ITEM
1. Financial Statements
|
|
PLANET
GREEN HOLDINGS CORP.
|
|
UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
MARCH
31, 2019 AND DECEMBER 31, 2018
|
|
(Stated
in US Dollars)
|
CONTENTS
|
|
PAGES
|
|
|
|
Unaudited
Condensed Consolidated Balance Sheets
|
|
F-2
|
|
|
|
Unaudited
Condensed Consolidated Statements of Operations and Comprehensive Loss
|
|
F-3
|
|
|
|
Unaudited
Condensed Consolidated Statements of Changes in Stockholders’ Equity/(Deficiency)
|
|
F-4
|
|
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows
|
|
F-5
|
|
|
|
Notes
to Financial Statements
|
|
F-6 to F-18
|
PLANET
GREEN HOLDINGS CORP.
|
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
AT
MARCH 31, 2019 AND DECEMBER 31, 2018
|
(Stated
in US Dollars)
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,367,758
|
|
|
$
|
1,062,643
|
|
Trade receivables, net
|
|
|
1,044,381
|
|
|
|
6,528,072
|
|
Inventories
|
|
|
10,265
|
|
|
|
-
|
|
Advances and prepayments to suppliers
|
|
|
7,609,439
|
|
|
|
7,381,785
|
|
Other receivables and other current assets
|
|
|
297
|
|
|
|
16,316
|
|
Related party receivable
|
|
|
1,944
|
|
|
|
2,208
|
|
Discontinued operations - current assets held for sale
|
|
|
|
|
|
|
-
|
|
Total current assets
|
|
$
|
10,034,084
|
|
|
$
|
14,991,024
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Plant and equipment, net
|
|
|
1,330,474
|
|
|
|
1,371,518
|
|
Construction in progress, net
|
|
|
864,409
|
|
|
|
846,441
|
|
Deposits
|
|
|
1,507
|
|
|
|
1,477
|
|
Discontinued operations - long term assets held for sale
|
|
|
|
|
|
|
-
|
|
Total Assets
|
|
$
|
12,230,474
|
|
|
$
|
17,210,460
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
475,147
|
|
|
$
|
579,228
|
|
Taxes payable
|
|
|
60,571
|
|
|
|
155,135
|
|
Accrued liabilities and other payables
|
|
|
492,528
|
|
|
|
496,799
|
|
Customers deposits
|
|
|
-
|
|
|
|
3,499
|
|
Related party payable
|
|
|
90,483
|
|
|
|
78,656
|
|
Discontinued operations - liabilities
|
|
|
3,643,696
|
|
|
|
8,607,813
|
|
Total current liabilities
|
|
$
|
4,762,425
|
|
|
$
|
9,921,130
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity/(Deficiency)
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 0 shares issued and outstanding
as of March 31, 2019 and December 31,2018, respectively
|
|
$
|
|
|
|
$
|
-
|
|
Common Stock, $0.001 par value, 200,000,000 shares authorized; 5,497,765 shares issued and outstanding as
of March 31, 2019 and December 31,2018, respectively
|
|
|
5,498
|
|
|
|
5,498
|
|
Additional paid-in capital
|
|
|
74,739,031
|
|
|
|
74,739,031
|
|
Statutory reserves
|
|
|
2,810,953
|
|
|
|
2,810,953
|
|
Accumulated deficit
|
|
|
(79,031,187
|
)
|
|
|
(79,038,883
|
)
|
Accumulated other comprehensive income
|
|
|
9,984,943
|
|
|
|
9,792,283
|
|
Non-controlling interests
|
|
|
(1,041,189
|
)
|
|
|
(1,019,552
|
)
|
Total Stockholders’ Equity/(Deficiency)
|
|
$
|
7,468,049
|
|
|
$
|
7,289,330
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
12,230,474
|
|
|
$
|
17,210,460
|
|
See Accompanying Notes to the Financial
Statements
PLANET
GREEN HOLDINGS CORP.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
AND
COMPREHENSIVE INCOME (LOSS)
|
FOR
THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
|
(Stated
in US Dollars)
|
|
|
For the Three months ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
1,078,245
|
|
|
$
|
1,017,528
|
|
Cost of revenues
|
|
|
779,988
|
|
|
|
901,491
|
|
Gross profit
|
|
|
298,257
|
|
|
|
116,037
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
110
|
|
|
|
21,947
|
|
General and administrative expenses
|
|
|
234,569
|
|
|
|
162,387
|
|
Total operating expenses
|
|
|
234,679
|
|
|
|
184,334
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
63,578
|
|
|
|
(68,297
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
161
|
|
|
|
486
|
|
Other income
|
|
|
-
|
|
|
|
730
|
|
Other expenses
|
|
|
-
|
|
|
|
(3,482
|
)
|
|
|
|
161
