ITEM
1. FINANCIAL STATEMENTS
PLANET
GREEN HOLDINGS CORP.
UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020 AND DECEMBER 31, 2019
(Stated
in US Dollars)
PLANET
GREEN HOLDINGS CORP.
|
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
AT
JUNE 30, 2020 AND DECEMBER 31, 2019
|
(Stated
in US Dollars)
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,241,280
|
|
|
$
|
7,403,323
|
|
Trade receivables, net
|
|
|
1,683,522
|
|
|
|
1,116,211
|
|
Inventories
|
|
|
2,113,151
|
|
|
|
1,946,548
|
|
Advances and prepayments to suppliers
|
|
|
9,776,948
|
|
|
|
7,414,066
|
|
Other receivables and other current assets
|
|
|
1,265,025
|
|
|
|
275,288
|
|
Related party receivable
|
|
|
104,115
|
|
|
|
2,162
|
|
Total current assets
|
|
$
|
19,184,041
|
|
|
$
|
18,157,598
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Plant and equipment, net
|
|
|
5,032,309
|
|
|
|
4,972,700
|
|
Intangible assets, net
|
|
|
1,443,965
|
|
|
|
1,533,927
|
|
Construction in progress, net
|
|
|
826,003
|
|
|
|
834,337
|
|
Deposits
|
|
|
26,041
|
|
|
|
1,454
|
|
Right-of-use assets
|
|
$
|
380,228
|
|
|
$
|
398,082
|
|
Total Assets
|
|
$
|
26,892,587
|
|
|
$
|
25,898,098
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Short-term bank loans
|
|
$
|
245,507
|
|
|
$
|
136,044
|
|
Accounts payable
|
|
|
1,047,688
|
|
|
|
952,520
|
|
Taxes payable
|
|
|
85,835
|
|
|
|
106,423
|
|
Accrued liabilities and other payables
|
|
|
1,806,061
|
|
|
|
1,489,665
|
|
Customers deposits
|
|
|
53,365
|
|
|
|
52,722
|
|
Related party payable
|
|
|
28,444
|
|
|
|
2,027,729
|
|
Lease payable-current portion
|
|
|
25,279
|
|
|
|
24,761
|
|
Total current liabilities
|
|
$
|
3,292,179
|
|
|
$
|
4,789,864
|
|
|
|
|
|
|
|
|
|
|
Lease payable- non-current
|
|
$
|
355,195
|
|
|
$
|
373,728
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
3,647,374
|
|
|
$
|
5,163,592
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
|
|
$
|
-
|
|
|
$
|
-
|
|
Common Stock, $0.001 par value, 200,000,000 shares authorized; 9,227,765 and 7,877,765 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
|
|
|
9,228
|
|
|
|
7,878
|
|
Additional paid-in capital
|
|
|
89,312,071
|
|
|
|
85,803,421
|
|
Accumulated deficit
|
|
|
(73,988,203
|
)
|
|
|
(73,280,734
|
)
|
Accumulated other comprehensive income
|
|
|
7,912,117
|
|
|
|
8,203,941
|
|
Total Stockholders’ Equity
|
|
$
|
23,245,213
|
|
|
$
|
20,734,506
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
26,892,587
|
|
|
$
|
25,898,098
|
|
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 AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
|
(Stated
in US Dollars)
|
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
471,441
|
|
|
$
|
852,009
|
|
|
$
|
1,306,152
|
|
|
$
|
1,930,254
|
|
Cost of revenues
|
|
|
287,907
|
|
|
|
771,458
|
|
|
|
1,139,976
|
|
|
|
1,551,446
|
|
Gross profit
|
|
|
183,534
|
|
|
|
80,551
|
|
|
|
166,176
|
|
|
|
378,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
18,928
|
|
|
|
19,280
|
|
|
|
26,773
|
|
|
|
19,390
|
|
General and administrative expenses
|
|
|
276,752
|
|
|
|
353,372
|
|
|
|
699,331
|
|
|
|
587,941
|
|
Total operating expenses
|
|
|
295,680
|
|
|
|
372,652
|
|
|
|
726,104
|
|
|
|
607,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(112,146
|
)
|
|
|
(292,101
|
)
|
|
|
(559,928
|
)
|
|
|
(228,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,773
|
|
|
|
9
|
|
|
|
4,094
|
|
|
|
170
|
|
Interest expense
|
|
|
(3,041
|
)
|
|
|
(15,989
|
)
|
|
|
(4,502
|
)
|
|
|
(15,989
|
)
|
Other income
|
|
|
1,830
|
|
|
|
(1,607
|
)
|
|
|
2,244
|
|
|
|
(1,607
|
)
|
Other expenses
|
|
|
(6,090
|
)
|
|
|
(5,766
|
)
|
|
|
(149,377
|
)
|
|
|
(5,766
|
)
|
Total other expenses
|
|
|
(5,528
|
)
|
|
|
(23,353
|
)
|
|
|
(147,541
|
))
|
|
|
(23,192
|
)
|
Loss before taxes
|
|
|
(117,674
|
)
|
|
|
(315,454
|
)
|
|
|
(707,469
|
)
|
|
|
(251,715
|
)
|
Provision for income taxes
|
|
|
|
|
|
|
52
|
|
|
|
-
|
|
|
|
56,095
|
|
Net loss
|
|
$
|
(117,674
|
)
|
|
$
|
(315,506
|
)
|
|
$
|
(707,469
|
)
|
|
$
|
(307,810
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
14,203
|
|
|
|
(254,483
|
)
|
|
|
(291,824
|
)
|
|
|
(61,823
|
)
|
Comprehensive loss
|
|
$
|
(103,471
|
)
|
|
$
|
(569,989
|
)
|
|
$
|
(999,293
|
)
|
|
$
|
(369,633
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and diluted
|
|
|
(0.01
|
)
|
|
|
(0.05
|
)
|
|
|
(0.08
|
)
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
9,227,765
|
|
|
|
5,901,411
|
|
|
|
8,332,697
|
|
|
|
5,901,411
|
|
See
Accompanying Notes to the Financial Statements
PLANET
GREEN HOLDINGS CORP.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’
EQUITY/(DEFICIENCY)
FOR
THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(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, 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 loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(307,810
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(307,810
|
)
|
Issuance of shares for acquisition
|
|
|
1,080,000
|
|
|
|
1,080
|
|
|
|
4,783,212
