PART
I
Use
of Certain Defined Terms
In
this annual report on Form 10-K:
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“Beijing Lorain”
refers to Beijing Green Foodstuff Co., Ltd.
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“China”
and “PRC” refer to the People’s Republic of China (excluding Hong Kong, Macau and Taiwan for the purposes
of this report only).
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“Fast
Approach” refers to Fast Approach Inc., a corporation incorporated under the laws of Canada.
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“Jiayi Technologies”
or “WFOE” refers to Jiayi Technologies (Xianning) Co., Ltd, a PRC limited liability company and a wholly foreign-owned
enterprise, formerly known as Lucky Sky Petrochemical Technology (Xianning) Co.
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“Jilin Chuangyuan”
refers to Jilin Chuangyuan Chemical Co., Ltd., a PRC limited liability company.
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“Jinshan Sanhe
Luckysky” refers to Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd., a PRC limited company.
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“Lucky Sky
HK” refers to Lucky Sky Holdings Corporations (HK) Limited, a company incorporated in Hong Kong and formerly known as
JianShi Technology Holding Limited.
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“Lucky Sky
Petrochemical” or “WFOE” refers to Lucky Sky Petrochemical Technology (Xianning) Co., Ltd., a PRC limited
liability company and a wholly foreign-owned enterprise.
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“Luotian Lorain”
refers to Luotian Green Foodstuff Co., Ltd., a PRC limited liability company.
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“PLAG,”
“we,” “us”, “our” and the “Company” refer to Planet Green Holdings Corp.,
a Nevada corporation, and except where the context requires otherwise, our wholly-owned subsidiaries and VIEs.
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“RMB”
refers to Renminbi, the legal currency of China.
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“Shandong
Greenpia” refers to Shandong Greenpia Foodstuff Co., Ltd., a PRC limited liability company.
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“Shanghai
Shuning” refers to Shanghai Shuning Advertising Co., Ltd, a PRC limited liability company.
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“Shanghai
Xunyang” refers to Shanghai Xunyang Internet Technology Co., Ltd., a PRC limited liability company.
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“Shenzhen
Lorain” refers to Lorain Food Stuff (Shenzhen) Co., Ltd., a PRC limited liability company.
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“Taishan Muren”
refers to Taishan Muren Agriculture Co. Ltd., a PRC limited liability company.
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“U.S. dollar”,
“$” and “US$” refer to the legal currency of the United States.
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“VIE”
refers to variable interest entity.
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“Xianning
Bozhuang” refers to Xianning Bozhuang Tea Products Co., Ltd., a PRC limited liability company.
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“Lucky Sky Planet Green” refers to Lucky Sky Planet Green Holdings Co., Limited,a company incorporated in Hong Kong.
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This
report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934 (“Exchange Act”), including, without limitation, statements regarding our expectations,
beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,”
“believe,” or similar language. All forward-looking statements included in this document are based on information
available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and
financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected
in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.
ITEM
1. BUSINESS
Overview
of Our Business
Planet Green is a Nevada company established in
1986 and is headquartered in Flushing, New York. We are a diversified technology and consumer products company with presence in North
America and China in the follow businesses: Chemical Products, Tea Products and Online Advertising Services.
Planet Green manages its operation in three
business segments which include:
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to grow, produce
and distribute Cyan brick tea, black tea and green tea in China; and
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to research, develop, manufacture and sell chemical products including formaldehyde, urea formaldehyde adhesive, methylal, ethanol fuel, fuel additives and clean fuel in
China; and
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to develop and operate a demand side platform which empowers buyers of advertising to manage and optimize their digital advertising across different real-time bidding networks in North America and China
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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:
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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 quarter 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.
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Some of our employees
were in mandatory self-quarantine from January 2020 to April 2020.
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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.
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The situation may
worsen if the COVID-19 pandemic continues. We continued to closely monitor our collections throughout 2020.
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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. Now that we are closer to containment of the COVID-19 pandemic
with the emergence of several very effective vaccines, market participants expect the economy will fully recover over the next
year or two.
Organizational
Structure
PLAG
was incorporated on February 4, 1986 and was formerly known as “American Lorain Corporation.” Effective November 12,
2009, PLAG reincorporated in Nevada from Delaware.
The
following diagram illustrates our corporate structure as of the date of this annual report on Form 10-K, including our subsidiaries
and our VIEs.
Subsidiary
We are a company that continuously strives
to create new value and relentlessly to capture new opportunities, which is why we are growing and strengthening the internet-based
business as another pillar towards the next growth stage. In addition to our Chinese domestic business, we set out for global market
by acquiring 100% shares of Fast Approach in Canada on June 5, 2020 to embark on demand-side platform (DSP) business in North America.
A demand-side platform is a system that allows buyers of digital advertising inventory to manage multiple advertisement exchange
and data exchange through one interface. Fast Approach is the first North America demand side platform that directly connects to
Chinese market without middleman and is supported by world class data science researchers among some well-respected universities
in North America. Fast Approach owns 100% equity of Shanghai Shuning in China. We believe this acquisition will accelerate our
global business growth, leading to further increasing the Planet Green enterprise value as well.
On May 29, 2020, the Planet Green Holdings Corporation
(BVI) incorporated Lucky Sky Planet Green Holdings Co., Limited, a limited company incorporated in Hong Kong. On June 16, 2020, Lucky
Sky Holdings Corporations (H.K.) transferred its 100% equity interest in Lucky Sky Petrochemical to Lucky Sky Planet Green Holdings Co.,
Limited (H.K.).
On August 10, 2020, as part of the reorganization,
Planet Green Holdings Corporation (BVI) transferred its 100% equity interest in Lucky Sky Holdings Corporations (H.K.) Limited
to Rui Tang, a unrelated party, at nominal price.
VIE
Arrangement
On
September 27, 2018, through Shanghai Xunyang, the Company entered into exclusive VIE agreements with Beijing Lorain, Luotian Lorain,
Shandong Greenpia, Taishan Muren, and Shenzhen Lorain and their shareholders that give the Company the ability to substantially
influence those companies’ daily operations and financial affairs and appoint their senior executives. The Company is considered
the primary beneficiary of these operating companies.
On
May 14, 2019, through Shanghai Xunyang, the Company entered into a series of VIE agreements with Xianning Bozhuang and its equity
holders to obtain control and became the primary beneficiary of Xianning Bozhuang. The Company consolidated Xianning Bozhuang’s
accounts as its VIE.
On
December 20, 2019, we sold 100% of equity interest in Shanghai Xunyang and terminated its VIE agreements with Xianning Bozhuang,
Shenzhen Lorain and Taishan Muren.
On
December 20, 2019, through Lucky Sky Petrochemical, the Company entered into exclusive VIE agreements (“VIE Agreements”)
with Taishan Muren, Xianning Bozhuang and Shenzhen Lorain, as well as their shareholders, which give the Company the ability to
substantially influence those companies’ daily operations and financial affairs and appoint their senior executives. The
Company is considered the primary beneficiary of these operating companies and it consolidates their accounts as VIEs.
On
September 8, 2020, the Company’s Board of Directors resolved to discontinue the operation of Shenzhen Lorain and Taishan
Muren due to the continued loss of such two subsidiaries. On September 15, 2020, Lucky Sky Petrochemical terminated the VIE agreements
with Shenzhen Lorain and Taishan Muren.
On
January 4, 2021, through Jiayi Technologies, formerly known as Lucky Sky Petrochemical, the Company entered into a series of VIE
agreements with Jingshan Sanhe Luckysky as well as its shareholders, which gives the Company the ultimate control of Jingshan Sanhe
Luckysky and its shareholders, making it operate in accordance with the will of the Company. The Company is
considered the primary beneficiary of Jingshan Sanhe Luckysky and it consolidates its accounts as VIEs.
On
March 9, 2021, through Jiayi Technologies, the Company entered into a series of VIE agreements with Jilin Chuangyuan as well as
its shareholders, which gives the Company the ultimate control of Jilin Chuangyuan and its shareholders, making it operate in
accordance with the will of the Company. The Company is considered the primary beneficiary of Jilin Chuangyuan and it consolidates
its accounts as VIEs. Each of the VIE Agreements is 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.
As of December 31, 2020, the following entities
were de-consolidated from the structure as a result of the termination agreements: Beijing Lorain, Luotian Lorain, Shandong Greenpia,
Shenzhen Lorain and Taishan Muren. Shanghai Xunyang was sold to one unrelated party in the company reorganization process.
Products
We
grow, produce and distribute Cyan brick tea, black tea and green tea in China. In addition, we also research, develop, manufacture
and sell products of formaldehyde, urea formaldehyde adhesive, methylal, ethanol fuel, fuel additives and clean fuel.
Our
ethanol fuel and fuel additives products business is carried on by our newly acquired VIE company, Jingshan Sanhe Luckysky.
Our
formaldehyde, urea formaldehyde adhesive, methylal, and clean fuel products business is carried out by our newly acquired VIE
company, Jilin Chuangyuan.
Service
We provide a demand-side platform which allows
buyers of digital advertising inventory to manage multiple advertisement exchange and data exchange through one interface.
Our
digital service is provided by our newly acquired company, Fast Approach.
Our
Manufacturing Facilities
General
We
currently manufacture our products in Meihekou City, Jilin Province, Jingshan City and Xianning City, Hubei Province, China.
The
following table indicates the year that operations commenced at each of the facilities and the size of the facilities.
Facility
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Year
Operations
Commenced
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Facility
Size
(square meters)
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Xianning
Bozhuang *
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2013
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33,333
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Jingshan
Sanhe Luckysky **
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2018
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11,018
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Jilin
Chuangyuan***
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2013
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59,690
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*
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Became a VIE in
May 2019.
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**
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Became
a VIE in January 2021
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***
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Became
a VIE in March 2021.
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Production
Lines
We
currently manufacture our different products using production lines operated through our subsidiaries.
The
production process for our cyan brick tea products involves, primary processing of fresh leaves, piling and fermenting, storing
and aging, picking, pressing, and baking. The production process for our black tea products involves selecting and sorting the
fresh leaves, withering, rolling, fermenting, baking and drying, grading according to color, prompting fragrance, packing and
warehousing. The production process for our green tea products involves selecting and sorting the fresh leaves, airing, fixating,
cooling, rolling, stir drying, selecting and grading, prompting fragrance, packing and warehousing.
The
production process for our formaldehyde products is illustrated as follows. The raw material methanol, after being injected into
the high position tank, enters the methanol evaporator through the filter, mixes with the air from the roots blower to form the
binary mixture, and then adds steam to form the ternary mixture, which is heated by the superheater to 120 ℃ and enters
the oxidizer, carries out oxidation and dehydrogenation reaction through the silver catalyst to form the formaldehyde gas, and
then absorbs the formaldehyde solution through the first absorption tower and the second absorption tower. The excess waste gas
is burned out by the exhaust gas boiler.
The
production process for our methyl starting with the raw materials methanol and formaldehyde are pumped into the reaction distillation
tower according to the proportion. At the bottom of the tower, formaldehyde and methanol are indirectly heated by steam. The reaction
liquid vapor from the tower upwards through the catalyst reaction to produce methyl acetal, and then through the distillation
tower separation, cooling, the final product methyl acetal.
The
production process for our urea-formaldehyde glue is demonstrated as follows. Formaldehyde is pumped from the formaldehyde workshop
into the tank of formaldehyde storage, and then pumped into the metering tank through the feed pump of formaldehyde. After the
PH value is adjusted by adding alkali, it is sent into the reaction kettle. At the same time, urea is also added into the kettle
according to the corresponding proportion, heating the reaction kettle. After heating up the kettle, melamine is added, so that
the material can undergo addition reaction in the kettle. After the PH value is adjusted by dropping formic acid in the kettle,
the material is sent into the condensation kettle through the transfer pump. Urea and additives are added into the condensation
kettle according to a certain proportion for condensation reaction, and the finished product is formed after cooling treatment.
The
production process for our clean fuel oil is illustrated as follows. The self-control design of the facilities for storage of
raw materials and addition of additives shall, in accordance with the requirements of the process, conduct centralized indication
and adjustment of the temperature, flow rate and liquid level of the raw oil tanks, raw oil metering tanks, product oil allocation
tanks and finished oil tanks during the fuel blending process; realize remote monitoring of the whole fuel production process,
and conduct on-the-spot indication of pressure and partial flow rate.
The
production process for our construction rubber powder (re-dispersible latex powder) is demonstrated as follows. Using polymer
emulsion (VAE emulsion) as raw material, all kinds of additives are added, and then transported to the reaction kettle through
diaphragm pump to warm up and mix evenly, and then transported to the mixing kettle with additives through diaphragm pump to mix
evenly, then transported to the high-speed reactor through diaphragm pump to emulsify, emulsified and then transported to the
spare material tank through the diaphragm pump, and then transported to the spray drying tower through the spare material tank
through the diaphragm pump to form polymer powder after spray drying, and the polymer powder and various additives are mixed and
screened through the mixer to be packed into the warehouse.