|
|
|
|
(2,266
|
)
|
|
|
|
|
|
|
|
|
|
Income (loss) Loss before taxes from continuing operations
|
|
|
63,739
|
|
|
|
(70,563
|
)
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
56,043
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
7,696
|
|
|
|
(70,563
|
)
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
-
|
|
|
|
13,046
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
Income (loss) from discontinued operations, net of taxes
|
|
|
-
|
|
|
|
13,046
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
7,696
|
|
|
$
|
(57,517
|
)
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to:
|
|
|
|
|
|
|
|
|
- Common shareholders
|
|
|
7,696
|
|
|
|
(60,100
|
)
|
- Non-controlling interests
|
|
|
-
|
|
|
|
2,583
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
192,662
|
|
|
|
(446,052
|
)
|
Comprehensive income (loss)
|
|
$
|
200,358
|
|
|
$
|
(503,569
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share from continuing operations
|
|
|
|
|
|
|
|
|
- Basic and diluted
|
|
|
0.00
|
|
|
|
(0.04
|
)
|
Income (loss) per share from discontinued operations
|
|
|
|
|
|
|
|
|
- Basic and diluted
|
|
|
0.00
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
|
|
|
|
|
|
- Basic and diluted
|
|
|
0.00
|
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
5,497,765
|
|
|
|
1,754,313
|
|
See Accompanying Notes to the Financial
Statements
PLANET GREEN HOLDINGS CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY/(DEFICIENCY)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(Stated in US Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
of
|
|
|
Common
|
|
|
Paid-in
|
|
|
Statutory
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Controlling
|
|
|
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Capital
|
|
|
Reserves
|
|
|
Deficit
|
|
|
Income
|
|
|
Interests
|
|
|
Total
|
|
Balance, January 1, 2018
|
|
|
1,530,980
|
|
|
$
|
1,531
|
|
|
$
|
57,888,993
|
|
|
$
|
25,103,354
|
|
|
$
|
(99,628,547
|
)
|
|
$
|
13,588,726
|
|
|
$
|
(7,745,353
|
)
|
|
$
|
(10,791,296
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(60,100
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(60,100
|
)
|
Issuance of common stock for cash
|
|
|
300,000
|
|
|
|
300
|
|
|
|
1,274,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,275,000
|
|
Allocation to non-controlling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,583
|
|
|
|
2,583
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(446,052
|
)
|
|
|
-
|
|
|
|
(446,052
|
)
|
Balance, March 31, 2018
|
|
|
1,830,980
|
|
|
$
|
1,831
|
|
|
$
|
59,163,693
|
|
|
$
|
25,103,354
|
|
|
$
|
(99,688,647
|
)
|
|
$
|
13,142,674
|
|
|
$
|
(7,742,770
|
)
|
|
$
|
(10,019,865
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2019
|
|
|
5,497,765
|
|
|
$
|
5,498
|
|
|
$
|
74,739,031
|
|
|
$
|
2,810,953
|
|
|
$
|
(79,038,883
|
)
|
|
$
|
9,792,283
|
|
|
$
|
(1,019,552
|
)
|
|
$
|
7,289,330
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,696
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,696
|
|
Issuance of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Allocation to non-controlling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(21,637
|
)
|
|
|
(21,637
|
)
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
192,662
|
|
|
|
-
|
|
|
|
192,662
|
|
Balance, March 31, 2019
|
|
|
5,497,765
|
|
|
$
|
5,498
|
|
|
$
|
74,739,031
|
|
|
$
|
2,810,953
|
|
|
$
|
(79,031,187
|
)
|
|
$
|
9,984,943
|
|
|
$
|
(1,041,189
|
)
|
|
$
|
7,468,049
|
|
See Accompanying Notes to the Financial Statements
PLANET
GREEN HOLDINGS CORP.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR
THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
|
(STATED
IN US DOLLARS)
|
|
|
For the Three months ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net income/(loss)
|
|
$
|
7,696
|
|
|
$
|
(70,563
|
)
|
Adjustments to reconcile net income to net cash sourced (used) in operating activities:
|
|
|
|
|
|
|
|
|
Gain from disposal of investment and subsidiaries
|
|
|
|
|
|
|
|
|
Adjustment to retained earnings as a result of disposal of subsidiaries
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
109,528
|
|
|
|
152,379
|
|
Amortization of intangible assets
|
|
|
-
|
|
|
|
88,204
|
|
Decrease in accounts and other receivables
|
|
|
459,873
|
|
|
|
1,485,391
|
|
Decrease in related party receivables
|
|
|
264
|
|
|
|
-
|
|
Decrease /(increase) in inventories
|
|
|
(10,265
|
)
|
|
|
517,677
|
|
Decrease/(increase) in advance to suppliers
|
|
|
-
|
|
|
|
(40,950
|
)
|
Decrease/(increase) in prepayment
|
|
|
(227,654
|
)
|
|
|
308,598
|
|
Increase/(decrease) in accounts and other payables
|
|
|
38,271
|
|
|
|
(3,739,511
|
)
|
Increase/(decrease) in taxes payable
|
|
|
(92,968
|
)
|
|
|
(193,615
|
)
|
Increase in customer deposits
|
|
|
-
|
|
|
|
17,666
|
|
Net cash provided by (used in) operating activities
|
|
|
284,745
|
|
|
|
(1,474,724
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of plant and equipment
|
|
|
-
|
|
|
|
(2,799
|
)
|
Net cash (used in) provided by investing activities
|
|
$
|
|
|
|
$
|
(2,799
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
-
|
|
|
|
1,275,000
|
|
Repayment of bank borrowings
|
|
|
-
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
$
|
-
|
|
|
$
|
1,275,000
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
284,745
|
|
|
|
(202,523
|
)
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation on cash and cash equivalents
|
|
|
20,370
|
|
|
|
416,907
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents–beginning of year
|
|
|
1,062,643
|
|
|
|
85,493
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents–end of year
|
|
$
|
1,367,758
|
|
|
$
|
299,877
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
|
Interest received
|
|
$
|
161
|
|
|
$
|
486
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
See Accompanying Notes to the Financial
Statements
PLANET
GREEN HOLDINGS CORP.
|
(F/K/A
AMERICAN LORAIN CORPORATION)
|
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
MARCH
31, 2019 AND DECEMBER 31, 2018
|
(Stated
in US Dollars)
|
|
1.
|
Organization
and Principal Activities
|
Planet
Green Holdings Corp. (the “Company” or “PLAG”) is registered as a corporation in the state of Nevada.
The Company conducts its primary business activities through its subsidiaries located in the People’s Republic of China,
including its operating subsidiary Taishan Muren Agriculture Co. Ltd. Through its subsidiaries, the Company grow herbs and spices,
sell sauces and other products developed from these herbs and spices, and offer a variety of food and beverage products, including
packaged sauce, tea and brown rice syrup, to consumers and food service businesses.
|
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 Technology Co. Ltd., a wholly-owned foreign entity incorporated
in Shanghai, PRC on August 29, 2012. The formation and acquisition of these companies was to implement the Company’s restructuring
plans.
On September 28, 2018, the Company
was restructured by disposing its equity interest in International Lorain and its subsidiaries to the former Chairman, Mr. Si
Chen, and re-acquiring certain equity interest in certain of these subsidiaries,; namely, Shandong Greenpia, Beijing Lorain, and
Luotian Lorain, indirectly through Planet Green BVI. Please refer to Form 8-K filed on October 2, 2018. The Company entered into
exclusive arrangements with Shandong Greenpia, Luotian Lorain, Taishan Muren, and Shenzhen Lorain and its shareholders that give
the Company the ability to substantially influence its daily operations and financial affairs. The Company entered into exclusive
arrangements with Beijing Lorain; however, the Company does not have significant influence over Beijing Lorain and Beijing Lorain
is accounted for as equity method investment.