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,784,292
|
|
Issuance of common stock for cash
|
|
|
1,300,000
|
|
|
|
1,300
|
|
|
|
5,458,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,460,000
|
|
Acquiring corporation
|
|
|
-
|
|
|
|
-
|
|
|
|
854,866
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
854,866
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(61,823
|
)
|
|
|
-
|
|
|
|
(61,823
|
)
|
Balance, June 30, 2019
|
|
|
7,877,765
|
|
|
$
|
7,878
|
|
|
$
|
85,835,809
|
|
|
$
|
2,810,953
|
|
|
$
|
(79,346,693
|
)
|
|
$
|
9,730,460
|
|
|
$
|
(1,019,552
|
)
|
|
$
|
18,018,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2020
|
|
|
7,877,765
|
|
|
$
|
7,878
|
|
|
$
|
85,803,421
|
|
|
$
|
-
|
|
|
$
|
(73,280,734
|
)
|
|
$
|
8,203,941
|
|
|
$
|
-
|
|
|
$
|
20,734,506
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(707,469
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(707,469
|
)
|
Issuance of common stock for cash
|
|
|
1,350,000
|
|
|
|
1,350
|
|
|
|
3,508,650
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,510,000
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(291,824
|
)
|
|
|
-
|
|
|
|
(291,824
|
)
|
Balance, June 30, 2020
|
|
|
9,227,765
|
|
|
$
|
9,228
|
|
|
$
|
89,312,071
|
|
|
$
|
-
|
|
|
$
|
(73,988,203
|
)
|
|
$
|
7,912,117
|
|
|
$
|
-
|
|
|
$
|
23,245,213
|
|
See
Accompanying Notes to the Financial Statements
PLANET
GREEN HOLDINGS CORP.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR
THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019
|
(STATED
IN US DOLLARS)
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net loss
|
|
$
|
(707,469
|
)
|
|
$
|
(307,810
|
)
|
Amortization
|
|
|
80,194
|
|
|
|
(47,780
|
)
|
Depreciation
|
|
|
167,501
|
|
|
|
205,027
|
|
Bad debt expenses
|
|
|
2,083
|
|
|
|
|
|
Increase in accounts and other receivables
|
|
|
(1,517,409
|
)
|
|
|
(342,060
|
)
|
Increase in related party receivables
|
|
|
(102,714
|
)
|
|
|
-
|
|
(Increase)/decrease in inventory
|
|
|
(196,399
|
)
|
|
|
4,971
|
|
(Increase)/decrease in prepayments and other current assets
|
|
|
(2,513,530
|
)
|
|
|
761,580
|
|
Decrease in payables and other current liabilities
|
|
|
(1,588,906
|
)
|
|
|
(2,435,442
|
)
|
Net cash used in operating activities
|
|
$
|
(6,376,649
|
)
|
|
$
|
(2,161,514
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of plant and equipment and construction in progress
|
|
|
(332,394
|
)
|
|
|
(131,786
|
)
|
Purchase of intangible assets
|
|
|
|
|
|
|
(525,943
|
)
|
Net cash used in investing activities
|
|
$
|
(332,394
|
)
|
|
$
|
(657,729
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
3,510,000
|
|
|
|
9,943,564
|
|
Receiving bank loans
|
|
|
112,246
|
|
|
|
-
|
|
Repayment of borrowings
|
|
|
-
|
|
|
|
(1,128,867
|
)
|
Proceeds from related party receivables
|
|
|
-
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
$
|
3,622,246
|
|
|
$
|
8,814,697
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(3,086,797
|
)
|
|
|
5,995,454
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation on cash and cash equivalents
|
|
|
(75,246
|
)
|
|
|
(39,315
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents–beginning of year
|
|
|
7,403,323
|
|
|
|
1,079,530
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents–end of year
|
|
$
|
4,241,280
|
|
|
$
|
7,035,669
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
|
Interest received
|
|
$
|
4,094
|
|
|
$
|
170
|
|
Interest paid
|
|
$
|
4,502
|
|
|
$
|
15,989
|
|
See
Accompanying Notes to the Financial Statements
PLANET
GREEN HOLDINGS CORP.
|
(F/K/A
AMERICAN LORAIN CORPORATION)
|
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
(Stated
in US Dollars)
|
1.
|
Organization
and Principal Activities
|
Planet
Green Holdings Corp. (the “Company” or “PLAG”), a Nevada corporation, engages in the businesses of (i)
growing, developing, manufacturing, and marketing fresh foods, spices, convenience foods and tea products through its subsidiaries
and VIEs in China and (ii) operating a demand side platform targeting the Chinese education market in North America.
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 (“GAAP”). 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
|
|
Lucky
Sky Holdings Corporations (HK) Limited
|
|
Hong
Kong
|
|
|
100
|
|
|
|
1,277
|
|
Lucky
Sky Planet Green Holdings Co., Limited
|
|
Hong
Kong
|
|
|
100
|
|
|
|
0.13
|
|
Lucky
Sky Petrochemical Technology (Xianning) Co., Ltd.
|
|
PRC
|
|
|
100
|
|
|
|
2,000,000
|
|
Fast
Approach, Inc.
|
|
Canada
|
|
|
100
|
|
|
|
71
|
|
Shanghai
Shuning Advertising Co., Ltd.
|
|
PRC
|
|
|
100
|
|
|
|
70,571
|
|
Taishan
Muren Agriculture Co., Ltd.
|
|
PRC
|
|
|
VIE
|
|
|
|
1,913,049
|
|
Lorain
Food Stuff (Shenzhen) Co., Ltd.
|
|
PRC
|
|
|
VIE
|
|
|
|
80,000
|
|
Xianning
Bozhuang Tea Products Co., Ltd.
|
|
PRC
|
|
|
VIE
|
|
|
|
6,277,922
|
|
Planet
Green Holdings Corp.
|
|
Notes
to Financial Statements
|
Management
has eliminated all significant inter-company balances and transactions in preparing the accompanying consolidated financial statements.