The
following table shows the number and types of production lines, the types of products produced and the production capacity as
of the date of this report:
Facility
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Production
Lines
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Product
Portfolio
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Capacity
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Jingshan Sanhe Luckysky
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There are two production
lines: the production line of ethanol fuel and the production line of fuel additive
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Alcohol based clean
fuel, liquid wax, arene and biomass fuel
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Two production lines
with a total production capacity of 300,000 tons/ year for ethanol fuel, and 3000 tons/year for fuel additive
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Xianning Bozhuang
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There are six production
lines: the production line of cyan brick tea with traditional handicraft; the production line of cyan brick tea; the production
line of teabag; the production line of green tea and the production line of black tea
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Cyan brick tea,
black tea and green tea
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Production line
with 5,020 tons of production capacity
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Jilin Chuangyuan
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The company has
two formaldehyde production lines, eight rubber production units, one methylal production line and one clean fuel oil production
line
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Formaldehyde, urea
formaldehyde adhesive, methylal and clean fuel oil
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Annual production
capacity of 120,000 tons of formaldehyde, 100,000 tons of urea formaldehyde glue, 3,0000 tons of methylal and 20,000 tons
of clean fuel oil
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We
operate our production lines year-round.
Raw
Materials
Our
Supply Sources
Our
business depends on obtaining a reliable supply of various products, including tea, refined methanol, methanol, formaldehyde and
polymer emulsion. Because of the diversity of available sources of these raw materials, we believe that our raw materials are
currently in adequate supply.
For
our tea operation, we obtain our raw materials primarily from domestic procurement. We purchase approximately 400 tons of tea
from suppliers in 2020. For our business lines of ethanol fuel and fuel additive, we purchased approximately 710 tons of additive
material from suppliers in 2020. For our business lines of formaldehyde, rubber and methylal products, we purchased approximately
18,547 tons of methanol and 146 tons of urea from suppliers in 2020.
We
select suppliers based on price and product quality. We typically rely on numerous domestic suppliers, including some with whom
we have a long-term relationship. Our suppliers generally include wholesale agricultural product companies, food production companies,
tea bag processing companies and chemical products wholesale companies.
Our
Customers
Our
tea and chemical products are sold exclusively in Chinese domestic markets.
We
sell our tea products to third-party distributors, such as trading companies with established distribution channels. The terms
of a typical sales contract between us and our distributors provide that we are responsible for transportation costs and the distributors
are responsible for storage costs. Furthermore, the distributors have the right to return products that fail to satisfy specified
quality standards, at our cost. The majority of such contracts require the distributors to pay us in cash in full upon delivery,
and the remaining contracts provide for short-term credit, usually two to three weeks.
As
to our formaldehyde products, vehicles gasoline and diesel products, we are a leading
regional chemical products provider in north eastern China area, and we are the sole
provider of formaldehyde in Jilin Province, China. We sell such products to end user
directly and through local distributors.
When
it comes to the sales of synthetic fuel products, we do business through direct sales, constructing refuel facilities and conducting
technical cooperation with other companies.
For
our DSP business line, we obtain clients through advertising agents from China and Canada.
Our
Sales and Marketing Efforts
We
have not spent a significant amount of capital on advertising in the past, and our advertising budget continues to be limited.
In 2020, our marketing and branding efforts mainly focus on internet advertising.
Competition
and Market Position
The
overall food market is diverse, both globally and in China. We do not have a significant market share in China.
Black
tea is produced in Guangxi, Sichuan, Yunnan, Hunan, Hubei, Shanxi and Anhui provinces in China. Our black tea products are processed
in our factory in Hubei province and distributed nationwide. There are few large players on the market but we face fierce competition
from numerous small black tea manufactures and distributors. However, as our brand has over hundreds of year’s history,
we have accumulated loyal consumers and gained favorable market reputation over years.
Competitive
factors in our industry include product innovation, product quality, price, brand recognition and loyalty, product variety and
ingredients, product packaging and package design, effectiveness of marketing and promotional activity, and our ability to identify
and satisfy consumer tastes and preferences.
Since
its inception, the company has developed rapidly relying on advanced enterprise management and safe, effective, exclusive patented
products and strong marketing strength. The production scale of formaldehyde is ranking top three among provinces in northeast
China. The production scale of urea-formaldehyde glue attains the first place in China. Our enterprise comprehensive strength
is considered first tier among all companies in northeast China.
We sell clean fuel and fuel additive in local reginal market. We compete
with other reginal players and national players.
Intellectual
Property
Patents
The
company vigorously implements scientific and technological innovation and obtains 12 practical patent certificates from the State
Intellectual Property Office of the PRC. These patents are registered under Jingshan Sanhe Luckysky, which includes a diesel exhaust
cleaner and its preparation method, a kind of automobile exhaust cleaner and preparation method, a kind of filtering device for
exhaust port of cleaning liquid production plant, a kind of automobile cleaner dispensing device, a kind of liquid dispensing
equipment, a kind of mixing and stirring tank, a kind of cleaning brush for cleaning agent storage tank, a kind of reactor for
producing auto cleaner, a kind of cleaning brush for cleaning agent mixing kettle, a kind of mixing tank, a cleaning tool for
cleaning the reactor for detergent production and a kind of mixing and defoaming tank. The company will give full play to the
advantages of independent intellectual property rights, continue to innovate, maintain the leading technology and enhance the
core competitiveness of the company.
We
take reasonable steps to protect our proprietary information and trade secrets, such as limiting disclosure of proprietary plans,
methods and other similar information on a need-to-know basis and requiring employees with access to our proprietary technology
to enter into confidentiality arrangements. We believe that our proprietary technology and trade secrets are adequately protected.
Our
Employees
As
of December 31, 2020, we had a total of 148 employees. Approximately 148 of our full-time employees are directly employed by our
subsidiaries and VIEs. Compared to 2019, the total employees decreased by 36% due to disposal of Taishan Muren, Shanzhen Lorain
and acquisition of Fast Approach.
The
following table sets forth the allocation of employees by job function.
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Number
of
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Department
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Employees
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Production
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42
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Human
Resources
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3
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Research
and Development
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19
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Sales
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35
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Finance
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9
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Procurement
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4
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Administration
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36
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Total
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148
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We
have not experienced any significant problems or disruption to our operations due to labor disputes, nor have we experienced any
difficulties in recruitment and retention of experienced staff.
We
compensate our production line employees by unit produced (piece work) and compensate other employees with a base salary and bonus
based on performance. We also provide training for our staffs from time to time to enhance their technical and product knowledge,
including knowledge of industry quality standards.
Our
employees participate in state pension scheme and various types of social insurance organized by municipal and provincial governments.
Outsourcing agents are responsible for contributions on behalf of the leased employees.
Our
Research and Development Activities
We
have research and development staffs at each of our facilities. In total, 19 employees are dedicated to research and development
for different business lines.
Jingshan
Sanhe Luckysky contains a professional laboratory which includes 17 sets of professional experimental equipment operated by 6
high-end scientific research experts to ensure the high quality of raw materials and products.
Jilin
Chuanyuan was jointly awarded by Jilin Provincial Department of education and Jilin Provincial Department of industry and information
technology as Jilin University enterprise joint technology innovation laboratory. The company currently carries out a project
of transformation of scientific and technological achievements with Beihua University. Specifically, it is a kind of urea formaldehyde
resin adhesive with ultra-low formaldehyde emission and its preparation process, ZL 201510055885x. At the same time, as a participant,
the project is applying for the national science and technology progress award. Beihua University has set up a teaching and research
practice base in our company. On top of that, the company also successfully developed the urea formaldehyde resin for E1 grade
waterproof particleboard, E0 grade and F grade particleboard, as well as the UF resin for E0 grade and F grade particleboard with
UFC.
We
rely heavily on customer feedback to assist us in the modification and development of our products. We also utilize customer feedback
to assist us in the development of new products.
The
amount we spent on research and development activities during the years ended December 31, 2020 and 2019 was not a material portion
of our total expenses for those years.
Government
Regulation
As
a company that continuously strives to create new value. We have been doing business in three areas: tea product cultivation,
packaging, and sales; manufacturing and sales of synthetic fuel products, formaldehyde products, vehicles gasoline and diesel
products in Chinese market and providing on-line advertising services in Canada and China.
Our
tea product cultivation, packaging, and sales business is subject to regulations of China’s Agricultural Ministry and Ministry
of Health. This regulatory scheme governs the manufacture (including composition and ingredients), labeling, packaging and safety
of food. It also regulates manufacturing practices, including quality assurance programs, for foods through its current manufacturing
practice regulations, and specifies the standards of identity for certain foods. We have obtained approvals from Chinese authorities
for products that requires the approval under regulations, including quality safety approval from government.
Our
manufacturing and sales of chemical products business is subject to multiple regulations under PRC law. We have complete certificates,
including the work safety license, production license and emission license. We have passed the environmental assessment acceptance
and currently works on the promotion to the second level of work safety standardization from the third level. Our operation meets
the requirements of relevant national laws, regulations, standards and specifications, as well as other the requirements of national
management departments at all levels.
Our
online advertising business line is operated in Canada and we meet the requirement of related regulations in Canada.
ITEM
1A. RISK FACTORS
Not
required for smaller reporting companies.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None.
ITEM
2. PROPERTIES
Our
primary facilities, which are owned except where otherwise indicated, are as follows:
Facility
|
|
Location
|
|
Approximate
Size
(Square Meters)
|
|
Owned
or Leased
|
|
Xianning
Bozhuang *
|
|
Xianning
City, Hubei Province, PRC
|
|
33,333
|
|
Land Use Rights Obtained
|
|
Jingshan
Sanhe Luckysky**
|
|
Jingshan City,
Hubei Province, PRC
|
|
11,018
|
|
Leased
|
|
Jilin
Chuangyuan ***
|
|
Meihekou City,
Jilin Province, PRC
|
|
59,690
|
|
Land Use Rights Obtained
|
|
|
*
|
Became
a VIE in May 2019.
|
|
**
|
Became
a VIE in January 2021.
|
|
***
|
Became
a VIE in March 2021.
|
In
the aggregate, we currently have land use rights to, or lease, 3 properties with approximately 104,041 square meters, consisting
of manufacturing facilities and office buildings for future expansion. We believe our current facilities provide adequate capacity
for our current and projected needs.
All
land in China is owned by the government. Individuals and companies are permitted to acquire land use rights for specific purposes.
In the case of land used for industrial purposes, the land use rights are granted for a period of up to 50 years. This period
may be renewed at the expiration of the initial and any subsequent terms. Granted land use rights are transferable and may be
used as security for borrowings and other obligations.
ITEM
3. LEGAL PROCEEDINGS
Not
Applicable.
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable.
PART
II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market
for our Common Stock
Our
common stock is quoted on the NYSE American (formerly known as the American Stock Exchange, the NYSE Amex Equities Exchange and
the NYSE MKT) under the symbol “PLAG”.
Approximate
Number of Holders of Our Common Stock
As
of March 29, 2021, there were 341 stockholders of record of our common stock. This does not include the holders whose shares are
held in a depository trust in “street” name.
Dividend
We
have not declared or paid cash dividends other than the payment of a dividend in April 2007 in connection with our reverse merger.
Any future decisions regarding dividends will be made by our Board of Directors. We currently intend to retain and use any future
earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable
future.
Issuances
of Unregistered Securities
On
February 10, 2020, the Company entered into a Securities Purchase Agreement, pursuant to which two individuals residing in the
People’s Republic of China agreed to purchase an aggregate of 1,350,000 shares of the Company’s common stock, par
value $0.001 per share, for an aggregate purchase price of $3,510,000, representing a purchase price of $2.60 per share. The transaction
was closed on February 28, 2020.
On
June 5, 2020, the Company has entered into a Share Exchange Agreement with Fast Approach Inc. and each shareholder of Fast
Approach. Pursuant to the Share Exchange Agreement, the Company will acquire all outstanding equity interests of Target. The acquisition
closed on June 5, 2020. At the closing, the Company issued an aggregate of 1,800,000 shares of common stock of the Company to
the original shareholders of Fast Approach in exchange for the transfer of all of the equity interests of the Fast Approach to
the Company.
Securities
Authorized for Issuance under Equity Compensation Plans
On
November 24, 2020, shareholders approved the 2020 Equity Incentive Plan, under which there is 1,654,165 shares of common available
for issuance. On December 30, 2020, Company issued 782,165 common shares to its employees under the 2020 Equity Incentive Plan.
ITEM
6. SELECTED FINANCIAL DATA
Not
applicable.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We
are headquartered in Flushing, NY. For the fiscal year 2020, our primary business, which is carried out by Fast Approach Inc and
Xianning Bozhuang, is:
|
●
|
Black
tea product cultivation, packaging, and sales;
|
|
●
|
Multimedia
design and online advertising services;
|
Reorganization
On
May 18, 2018, the Company incorporated Planet Green Holdings Corporation, a limited company incorporated in the British Virgin
Islands. On September 28, 2018, Planet Green BVI acquired JianShi Technology Holding Limited, a limited company incorporated in
Hong Kong on February 21, 2012, and Shanghai Xunyang Internet Tech Co., Ltd., a wholly-owned foreign entity incorporated in Shanghai,
PRC, on August 29, 2012 (“Shanghai Xunyang”).
