The accompanying notes are an integral part of the
unaudited consolidated financial statements.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31,
2020 AND 2019
(UNAUDITED, IN U.S.
DOLLARS)
|
|
For the three months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
REVENUES
|
|
$
|
9,872,067
|
|
|
$
|
15,811,488
|
|
COST OF GOODS SOLD
|
|
|
7,948,119
|
|
|
|
12,250,989
|
|
GROSS PROFIT
|
|
|
1,923,948
|
|
|
|
3,560,499
|
|
Selling expenses
|
|
|
216,841
|
|
|
|
386,080
|
|
General and administrative expenses
|
|
|
1,074,409
|
|
|
|
444,158
|
|
Research and development expenses
|
|
|
564,298
|
|
|
|
737,774
|
|
Total operating expenses
|
|
$
|
1,855,548
|
|
|
$
|
1,568,012
|
|
INCOME FROM OPERATIONS
|
|
$
|
68,400
|
|
|
$
|
1,992,487
|
|
Interest income
|
|
|
33,310
|
|
|
|
64,931
|
|
Interest expense
|
|
|
(321,692
|
)
|
|
|
(356,544
|
)
|
Other income
|
|
|
597,252
|
|
|
|
292,861
|
|
INCOME BEFORE INCOME TAX
|
|
$
|
377,270
|
|
|
$
|
1,993,735
|
|
INCOME TAX
|
|
|
49,187
|
|
|
|
265,183
|
|
NET INCOME
|
|
$
|
328,083
|
|
|
$
|
1,728,552
|
|
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST
|
|
|
71,419
|
|
|
|
186,358
|
|
NET INCOME ATTRIBUTABLE TO GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES
|
|
$
|
256,664
|
|
|
$
|
1,542,194
|
|
OTHER COMPREHENSIVE INCOME (LOSS):
|
|
|
(1,305,760
|
)
|
|
|
883,088
|
|
Unrealized foreign currency translation income
(loss) attributable to Greenland technologies holding corporation and subsidiaries
|
|
|
(604,994
|
)
|
|
|
782,078
|
|
Unrealized foreign currency translation income
(loss) attributable to Noncontrolling interest
|
|
|
(700,766
|
)
|
|
|
101,010
|
|
Comprehensive income (loss)
|
|
|
(348,330
|
)
|
|
|
2,324,272
|
|
Noncontrolling interest
|
|
|
(629,347
|
)
|
|
|
287,368
|
|
WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
10,009,198
|
|
|
|
7,500,000
|
|
NET INCOME PER ORDINARY SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
0.03
|
|
|
|
0.21
|
|
The accompanying notes are an integral part of the
unaudited consolidated financial statements.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREREHOLDERS’
EQUITY
FOR THE THREE MONTHS ENDED MARCH 31,
2020 AND 2019
(UNAUDITED, IN U.S. DOLLARS, EXCEPT
FOR SHARE DATA)
|
|
Ordinary Shares
|
|
|
Additional
|
|
|
Accumulated
Other
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
No Par Value
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Statutory
|
|
|
Retained
|
|
|
controlling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income/(loss)
|
|
|
Reserve
|
|
|
Earnings
|
|
|
Interest
|
|
|
Total
|
|
Balance at December 31, 2018
|
|
|
7,500,000
|
|
|
|
-
|
|
|
|
12,301,305
|
|
|
|
173,881
|
|
|
|
3,334,322
|
|
|
|
15,931,296
|
|
|
|
7,898,064
|
|
|
|
39,638,868
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,542,194
|
|
|
|
186,358
|
|
|
|
1,728,552
|
|
Transfer to statutory reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
164,296
|
|
|
|
(164,296
|
)
|
|
|
-
|
|
|
|
-
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
782,078
|
|
|
|
-
|
|
|
|
-
|
|
|
|
101,010
|
|
|
|
883,088
|
|
Balance at March 31, 2019
|
|
|
7,500,000
|
|
|
|
-
|
|
|
|
12,301,305
|
|
|
|
955,959
|
|
|
|
3,498,618
|
|
|
|
17,309,194
|
|
|
|
8,185,432
|
|
|
|
42,250,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
10,006,142
|
|
|
|
-
|
|
|
$
|
15,226,685
|
|
|
$
|
(360,981
|
)
|
|
|
3,866,574
|
|
|
$
|
19,863,600
|
|
|
$
|
8,366,246
|
|
|
$
|
46,962,124
|
|
Restricted stock grants
|
|
|
15,000
|
|
|
|
-
|
|
|
|
42,800
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42,800
|
|
Net income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
256,664
|
|
|
|
71,419
|
|
|
|
328,083
|
|
Transfer to statutory reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
60,253
|
|
|
|
(60,253
|
)
|
|
|
-
|
|
|
|
-
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(604,994
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(700,766
|
)
|
|
|
(1,305,760
|
)
|
Balance at March 31, 2020
|
|
|
10,021,142
|
|
|
|
-
|
|
|
$
|
15,269,485
|
|
|
$
|
(965,975
|
)
|
|
|
3,926,827
|
|
|
$
|
20,060,011
|
|
|
$
|
7,736,899
|
|
|
$
|
46,027,247
|
|
The accompanying notes are an integral part of the
unaudited consolidated financial statements.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
2020 AND 2019
(UNAUDITED, IN U.S.