Ownership interests of subsidiaries that the Company does not wholly-own are accounted for as non-controlling interests.
On
May 18, 2018, the Company incorporated Planet Green Holdings Corporation, a limited company incorporated in the British Virgin
Islands. On September 27, 2018, the Company acquired Lucky Sky HK and Shanghai Xunyang, a wholly foreign-owned enterprise incorporated
in Shanghai, China. The formation and acquisition of these companies was to implement the Company’s restructuring plans.
On
August 12, 2019, through Lucky Sky HK, the Company established Lucky Sky Petrochemical, a wholly foreign-owned enterprise incorporated
in Xianning City, Hubei Province, China.
On
December 20, 2019, the Company sold 100% of equity interest in Shanghai Xunyang.
On
June 5, 2020, the Company acquired all of the outstanding equity interests of Fast Approach, a corporation incorporated under
the laws of Canada and in the business of operation of a demand side platform targeting the Chinese education market in North
America.
On
May 29, 2020, the Company incorporated Lucky Sky Planet Green Holdings Co., Limited, a limited company incorporated in the Hong
Kong.
On
June 16, 2020, Lucky Sky HK transfer 100% of the shares held by Lucky Sky Petrochemical transferred to Lucky Sky Planet Green.
Consolidation
of Variable Interest Entities
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 its VIEs.
On
September 27, 2018, through Shanghai Xunyang Internet Technology Co. Ltd. (“Shanghai Xunyang”), 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. (“Taishan Muren”) and Lorain Foodstuff (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 these companies and
it consolidates its accounts as a VIE.
On
May 9, 2019, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with Xianning Bozhuang
Tea Products Co., Ltd. (“Xianning Bozhuang”), a company incorporated in China engaging in the sale of tea products,
and its shareholders (“Bozhuang Shareholders”). Pursuant to the Purchase Agreement, the Company issued an aggregate
of 1,080,000 shares of its common stock to the Bozhuang Shareholders, in exchange for Bozhuang Shareholders’ agreement to
enter into, and their agreement to cause Xianning Bozhuang to enter into, certain VIE Agreements with Shanghai Xunyang, through
which Shanghai Xunyang shall have the right to control, manage and operate Xianning Bozhuang in return for a service fee approximately
equal to 100% of Xianning Bozhuang’s net income (“Bozhuang Acquisition”). On May 14, 2019, Shanghai Xunyang
entered into a series of VIE Agreements with Xianning Bozhuang and Bozhuang Shareholders. The VIE Agreements are designed to provide
Shanghai Xunyang with the power, rights and obligations equivalent in all material respects to those it would possess as the sole
equity holder of Xianning Bozhuang, including absolute rights to control the management, operations, assets, property and revenue
of Xianning Bozhuang. The Bozhuang Acquisition closed on May 14, 2019. Starting on May 14, 2019, the Company’s business
activities added the production line of green tea and black tea and sales of tea products, of which business activities are carried
out in Xianning City, Huibei Province, China. The Company consolidated Xianning Bozhuang’s accounts as its VIE.
Planet
Green Holdings Corp.
Notes
to Financial Statements
On
December 20, 2019, through Lucky Sky Petrochemical Technology (Xianning) Co., Ltd. (“WFOE”), the Company entered into
exclusive VIE agreements with Taishan Muren, Xianning Bozhuang and Shenzhen Lorain and their shareholders that give the Company
the ability to substantially influence those companies’ daily operations and financial affairs and appoint their senior
executives. The Company is considered the primary beneficiary of these operating companies and it consolidates their accounts
as VIEs. The VIE agreements are described in detail below:
Consultation
and Service Agreement
Pursuant
to the Consultation and Service Agreement, WFOE has the exclusive right to provide consultation and services to the operating
entities in China in the area of business management, human resource, technology and intellectual property rights. WFOE exclusively
owns any intellectual property rights arising from the performance of this Consultation and Service Agreement. The amount of service
fees and payment term can be amended by the WFOE and operating companies’ consultation and the implementation. The term
of the Consultation and Service Agreement is 20 years. WFOE may terminate this agreement at any time by giving 30 day’s
prior written notice.
Business
Cooperation Agreement
Pursuant
to the Business Cooperation Agreement, WFOE has the exclusive right to provide complete technical support, business support and
related consulting services, including but not limited to technical services, business consultations, equipment or property leasing,
marketing consultancy, system integration, product research and development, and system maintenance. WFOE exclusively owns any
intellectual property rights arising from the performance of this Business Cooperation Agreement. The rate of service fees may
be adjusted based on the services rendered by WFOE in that month and the operational needs of the operating entities. The Business
Cooperation Agreement shall maintain effective unless it was terminated or was compelled to terminate under applicable PRC laws
and regulations. WFOE may terminate this Business Cooperation Agreement at any time by giving 30 day’s prior written notice.
Equity
Pledge Agreements
Pursuant
to the Equity Pledge Agreements among WFOE, operating entities and each of operating entities’ shareholder, shareholders
of the operating entities pledge all of their equity interests in the operating entities to WFOE to guarantee their performance
of relevant obligations and indebtedness under the Technical Consultation and Service Agreement and other control agreements.
In addition, shareholders of the operating entities are in the process of registering the equity pledge with the competent local
authority.