On
May 9, 2019, the Company entered into a share exchange agreement to acquire Xianning Bozhuang Tea Products Co., Ltd, Then 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, Hubei Province, China.
On
August 12, 2019, through Lucky Sky Holdings Corporations (H.K.) Limited, formerly known as JianShi Technology Holding Limited,
Company established Lucky Sky Petrochemical Technology (Xianning) Co., Ltd., a wholly foreign-owned enterprise incorporated in
Xianning City, Hubei Province, China.
On
December 20, 2019, The Lucky Sky Holdings Corporations (H.K.) Limited sold 100% of equity interest in Shanghai Xunyang.
On May 29, 2020, the Planet Green Holdings
Corporation (BVI) incorporated Lucky Sky Planet Green Holdings Co., Limited, a limited company incorporated in Hong Kong.
On June 5, 2020, the Company issued an aggregate
of 1,800,000 shares of our common stock to acquire all of the outstanding equity interest of Fast Approach Inc. As a result, the
Planet Green Holdings Corporation (BVI) acquired all of the outstanding equity interests of Fast Approach Inc. It was incorporated
under Canada’s laws and the business of operation of a demand-side platform targeting the Chinese education market in North
America, besides, Shanghai Shuning Advertising Co., Ltd, a PRC entity as the subsidiary of Fast Approach Inc, conducted the multimedia
design, advertising, import, and export business in China.
On
June 16, 2020, Lucky Sky Holdings Corporations (H.K.) transferred its 100% equity interest in Lucky Sky Petrochemical to Lucky
Sky Planet Green Holdings Co., Limited (H.K.).
On
August 10, 2020, Planet Green Holdings Corporation (BVI) transferred its 100% equity interest in Lucky Sky Holdings Corporations
(H.K.) Limited to Rui Tang, an unrelated party, at nominal price.
On September 15, 2020, Lucky Sky Petrochemical
terminated the VIE agreements with Shenzhen Lorain and Taishan Muren.
On
December 9, 2020, Lucky Sky Petrochemical Technology (Xianning) Co., Ltd. changed its name to Jiayi Technologies (Xianning) Co.,
Ltd.
On
January 4, 2021, the Company and Jiayi Technologies (Xianning) Co., Ltd. (the “Subsidiary”), a subsidiary of the Company,
entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Jingshan Sanhe Luckysky New Energy Technologies
Co., Ltd. (“Target”), and each of shareholders of the Target (collectively, the “Sellers”), pursuant to
which, among other things and subject to the terms and conditions contained therein, the Subsidiary agreed to effect an acquisition
of the Target by acquiring from the Sellers 85% of the outstanding equity interests of the Target (the “Acquisition”).
Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd, engaged in researching, manufacturing, and selling high-grade synthetic
fuel products. Jingshan Sanhe has four production lines on an 11,000-square-meter facility and capacities to complete manufacturing,
labeling, and packaging. It is the primary facility for Green Energy products. Besides, this facility also serves research and
sales purpose with an office space of 3,400 square meters. On January 4, 2021, the Company closed the Acquisition.
On
March 9, 2021, Planet Green Holdings Corp. (the “Company”) and Jiayi Technologies (Xianning) Co., Ltd. (the “Subsidiary”),
a subsidiary of the Company, entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Jilin Chuangyuan
Chemical Co., Ltd. (“Target”). Each of shareholders of the Target (collectively, the “Sellers”), under
which, among other things and subject to the terms and conditions contained therein, the subsidiary agreed to effect an acquisition
of the Target by acquiring from the Sellers 75% of the outstanding equity interests of the Target (the “Acquisition”).
Jilin Chuangyuan Chemical Co., Ltd’s main products are formaldehyde, urea-formaldehyde glue, methylal, and clean fuel oil;
it has two formaldehyde production lines, eight rubber production lines methylal production line, and one clean fuel oil production
line. There are 367 sets of leading production equipment, the entire plant covering an area of 43,661 square meters, construction
area of 16,090 square meters. On March 10, 2021, the Company closed the acquisition.
After
that, through Jiayi Technologies (Xianning) Co., Ltd, the Company entered into a new variable interest entity agreement. Jingshan
Sanhe Luckysky New Energy Technologies Co., Ltd and Jilin Chuangyuan Chemical Co., Ltd became the Company’s new contractually
controlled affiliate. The New VIE Agreements allow us to:
|
a.
|
exercise
effective control over Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd and Jilin
Chuangyuan Chemical Co., Ltd;
|
|
b.
|
receive 85% of the economic benefits of Jingshan Sanhe Luckysky New Energy
Technologies Co., Ltd and receive 75% of the economic benefits of Jilin Chuangyuan Chemical Co., Ltd substantially;
|
|
c.
|
have
an exclusive option to purchase all or part of the equity interests in Jingshan Sanhe
Luckysky New Energy Technologies Co., Ltd and Jilin Chuangyuan Chemical Co., Ltd when
and to the extent permitted by the laws of the PRC;
|
As
a result of the New VIE Agreements, The Company has become the primary beneficiary of Jingshan Sanhe Luckysky New Energy Technologies
Co., Ltd and Jilin Chuangyuan Chemical Co., Ltd; They treat these above entities as its variable interest entity under U.S. GAAP.
The Company will continue to consolidate the financial results of Xianning Bozhuang Tea Products Co., Ltd in our consolidated
financial statements following U.S. GAAP.
The
table below illustrates the business the Company conduct through our subsidiaries and consolidated affiliated entities:
|
|
|
|
Attributable equity
|
|
Place of
|
|
Name of Company
|
|
Principal Business
|
|
interest %
|
|
incorporation
|
|
Shanghai Shuning Advertising Co., Ltd
|
|
Multimedia design, advertising, import, and export business
|
|
100
|
|
PRC
|
|
Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd
|
|
Manufacturing and sales of Synthetic fuel products
|
|
85%
VIE
|
|
PRC
|
|
Jilin Chuangyuan Chemical Co., Ltd
|
|
Production and sales of formaldehyde products, vehicles gasoline and diesel products
|
|
75%
VIE
|
|
PRC
|
|
Xianning Bozhuang Tea Products Co., Ltd.
|
|
Tea product cultivation, packaging, and sales
|
|
100%
VIE
|
|
PRC
|
|
Fast Approach Inc.
|
|
Multiple media design and online advertising
|
|
100
|
|
Canada
|
|
The
above reorganization which occurred during the subsequent period after December 31, 2020 does not affect the Company’s consolidated
financial statements for the current period.
Coronavirus
(COVID-19) Update
Recently,
an ongoing outbreak of a novel strain of coronavirus (COVID-19) was 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 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 the results of our 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.
|
1)
|
The
impacts of COVID-19 on our business, financial condition, and results of operations include,
but are not limited to, the following:
|
|
2)
|
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. During the past 12 months
in the fiscal year 2020, the COVID-19 outbreak had caused disruptions in our manufacturing
operations, which had resulted in delays in the shipment of products to certain of our
customers.
|
|
3)
|
Some
of our employees were in mandatory self-quarantine from January 2020 to April 2020.
|
|
4)
|
Our
customers have been negatively impacted by the outbreak, which may reduce the demand
for our products. As a result, our revenue and income have been being negatively impacted
in 2020.
|
|
5)
|
The situation may worsen if the COVID-19 pandemic continues. We will continue to closely monitor our collections throughout 2021.
|
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
The
following discussion should be read in conjunction with the company’s audited consolidated financial statement for the years
ended December 31, 2020, and 2019 and related notes to that.
|
|
|
|
|
|
|
|
Increase /
|
|
|
Increase /
|
|
|
|
|
|
|
|
|
|
Decrease
|
|
|
Decrease
|
|
|
|
2020
|
|
|
2019
|
|
|
($)
|
|
|
(%)
|
|
Net revenues
|
|
|
3,638,801
|
|
|
|
1,106,482
|
|
|
|
2,532,319
|
|
|
|
229
|
|
Cost of revenues
|
|
|
2,369,736
|
|
|
|
464,402
|
|
|
|
1,905,334
|
|
|
|
410
|
|
Gross profit
|
|
|
1,269,065
|
|
|
|
642,080
|
|
|
|
626,985
|
|
|
|
98
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
160,109
|
|
|
|
40,069
|
|
|
|
120,040
|
|
|
|
300
|
|
General and administrative expenses
|
|
|
3,896,489
|
|
|
|
904,913
|
|
|
|
2,991,576
|
|
|
|
331
|
|
Total operating expenses
|
|
|
4,056,598
|
|
|
|
944,982
|
|
|
|
3,111,616
|
|
|
|
329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,787,533
|
)
|
|
|
(302,902
|
)
|
|
|
(2,484,631
|
)
|
|
|
820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expenses), net.
|
|
|
(23,407
|
)
|
|
|
(9,725
|
)
|
|
|
(13,682
|
)
|
|
|
141
|
|
Other income (expenses), net.
|
|
|
27,318
|
|
|
|
68,376
|
|
|
|
(41,058
|
)
|
|
|
(60
|
)
|
Impairment of goodwill
|
|
|
(2,339,829
|
)
|
|
|
-
|
|
|
|
(2,339,829
|
)
|
|
|
-
|
|
Write off receivables from the disposal of former subsidiaries
|
|
|
(6,078,623
|
)
|
|
|
8,783,848
|
|
|
|
(14,862,471
|
)
|
|
|
(169
|
)
|
Total other (expenses) income
|
|
|
(8,414,541
|
)
|
|
|
8,842,499
|
|
|
|
(17,257,040
|
)
|
|
|
(195
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before taxes
|
|
|
(11,202,074
|
)
|
|
|
(8,539,597
|
)
|
|
|
(19,741,671
|
)
|
|
|
(231
|
)
|
Discontinued Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
150,911
|
|
|
|
(5,592,401
|
)
|
|
|
5,743,312
|
|
|
|
(103
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income(loss)from discontinuing operations
|
|
|
150,911
|
|
|
|
(5,592,401
|
)
|
|
|
5,743,312
|
|
|
|
(103
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income(loss)
|
|
|
(11,051,163
|
)
|
|
|
2,947,196
|
|
|
|
(13,998,359
|
)
|
|
|
(475
|
)
|
Year
Ended December 31, 2020, Compared to Year Ended December 31, 2019
Net Revenues. Our net revenues amounted
to $3.64 million in 2020, representing an increase of approximately $2.53 million, from 2019, in which our net revenue was $1.11 million.
This increase was attributable to the fact that the Company has acquired Xianning Bozhuang Tea Products Co., Ltd in May 2019 and expanded
enterprise sales distribution channel in the fiscal year 2020.
Cost of Revenues.
In 2020, we experienced an increase in the cost of revenues of $1.91 million compared to 2019, from approximately $0.46 million to $2.37
million. This soaring in cost of goods sold was in line with the increase in sales in the fiscal year 2020.
Gross Profit. Our
gross profit increased by $0.63 million, or 98%, to $1.27 million in 2020 from $0.64 million in 2019, For the years ended December 31,
2020, and 2019, our overall gross margin was 35% and 58%, respectively. The decrease in gross margin was primarily due to the reshaping
of the brand and the adjustment of the product lines.
Operating
Expenses
Selling
and Marketing Expenses. Our selling and marketing expenses increased by $0.12 million or 300%, to $0.16 million in 2020, compared
to $0.04 million in 2019. The increase in our selling and marketing expenses is mainly due to the development of new sales channels;
it includes the adjustment of promotion strategies, marketing strategies, and Channel strategies. Specifically, in the fiscal
year 2020, the Company began to engage in online wholesales business.
General and Administrative Expenses. We
experienced an increase in general and administrative expenses of $2.99 million from $0.90 million to approximately $3.90 million in 2020,
compared to 2019. The increase was mainly because the Company incurred approximately $1.75million on stock compensation expense concerning
our ordinary shares issued to the management.
Net
Income
For
the 12 months ended December 31, 2020, our net loss amounted to approximately $11 million, comparing approximately 3 million net
income in the fiscal year 2019. This decrease in net income was attributable to the outbreak of COVID-19 and the disposal of certain
VIEs.
Liquidity
and Capital Resources
In
assessing our liquidity, we monitor and analyze our cash-on-hand and our operating and capital expenditure commitments. Our liquidity
needs are to meet our working capital requirements, operating expenses, and capital expenditure obligations. In the reporting
period in the fiscal year 2020, our primary sources of financing have been cash generated from operations and private placements.
On
February 10, 2020, we entered into a securities purchase agreement with Mengru Xu and Zhichao Du, pursuant to which Mr. 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.
