in operating activities was $8.4 million and
provided by operating activities was $9.3 million for the nine month periods
ended September 30, 2018 and 2017, respectively. The decrease of approximately
$0.3 million in net cash flows used in operating activities in the nine months
of 2018 was primarily due to an increase of $53.1 million in net income, $61.2
from disposal of investment and subsidiaries, $3.1 in accounts and other
receivables. An increase of $2.6 million in accounts and other payables, $21.9
million in advance to suppliers during the current reporting period, and a
decrease of $28.0 million in related party payable and $33.7 million in related
party receivable.
Investing Activities
Net cash used in investing activities for the nine months
period ended September 30, 2018 was $5.4 million, representing a decrease of
$4.0 million in net cash used in investing activities from $9.4 million for the
same period of 2017. The difference was primarily a result of the
discontinued operations of our French company, Junan Hongrun, Dongguan Lorain,
and Shandong Lorain.
Financing Activities
Net cash provided by financing activities for the nine months
period ended September 30, 2018 was $13.9 million, representing an increase of
$14.2 million in net cash provided by financing activities from $9.4 million
used for the same period of 2017. The difference was primarily a result of
investors input raised from the additional capital contribution and private
financing.
Loan Facilities
As of September 30, 2018, the amounts and maturity dates for
our short-term bank loans are as set forth in the Notes to the Financial
Statements. The total amounts outstanding were $5.0 million as of September 30,
2018, compared with $23.4 million as of September 30, 2017.
Critical Accounting Policies
The preparation of financial statements in conformity with
United States generally accepted accounting principles requires our management
to make assumptions, estimates and judgments that affect the amounts reported in
our financial statements, including the notes thereto, and related disclosures
of commitments and contingencies, if any. We consider our critical accounting
policies to be those that require significant judgments and estimates in the
preparation of financial statements, including those set forth in Note 2 to the
financial statements included herein.
Off-Balance Sheet Arrangements
We do not have any off-balance arrangements.