Equity
Option Agreements
Pursuant
to the Equity Option Agreements, WFOE has the exclusive right to require each shareholder of the operating companies to fulfill
and complete all approval and registration procedures required under PRC laws for WFOE to purchase, or designate one or more persons
to purchase, each shareholder’s equity interests in the operating companies, once or at multiple times at any time in part
or in whole at WFOE’s sole and absolute discretion. The purchase price shall be the lowest price allowed by PRC laws. The
Equity Option Agreements shall remain effective until all the equity interest owned by each operating entities shareholder has
been legally transferred to WFOE or its designee(s).
Voting
Rights Proxy Agreements
Pursuant
to the Voting Rights Proxy Agreements, each shareholder irrevocably appointed WFOE or WFOE’s designee to exercise all his
or her rights as the shareholders of the operating entities under the Articles of Association of each operating entity, including
but not limited to the power to exercise all shareholder’s voting rights with respect to all matters to be discussed and
voted in the shareholders’ meeting. The term of each Voting Rights Proxy Agreement is 20 years. WOFE has the right to extend
each Voting Proxy Agreement by giving written notification.
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 Corp.
|
|
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:
Buildings
|
|
20-40
years
|
Landscaping,
plant and tree
|
|
30
years
|
Machinery
and equipment
|
|
1-10
years
|
Motor
vehicles
|
|
5-10
years
|
Office
equipment
|
|
5-20
years
|
Planet Green Holdings Corp.
|
|
Notes to Financial Statements
|
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.
Intangible assets
Intangible assets are carried
at cost less accumulated amortization. Amortization is provided over their useful lives, using the straight-line method. The estimated
useful lives of the intangible assets are as follows:
Land use rights
|
|
50 years
|
Software licenses
|
|
2 years
|
Trademarks
|
|
10 years
|
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.
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.
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.
|
|
6/30/2020
|
|
|
12/31/2019
|
|
|
6/30/2019
|
|
Period/year end RMB: US$ exchange rate
|
|
|
7.0795
|
|
|
|
6.9762
|
|
|
|
6.7801
|
|
Period/annual average RMB: US$ exchange rate
|
|
|
7.0292
|
|
|
|
6.8967
|
|
|
|
6.8656
|
|
Planet Green Holdings Corp.
|
|
Notes to Financial Statements
|
The RMB is not freely convertible
into foreign currencies and all foreign exchange transactions must be conducted through authorized financial institutions.
Revenue recognition
The Company adopted ASC 606 “Revenue Recognition”,
and recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the
consideration we expect to be entitled to in exchange for those goods or services.
The Company derives its revenues from the sale of
fresh foods, spices, convenience foods and tea products. The Company applies the following five steps in order to determine the
appropriate amount of revenue to be recognized as it fulfils its obligations under each of its agreements:
|
●
|
identify the contract with a customer;
|
|
●
|
identify the performance obligations in the contract;
|
|
●
|
determine the transaction price;
|
|
●
|
allocate the transaction price to performance obligations in the contract; and
|
|
●
|
recognize revenue as the performance obligation is satisfied.
|
Advertising
All advertising costs are expensed
as incurred.
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 Financial Accounting
Standards Board (“FASB”) ASC Topic 220, “Reporting Comprehensive Income.” Comprehensive income is comprised
of net income and all changes to the statements of stockholders’ equity, except the changes in paid-in capital and distributions
to stockholders due to investments by stockholders.
Earnings per share
The Company computes earnings
per share (“EPS”) 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 Corp.
|
|
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 SEC 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, 2020.
The consolidated balance sheets
and certain comparative information as of December 31, 2019 are derived from the audited consolidated financial statements and
related notes for the year ended December 31, 2019 (“2019 Annual Financial Statements”), included in the Company’s
2019 Annual Report on Form 10-K for the year ended December 31, 2019. These unaudited interim condensed consolidated financial
statements should be read in conjunction with the 2019 Annual Financial Statements.
Recent accounting pronouncements
In February 2018, the FASB issued
ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income. The amendments in this Update affect any entity that is required to apply the provisions of Topic 220,
Income Statement – Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax
effects are presented in other comprehensive income as required by GAAP. The amendments in this Update are effective for all entities
for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments
in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for
which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements
have not yet been made available for issuance. The amendments in this Update should be applied either in the period of adoption
or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate
in the Tax Cuts and Jobs Act is recognized. The Company does not believe the adoption of this ASU would have a material effect
on the Company’s condensed consolidated financial statements.
In August 2018, the FASB issued
ASU 2018-13, “Fair Value Measurement (Topic 820), – Disclosure Framework – Changes to the Disclosure Requirements
for Fair Value Measurement,” which makes a number of changes meant to add, modify or remove certain disclosure requirements
associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. The amendments
in this update modify the disclosure requirements on fair value measurements based on the concepts in FASB Concepts Statement,
Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs
and benefits. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable
inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied
prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments
should be applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities
for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted.
The Company does not believe the adoption of this ASU would have a material effect on the Company’s condensed consolidated
financial statements.
The Company is evaluating the
timing and the impact of the aforesaid guidance on the financial statements.
Planet Green Holdings Corp.
|
|
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.