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 December 31, 2020, we had cash and cash
equivalents (including restricted cash) of $3.42 million compared to $7.4 million as of December 31, 2019. The debt to assets ratio was
16.7% and 19.9% as of December 31, 2020, and 2019. We expect to continue to finance our operations and working capital needs in 2021 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. In that case, our plans include pursuing alternative financing arrangements or reducing expenditures
as necessary to meet our cash requirements.
However,
there is no assurance that we will raise additional capital or reduce discretionary spending to provide liquidity if needed. We
cannot be sure of the availability or terms of any alternative financing arrangements.
The
following table provides detailed information about our net cash flow for all financial statement periods presented in this report.
Cash
Flows Data:
|
|
For the year ended December 31,
|
|
(In thousands of U.S. dollars)
|
|
2020
|
|
|
2019
|
|
Net cash flows used in operating activities
|
|
|
(3,499
|
)
|
|
|
(5,419
|
)
|
Net cash flows used in investing activities
|
|
|
(853
|
)
|
|
|
(516
|
)
|
Net cash flows provided by financing activities
|
|
|
238
|
|
|
|
13,203
|
|
Operating
Activities
For the year ended December 31, 2020, net cash
used in operating activities was $3.5 million, which consisted primarily of net loss of $11.1 million, and was adjusted by depreciation
and amortization of $0.4 million, write off receivables of $6.1 million, impairment of goodwill of $2.3 million and exchange loss of $1.8
million.
The Company had an increase of $1.5 million in
accounts and other receivables, an increase of $4.1 million in prepayments and other current assets and an increase of $0.9 million in
payables and other current liabilities.
For the year ended December 31, 2019, net cash
used in operating activities was $5.4 million, which consisted primarily of net income of $8.5 million, and was adjusted by depreciation
and amortization of $0.2 million, gain from disposal of investment and subsidiaries of $8.8 million.
The Company had an increase of $1.5 million in
prepayments and other current assets and a reduction of $3.5 million in payables and other current liabilities.
Investing
Activities
Net cash used in investing
activities for 2020 was $0.9 million, representing an increase of $0.4 million in net cash used in investing activities from $0.5 million
for the same period of 2019. This is mainly due to the purchasing of plant and equipment and intangible assets.
Financing
Activities
Net cash provided by financing activities for
the year ended December 31, 2020, was $0.2million, representing a decrease of $13.0 million in net cash provided by financing activities
from $13.2 million for the same period of 2019. This is mainly due to repayment to related party and decrease from proceed from issuance
of common stock.
Critical
Accounting Policies
The
preparation of financial statements in conformity with the United States generally accepted accounting principles requires our
management to make assumptions, estimates, and judgments that affect the amounts reported in the financial statements, including
the notes to that, and related disclosures of commitments contingencies, if any.
We
consider our critical accounting policies to require the more significant judgments and estimates in the preparation of financial
statements, including those outlined in Note 2 to the financial statements included herein.
The
Company has evaluated the timing and the impact of the guidance above on the financial statements.
As
of December 31, 2020, there were no other recently issued accounting standards not yet adopted that would or could have a material
effect on the Company’s consolidated financial statements.
Off-Balance
Sheet Arrangements
We
do not have any off-balance arrangements.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not
applicable.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
The
full text of our audited consolidated financial statements as of December 31, 2020, begins on page F-1 of this annual report on
Form 10-K.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM
9A. CONTROLS AND PROCEDURES
Disclosure
Controls and Procedures
We
maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure
that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management,
including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.
As
required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that as of December 31, 2020, our disclosure controls and procedures were
not effective due to the material weakness in our internal control over financial reporting described below.
Internal
Controls over Financial Reporting
Management’s
Annual Report on Internal Control over Financial Reporting.
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over
financial reporting based upon the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Based on that evaluation, our management concluded that, as of December 31, 2020, our internal
controls over financial reporting were not effective.
The
material weakness and significant deficiency identified by our management as of December 31, 2020, relates to the ability of the
Company to record transactions and provide disclosures in accordance with generally accepted accounting principles in the United
States (“U.S. GAAP”). We did not have sufficient and skilled accounting personnel with an appropriate level of experience
in the application of U.S. GAAP commensurate with our financial reporting requirements. For example, our staff members do not
hold licenses such as Certified Public Accountant or Certified Management Accountant in the U.S., have not attended U.S. institutions
for training as accountants, and have not attended extended educational programs that would provide sufficient relevant education
relating to U.S. GAAP. Our staff will require substantial training to meet the demands of a U.S. public company and our staff’s
understanding of the requirements of U.S. GAAP-based reporting are inadequate.
Remediation
Initiative
We
plan to provide U.S. GAAP training sessions to our accounting team. The training sessions will be organized to help our corporate
accounting team gain experience in U.S. GAAP reporting and to enhance their awareness of new and emerging pronouncements with
potential impact on our financial reporting. We plan to continue to recruit experienced and professional accounting and financial
personnel and participate in educational seminars, tutorials, and conferences and employ more qualified accounting staff in the
future.
Changes
in Internal Controls over Financial Reporting
Other
than as described above, during the fiscal year ended December 31, 2020, there were no material changes in our internal control
over financial reporting identified in connection with the evaluation performed during the fiscal year covered by this annual
report that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent
Limitations over Internal Controls.
Our
internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes under U.S. GAAP. Our internal control over financial reporting
includes those policies and procedures that:
|
(i)
|
pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of our assets;
|
|
(ii)
|
provide
reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements under U.S. GAAP, and that our receipts and expenditures are being
made only under authorizations of our management and directors; and
|
|
(iii)
|
provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of our assets that could affect the financial statements.
|
Management,
including our Chief Executive Officer and Chief Financial Officer, does not expect our internal controls to prevent or detect
all misstatements. No matter how well designed and operated, a control system can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of such controls must be considered relative to their costs. Because of the inherent limitations
in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances
of misstatements, if any, have been detected or prevented. Also, projections of any evaluation of the effectiveness of controls
in future periods are subject to the risk that those internal controls may become inadequate because of changes in conditions
or that the degree of compliance with the policies or procedures may deteriorate.
ITEM
9B. OTHER INFORMATION.
None.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Stated in U.S. Dollars)
|
|
2020
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,415,751
|
|
|
$
|
7,272,510
|
|
Trade receivables, net
|
|
|
835,384
|
|
|
|
66,673
|
|
Inventories
|
|
|
2,251,628
|
|
|
|
1,939,025
|
|
Advances and prepayments to suppliers
|
|
|
5,922,562
|
|
|
|
1,558,922
|
|
Other receivables and other current assets
|
|
|
1,091,815
|
|
|
|
270,421
|
|
Related party receivable
|
|
|
-
|
|
|
|
-
|
|
Discontinued operations - current assets
|
|
|
-
|
|
|
|
7,050,047
|
|
Total current assets
|
|
$
|
13,517,140
|
|
|
$
|
18,157,598
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
4,596,637
|
|
|
|
4,152,708
|
|
Intangible assets, net
|
|
|
1,516,467
|
|
|
|
1,533,927
|
|
Construction in progress, net
|
|
|
-
|
|
|
|
-
|
|
Goodwill
|
|
|
2,340,111
|
|
|
|
-
|
|
Discontinued operations – non-current assets
|
|
|
-
|
|
|
|
2,053,865
|
|
Total non-current assets
|
|
|
8,453,215
|
|
|
|
7,740,500
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
21,970,355
|
|
|
$
|
25,898,098
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,302,850
|
|
|
$
|
765,427
|
|
Taxes payable
|
|
|
198,683
|
|
|
|
106,315
|
|
Accrued liabilities and other payables
|
|
|
1,848,598
|
|
|
|
1,485,365
|
|
Customers deposits
|
|
|
241,893
|
|
|
|
52,722
|
|
Related party payables
|
|
|
19,850
|
|
|
|
2,003,390
|
|
Deferred income
|
|
|
15,682
|
|
|
|
-
|
|
Discontinued operations - current liabilities
|
|
|
-
|
|
|
|
376,645
|
|
Total current liabilities
|
|
$
|
3,627,556
|
|
|
$
|
4,789,864
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Long-term payables
|
|
|
31,364
|
|
|
|
-
|
|
Discontinued operations – non-current liabilities
|
|
|
-
|
|
|
|
373,728
|
|
Total non-current liabilities
|
|
$
|
31,364
|
|
|
$
|
373,728
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
3,658,919
|
|
|
$
|
5,163,592
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred Stock, $0.001 par value, 5,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2020 and 2019, respectively
|
|
|
-
|
|
|
|
-
|
|
Common Stock, $0.001 par value, 200,000,000 shares authorized; 11,809,930 and 7,877,765 shares issued and outstanding as of December 31, 2020 and 2019, respectively
|
|
|
11,810
|
|
|
|
7,878
|
|
Additional paid-in capital
|
|
|
95,659,360
|
|
|
|
85,803,421
|
|
Accumulated deficit
|
|
|
(84,331,897
|
)
|
|
|
(73,280,734
|
)
|
Accumulated other comprehensive income
|
|
|
6,972,163
|
|
|
|
8,203,941
|
|
Total Stockholders’ Equity
|
|
$
|
18,311,436
|
|
|
$
|
20,734,506
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
21,970,355
|
|
|
$
|
25,898,098
|
|
See
Accompanying Notes to the Financial Statements
PLANET
GREEN HOLDINGS CORP.
AUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Stated in US Dollars)
|
|
2020
|
|
|
2019
|
|
Net revenues
|
|
$
|
3,638,801
|
|
|
$
|
1,106,482
|
|
Cost of revenues
|
|
|
2,369,736
|
|
|
|
464,402
|
|
Gross profit
|
|
|
1,269,065
|
|
|
|
642,080
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
-
|
|
|
|
-
|
|
Selling and marketing expenses
|
|
|
160,109
|
|
|
|
40,069
|
|
General and administrative expenses
|
|
|
3,896,489
|
|
|
|
904,913
|
|
Total operating expenses
|
|
|
4,056,598
|
|
|
|
944,982
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,787,533
|
)
|
|
|
(302,902
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
Interest income(expenses), net.
|
|
|
(23,407
|
)
|
|
|
(9,725
|
)
|
Other income(expenses), net.
|
|
|
27,318
|
|
|
|
68,376
|
|
Impairment of goodwill
|
|
|
(2,339,829
|
)
|
|
|
-
|
|
Write off receivables from disposal of former subsidiaries
|
|
|
(6,078,623
|
)
|
|
|
8,783,848
|
|
Total other (expenses) income
|
|
|
(8,414,541
|
)
|
|
|
8,842,499
|
|
|
|
|
|
|
|
|
|
|
Loss before taxes
|
|
|
(11,202,074
|
)
|
|
|
8,539,597
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(11,202,074
|
)
|
|
|
8,539,597
|
|
|
|
|
|
|
|
|
|
|
Discontinued Operations:
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
150,911
|
|
|
|
(5,592,401
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) from discontinuing operations
|
|
|
150,911
|
|
|
|
(5,592,401
|
)
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(11,051,163
|
)
|
|
|
2,947,196
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(1,231,778
|
)
|
|
|
(1,588,342
|
)
|
Comprehensive (loss) income
|
|
|
(12,282,941
|
)
|
|
$
|
1,358,854
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per share from continuing operations - Basic and diluted
|
|
|
(1.11
|
)
|
|
|
1.24
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share from discontinued operations-Basic and diluted
|
|
|
0.01
|
|
|
|
(0.81
|
)
|
|
|
|
|
|
|
|
|
|
(Loss) income per share - Basic and diluted
|
|
|
(1.09
|
)
|
|
|
0.43
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding
|
|
|
10,112,648
|
|
|
|
6,897,710
|
|
See
Accompanying Notes to the Financial Statements
PLANET
GREEN HOLDINGS CORP.