DOLLARS)
|
|
For the three months ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net income
|
|
$
|
328,083
|
|
|
$
|
1,728,552
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
562,048
|
|
|
|
507,758
|
|
Increase in allowance for doubtful accounts
|
|
|
57,258
|
|
|
|
73,896
|
|
Increase in allowance for notes receivable
|
|
|
(3,979
|
)
|
|
|
(95,104
|
)
|
Increase in provision for inventory
|
|
|
(11,143
|
)
|
|
|
(86,949
|
)
|
Deferred tax assets
|
|
|
(47,568
|
)
|
|
|
47,157
|
|
Stock based compensation expense
|
|
|
42,800
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease (Increase) In:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(667,154
|
)
|
|
|
(5,815,052
|
)
|
Notes receivable
|
|
|
1,918,096
|
|
|
|
975,163
|
|
Inventories
|
|
|
(2,289,727
|
)
|
|
|
1,540,885
|
|
Advance to suppliers
|
|
|
(8,730
|
)
|
|
|
(132,558
|
)
|
Other current and noncurrent assets
|
|
|
223,104
|
|
|
|
56,410
|
|
Increase (Decrease) In:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
3,510,842
|
|
|
|
1,408,588
|
|
Customer deposits
|
|
|
133,959
|
|
|
|
8,133
|
|
Other current liabilities
|
|
|
(328,334
|
)
|
|
|
460,592
|
|
Income tax payable
|
|
|
248,669
|
|
|
|
27,291
|
|
Due to related parties
|
|
|
323,227
|
|
|
|
(10,449
|
)
|
Long-term payables-Unamortized deferred financing costs
|
|
|
104,335
|
|
|
|
64,783
|
|
Other long-term liabilities
|
|
|
(54,791
|
)
|
|
|
(154,444
|
)
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
|
$
|
4,040,995
|
|
|
$
|
604,652
|
|
The accompanying notes are an integral part of the
unaudited consolidated financial statements.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
2020 AND 2019 (Continued)
(UNAUDITED, IN U.S. DOLLARS)
|
|
For the three months ended
March 31
|
|
|
|
2020
|
|
|
2019
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Purchases of Long term assets
|
|
$
|
(384,624
|
)
|
|
$
|
(110,137
|
)
|
Proceeds from government grants for construction
|
|
|
242,763
|
|
|
|
331,902
|
|
Purchases of land use rights
|
|
|
-
|
|
|
|
(129,716
|
)
|
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
$
|
(141,861
|
)
|
|
$
|
92,049
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from short-term bank loans
|
|
$
|
3,271,391
|
|
|
$
|
8,045,497
|
|
Repayments of short-term bank loans
|
|
|
-
|
|
|
|
(7,464,848
|
)
|
Notes payable
|
|
|
(2,191,338
|
)
|
|
|
(772,260
|
)
|
Proceeds from related parties
|
|
|
620,183
|
|
|
|
1,119,503
|
|
Repayment of loans from related parties
|
|
|
(355,586
|
)
|
|
|
(2,653,466
|
)
|
Repayment of loans from third parties
|
|
|
(2,844,097
|
)
|
|
|
-
|
|
Proceeds from third parties
|
|
|
1,498,686
|
|
|
|
-
|
|
Dividend paid
|
|
|
-
|
|
|
|
(164,257
|
)
|
Proceeds received from financing lease obligation
|
|
|
-
|
|
|
|
3,731,677
|
|
Deposits for the financing lease obligation
|
|
|
-
|
|
|
|
(559,752
|
)
|
Payment of principal on financing lease obligation
|
|
|
(677,734
|
)
|
|
|
(397,721
|
)
|
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
$
|
(678,495
|
)
|
|
$
|
884,373
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
|
|
$
|
3,220,639
|
|
|
$
|
1,581,074
|
|
Effect of exchange rate changes on cash
|
|
|
(642,434
|
)
|
|
|
157,851
|
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR
|
|
|
5,717,207
|
|
|
|
8,968,177
|
|
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD
|
|
$
|
8,295,412
|
|
|
$
|
10,707,102
|
|
Bank balances and cash
|
|
|
6,694,870
|
|
|
|
7,818,850
|
|
Bank balances and cash included in assets classified as restricted cash
|
|
|
1,600,542
|
|
|
|
2,888,252
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure Of Cash Flow Information
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