|
|
6/30/2020
|
|
|
12/31/2019
|
|
Trade accounts receivable
|
|
$
|
2,177,343
|
|
|
$
|
1,615,245
|
|
Less: Allowance for doubtful accounts
|
|
|
(493,821
|
)
|
|
|
(499,034
|
)
|
|
|
$
|
1,683,522
|
|
|
$
|
1,116,211
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts:
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
(499,034
|
)
|
|
$
|
-
|
|
Reclassified to discontinued operations
|
|
|
-
|
|
|
|
-
|
|
Additions to allowance
|
|
|
(2,083
|
)
|
|
|
(499,034
|
)
|
Bad debt written-off
|
|
|
7,296
|
|
|
|
-
|
|
Ending balance
|
|
$
|
(493,821
|
)
|
|
$
|
(499,034
|
)
|
As of June 30, 2020 and December
31, 2019, inventories consisted of the following:
|
|
6/30/2020
|
|
|
12/31/2019
|
|
Raw material
|
|
$
|
568,181
|
|
|
$
|
640,990
|
|
Inventory of Supplies
|
|
|
10,975
|
|
|
|
12,489
|
|
Work in progress
|
|
|
961,255
|
|
|
|
1,071,363
|
|
Finished goods
|
|
|
572,740
|
|
|
|
221,706
|
|
|
|
$
|
2,113,151
|
|
|
$
|
1,946,548
|
|
As of June 30, 2020 and December
31, 2019, property, plant, and equipment consisted of the following:
|
|
6/30/2020
|
|
|
12/31/2019
|
|
At Cost:
|
|
|
|
|
|
|
|
|
Buildings
|
|
$
|
4,733,932
|
|
|
$
|
4,512,606
|
|
Machinery and equipment
|
|
|
975,266
|
|
|
|
980,196
|
|
Office Equipment
|
|
|
54,411
|
|
|
|
53,376
|
|
Motor vehicles
|
|
|
148,217
|
|
|
|
150,412
|
|
Lemon trees, mint plants, pepper trees
|
|
|
313,206
|
|
|
|
317,720
|
|
|
|
$
|
6,225,032
|
|
|
$
|
6,014,310
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
(1,192,723
|
)
|
|
|
(1,041,610
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,032,309
|
|
|
$
|
4,972,700
|
|
Depreciation expense for the
six months ended June 30, 2020 and 2019 was $167,501 and $205,027, respectively.
Planet Green Holdings Corp.
|
|
Notes to Financial Statements
|
|
|
6/30/2020
|
|
|
12/31/2019
|
|
At Cost:
|
|
|
|
|
|
|
Land use rights
|
|
$
|
739,278
|
|
|
$
|
750,224
|
|
Software licenses
|
|
|
2,514
|
|
|
|
2,552
|
|
Trademark
|
|
|
882,125
|
|
|
|
895,187
|
|
|
|
$
|
1,623,917
|
|
|
$
|
1,647,963
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
(179,952
|
)
|
|
|
(114,036
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,443,965
|
|
|
$
|
1,533,927
|
|
Land use rights: The land use
rights of a parcel of industrial land of 31,585 square meters was obtained on April 15, 2019 with a consideration of $750,224.
The land is located at Xianning City, Hubei Province, China with the land use right valid until June 12, 2068.
Trademark: A tea brand trademark
was obtained on March 28, 2014 with a consideration of $895,187. The trademark was registered with the China National Intellectual
Property Administration under registration number of 16964992A.
Amortization expense for the
six months ended June 30, 2020 and 2019 was $68,063 and $47,780, respectively.
As of June 30, 2020 and December
31, 2019, short-term bank loans consisted of the following:
Short-term Bank Loans
|
|
6/30/2020
|
|
|
12/31/2019
|
|
|
|
|
|
|
|
|
Loan from China Construction Bank, Taishan Branch
|
|
|
|
|
|
|
● Interest rate at 3.915% per annum; due 12/12/2020
|
|
|
134,059
|
|
|
|
136,044
|
|
● Interest rate at 5.0025% per annum; due 1/17/2021
|
|
|
70,485
|
|
|
|
-
|
|
● Interest rate at 4.5025% per annum; due 4/25/2021
|
|
|
40,963
|
|
|
|
-
|
|
|
|
$
|
245,507
|
|
|
$
|
136,044
|
|
The short-term loans, which are
denominated in RMB, were primarily obtained for general working capital purpose. $134,059 was secured by Yongjun Huang’s
bank certificate of deposit. Yonjun Huang is the President of Taishan Muren. $70,485 and $40,963 are from the line of credit of
China Construction Bank, Taishan Branch.
9.
|
Related Parties Transaction
|
As of June 30, 2020 and December
31, 2019, the outstanding balance due to related parties was $28,444 and $2,027,729, respectively.
As of June 30, 2020 and December
31, 2019, the outstanding balance due to Mr. Bin Zhou, Chief Executive Officer and Chairman of the Company was $743 and $2,003,390,
respectively. Both are advances for working capital of the Company, non-interest bearing, and unsecured, unless further disclosed.
As of June 30, 2020 and December
31, 2019, the outstanding balance due to Mr. Yong Jun Huang, the President of Taishan Muren, was $18,901 and $16,885, respectively.
Both are advances for working capital of the Company, non-interest bearing, and unsecured, unless further disclosed.
As of June 30, 2020 and December
31, 2019, the outstanding balance due to Mr. Ming Yue Cai, the President of Shenzhen Lorain, was $8,800 and $7,454, respectively.
Both are advances for working capital of the Company, non-interest bearing, and unsecured, unless further disclosed.
On June 5, 2020, the Company
issued an aggregate of 1,800,000 shares of its common stock to acquire all of the outstanding equity interest of Fast Approach
Inc., a corporation incorporated under the laws of Canada and in the business of operating a demand side platform targeting the
Chinese education market in North America.
Planet Green Holdings Corp.
|
|
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 six months ended June 30, 2020 and
2019:
|
|
6/30/2020
|
|
|
6/30/2019
|
|
Loss attributed to PRC operations
|
|
$
|
(585,269
|
)
|
|
$
|
(251,715
|
)
|
Loss attributed to U.S. operations
|
|
|
(122,200
|
)
|
|
|
-
|
|
Loss before tax
|
|
$
|
(707,469
|
)
|
|
$
|
(251,715
|
)
|
|
|
|
|
|
|
|
|
|
PRC Statutory Tax at 25% Rate
|
|
|
-
|
|
|
|
56,095
|
|
Effect of tax exemption granted
|
|
|
-
|
|
|
|
-
|
|
Income tax
|
|
$
|
-
|
|
|
$
|
56,095
|
|
Per Share Effect of Tax
Exemption
|
|
6/30/2020
|
|
|
6/30/2019
|
|
Effect of tax exemption granted
|
|
$
|
-
|
|
|
$
|
-
|
|
Weighted-Average Shares Outstanding Basic
|
|
|
8,332,697
|
|
|
|
5,901,411
|
|
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 June 30,
2020 and 2019:
|
|
6/30/2020
|
|
|
6/30/2019
|
|
U.S. federal statutory income tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
Higher (lower) rates in PRC, net
|
|
|
4
|
%
|
|
|
4
|
%
|
Expenses not deductible to taxable income
|
|
|
(25
|
)%
|
|
|
(47.3
|
)%
|
The Company’s effective tax rate
|
|
|
0
|
%
|
|
|
(22.3
|
)%
|
12.