Consolidated Statements of Stockholders’ Equity
For the years ended December 31, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Other
|
|
|
Non-
|
|
|
|
|
|
|
Number
|
|
|
Common
|
|
|
Paid-in
|
|
|
Statutory
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Controlling
|
|
|
|
|
|
|
of 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 income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,947,196
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,947,196
|
|
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
|
|
Disposition
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,810,953
|
)
|
|
|
2,810,953
|
|
|
|
-
|
|
|
|
1,019,552
|
|
|
|
1,019,552
|
|
Acquiring corporation
|
|
|
-
|
|
|
|
-
|
|
|
|
822,478
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
822,478
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,588,342
|
)
|
|
|
-
|
|
|
|
(1,588,342
|
)
|
Balance, December 31, 2019
|
|
|
7,877,765
|
|
|
|
7,878
|
|
|
|
85,803,421
|
|
|
|
-
|
|
|
|
(73,280,734
|
)
|
|
|
8,203,941
|
|
|
|
-
|
|
|
|
20,734,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2020
|
|
|
7,877,765
|
|
|
$
|
7,878
|
|
|
$
|
85,803,421
|
|
|
$
|
-
|
|
|
$
|
(73,280,734
|
)
|
|
$
|
8,203,941
|
|
|
$
|
-
|
|
|
$
|
20,734,506
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,051,163
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,051,163
|
)
|
Issuance of shares for acquisition
|
|
|
1,800,000
|
|
|
|
1,800
|
|
|
|
4,588,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,590,000
|
|
Issuance of common stock for cash
|
|
|
1,350,000
|
|
|
|
1,350
|
|
|
|
3,508,650
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,510,000
|
|
Issuance of common stock for employee stock compensation
|
|
|
782,165
|
|
|
|
782
|
|
|
|
1,759,089
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,759,871
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,231,778
|
)
|
|
|
-
|
|
|
|
(1,231,778
|
)
|
Balance, December 31, 2020
|
|
|
11,809,930
|
|
|
$
|
11,810
|
|
|
$
|
95,659,360
|
|
|
$
|
-
|
|
|
$
|
(84,331,897
|
)
|
|
$
|
6,972,163
|
|
|
$
|
-
|
|
|
$
|
18,311,436
|
|
See
Accompanying Notes to the Financial Statements
AUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(STATED IN US DOLLARS)
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net (Loss) income
|
|
$
|
(11,051,163
|
)
|
|
$
|
8,539,597
|
|
Gain from disposal of investment and subsidiaries
|
|
|
-
|
|
|
|
(8,783,848
|
)
|
Write off receivables
|
|
|
6,078,623
|
|
|
|
-
|
|
Exchange loss
|
|
|
1,830,579
|
|
|
|
-
|
|
Impairment of goodwill
|
|
|
2,339,829
|
|
|
|
-
|
|
Stock base compensation
|
|
|
1,759,871
|
|
|
|
-
|
|
Bad debt expenses
|
|
|
43,694
|
|
|
|
-
|
|
Amortization
|
|
|
173,825
|
|
|
|
13,319
|
|
Depreciation
|
|
|
275,228
|
|
|
|
200,727
|
|
Accounts and other receivables
|
|
|
(1,526,888
|
)
|
|
|
58,127
|
|
Inventory
|
|
|
(295,975
|
)
|
|
|
(434,411
|
)
|
Prepayments and other current assets
|
|
|
(4,065,395
|
)
|
|
|
(1,486,828
|
)
|
Payables and other current liabilities
|
|
|
938,670
|
|
|
|
(3,525,853
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
(3,499,103
|
)
|
|
$
|
(5,419,170
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of plant and equipment and construction in progress
|
|
|
(695,544
|
)
|
|
|
(578,595
|
)
|
Purchase of intangible assets
|
|
|
(157,293
|
)
|
|
|
62,274
|
|
Net cash used in investing activities
|
|
$
|
(852,837
|
)
|
|
$
|
(516,321
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
3,016,204
|
|
|
|
12,319,834
|
|
Repayment of borrowings
|
|
|
-
|
|
|
|
(1,108,584
|
)
|
(Repayment to) proceeds from related party
|
|
|
(2,777,808
|
)
|
|
|
1,991,296
|
|
Net cash provided by financing activities
|
|
$
|
238,396
|
|
|
$
|
13,202,546
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
|
|
|
(4,113,544
|
)
|
|
|
7,267,055
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation on cash
|
|
|
256,785
|
|
|
|
(11,432
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents–beginning of year
|
|
|
7,272,510
|
|
|
|
16,887
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents–end of year
|
|
$
|
3,415,751
|
|
|
$
|
7,272,510
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information:
|
|
|
|
|
|
|
|
|
Interest received
|
|
$
|
-
|
|
|
$
|
186
|
|
Interest paid
|
|
$
|
23,407
|
|
|
$
|
9,911
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
See
Accompanying Notes to the Financial Statements
PLANET
GREEN HOLDINGS CORP.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(Stated in US Dollars)
1.
|
Organization
and Principal Activities
|
Planet
Green Holdings Corp. (the “Company” or “PLAG”) is a holding company incorporated in Nevada. We are engaged
in various businesses through our subsidiaries and controlled entities in China.
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 reflect the activities of Planet Green Holdings Corp. and each of the following
entities:
|
|
Place
of
|
|
|
Attributable
equity
|
|
|
Registered
|
|
Name
of Company
|
|
incorporation
|
|
|
interest
%
|
|
|
capital
|
|
Planet
Green Holdings Corporation
|
|
British
Virgin Islands
|
|
|
|
100
|
|
|
$
|
10,000
|
|
Lucky
Sky Planet Green Holdings Co., Limited (H.K.)
|
|
Hong
Kong
|
|
|
|
100
|
|
|
|
1
|
|
Jiayi
Technologies (Xianning) Co., Ltd.
|
|
PRC
|
|
|
|
100
|
|
|
|
2,000,000
|
|
Fast
Approach Inc.
|
|
Canada
|
|
|
|
100
|
|
|
|
79
|
|
Shanghai
Shuning Advertising Co., Ltd. (a subsidiary of FAST)
|
|
PRC
|
|
|
|
100
|
|
|
|
-
|
|
Lorain
Food Stuff (Shenzhen) Co., Ltd (terminated the VIE)
|
|
PRC
|
|
|
|
VIE
|
|
|
|
1,913,049
|
|
Taishan
Muren Agriculture Co. Ltd. (terminated the VIE)
|
|
PRC
|
|
|
|
VIE
|
|
|
|
80,000
|
|
Xianning
Bozhuang Tea Products Co., Ltd.
|
|
PRC
|
|
|
|
VIE
|
|
|
|
6,277,922
|
|
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 noncontrolling interests.
On
May 18, 2018, the Company incorporated Planet Green Holdings Corporation, a limited company incorporated in the British Virgin
Islands. On September 28, 2018, Planet Green BVI acquired JianShi Technology Holding Limited, a limited company inc orporated
in Hong Kong on February 21, 2012, and Shanghai Xunyang Internet Tech Co., Ltd., a wholly-owned foreign entity incorporated in
Shanghai, PRC, on August 29, 2012 (“Shanghai Xunyang”).
On
August 12, 2019, through Lucky Sky Holdings Corporations (H.K.) Limited, formerly known as JianShi Technology Holding Limited,
Company established Lucky Sky Petrochemical Technology (Xianning) Co., Ltd., a wholly foreign-owned enterprise incorporated in
Xianning City, Hubei Province, China.
On
December 20, 2019, The Lucky Sky Holdings Corporations (H.K.) Limited sold 100% of equity interest in Shanghai Xunyang.
On May 29, 2020, the Planet Green Holdings Corporation
(BVI) incorporated Lucky Sky Planet Green Holdings Co., Limited, a limited company incorporated in Hong Kong.
On June 5, 2020, the Planet Green Holdings Corporation
(BVI) acquired all of the outstanding equity interests of Fast Approach Inc. It was incorporated under Canada’s laws and the business
of operation of a demand-side platform targeting the Chinese education market in North America.
On
June 16, 2020, Lucky Sky Holdings Corporations (H.K.) transferred its 100% equity interest in Lucky Sky Petrochemical to Lucky
Sky Planet Green Holdings Co., Limited (H.K.).
On
September 15, 2020, Lucky Sky Petrochemical terminated the VIE agreements with Shenzhen Lorain and Taishan Muren
On
August 10, 2020, Planet Green Holdings Corporation(BVI) transferred its 100% equity interest in Lucky Sky Holdings Corporations
(H.K.) Limited to Rui Tang.
On
December 9, 2020, Lucky Sky Petrochemical Technology (Xianning) Co., Ltd. changed its name to Jiayi Technologies (Xianning) Co.,
Ltd.
Consolidation
of Variable Interest Entity
On
September 27, 2018, through Shanghai Xunyang, the Company entered into exclusive VIE agreements with Beijing Lorain, Luotian Lorain,
Shandong Greenpia, Taishan Muren, and Shenzhen Lorain and their shareholders that give the Company the ability to substantially
influence those companies’ daily operations and financial affairs and appoint their senior executives. The Company is considered
the primary beneficiary of these operating companies.
On
May 14, 2019, through Shanghai Xunyang, the Company entered into a series of VIE agreements with Xianning Bozhuang and its equity
holders to obtain control and became the primary beneficiary of Xianning Bozhuang. The Company consolidated Xianning Bozhuang’s
accounts as its VIE.
On
December 20, 2019, we sold 100% of equity interest in Shanghai Xunyang and terminated its VIE agreements with Xianning Bozhuang,
Shenzhen Lorain and Taishan Muren.
On
December 20, 2019, through Lucky Sky Petrochemical, the Company entered into exclusive VIE agreements (“VIE Agreements”)
with Taishan Muren, Xianning Bozhuang and Shenzhen Lorain, as well as their shareholders, which give the Company the ability to
substantially influence those companies’ daily operations and financial affairs and appoint their senior executives. The
Company is considered the primary beneficiary of these operating companies and it consolidates their accounts as VIEs.
As
of December 31, 2020, the following entities were de-consolidated from the structure as a result of the sale agreement executed
on September 15, 2020:
Name
|
|
Place
of incorporation
|
|
Ownership
|
Taishan
Muren Agriculture Co., Ltd.
|
|
PRC
|
|
VIE
of Jiayi Technologies (Xianning) Co., Ltd
|
Lorain
Food Stuff (Shenzhen) Co., Ltd
|
|
PRC
|
|
VIE
of Jiayi Technologies (Xianning) Co., Ltd
|
As a result of sale agreement, the accumulated
deficit of Taishan Muren Agriculture Co., Ltd. and Lorain Food Stuff (Shenzhen) Co., Ltd with total amount of $6,479,978 are written off,
and it also had a net loss of $12,407,690 due to the waiver of receivables. In addition, the Company also recognized a long-term investment
loss with total amount of $2,153,111. The net effect is a loss on disposal of VIEs with the total amount of $5,927,712.
Discontinued
operations
See
financial note 16.
Each
of the VIE Agreements is described in detail below:
Consultation
and Service Agreement
Under
the Consultation and Service Agreement, WFOE has the exclusive right to provide consultation and services to the operating entities
in China in business management, human resource, technology, and intellectual property rights. WFOE exclusively owns any intellectual
property rights arising from the performance of this Consultation and Service Agreement. The number of service fees and payment
terms can be amended by the WFOE and operating companies’ consultation and implementation. The duration of the Consultation
and Service Agreement is 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 specialized services, business consultations, equipment or property
leasing, marketing consultancy, system integration, product research and development, and system maintenance. WFOE exclusively
owns any intellectual property rights arising from the performance of this Business Cooperation Agreement. The rate of service
fees may be adjusted based on the services rendered by WFOE in that month and the operational needs of the operating entities.
The Business Cooperation Agreement shall maintain effective unless it was terminated or was compelled to release under applicable
PRC laws and regulations. WFOE may terminate this Business Cooperation Agreement at any time by giving 30 day’s prior written
notice.
Equity
Pledge Agreements
According
to the Equity Pledge Agreements among WFOE, operating entities, and each of operating entities’ shareholders, shareholders
of the operating entities pledge all of their equity interests in the functional entities to WFOE to guarantee their performance
of relevant obligations and indebtedness under the Technical Consultation and Service Agreement and other control agreements.
Besides, shareholders of the operating entities are in the process of registering the equity pledge with the competent local authority.
Equity
Option Agreements
According
to the Equity Option Agreements, WFOE has the exclusive right to require each shareholder of the operating companies to fulfill
and complete all approval and registration procedures required under PRC laws for WFOE to purchase or designate one or more persons
to buy, each shareholder’s equity interests in the operating companies, once or at multiple times at any time in part or
in whole at WFOE’s sole and absolute discretion. The purchase price shall be the lowest price allowed by PRC laws. The Equity
Option Agreements shall remain effective until all the equity interest owned by each operating entity shareholder has been legally
transferred to WFOE or its designee(s).
Voting
Rights Proxy Agreements
According
to the Voting Rights Proxy Agreements, each shareholder irrevocably appointed WFOE or WFOE’s designee to exercise all his
or her rights as the shareholders of the operating entities under the Articles of Association of each operating entity, including
but not limited to the power to exercise all shareholder’s voting rights concerning all matters to be discussed and voted
in the shareholders’ meeting. The term of each Voting Rights Proxy Agreement is 20 years. WOFE has the right to extend each
Voting Proxy Agreement by giving written notification.
Use
of estimates
The
financial statements’ preparation 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 when the calculations are made; however, actual results could differ materially from those estimates.
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 deposits 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. They 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 the impairment is other-than-temporary, the
Company considers whether it has the ability and intent to hold the investment until a market price recovery and believes whether
evidence indicating the cost of the asset is recoverable outweighs evidence to the contrary. Evidence considered in this assessment
includes the reasons for the impairment, the severity and duration of the impairment, changes in value after year-end, and forecasted
performance of the investee.
Premiums
and discounts are amortized or accreted over the life of the related available-for-sale security as an adjustment to yield using
the effective-interest method. Dividend and interest income are recognized when earned.
Trade
receivables
Trade
receivables are recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An estimate
for doubtful accounts is made when the collection of the total amount is no longer probable. Bad debts are written off as incurred.
Inventories
Inventories
consist of raw materials and finished goods, stated at the lower of cost or market value. Finished goods are comprised of direct
materials, direct labor, inbound shipping costs, and allocated overhead. The Company applies the weighted average cost method
to its inventory.