In December 2018, the Company’s
management determined that it would discontinue the operations of Shandong Greenpia and Luotian Lorain. Accordingly, the Company
has recorded full impairment related to the value of those assets.
Planet
Green Holdings Corporation
|
|
Notes to Financial
Statements
|
In December 2018, the Company
was no longer able to exercise significant influence over Beijing Lorain, and management did not believe that the Company would
be able recover the value of its investment; accordingly, the Company recognized full impairment of its investment in Beijing
Lorain.
Consolidation of Variable
Interest Entity
VIEs are entities that lack
sufficient equity to finance their activities without additional financial support from other parties or whose equity holders
lack adequate decision-making ability. Any VIE with which the Company is involved must be evaluated to determine the primary beneficiary
of the risks and rewards of the VIE. Management makes ongoing reassessments of whether the Company is the primary beneficiary.
On December 14, 2017, the Company
formed Shenzhen Lorain as a limited company under the laws of the PRC. Through Shandong Greenpia, the Company entered into exclusive
VIE agreements with Lorain Food (Shenzhen) Co., Ltd. (“Shenzhen Lorain”) and its shareholders that give the Company
the ability to substantially influence Shenzhen Lorain’s daily operations and financial affairs and appoint its senior executives.
The Company is considered the primary beneficiary of Shenzhen Lorain and it consolidates its accounts as a VIE. On September 27,
2018, the agreements were terminated due to the Company’s restructuring and Shenzhen Lorain was no longer a variable interest
entity under Shandong Greenpia.
As of March 31, 2019, the following
entities were de-consolidated from the structure as a result of the sale agreement executed on September 28, 2018:
|
|
Place of
|
|
Attributable equity
|
|
Registered
|
|
Name of Company
|
|
incorporation
|
|
interest %
|
|
capital
|
|
International Lorain Holding Inc.
|
|
Cayman Islands
|
|
100.0
|
|
$
|
46,659,135
|
|
Junan Hongrun Foodstuff Co., Ltd.
|
|
PRC
|
|
100.0
|
|
|
44,861,741
|
|
Shandong Lorain Co., Ltd.
|
|
PRC
|
|
80.2
|
|
|
12,123,985
|
|
Dongguan Lorain Co., Ltd.
|
|
PRC
|
|
100.0
|
|
|
149,939
|
|
Discontinued operations
In 2017, the Company discontinued
the operations in Shandong Lorain Co. Ltd. and Dongguan Lorain Co., Ltd. As a result, the financial results of these two subsidiaries
are presented as discontinued operations.
In the first quarter of 2018,
the Company’s board of directors resolved to discontinue the operations of Junan Hongrun Foodstuff Co. Ltd.
As of September 30, 2018, the
Company disposed International Lorain Holding Inc. and its subsidiaries: Junan Hongrun Foodstuff Co., Ltd., Shandong Lorain Co.,
Ltd., Dongguan Lorain Co., Ltd. as a result of the sale agreement.
In the fourth quarter of 2018,
the Company’s board of directors resolved to discontinue the operations of Beijing Lorain Co, Ltd., Luotian Lorain Co.,
Ltd., and Shandong Greenpia Foodstuff Co., Ltd.
Use of estimates
The preparation of 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.
Planet
Green Holdings 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.
Planet
Green Holdings Corporation
|
|
Notes to Financial
Statements
|
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:
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 Company’s
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 Company’s 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 enterprise’s PRC registered capital.
Planet
Green Holdings 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 Company’s 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.
|
|
3/31/2019
|
|
|
12/31/2018
|
|
|
3/31/2018
|
|
Period/year end RMB: US$ exchange rate
|
|
|
6.7335
|
|
|
|
6.8764
|
|
|
|
6.2881
|
|
Period/annual average RMB: US$ exchange rate
|
|
|
6.7087
|
|
|
|
6.5137
|
|
|
|
6.3171
|
|
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.
Planet
Green Holdings Corporation
|
|
Notes to Financial
Statements
|
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 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, 2019.
The consolidated balance sheets
and certain comparative information as of December 31, 2018 are derived from the audited consolidated financial statements and
related notes for the year ended December 31, 2018 (“2018 Annual Financial Statements”), included in the Company’s
2018 Annual Report on Form 10-K. These unaudited interim condensed consolidated financial statements should be read in conjunction
with the 2018 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 unit’s carrying amount over its fair value, determined
in Step 1. The Company is currently evaluating the impact on the financial statements of this guidance.