|
Earnings/(Loss) Per Share
|
Components of basic and diluted
earnings per share were as follows:
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Basic and diluted (loss) earnings per share numerator:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(707,469
|
)
|
|
|
(307,810
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted (loss) earnings per share denominator:
|
|
|
|
|
|
|
|
|
Original Shares:
|
|
|
7,877,765
|
|
|
|
5,497,765
|
|
Additions from Actual Events -Issuance of Common Stock
|
|
|
454,932
|
|
|
|
403,646
|
|
Basic Weighted Average Shares Outstanding
|
|
|
8,332,697
|
|
|
|
5,901,411
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) per share - Basic and diluted
|
|
|
(0.08
|
)
|
|
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding - Basic and diluted
|
|
|
8,332,697
|
|
|
|
5,901,411
|
|
Planet Green Holdings Corp.
|
|
Notes to Financial Statements
|
During the year ended December
31, 2016, Taishan Muren entered into one operating lease agreement leasing one plot of land where biological assets are grown,
one building, and farming facilities. During the year ended December 31, 2017, Taishan Muren entered into two operating lease agreements
leasing three additional plots of land where biological assets are grown and two buildings. During the year ended December 31,
2018, Taishan Muren entered into two operating lease agreements for two buildings.
As of the date of this report,
the leases of the Company are as follows:
Lease
|
|
Date Commenced
|
|
Date of expiration
|
Lease #1
|
|
March 1, 2016
|
|
February 28, 2031
|
Lease #2
|
|
January 1, 2017
|
|
February 28, 2031
|
Lease #3
|
|
January 1, 2017
|
|
February 28, 2031
|
Lease #4
|
|
January 1, 2018
|
|
February 28, 2031
|
Lease #5
|
|
June 1, 2018
|
|
February 28, 2031
|
Effective January 1, 2019, the
Company adopted ASU 2016-02, “Leases” (Topic 842), and elected the package of practical expedients that does not require
us to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired
or existing leases and (3) initial direct costs for any expired or existing leases. The Company adopted the practical expedient
that allows lessees to treat the lease and non-lease components of a lease as a single lease component. The impact of the adoption
on January 1, 2019 increased the right-of-uses and lease liabilities by approximately $421,382.
Upon adoption of ASU 2016-02,
the Company recognized lease labilities of approximately $421,382, with corresponding right-of-use assets of the same amount based
on the present value of the future minimum rental payments of the new lease, using an effective interest rate of 5.0025%, which
is determined using an incremental borrowing rate.
The weighted average remaining
lease term of its existing leases is 13.3 years.
The Company’s lease agreements
do not contain any material residual value guarantees or material restrictive covenants.
For the six months ended June
30, 2020 and 2019, rent expenses amounted to $22,023 and $23,098, respectively.
The thirteen-year maturity of
the Company’s lease obligations is presented below:
Twelve months ending December 31,
|
|
Operating lease amount
|
|
2020
|
|
$
|
12,287
|
|
2021
|
|
|
26,346
|
|
2022
|
|
|
28,382
|
|
2023
|
|
|
30,345
|
|
2024
|
|
|
32,580
|
|
Thereafter
|
|
|
253,257
|
|
Total lease payment
|
|
|
383,197
|
|
Less: interest
|
|
|
(2,723
|
)
|
Present value of lease liabilities
|
|
$
|
380,474
|
|
Other expenses consisted of the following:
|
|
6/30/2020
|
|
|
6/30/2019
|
|
Other expense:
|
|
|
|
|
|
|
Donation outlay
|
|
$
|
(142,264
|
)
|
|
$
|
-
|
|
Other
|
|
|
(7,113
|
)
|
|
|
(5,766
|
)
|
|
|
$
|
(149,377
|
)
|
|
$
|
(5,766
|
)
|
The Company donated RMB 1,000,000
($142,264) to the local non-profit organization for treatment and prevention of COVID-19 in local community.
Planet Green Holdings Corp.
|
|
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 of the Company 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.
The Company evaluates subsequent
events that have occurred after the balance sheet date but before the financial statements are issued. There are two types of subsequent
events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the dates of the balance
sheets, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that
provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date.
The Company has analyzed its operations subsequent to June 30, 2020 to the date these unaudited condensed consolidated financial
statements were issued, and has determined that it does not have any material events to disclose.
ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW
Overview
We are headquartered in Gaithersburg, MD.
After a series of acquisitions and dispositions in 2018 and 2019, our primary business, which is carried out by Taishan Muren and
Xianning Bozhuang, is:
|
●
|
to develop and market products, such as sauces and tea products, from herbs and spices, in China; and
|
|
●
|
to sell brown rice syrup and tea bags developed using our unique recipes in China.
|
Recent Development
Acquisition of Fast Approach
On June 5, 2020, we issued an aggregate
of 1,800,000 shares of our common stock to acquire all of the outstanding equity interest of Fast Approach Inc., a corporation
incorporated under the laws of Canada and in the business of operating a demand side platform targeting the Chinese education market
in North America.
Coronavirus (COVID-19) Update
Recently, there is an ongoing outbreak
of a novel strain of coronavirus (COVID-19) first identified in China and has since spread rapidly globally. The pandemic has resulted
in quarantines, travel restrictions, and the temporary closure of stores and business facilities globally for the past few months.