Advances
and prepayments to suppliers
The
Company makes an advance payment to suppliers and vendors for the procurement of raw materials. Upon physical receipt and inspection
of the raw materials from suppliers, the applicable amount is reclassified from advances and prepayments to suppliers to inventory.
Plant
and equipment
Plant
and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using
the straight-line method. The Company typically applies a salvage value of 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
|
|
The
cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts, and any gain or
loss are included in the Company’s results of operations. The costs of maintenance and repairs are recognized as incurred;
significant renewals and betterments are capitalized.
Intangible
assets
Intangible
assets are carried at cost less accumulated amortization. Amortization is provided over their useful lives, using the straight-line
method. The estimated useful lives of the intangible assets are as follows:
Land
use rights
|
|
|
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 fees
of purchase and installation of related equipment. Amounts classified as construction in progress and prepayments for equipment
are transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended
use are completed. Depreciation is not provided for assets classified in this account.
Goodwill
Goodwill
represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination.
The Company conducts an annual assessment of its goodwill for impairment. If the carrying value of its goodwill exceeds its fair
value, then impairment has incurred; accordingly, a charge to the Company’s operations results will be recognized during the
period. Impairment losses on goodwill are not reversed. Fair value is generally determined using a discounted expected future cash
flow analysis. In 2020, the Company recorded approximately $2.34 million in impairment to its Canadian operating units Fast
Approach. Fast Approach’s main business is operated in China in which were materially adversely impacted by the COVID 19
virus.
Accounting
for the impairment of long-lived assets
The
Company annually reviews its long-lived assets for impairment or whenever events or changes in circumstances indicate that the
carrying amount of assets may not be recoverable. Impairment may become obsolete from a difference in the industry, introduction
of new technologies, or if the Company has inadequate working capital to utilize the long-lived assets to generate adequate profits.
Impairment is present if the carrying amount of an asset is less than its expected future undiscounted cash flows.
If
an asset is considered impaired, a loss is recognized based on the amount by which the carrying amount exceeds the fair market
value of the asset. Assets to be disposed of are reported lower the carrying amount or fair value fewer costs to selling.
Statutory
reserves
Statutory
reserves are referring to the amount appropriated from the net income following laws or regulations, which can be used to recover
losses and increase capital, as approved, and are to be used to expand production or operations. PRC laws prescribe that an enterprise
operating at a profit must appropriate and reserve, on an annual basis, an amount equal to 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 currency of the Company is the Renminbi
(RMB). The Company’s assets and liabilities are translated into United States dollars from RMB at year-end exchange rates.
Its revenues and expenses are translated at the average exchange rate during the period. Capital accounts are translated at their
historical exchange rates when the capital transactions occurred.
|
|
12/31/2020
|
|
|
12/31/2019
|
|
Period-end
US$: CDN$ exchange rate
|
|
|
1.2754
|
|
|
|
1.2988
|
|
Period-end
US$: RMB exchange rate
|
|
|
6.5326
|
|
|
|
6.9762
|
|
Period
average US$: CDN$ exchange rate
|
|
|
1.3409
|
|
|
|
1.3269
|
|
Period
average US$: RMB exchange rate
|
|
|
6.8996
|
|
|
|
6.8967
|
|
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 recognized revenue when control of the promised goods or services
is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods
or services.
The
Company derives its revenues from selling fresh foods, spices, convenience foods, and tea products. The Company applies the following
five steps to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
|
●
|
identify
the contract with a customer;
|
|
●
|
identify
the performance obligations in the contract;
|
|
●
|
determine
the transaction price;
|
|
●
|
allocate
the transaction price to performance obligations in the contract; and
|
|
●
|
Recognize
revenue as the performance obligation is satisfied.
|
Advertising
All
advertising costs are expensed as incurred.
Shipping
and handling
All
outbound shipping and handling costs are expensed as incurred.
Research
and development
All
research and development costs are expensed as incurred.
Retirement
benefits
Retirement
benefits in the form of mandatory government-sponsored defined contribution plans are charged to either expense as incurred or
allocated to inventory as part of overhead.
Stock-based
compensation
The Company records stock compensation expense
for employees at fair value on the grant date and recognizes the expense one time because there is no employee’s requisite service
period requirement. On December 30, 2020, 782,165 shares of common stocks are granted to six employees of the Company for stock compensation.
The closing stock price on December 30, 2020 is $2.25 per share. Total amount of $1,759,871 are recorded as stock compensation expenses.
Income
taxes
The
Company accounts for income tax using an asset and liability approach and recognizes deferred tax benefits in future years. Under
the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance
is provided for deferred tax assets. If it is more likely than not, these items will either expire before the Company can realize
their benefits or 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”) following ASC Topic 260, “Earnings per share.” Basic EPS is
measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for
the period. Diluted EPS presents the dilutive effect on a per-share basis from the potential conversion of convertible securities
or the exercise of options and or warrants; the dilutive impacts of potentially convertible securities are calculated using the
as-if method; the potentially dilutive effect of options or warranties are computed using the treasury stock method. Securities
that are potentially an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded
from diluted EPS calculation.
Financial
instruments
The
Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts and other payables,
accrued liabilities, and short-term debt, have carrying amounts that approximate their fair values due to their short maturities.
ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosing the 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 between the origination of such instruments and
their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
|
●
|
Level
1 - inputs to the valuation methodology used quoted prices for identical assets or liabilities in active markets.
|
|
●
|
Level
2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and information
that are observable for the asset or liability, either directly or indirectly, for substantially the financial instrument’s
full term.
|
|
●
|
Level
3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
The
Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities
from Equity,” and ASC 815.
Commitments
and contingencies
Liabilities
for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when
it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
Recent
accounting pronouncements
In
February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity required to apply
the provisions of Topic 220, Income Statement – Reporting Comprehensive Income and has items of other comprehensive income
for which the related tax effects are presented in other comprehensive income required by GAAP. The amendments in this Update
are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.
Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business
entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting
periods for which financial statements have not however been made available for issuance. The amendments in this Update should
be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in
the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not believe the adoption
of this ASU would affect the Company’s financial statements.
In
August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820), – Disclosure Framework – Changes
to the Disclosure Requirements for Fair Value Measurement,” which makes several changes meant to add, modify or remove
specific disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level
3 fair value measurements. The amendments in this Update modify the disclosure requirements on fair value measurements based on
the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements,
including the consideration of costs and benefits. The amendments on changes in unrealized gains and losses, the range and weighted
average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement
uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal
year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The
modifications are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those
fiscal years, with early adoption, permitted. The Company does not believe the adoption of this ASU would have a material effect
on the Company’s condensed financial statements.
The
Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a
material effect on the Company’s balance sheets, statements of income and comprehensive income and statements of cash flows.
Restricted
cash represents interest-bearing deposits placed with banks to secure banking facilities in the form of loans and notes payable.
The funds are restricted from immediate use and are designated for settlement of loans or notes when they become due.
4.
|
Variable interest entity (“VIE”)
|
A
VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities
without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial
interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb
the expected losses of the entity. If any, the variable interest holder that has a controlling financial interest in a VIE is
deemed to be the primary beneficiary and must consolidate the VIE. PLAG WOFE is deemed to have the controlling financial interest
and be the primary beneficiary of Xianning Bozhuang Tea Products Co., Ltd because it has both of the following characteristics:
|
1)
|
The
power to direct activities at Xianning Bozhuang Tea Products Co., Ltd that most significantly
impact such entity’s economic performance, and
|
|
2)
|
The
obligation to absorb losses of, and the right to receive benefits from Xianning Bozhuang
Tea Products Co., Ltd that could potentially be significant to such entity.
|
Pursuant
to the Contractual Arrangements, Xianning Bozhuang Tea Products Co., Ltd pays service fees equal to all of its net income to PLAG
WFOE. At the same time, PLAG WFOE is obligated to absorb all of Xianning Bozhuang Tea Products Co., Ltd’s losses. The Contractual
Arrangements are designed so that Xianning Bozhuang Tea Products Co., Ltd operate for the benefit of PLAG WFOE and ultimately,
the Company. Accordingly, the accounts of Xianning Bozhuang Tea Products Co., Ltd are consolidated in the accompanying consolidated
financial statements. In addition, its financial positions and results of operations are included in the Company’s consolidated
financial statements.
The
carrying amount of VIE’s consolidated assets and liabilities are as follows:
|
|
12/31/2020
|
|
|
12/31/2019
|
|
Cash and cash equivalents
|
|
$
|
528,048
|
|
|
$
|
5,269,076
|
|
Note and Accounts receivable, net
|
|
|
835,384
|
|
|
|
66,673
|
|
Other receivables - third party
|
|
|
7,726,607
|
|
|
|
270,421
|
|
Inventories, net
|
|
|
2,251,628
|
|
|
|
1,939,025
|
|
Prepayments
|
|
|
1,215,089
|
|
|
|
1,558,922
|
|
TOTAL CURRENT ASSETS
|
|
|
12,556,756
|
|
|
|
9,104,117
|
|
|
|
|
|
|
|
|
|
|
Plan and equipment, net
|
|
|
4,592,615
|
|
|
|
4,152,708
|
|
Intangible assets, net
|
|
|
1,491,614
|
|
|
|
1,533,927
|
|
Total Non-Current Assets
|
|
|
6,084,229
|
|
|
|
5,686,635
|
|
TOTAL ASSETS
|
|
$
|
18,640,985
|
|
|
$
|
14,790,752
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,017,373
|
|
|
$
|
486,241
|
|
Accounts payable - related party
|
|
|
-
|
|
|
|
-
|
|
Advance from customer
|
|
|
213,469
|
|
|
|
52,722
|
|
Other payables and accrued liabilities
|
|
|
8,951,117
|
|
|
|
8,963,091
|
|
Other payables - related party
|
|
|
2,716,537
|
|
|
|
-
|
|
Taxes payable
|
|
|
171,231
|
|
|
|
106,315
|
|
Deferred income
|
|
|
-
|
|
|
|
-
|
|
TOTAL CURRENT LIABILITIES
|
|
|
13,069,728
|
|
|
|
9,608,369
|
|
|
|
|
|
|
|
|
|
|
Long term payable
|
|
|
-
|
|
|
|
-
|
|
TOTAL LIABILITIES
|
|
$
|
13,069,728
|
|
|
$
|
9,608,369
|
|
|
|
|
|
|
|
|
|
|
Paid-in capital
|
|
|
6,314,908
|
|
|
|
6,314,908
|
|
Retained earnings
|
|
|
(793,601
|
)
|
|
|
(834,993
|
)
|
Accumulated other comprehensive income
|
|
|
49,950
|
|
|
|
(297,532
|
)
|
Total Equity
|
|
|
5,571,257
|
|
|
|
5,182,383
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
18,640,985
|
|
|
$
|
14,790,752
|
|
The
summarized operating results of the VIE’s are as follows:
|
|
12/31/2020
|
|
|
12/31/2019
|
|
Operating revenues
|
|
$
|
3,804,595
|
|
|
$
|
1,106,482
|
|
Gross profit
|
|
|
1,336,228
|
|
|
|
706,292
|
|
Income from operations
|
|
|
41,392
|
|
|
|
(244,194
|
)
|
Net income (loss)
|
|
$
|
41,392
|
|
|
$
|
(244,194
|
)
|
On June 5, 2020, the Company and its wholly owned
subsidiary the Planet Green Holdings Corporation (BVI) acquired all of the outstanding equity interests of Fast Approach Inc. It was incorporated
under Canada’s laws and the business of operation of a demand-side platform targeting the Chinese education market in North America.
The Company’s acquisition of Fast Approach Inc. was accounted
for as a business combination in accordance with ASC 805. The Company has allocated the purchase price of Fast Approach Inc. based upon
the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Other current assets and current liabilities
were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities
assumed, plant and equipment, and intangible assets identified as of the acquisition date and considered a number of factors including
valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed
as incurred in general and administrative expense.
The following table summarizes the fair value of the identifiable assets
acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition
of Fast Approach Inc.:
Total consideration at fair value
|
|
$
|
4,679,940
|
|
|
|
Fair Value
|
|
Cash
|
|
$
|
3,936
|
|
Other current assets
|
|
|
2,260
|
|
Plant and equipment
|
|
|
1,037
|
|
Other noncurrent assets
|
|
|
43,777
|
|
Total asset
|
|
|
51,010
|
|
Total liabilities
|
|
|
(140,950
|
)
|
Net asset acquired
|
|
$
|
(89,940
|
)
|
As of the date of the acquisition, the net asset acquired
negative $89,940 is less than total consideration at fair value $4,679,940. The difference of $4,679,940 will be added to the goodwill
and additional paid in capital.