In January 2017, the FASB amended
the existing accounting standards for business combinations. The amendments clarify the definition of a business with the objective
of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals)
of assets or businesses.
The Company is evaluated the
timing and the impact of the aforesaid guidance on the financial statements.
Planet
Green Holdings 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.
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.
|
|
3/31/2019
|
|
|
12/31/2018
|
|
Trade accounts receivable
|
|
$
|
1,044,381
|
|
|
$
|
6,528,072
|
|
Less:
Allowance for doubtful
accounts
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
1,044,381
|
|
|
$
|
6,528,072
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
-
|
|
|
$
|
(804,937
|
)
|
Reclassified to discontinued operations
|
|
|
-
|
|
|
|
804,937
|
|
Additions to allowance
|
|
|
-
|
|
|
|
-
|
|
Bad debt written-off
|
|
|
-
|
|
|
|
-
|
|
Ending balance
|
|
$
|
-
|
|
|
$
|
-
|
|
Inventories consisted of the
following as of March 31, 2019 and December 31, 2018
|
|
3/31/2019
|
|
|
12/31/2018
|
|
Raw material
|
|
$
|
-
|
|
|
$
|
-
|
|
Work in progress
|
|
|
-
|
|
|
|
-
|
|
Finished goods
|
|
|
10,265
|
|
|
|
-
|
|
|
|
$
|
10,265
|
|
|
$
|
-
|
|
Property, plant, and equipment
consisted of the following as of March 31, 2019 and December 31, 2018:
|
|
3/31/2019
|
|
|
12/31/2018
|
|
At Cost:
|
|
|
|
|
|
|
|
|
Buildings
|
|
$
|
1,140,645
|
|
|
$
|
1,116,940
|
|
Machinery and equipment
|
|
|
31,732
|
|
|
|
31,066
|
|
Biological assets
|
|
|
2,122,125
|
|
|
|
2,078,012
|
|
|
|
$
|
3,294,502
|
|
|
$
|
3,226,018
|
|
|
|
|
|
|
|
|
|
|
Less:
Accumulated depreciation
|
|
|
(1,964,028
|
)
|
|
|
(1,854,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,330,474
|
|
|
$
|
1,371,518
|
|
Depreciation expense for the
three months ended March 31, 2019 and 2018 was $109,528 and $152,379 respectively.
Planet
Green Holdings Corporation
|
|
Notes to Financial
Statements
|
All of the Company’s 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 for the three months ended March 31, 2019
and 2018:
|
|
3/31/2019
|
|
|
3/31/2018
|
|
Income/(loss) attributed to PRC continuing operations
|
|
$
|
63,739
|
|
|
$
|
(70,563
|
)
|
Income/(loss) attributed to U.S. operations
|
|
|
|
|
|
|
|
|
Income/(loss) before tax
|
|
$
|
63,739
|
|
|
$
|
(70,563
|
)
|
|
|
|
|
|
|
|
|
|
PRC Statutory Tax at 25% Rate
|
|
|
56,043
|
|
|
|
-
|
|
Effect of tax exemption granted
|
|
|
|
|
|
|
|
|
Income tax
|
|
$
|
56,043
|
|
|
$
|
-
|
|
Per Share Effect of Tax
Exemption
|
|
3/31/2019
|
|
|
3/31/2018
|
|
Effect of tax exemption granted
|
|
$
|
-
|
|
|
$
|
-
|
|
Weighted-Average Shares Outstanding Basic
|
|
|
5,497,765
|
|
|
|
1,754,313
|
|
Per share effect
|
|
$
|
-
|
|
|
$
|
-
|
|
The difference between the U.S.
federal statutory income tax rate and the Company’s effective tax rate was as follows for the Three months ended March 31,
2019 and 2018:
|
|
3/31/2019
|
|
|
3/31/2018
|
|
U.S. federal statutory income tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
Higher (lower) rates in PRC, net
|
|
|
4
|
%
|
|
|
4
|
%
|
Expenses not deductible to taxable income
|
|
|
62.9
|
%
|
|
|
-25
|
%
|
The Company’s effective tax rate
|
|
|
87.9
|
%
|
|
|
0
|
%
|
Planet
Green Holdings Corporation
|
|
Notes to Financial
Statements
|
|
8.