In March 2020, the World Health Organization declared the COVID-19 as a pandemic. Given the rapidly expanding nature of the COVID-19
pandemic, and because substantially all of our business operations and our workforce are concentrated in China, our business, results
of operations and financial condition have been and will continue to be adversely affected. Potential impact to our results of
operations will also depend on future developments and new information that may emerge regarding the duration and severity of the
COVID-19 and the actions taken by government authorities and other entities to contain the COVID-19 or mitigate its impact, almost
all of which are beyond our control.
The impacts of COVID-19 on our business,
financial condition, and results of operations include, but are not limited to, the following:
|
●
|
We temporally closed our offices and production facilities to
adhere to the policy from February 2020 until April 2020, as required by relevant PRC regulatory authorities. Our offices are
slowly reopening pursuant to local guidelines. In the first half of 2020, the COVID-19 outbreak has caused disruptions in our
manufacturing operations, which have resulted in delays in the shipment of products to certain of our customers.
|
|
|
|
|
●
|
Some of our employees were in mandatory self-quarantine from January 2020 to April 2020.
|
|
●
|
Our customers have been negatively impacted by the outbreak, which may reduce the demand of our products. As a result, our revenue and income may be negatively impacted in 2020.
|
|
●
|
The situation may worsen if the COVID-19 pandemic continues. We will continue to closely monitor our collections throughout 2020.
|
A prolonged disruption or any further unforeseen
delay in our operations of the manufacturing, delivery and assembly process within any of our production facilities could continue
to result in delays in the shipment of products to our customers, increased costs and reduced revenue.
We cannot foresee whether the outbreak
of COVID-19 will be effectively contained, nor can we predict the severity and duration of its impact. If the outbreak of COVID-19
is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected
as a result of the deteriorating market outlook, the slowdown in regional and national economic growth, weakened liquidity and
financial condition of our customers or other factors that we cannot foresee. Any of these factors and other factors beyond our
control could have an adverse effect on the overall business environment, cause uncertainties in the regions where we conduct business,
cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition
and results of operations.
Results of Operations
Three Months Ended June 30, 2020 Compared
to Three Months Ended June 30, 2019
The following table summarizes the results
of our operations during the three-month periods ended June 30, 2020 and 2019 and provides information regarding the dollar and
percentage increase or (decrease) from the three months ended June 30, 2020 compared to the three months ended June 30, 2019.
(All amounts, other than percentages,
stated in thousands of U.S. dollars)
|
|
Three months ended
|
|
|
Increase /
|
|
|
Increase /
|
|
|
|
June 30,
|
|
|
Decrease
|
|
|
Decrease
|
|
(In Thousands of USD)
|
|
2020
|
|
|
2019
|
|
|
($)
|
|
|
(%)
|
|
Net revenues
|
|
|
471
|
|
|
|
852
|
|
|
|
(381
|
)
|
|
|
(45
|
)
|
Cost of revenues
|
|
|
288
|
|
|
|
771
|
|
|
|
(483
|
)
|
|
|
(63
|
)
|
Gross profit
|
|
|
184
|
|
|
|
81
|
|
|
|
103
|
|
|
|
127
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
19
|
|
|
|
19
|
|
|
|
-
|
|
|
|
-
|
|
General and administrative expenses
|
|
|
277
|
|
|
|
353
|
|
|
|
(76
|
)
|
|
|
(22
|
)
|
Operating loss
|
|
|
(112
|
)
|
|
|
(293
|
)
|
|
|
181
|
|
|
|
(62
|
)
|
Interest and other income
|
|
|
4
|
|
|
|
(1
|
)
|
|
|
5
|
|
|
|
(500
|
)
|
Other expenses
|
|
|
(6
|
)
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
-
|
|
Interest expense
|
|
|
(3
|
)
|
|
|
(16
|
)
|
|
|
13
|
|
|
|
(81
|
)
|
Loss before tax
|
|
|
(118
|
)
|
|
|
(316
|
)
|
|
|
198
|
|
|
|
(63
|
)
|
Net loss
|
|
|
(118
|
)
|
|
|
(316
|
)
|
|
|
198
|
|
|
|
(63
|
)
|
Revenue
Net Revenues. Our net revenues for
the three months ended June 30, 2020 amounted to $0.47 million, which represents a decrease of approximately $0.38 million, or
45%, from $0.85 million for the three months ended June 30, 2019. This decrease was mainly due to a reduction in demand of our
products caused by the COVID-19 pandemic.
Cost of Revenues. During the three
months ended June 30, 2020, we experienced a decrease in cost of revenue of $0.48 million or 63%, in comparison to the three months
ended June 30, 2019, from approximately $0.77 million to $0.29 million. This decrease was mainly due to reduced sales.
Gross Profit. Our gross profit increased
by $0.1 million, or 127%, to $0.18 million for the three months ended June 30, 2020 from $0.08 million for the three months ended
June 30, 2019. This increase was mainly due to increased sales of tea products with higher gross margins.
Operating Expenses
Selling and Marketing Expenses.
Our selling and marketing expenses have not changed at all compared with the same period last year.
General and Administrative Expenses.
We experienced a decrease in general and administrative expense of $0.08 million from $0.35 million to approximately $0.28
million for the three months ended June 30, 2020, compared to the three months ended June 30, 2019. This decrease was mainly due
to the decrease in professional service fees.
Net Loss
Our net loss decreased by $0.2 million
or 62%, to $0.12 million net loss for the three months ended June 30, 2020 from $0.32 million net loss for the three months ended
June 30, 2019. Such decrease was primarily the result of increased sales of tea products with higher gross margins.
Six Months Ended June 30, 2020 Compared
to Six Months Ended June 30, 2019
The following table summarizes the
results of our operations during the six-month periods ended June 30, 2020 and 2019, respectively, and provides information
regarding the dollar and percentage increase or decrease from the six-month period ended June 30, 2020 compared to the six-month period ended June 30, 2019.