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
|
|
12/31/2020
|
|
|
12/31/2019
|
|
Trade
accounts receivable
|
|
$
|
881,533
|
|
|
$
|
66,673
|
|
Less:
Allowance for doubtful accounts
|
|
|
(46,149
|
)
|
|
|
-
|
|
|
|
$
|
835,384
|
|
|
$
|
66,673
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts:
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
-
|
|
|
$
|
-
|
|
Additions
to allowance
|
|
|
(46,149
|
)
|
|
|
-
|
|
Bad
debt written-off
|
|
|
-
|
|
|
|
-
|
|
Ending
balance
|
|
$
|
(46,149
|
)
|
|
$
|
-
|
|
The
advances to suppliers balance of $5,922,562 and $1,558,922 as of December 31, 2020 and December 31, 2019, respectively, mainly
represents the advanced payment to the suppliers for raw materials.
Inventories
consisted of the following as of December 31, 2020, and 2019.
|
|
12/31/2020
|
|
|
12/31/2019
|
|
Raw
materials
|
|
$
|
240,468
|
|
|
$
|
640,990
|
|
Inventory
of supplies
|
|
|
13,873
|
|
|
|
12,489
|
|
Work
in progress
|
|
|
1,991,749
|
|
|
|
1,071,363
|
|
Finished
goods
|
|
|
5,538
|
|
|
|
214,183
|
|
Total
|
|
$
|
2,251,628
|
|
|
$
|
1,939,025
|
|
Plant, and equipment consisted of the following
as of December 31, 2020, and 2019:
|
|
12/31/2020
|
|
|
12/31/2019
|
|
At Cost:
|
|
|
|
|
|
|
Buildings
|
|
$
|
3,952,207
|
|
|
$
|
3,616,207
|
|
Machinery and equipment
|
|
|
1,103,152
|
|
|
|
785,487
|
|
Office equipment
|
|
|
82,670
|
|
|
|
42,772
|
|
Motor vehicles
|
|
|
161,590
|
|
|
|
120,534
|
|
|
|
$
|
5,299,619
|
|
|
$
|
4,565,000
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
(702,982
|
)
|
|
|
(412,292
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,596,637
|
|
|
$
|
4,152,708
|
|
Depreciation expense for the years ended December
31, 2020, and 2019 was $290,690 and $193,399 respectively.
|
|
12/31/2020
|
|
|
12/31/2019
|
|
At
Cost:
|
|
|
|
|
|
|
Land
use rights
|
|
|
801,170
|
|
|
|
750,224
|
|
Software
licenses
|
|
|
56,949
|
|
|
|
2,552
|
|
Trademark
|
|
|
955,974
|
|
|
|
895,187
|
|
|
|
$
|
1,814,093
|
|
|
$
|
1,647,963
|
|
|
|
|
|
|
|
|
|
|
Less:
Accumulated amortization
|
|
|
(297,626
|
)
|
|
|
(114,036
|
)
|
|
|
$
|
1,516,467
|
|
|
$
|
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, located at Xianning City, Hubei Province, China with the land use right until June 12, 2068.
Trademark:
a tea brand trademark was obtained on March 28, 2014 with a consideration of $895,187, registered with the China National Intellectual
Property Administration, registration number is 16964992A.
Amortization expense for the years ended December
31, 2020 and 2019 was $183,590 and $10,127, respectively.
11.
|
Related
Parties Transaction
|
As
of December 31, 2020 and 2019, the outstanding balance due to related parties is $19,850 and $2,003,390, respectively.
As
of December 31, 2020 and 2019, the outstanding balance of $19,850 and $Nil, respectively. The balance as of December 31, 2020
due to Yong Yang, an executive of a subsidiary, was advances for working capital of the Company, non-interest bearing, and unsecured,
unless further disclosed.
As of December 31, 2020 and 2019, the outstanding balance was
$Nil and $2,003,390 due to Mr. Bin Zhou, Chief Executive Officer and Chairman of the Company, respectively, is advances for working
capital of the Company which are fully paid off as of December 31, 2020.
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.
On
June 17, 2019, the Company entered into a securities purchase agreement, pursuant to which five individuals residing in the PRC
agreed to purchase an aggregate of 1,300,000 shares of the Company’s common stock, par value $0.001 per share, for an aggregate
purchase price of $5,460,000, representing a purchase price of $4.20 per share. The transaction closed on June 19, 2019.
On
February 10, 2020, the Company entered into a securities purchase agreement with Mengru Xu and Zhichao Du, pursuant to which Ms.
Xu and Mr. Du agreed to invest an aggregate of $3.51 million in the Company in exchange for an aggregate of 1,350,000 shares of
common stock, representing a purchase price of approximately $2.60 per share. On February 28, 2020, the Company closed the transaction.
On
June 5, 2020, the Company issued an aggregate of 1,800,000 shares of its common stock to acquire all 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.
On
December 30, 2020, the Company issued a total of 782,165 ordinary shares to six employees of the Company. Total fair value of
these ordinary shares was approximately $1.75 million and the compensation expenses are to be recognized in the fiscal year 2020
because there is no employee’s requisite service period requirement.
As
of December 31, 2020, there were 11,809,930 shares of common stock outstanding.
The Company’s primary operations are located
in Canada and the PRC. The corporate income tax rate was 13% in Canada and 25% in the PRC as of December 31, 2020.
The
following tables provide the reconciliation of the differences between the statutory and effective tax expenses following as of
December 31, 2020 and 2019.
|
|
12/31/2020
|
|
|
12/31/2019
|
|
Loss attributed to PRC continuing operations
|
|
$
|
(34,348
|
)
|
|
$
|
(5,836,652
|
)
|
Loss attributed to Canada operations
|
|
|
(417,271
|
)
|
|
|
-
|
|
Income attributed to BVI
|
|
|
9,779,542
|
|
|
|
8,783,848
|
|
Loss attributed to U.S. operations
|
|
|
(20,529,997
|
)
|
|
|
-
|
|
(Loss) income before
tax
|
|
$
|
(11,202,074
|
)
|
|
$
|
2,947,196
|
|
|
|
|
|
|
|
|
|
|
PRC Statutory Tax at 25%
|
|
|
-
|
|
|
|
-
|
|
Canada Statutory Tax at 13%
|
|
|
-
|
|
|
|
-
|
|
U.S. Federal Statutory Income Tax at 21%
|
|
|
-
|
|
|
|
-
|
|
Effect of tax exemption granted
|
|
|
-
|
|
|
|
|
|
Income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Per Share Effect of Tax Exemption
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Effect of tax exemption granted
|
|
$
|
-
|
|
|
$
|
-
|
|
Weighted-Average Shares Outstanding Basic
|
|
|
10,112,648
|
|
|
|
6,897,710
|
|
Per share effect
|
|
$
|
-
|
|
|
$
|
-
|
|
The
difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows as of
December 31, 2020 and 2019:
|
|
12/31/2020
|
|
|
12/31/2019
|
|
U.S. federal statutory income tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
Higher (lower) rates in PRC, net
|
|
|
4
|
%
|
|
|
4
|
%
|
Expenses not deductible to taxable income
|
|
|
(25
|
)%
|
|
|
(25
|
)%
|
The Company’s effective tax rate
|
|
|
0
|
%
|
|
|
0
|
%
|
Deferred
tax assets
Bad
debt allowances must be approved by the Chinese tax authority prior to being deducted as an expense item on the tax return. Therefore,
deferred tax assets are not likely realized.
14.
|
Earnings/(Loss)
Per Share
|
Components
of basic and diluted earnings per share were as follows:
|
|
For the years ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
(Loss) income from continuing operations
|
|
$
|
(11,202,074
|
)
|
|
$
|
8,539,597
|
|
Income (loss) from discontinued operations
|
|
$
|
150,911
|
|
|
$
|
(5,592,401
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted (loss) earnings per share denominator:
|
|
|
|
|
|
|
|
|
Original Shares:
|
|
|
7,877,765
|
|
|
|
5,497,765
|
|
Additions from Actual Events -issuance of common stock for cash
|
|
|
1,202,055
|
|
|
|
701,644
|
|
Additions from Actual Events – issuance of common stock for acquisition
|
|
|
1,030,685
|
|
|
|
698,301
|
|
Additions from Actual Events – issuance of common stock for stock compensation
|
|
|
2,143
|
|
|
|
-
|
|
Basic Weighted Average Shares Outstanding
|
|
|
10,112,648
|
|
|
|
6,897,710
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per share from continuing operations - Basic and
diluted
|
|
$
|
(1.11
|
)
|
|
$
|
1.24
|
|
Income (loss) per share from discontinued operations-Basic and diluted
|
|
$
|
0.01
|
|
|
$
|
(0.81
|
)
|
(Loss) income per share - Basic and diluted
|
|
$
|
(1.09
|
)
|
|
$
|
0.43
|
|
Customers
Concentrations
The
following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues as of
December 31, 2020 and 2019.
|
|
|
For the years ended
|
|
Customers
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
Amount $
|
|
|
%
|
|
|
Amount $
|
|
|
%
|
|
A
|
|
|
|
3,161,520
|
|
|
|
88
|
|
|
|
-
|
|
|
|
-
|
|
B
|
|
|
|
-
|
|
|
|
-
|
|
|
|
283,822
|
|
|
|
27
|
|
C
|
|
|
|
-
|
|
|
|
-
|
|
|
|
210,716
|
|
|
|
20
|
|
D
|
|
|
|
-
|
|
|
|
-
|
|
|
|
207,273
|
|
|
|
20
|
|
E
|
|
|
|
-
|
|
|
|
-
|
|
|
|
277,302
|
|
|
|
25
|
|
Suppliers
Concentrations
The
following table sets forth information as to each supplier that accounted for 10% or more of the Company’s purchase as of
December 31, 2020 and December 31, 2019.
|
|
|
For the periods ended
|
|
Suppliers
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
Amount $
|
|
|
%
|
|
|
Amount $
|
|
|
%
|
|
A
|
|
|
|
307,817
|
|
|
|
50
|
|
|
|
-
|
|
|
|
-
|
|
B
|
|
|
|
225,577
|
|
|
|
37
|
|
|
|
-
|
|
|
|
-
|
|
C
|
|
|
|
-
|
|
|
|
-
|
|
|
|
196,899
|
|
|
|
36
|
|
D
|
|
|
|
-
|
|
|
|
-
|
|
|
|
79,878
|
|
|
|
15
|
|
16.
|
Discontinued
Operations
|
As
of December 31, 2020, the Company has reclassified the results of operations and the financial position of Taishan Muren and Shenzhen
Lorain as discontinued operations. Selected details regarding those discontinued operations are provided below.
|
|
For the years ended
December 31
|
|
Results of Operations
|
|
2020
|
|
|
2019
|
|
Net revenues
|
|
$
|
38,748
|
|
|
$
|
3,006,595
|
|
Cost of revenues
|
|
|
33,111
|
|
|
|
2,515,326
|
|
Gross profit
|
|
|
5,637
|
|
|
|
491,269
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
|
-
|
|
|
|
224
|
|
General and administrative expenses
|
|
|
152,104
|
|
|
|
1,013,542
|
|
Total operating expenses
|
|
|
152,104
|
|
|
|
1,013,766
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(146,467
|
)
|
|
|
(522,497
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
Interest income(expenses), net.
|
|
|
(4,444
|
)
|
|
|
169
|
|
Other income(expenses), net.
|
|
|
-
|
|
|
|
(45,039
|
)
|
Impairment for goodwill
|
|
|
-
|
|
|
|
-
|
|
Write off receivables from disposal of former subsidiaries
|
|
|
-
|
|
|
|
(5,025,034
|
)
|
Total other (expenses) income
|
|
|
(4,444
|
)
|
|
|
(5,069,904
|
)
|
|
|
|
|
|
|
|
|
|
Loss before taxes
|
|
|
(150,911
|
)
|
|
|
(5,592,401
|
)
|
|
|
|
|
|
|
|
|
|
Taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net income(loss)
|
|
$
|
(150,911
|
)
|
|
$
|
(5,592,401
|
)
|
|
|
As of December 31,
|
|
Financial Position
|
|
2020
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
-
|
|
|
$
|
130,813
|
|
Trade receivables, net
|
|
|
-
|
|
|
|
1,049,538
|
|
Inventories
|
|
|
-
|
|
|
|
7,523
|
|
Advances and prepayments to suppliers
|
|
|
-
|
|
|
|
5,855,144
|
|
Other receivables and other current assets
|
|
|
-
|
|
|
|
4,867
|
|
Related party receivable
|
|
|
-
|
|
|
|
2,162
|
|
Total current assets
|
|
$
|
-
|
|
|
$
|
7,050,047
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
-
|
|
|
|
819,992
|
|
Construction in progress, net
|
|
|
-
|
|
|
|
834,337
|
|
Deposits
|
|
|
-
|
|
|
|
1,454
|
|
Right-of-use assets
|
|
|
-
|
|
|
|
398,082
|
|
Total non-current assets
|
|
|
-
|
|
|
|
2,053,865
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
-
|
|
|
$
|
9,103,912
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Short-term bank loans
|
|
$
|
-
|
|
|
$
|
136,044
|
|
Accounts payable
|
|
|
-
|
|
|
|
187,093
|
|
Taxes payable
|
|
|
-
|
|
|
|
108
|
|
Accrued liabilities and other payables
|
|
|
-
|
|
|
|
4,300
|
|
Customers deposits
|
|
|
-
|
|
|
|
-
|
|
Related party otherpayables
|
|
|
-
|
|
|
|
24,339
|
|
Lease payable-current portion
|
|
|
-
|
|
|
|
24,761
|
|
Total current liabilities
|
|
$
|
-
|
|
|
$
|
376,645
|
|
|
|
|
|
|
|
|
|
|
Lease payable- non-current
|
|
|
-
|
|
|
|
373,728
|
|
Total non-current liabilities
|
|
$
|
-
|
|
|
$
|
373,728
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
-
|
|
|
$
|
750,373
|
|
|
|
|
|
|
|
|
|
|
Net Assets
|
|
$
|
-
|
|
|
$
|
8,353,539
|
|
The Company follows ASC 280, Segment Reporting,
which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and
evaluating their performance. The Company’s management evaluates performance and determines resource allocations based on a number
of factors, the primary measure being income from operations.