|
Earnings/(Loss)
Per Share
|
Components of basic and diluted
earnings per share were as follows:
|
|
For the three months ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Basic and diluted (loss) earnings per share numerator:
|
|
|
|
|
|
|
Income/(loss) from continuing operations (attributable) available to common stockholders
|
|
$
|
7,696
|
|
|
|
(70,563
|
)
|
(Loss) income from discontinued operations (attributable) available to common stockholders
|
|
|
-
|
|
|
|
13,046
|
|
(Loss) income (attributable) available to common stockholders
|
|
|
7,696
|
|
|
|
(60,100
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted (loss) earnings per share denominator:
|
|
|
|
|
|
|
|
|
Original Shares:
|
|
|
5,497,765
|
|
|
|
1,530,980
|
|
Additions from Actual Events -Issuance of Common Stock
|
|
|
-
|
|
|
|
233,333
|
|
Basic Weighted Average Shares Outstanding
|
|
|
5,497,765
|
|
|
|
1,754,313
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) per share from continuing operations - Basic and diluted
|
|
|
0.00
|
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
Income/(loss) per share from discontinued operations - Basic and diluted
|
|
|
-
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) per share - Basic and diluted
|
|
|
0.00
|
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding - Basic and diluted
|
|
|
5,497,765
|
|
|
|
1,754,313
|
|
Planet
Green Holdings Corporation
|
|
Notes to Financial
Statements
|
For the year ended December
31, 2016, Taishan Muren Agriculture Co., Ltd. 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. For the
year ended December 31, 2018
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 March 31, 2019 are as follows:
Period
|
|
Lease Payable
|
|
Year 1
|
|
$
|
224,896
|
|
Year 2
|
|
|
224,896
|
|
Year 3
|
|
|
224,896
|
|
Year 4
|
|
|
224,896
|
|
Year 5
|
|
|
224,896
|
|
Thereafter
|
|
|
1,386,853
|
|
|
|
$
|
2,511,333
|
|
The outstanding lease commitments
for the leases listed above as of March 31, 2019 was $2,511,333.
In February 2016, the FASB issued
ASU 2016-02 “Leases (Topic 842).” The new standard requires lessees to recognize lease assets (right of use) and lease
obligations (lease liability) for leases previously classified as operating leases under generally accepted accounting principles
on the balance sheet for leases with terms in excess of 12 months. The standard is effective for annual periods beginning after
December 15, 2018, including interim periods within those fiscal years. The Company is assessing the impact of the adoption of
the new standard.
Planet
Green Holdings Corporation
|
|
Notes to Financial
Statements
|
Other expenses consisted of the following:
|
|
3/31/2019
|
|
|
3/31/2018
|
|
Other expense:
|
|
|
|
|
|
|
Impairment of property and equipment
|
|
$
|
-
|
|
|
$
|
-
|
|
Other
|
|
|
-
|
|
|
|
(3,482
|
)
|
|
|
$
|
-
|
|
|
$
|
(3,482
|
)
|
|
11.
|
Discontinued
Operations
|
As of December 31, 2018, the
Company has reclassified the results of operations and the financial position of Luotian Lorain and Shandong Greenpia as discontinued
operations. Selected details regarding those discontinued operations are provided below. Selected details regarding those discontinued
operations are provided below.
|
|
For the three months ended
March
31,
|
|
Results of Operations
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
-
|
|
|
$
|
14,582
|
|
Cost of sales
|
|
|
-
|
|
|
|
|
|
Gross profit
|
|
|
-
|
|
|
|
14,582
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
-
|
|
|
|
1,536
|
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Loss before Taxes
|
|
|
-
|
|
|
|
13,046
|
|
|
|
|
|
|
|
|
|
|
Taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
-
|
|
|
$
|
13,046
|
|
|
|
At
|
|
|
At
|
|
Financial Position
|
|
3/31/2019
|
|
|
12/31/2018
|
|
Current Assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-Current Assets
|
|
|
-
|
|
|
|
-
|
|
Total Assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
$
|
3,643,696
|
|
|
$
|
8,607,813
|
|
Total Long-Term Liabilities
|
|
|
|
|
|
|
-
|
|
Total Liabilities
|
|
$
|
3,643,696
|
|
|
$
|
8,607,813
|
|
|
|
|
|
|
|
|
|
|
Net Assets
|
|
$
|
(3,643,696
|
)
|
|
$
|
(8,607,813
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities & Net Assets
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Planet
Green Holdings Corporation
|
|
Notes to Financial
Statements
|
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.