(All amounts, other than percentages,
stated in thousands of U.S. dollars)
|
|
Six months ended
|
|
|
Increase /
|
|
|
Increase /
|
|
|
|
June 30,
|
|
|
Decrease
|
|
|
Decrease
|
|
(In Thousands of USD)
|
|
2020
|
|
|
2019
|
|
|
($)
|
|
|
(%)
|
|
Net revenues
|
|
|
1,306
|
|
|
|
1,930
|
|
|
|
(624
|
)
|
|
|
(32
|
)
|
Cost of revenues
|
|
|
1,140
|
|
|
|
1,551
|
|
|
|
(411
|
)
|
|
|
(26
|
)
|
Gross profit
|
|
|
166
|
|
|
|
379
|
|
|
|
(213
|
)
|
|
|
(56
|
)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
27
|
|
|
|
19
|
|
|
|
8
|
|
|
|
42
|
|
General and administrative expenses
|
|
|
699
|
|
|
|
588
|
|
|
|
111
|
|
|
|
19
|
|
Operating loss
|
|
|
(560
|
)
|
|
|
(229
|
)
|
|
|
(789
|
)
|
|
|
(345
|
)
|
Interest and other income
|
|
|
6
|
|
|
|
(1
|
)
|
|
|
7
|
|
|
|
(700
|
)
|
Other expenses
|
|
|
(149
|
)
|
|
|
(6
|
)
|
|
|
(143
|
)
|
|
|
2,383
|
|
Interest expense
|
|
|
(5
|
)
|
|
|
(16
|
)
|
|
|
11
|
|
|
|
(69
|
)
|
Loss before tax
|
|
|
(707
|
)
|
|
|
(252
|
)
|
|
|
(455
|
)
|
|
|
181
|
|
Income tax expense
|
|
|
-
|
|
|
|
56
|
|
|
|
(56
|
)
|
|
|
(100
|
)
|
Net loss
|
|
|
(707
|
)
|
|
|
(308
|
)
|
|
|
(399
|
)
|
|
|
130
|
|
Revenue
Net Revenues. Our net revenues for
the six months ended June 30, 2020 amounted to $1.3 million, which represents a decrease of approximately $0.6 million, or 32%,
from $1.9 million for the six months ended June 30, 2019. This decrease was mainly due to a reduction in demand of our products
caused by the COVID-19 pandemic.
Cost of Revenues. During the six
months ended June 30, 2020, we experienced a decrease in cost of revenue of $0.4 million or 26%, in comparison to the six months
ended June 30, 2019, from approximately $1.5 million to $1.1 million. This decrease was mainly due to reduced sales.
Gross Profit. Our gross profit decreased
by $0.21 million, or 56%, to $0.17 million for the six months ended June 30, 2020 from $0.38 million for the six months ended June
30, 2019. This decrease was mainly due to decreased sales of spices with higher gross margin.
Operating Expenses
Selling and Marketing Expenses.
Our selling and marketing expenses increased by $0.008 million, or 42%, to $0.03 million for the six months ended June 30, 2020
from $0.02 million for the six months ended June 30, 2019. This increase was mainly due to our effort to expand our business.
General and Administrative Expenses.
We experienced an increase in general and administrative expense of $0.11 million from $0.59 million to approximately $0.70
million for the six months ended June 30, 2020, compared to the six months ended June 30, 2019. This increase was mainly due to
the increase in intermediary service fees.
Net Loss
Our net loss increased by $0.4 million
or 130%, to $0.7 million net loss for the six months ended June 30, 2020 from $0.3 million net loss for the six months ended June
30, 2019. Such increase was primarily the result of the impact of COVID-19, resulting in lower revenue and thus net loss.
Liquidity and Capital Resources
In the reporting period in 2020, our primary
sources of financing have been cash generated from operations and private placements. We raised funds in the following private
placement in the first quarter of 2020:
On February 10, 2020, we entered into a
securities purchase agreement with Mengru Xu and Zhichao Du, pursuant to which Ms. Xu and Mr. Du agreed to invest an aggregate
of $3.51 million in the Company in exchange for an aggregate of 1,350,000 shares of our common stock, representing a purchase price
of approximately $2.60 per share.
General
Management anticipates that our existing
capital resources and anticipated cash flows from operations are adequate to satisfy our liquidity requirements for the next 12
months. Our primary capital needs have been to fund our working capital requirements. In the past, our primary sources of financing
have been cash generated from operations and financing activities.
As of June 30, 2020, we had cash and cash
equivalents (including restricted cash) of $4.24 million. The debt to assets ratio was 13.6% and 19.9% as of June 30, 2020 and
December 31, 2019, respectively. We expect to continue to finance our operations and working capital needs in 2020 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 Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Net cash used in operating activities
|
|
|
(6,377
|
)
|
|
|
(2,162
|
)
|
Net cash used in investing activities
|
|
|
(332
|
)
|
|
|
(658
|
)
|
Net cash provided by financing activities
|
|
|
3,622
|
|
|
|
8,815
|
|
Net cash flow
|
|
|
(3,087
|
)
|
|
|
5,995
|
|
Operating Activities
Net cash used in operating activities was
$6.4 million and $0.2 million for the six months ended June 30, 2020 and 2019, respectively. Net cash used in operating activities
was mainly due to an increase of $1.5 million in accounts and other receivables, a decrease of $1.6 million in payables and other
current liabilities and an increase of $2.5 million in prepayments and other current assets.
Investing Activities
Net cash used in investing activities for
the six months ended June 30, 2020 was $0.3 million, representing a decrease of $0.3 million in net cash used in investing activities
from $0.6 million for the same period of 2019. This was mainly due to a decrease in the investment of fixed assets.
Financing Activities
Net cash provided by financing activities
for the six months period ended June 30, 2020 was $3.6 million, representing a decrease of $5.2 million in net cash provided by
financing activities from $8.8 million for the same period of 2019. This is mainly due to a decrease in private financing.
Critical Accounting Policies
The preparation of financial statements
in conformity with GAAP 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.