The Company’s main business segment and
operations are Xianning Bozhuang and Fast Approach. The Company’s consolidated results of operations and consolidated financial
position from continuing operations are almost all attributable to Xianning Bozhuang and Fast Approach. Accordingly, management believes
that the consolidated balance sheets and statement of operations provide the relevant information to assess Xianning Bozhuang and Fast
Approach’s performance.
The following represents assets by division as
of:
Total assets as of
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
Fast Approach and Shanghai Xunyang
|
|
$
|
572,509
|
|
|
$
|
-
|
|
Xianning Bozhuang
|
|
|
11,968,553
|
|
|
|
14,790,752
|
|
Jiayi Technologies (Xianning) Co., Ltd.
|
|
|
6,563,580
|
|
|
|
2,003,135
|
|
Planet Green Holdings Corporation (BVI)
|
|
|
-
|
|
|
|
-
|
|
Planet Green Holdings Corporation
|
|
|
853,486
|
|
|
|
100
|
|
Lucky Sky Planet Green Holdings Co., Limited (H.K.).
|
|
|
2,012,228
|
|
|
|
2,012,228
|
|
Total Assets
|
|
$
|
21,970,355
|
|
|
$
|
19,331,066
|
|
18.
|
Risks
|
|
|
|
|
A.
|
Credit
risk
|
|
|
|
|
|
The
Company’s deposits are made with banks located in the PRC. They do not carry federal deposit insurance and may be subject
to loss of the banks become insolvent.
|
|
|
|
|
|
Since
the Company’s inception, the age of account receivables has been less than one year indicating that the Company is subject
to minimal risk borne from credit extended to customers.
|
|
|
|
|
B.
|
Interest
risk
|
|
|
|
|
|
The
Company is subject to interest rate risk when short term loans become due and require refinancing.
|
|
C.
|
Economic
and political risks
|
|
|
The
Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition, and results
of operations may be influenced by changes in the political, economic, and legal environments in the PRC.
|
|
|
|
|
|
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.
|
|
D.
|
Environmental
risks
|
|
|
|
|
|
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.
|
|
|
|
|
E.
|
Inflation
Risk
|
|
|
|
|
|
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.
|
Acquisition
of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd
In
January 2021, the Company and its wholly-owned subsidiary Jiayi Technologies (Xianning) Co., Ltd, formerly known as Lucky Sky
Petrochemical Technology (Xianning) Co., Ltd., entered into a series of VIE agreements with Jingshan Sanhe Luckysky New Energy
Technologies Co., Ltd and its equity holders to obtain control and become the primary beneficiary of Jingshan Sanhe Luckysky New
Energy Technologies Co., Ltd. The Company consolidated Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd’s accounts
as its VIE. According to the VIE agreements, the Company issued an aggregate of 2,200,000 shares of common stock of the Company
to the equity holders of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd in exchange for the transfer of 85% of the equity
interest of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd to the Jiayi Technologies (Xianning) Co., Ltd. The significant
terms of these VIE agreements are summarized in “Note 2 - Summary of Significant Accounting Policies” above.
The
Company’s acquisition of Jingshan Sanhe Luckysky New Energy Technologies Co., Ltd was accounted for as a business combination
following ASC 805. The Company has allocated the purchase price of Jingshan Sanhe based upon the fair value of the identifiable
assets acquired and liabilities assumed on the acquisition date. The Company estimated the fair values of the assets acquired
and liabilities taken at the acquisition date following the business combination standard issued by the FASB with the valuation
methodologies using level 3 inputs, except for other current assets and current liabilities were valued using the cost approach.
Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, and intangible
assets identified as the acquisition date and considered several other available factors. Acquisition-related costs incurred for
the acquisitions are not material and expensed as incurred in general and administrative expense.
Acquisition
of Jilin Chuangyuan Chemical Co., Ltd
In March 2021, the Company and its wholly-owned
subsidiary Jiayi Technologies (Xianning) Co., Ltd, formerly known as Lucky Sky Petrochemical Technology (Xianning) Co., Ltd., entered
into a series of VIE agreements with Jilin Chuangyuan Chemical Co., Ltd and its equity holders to obtain control and become the primary
beneficiary of Jilin Chuangyuan Chemical Co., Ltd. The Company consolidated Jilin Chuangyuan Chemical Co., Ltd’s accounts as its
VIE. Under the VIE agreements, the Company issued an aggregate of 3,300,000 shares of common stock of the Company to the equity holders
of Jilin Chuangyuan Chemical Co., Ltd in exchange for the transfer of 75% of the equity interest of Jilin Chuangyuan Chemical Co., Ltd
to the Jiayi Technologies (Xianning) Co., Ltd. The significant terms of these VIE agreements are summarized in “Note 2 - Summary
of Significant Accounting Policies” above.
The
Company’s acquisition of Jilin Chuangyuan Chemical Co., Ltd was accounted for as a business combination following ASC 805.
The Company has allocated the purchase price of Jilin Chuangyuan based upon the fair value of the identifiable assets acquired
and liabilities assumed on the acquisition date. The Company estimated the fair values of the assets acquired and liabilities
taken at the acquisition date following the business combination standard issued by the FASB with the valuation methodologies
using level 3 inputs, except for other current assets and current liabilities were valued using the cost approach. Management
of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, and intangible assets identified
as of the acquisition date and considered several other available factors. Acquisition-related costs incurred for the acquisitions
are not material and expensed as incurred in general and administrative expenses.
The following table sets forth the unaudited pro
forma condensed combined balance sheet for the purpose of providing a brief description of the respective identifiable assets and liabilities
of the two companies and the impact on the overall statement of PLAG assuming that the merger date was on December 31, 2020.
Planet
Green Holdings Corp.
Unaudited
Pro Forma Condensed Combined Balance Sheet
AS
OF DECEMBER 31, 2020
(Stated
in US Dollars)
|
|
PLAG
|
|
|
JSSH
|
|
|
JLCY
|
|
|
Adjustments
|
|
|
Combined
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
3,415,751
|
|
|
$
|
21,973
|
|
|
$
|
95,237
|
|
|
$
|
-
|
|
|
$
|
3,532,961
|
|
Accounts receivable
|
|
|
835,384
|
|
|
|
-
|
|
|
|
868,874
|
|
|
|
-
|
|
|
|
1,704,258
|
|
Advances and prepayments to suppliers
|
|
|
5,922,562
|
|
|
|
298,381
|
|
|
|
388,349
|
|
|
|
-
|
|
|
|
6,609,292
|
|
Other receivables and other current assets
|
|
|
1,091,815
|
|
|
|
282878
|
|
|
|
123,969
|
|
|
|
-
|
|
|
|
1,498,663
|
|
Due from related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
212,594
|
|
|
|
-
|
|
|
|
212,594
|
|
Inventory
|
|
|
2,251,628
|
|
|
|
400,012
|
|
|
|
581,569
|
|
|
|
-
|
|
|
|
3,233,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
13,517,140
|
|
|
|
1,003,245
|
|
|
|
2,270,593
|
|
|
|
-
|
|
|
|
16,790,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net.
|
|
|
4,596,637
|
|
|
|
4,021,195
|
|
|
|
11,109,220
|
|
|
|
-
|
|
|
|
19,727,053
|
|
Intangible assets, net
|
|
|
1,516,467
|
|
|
|
12,893
|
|
|
|
2,149,910
|
|
|
|
-
|
|
|
|
3,679,269
|
|
Right-of-use assets
|
|
|
-
|
|
|
|
976,605
|
|
|
|
-
|
|
|
|
-
|
|
|
|
976,605
|
|
Other assets and goodwill
|
|
|
2,340,111
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,220,888
|
|
|
|
6,560,999
|
|
Deferred Tax Asset
|
|
|
-
|
|
|
|
728,743
|
|
|
|
415,154
|
|
|
|
-
|
|
|
|
1,143,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current Assets
|
|
|
8,453,215
|
|
|
|
5,739,436
|
|
|
|
13,674,284
|
|
|
|
4,220,888
|
|
|
|
32,087,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
21,970,355
|
|
|
$
|
6,742,680
|
|
|
$
|
15,944,877
|
|
|
$
|
4,220,888
|
|
|
$
|
48,878,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, MINORITY INTEREST & STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term loans
|
|
$
|
-
|
|
|
$
|
459,235
|
|
|
$
|
3,826,934
|
|
|
$
|
-
|
|
|
$
|
4,286,169
|
|
Accounts payable
|
|
|
1,302,850
|
|
|
|
153,439
|
|
|
|
575,495
|
|
|
|
-
|
|
|
|
2,031,784
|
|
Customer advances and deposits
|
|
|
241,893
|
|
|
|
6,904
|
|
|
|
291,655
|
|
|
|
-
|
|
|
|
540,452
|
|
Other payable
|
|
|
1,848,598
|
|
|
|
1,071,967
|
|
|
|
2,722,428
|
|
|
|
-
|
|
|
|
5,642,993
|
|
Due to related parties
|
|
|
19,850
|
|
|
|
-
|
|
|
|
765,387
|
|
|
|
-
|
|
|
|
785,237
|
|
Taxes payable
|
|
|
198,683
|
|
|
|
-
|
|
|
|
1,073
|
|
|
|
-
|
|
|
|
199,756
|
|
Deferred tax liabilities
|
|
|
15,682
|
|
|
|
-
|
|
|
|
73,477
|
|
|
|
-
|
|
|
|
89,159
|
|
Lease payables
|
|
|
-
|
|
|
|
406,410
|
|
|
|
-
|
|
|
|
-
|
|
|
|
406,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
3,627,556
|
|
|
|
2,097,954
|
|
|
|
8,256,449
|
|
|
|
-
|
|
|
|
13,981,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt
|
|
|
31,364
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
31,364
|
|
Long term payable
|
|
|
-
|
|
|
|
-
|
|
|
|
1,162,355
|
|
|
|
-
|
|
|
|
1,162,355
|
|
Lease payables-non current
|
|
|
-
|
|
|
|
425,715
|
|
|
|
-
|
|
|
|
-
|
|
|
|
425,715
|
|
Total Non-Current Liabilities
|
|
|
31,364
|
|
|
|
425,715
|
|
|
|
1,162,355
|
|
|
|
-
|
|
|
|
1,619,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
3,658,919
|
|
|
$
|
2,523,669
|
|
|
$
|
9,418,804
|
|
|
$
|
-
|
|
|
$
|
15,601,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered capital
|
|
$
|
-
|
|
|
$
|
4,710,254
|
|
|
$
|
9,280,493
|
|
|
$
|
(13,990,747
|
)
|
|
$
|
-
|
|
Common stock
|
|
|
11,810
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,500
|
|
|
|
17,310
|
|
Additional paid in capital
|
|
|
95,659,360
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,941,766
|
|
|
|
111,601,126
|
|
Statutory reserves
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Retained earnings
|
|
|
(84,331,897
|
)
|
|
|
(281,646
|
)
|
|
|
(2,129,776
|
)
|
|
|
-
|
|
|
|
(86,743,319
|
)
|
Accumulated other comprehensive income
|
|
|
6,972,163
|
|
|
|
(209,597
|
)
|
|
|
(624,645
|
)
|
|
|
-
|
|
|
|
6,137,921
|
|
Total stockholders’ equity
|
|
|
18,311,436
|
|
|
|
4,219,011
|
|
|
|
6,526,073
|
|
|
|
1,956,519
|
|
|
|
31,013,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,264,370
|
|
|
|
2,264,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
$
|
18,311,436
|
|
|
$
|
4,219,011
|
|
|
$
|
6,526,073
|
|
|
$
|
4,220,888
|
|
|
$
|
33,277,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities & Stockholders’ Equity
|
|
$
|
21,970,355
|
|
|
$
|
6,742,680
|
|
|
$
|
15,944,877
|
|
|
$
|
4,220,888
|
|
|
$
|
48,878,800
|
|