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.
The Company’s 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 Company’s 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.
Management monitors changes
in prices levels. Historically inflation has not materially impacted the company’s financial statements; however, significant
increases in the price of raw materials and labor that cannot be passed to the Company’s customers could adversely impact
the Company’s results of operations.
Planet
Green Holdings Corporation
|
|
Notes to Financial
Statements
|
On April 10, 2019, the Company’s
executive officers determined to dispose the discontinued subsidiaries, Luotian Green Foodstuff Co., Ltd. and Shandong Greenpia
Foodstuff Co., Ltd. for the interests of the Company and its stockholders.
On April 29, 2019, the Company
issued a press release (the “Press Release”) announcing that on April 26, 2019, the NYSE American LLC (“NYSE
American”) notified the Company that the Company had regained compliance with the NYSE American listing requirements because
it has resolved the continued listing deficiency with respect to Section 1003(a)(i) and Section 1003(a)(ii) of the NYSE American
Company Guide.
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
1,080,000 shares of common stock of the Company to the Sellers in exchange for the transfer of all of the equity interest of
the Target to the Subsidiary.
ITEM 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations Overview
Overview
We are headquartered in Shanghai, China.
Since the restructuring of our company in September 2018, our primary business, which is carried out by Taishan Muren, our newly
acquired business, is:
|
●
|
to
develop and market products, such as sauces, from herbs and spices that we grow in China;
and
|
|
●
|
to
sell brown rice syrup and tea bags developed using our unique recipes in China.
|
Results of Operations
Three Months Ended March 31, 2019 Compared
to Three Months Ended March 31, 2018
The following table summarizes the results
of our operations during the three-month periods ended March 31, 2019 and March 31, 2018, respectively, and provides information
regarding the dollar and percentage increase or (decrease) from the three-month period ended March 31, 2019 compared to the three
month period ended March 31, 2018.
(All amounts, other than percentages,
stated in thousands of U.S. dollars)
|
|
Three months ended
|
|
|
Increase /
|
|
|
Increase /
|
|
|
|
March 31,
|
|
|
Decrease
|
|
|
Decrease
|
|
(In Thousands of USD)
|
|
2019
|
|
|
2018
|
|
|
($)
|
|
|
(%)
|
|
Net revenues
|
|
|
1,078
|
|
|
|
1,018
|
|
|
|
60
|
|
|
|
5.9
|
|
Cost of revenues
|
|
|
780
|
|
|
|
901
|
|
|
|
(121
|
)
|
|
|
(13.4
|
)
|
Gross profit (loss)
|
|
|
298
|
|
|
|
116
|
|
|
|
182
|
|
|
|
156.9
|
|
Operating expenses:
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Selling and marketing expenses
|
|
|
-
|
|
|
|
22
|
|
|
|
(22
|
)
|
|
|
(100.0
|
)
|
General and administrative expenses
|
|
|
235
|
|
|
|
162
|
|
|
|
73
|
|
|
|
45.1
|
|
Operating (loss) Income
|
|
|
64
|
|
|
|
(68
|
)
|
|
|
132
|
|
|
|
(194.1
|
)
|
Government subsidy income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest and other income
|
|
|
-
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
(100.0
|
)
|
Other expenses
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
3
|
|
|
|
(100.0
|
)
|
Interest expense
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
Gain from investment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Income before tax from continuing operations
|
|
|
64
|
|
|
|
(71
|
)
|
|
|
135
|
|
|
|
(190.1
|
)
|
Income tax expense/(income)
|
|
|
56
|
|
|
|
-
|
|
|
|
56
|
|
|
|
-
|
|
Net income from continuing operations
|
|
|
8
|
|
|
|
(71
|
)
|
|
|
79
|
|
|
|
(111.3
|
)
|
Net (loss) income from discontinued operations
|
|
|
-
|
|
|
|
13
|
|
|
|
(13
|
)
|
|
|
(100.0
|
)
|
Net Income
|
|
|
8
|
|
|
|
(58
|
)
|
|
|
66
|
|
|
|
(113.8
|
)
|
Non-controlling interests
|
|
|
-
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
(100.0
|
)
|
Net income of common stockholders
|
|
|
8
|
|
|
|
(60
|
)
|
|
|
68
|
|
|
|
(113.3
|
)
|
Revenue
Net Revenues
. Our net revenues
for the three months ended March 31, 2019 amounted to $1.07 million, which represents an increase of approximately $0.06 million,
or 5.9%, from the three-month period ended on March 31, 2018, in which our net revenue was $1.01 million. This increase was attributable
to the disposal of certain of our historical subsidiaries and acquisition of Taishan Muren.
Cost of Revenues.
During the three
months ended March 31, 2019, we experienced an decrease in cost of revenue of $0.12 million, in comparison to the three months
ended March 31, 2018, from approximately $0.9 million to $0.78 million, reflecting a decrease of 14%. This decrease was related
to our new subsidiary, Taishan Muren Agriculture Co. Ltd. and disposal and discontinue of certain subsidiaries.
Gross Profit
. Our gross profit
increased $0.18 million, or 157%, to $0.29 million for the three months ended March 31, 2019 from $0.11 million for the three
months ended March 31, 2018, attributable to the disposal of certain of our historical subsidiaries and acquisition of Taishan
Muren.
Operating Expenses
Selling and Marketing Expenses
.
Our selling and marketing expenses decreased $21,847, or 99%, to $110 during the three months ended March 31, 2019, as compared
to $21,947 during the three months ended March 31, 2018. The decrease of our selling and marketing expenses is mainly due to a
decrease in sales activities because sales generated from our existing clients had been steady.
General and Administrative Expenses.
We experienced an increase in general and administrative expense of $0.07 million from $0.16 million to approximately $0.23
million for the three months ended March 31, 2019, compared to the three months ended March 31, 2018. This cost increase was caused
by the cost of service providers in connection with our reporting obligation.
Net Income
Net income increased to $8,000 for the
three months ended March 31, 2019 from net loss of $58,000 for the three months ended March 31, 2018. Such gain was primarily
the result of acquisition of Taishan Muren and disposal and discontinue of certain subsidiaries.
Liquidity and Capital Resources
In the reporting period in 2019, our primary
sources of financing have been cash generated from operations. As of March 31, 2019, we had cash and cash equivalents (including
restricted cash) of $1,367,758. Our cash and cash equivalents increased by approximately $ 305,115 from March 31, 2018. The following
table provides detailed information about our net cash flow for all financial statement periods presented in this report.
General
Management anticipates that our existing
capital resources and 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 financing activities.
As of March 31, 2019 and 2018, cash and
cash equivalents (including restricted cash) were $1.36 million and $1.06 million, respectively. The debt to assets ratio was
38.9% and 57.6% as of March 31, 2019 and December 31, 2018, respectively. We expect to continue to finance our operations and
working capital needs in 2019 from cash generated from operations and, if needed, private financings. If available liquidity is
not sufficient to meet our operating and loan obligations as they come due, 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 be able to 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.
Cash Flow (In thousands)
|
|
For the Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Net cash (used in)/provided by operating activities
|
|
|
285
|
|
|
|
(1,475
|
)
|
Net cash provided by/ (used in) investing activities
|
|
|
-
|
|
|
|
(3
|
)
|
Net cash provided by/ (used in) financing activities
|
|
|
-
|
|
|
|
1,275
|
|
Net cash flow
|
|
|
285
|
|
|
|
(203
|
)
|
Operating Activities
Net cash provided by operating activities
was $0.29 million and used by operating activities was $1.5 million for the three months periods ended March 31, 2019 and 2018,
respectively. The increase of approximately $1.76 million in net cash flows provided by operating activities in the first three
months of 2019 was primarily due to decreases of $3.8 million in accounts and other payables, decrease of $1.0 million accounts
and other receivable, and increase of $0.5 million in prepayment, increase of $0.5 million in inventories.
Financing Activities
Net cash used in financing
activities for the three months period ended March 31, 2019 was $0 million representing a decrease of $1.3 million in net
cash used in financing from $1.3 million for the same period of 2018.
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.