|
3,861
|
|
|
|
186,919
|
|
Interest paid
|
|
|
298,337
|
|
|
|
356,544
|
|
The accompanying notes are an integral part of the
unaudited consolidated financial statements.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND PRINCIPAL
ACTIVITIES
Greenland Technologies Holding Corporation,
formerly known as Greenland Acquisition Corporation (“Greenland” or the “Company”), was incorporated on
December 28, 2017 as a British Virgin Islands Company with limited liability. The Company was incorporated as a blank check
Company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization
or similar business combination with one or more target businesses. On October 24 2019, the Company acquired all of the outstanding
shares of Zhongchai Holding (Hong Kong) Limited via a reverse capitalization and changed its name from Greenland Acquisition Corporation
to Greenland Technologies Holding Corporation.
Greenland serves as the parent Company
for the primary operating Company, Zhongchai Holding (Hong Kong) Limited, a holding Company formed under the laws of Hong Kong
on April 23, 2009 (“Zhongchai Holding”). Through Zhongchai Holding and other subsidiaries, Greenland develops and manufactures
traditional transmission products for material handling machineries in PRC, as well as develop models for robotic cargo carriers,
which are expected to be produced in the near future in PRC.
The Company’s Shareholders
As of March 31, 2020, Cenntro Holding Limited
owns 74.842% of Greenland’s outstanding ordinary shares. Cenntro Holding Limited is controlled and beneficially owned by
Mr. Peter Zuguang Wang, chairman of the Company.
The Company’s Subsidiaries
Zhongchai
Holding, the 100% owned subsidiary of the Company, owned 89.47% of Zhejiang Zhongchai Machinery Co., Ltd. (“Zhejiang Zhongchai”),
62.5% of Shanghai Hengyu Enterprise Management Consulting Co., Ltd. (“Hengyu”) and
100% of Hangzhou Greenland Robotic Co., Ltd (“Hangzhou Greenland”).
Zhejiang
Zhongchai, the subsidiary of the Company, is the sole shareholder of Zhejiang Shengte Transmission Co., Ltd. (“Shengte”).
It also owned 62.5% of Hengyu until transferred its ownership
to Zhongchai Holding on July 15, 2019.
Zhejiang Zhongchai
Zhejiang Zhongchai, a limited liability
Company registered on November 21, 2005, is the direct operating subsidiary of Zhongchai Holding in PRC. On April 5, 2007, Usunco
Automotive Limited (“Usunco”), a British Virgin Islands limited liability Company incorporated on April 24, 2006, invested
$8,000,000 USD into Zhejiang Zhongchai for its approximately 75.47% interest. On December 16, 2009, Usunco agreed to transfer its
75.47% interest in Zhejiang Zhongchai to Zhongchai Holding. On April 26, 2010, Xinchang County Keyi Machinery Co., Ltd. transferred
all its 24.528% interest in Zhejiang Zhongchai to Zhongchai Holding for a consideration of US$2.6 million. On November 1, 2017,
Xinchang County Jiuxin Investment Management Partnership (LP) (“Jiuxin”), an entity controlled and beneficially owned
by Mr. He Mengxing, president of Zhejiang Zhongchai, closed its investment of approximately RMB31,590,000 in Zhejiang Zhongchai
for 10.53% of its interest. As of March 31, 2020, Zhongchai Holding owns approximately 89.47% of Zhejiang Zhongchai and Jiuxin
owns approximately 10.53% of Zhejiang Zhongchai.
Through Zhejiang Zhongchai, the Company
has been engaging in the manufacture and sale of transmission systems mainly for forklift trucks since 2006. These forklift trucks
are used in manufacturing and logistics applications, such as factory, workshop, warehouse, fulfilment centers, shipyards and seaports.
The transmission systems are the key components for the forklift trucks. The Company supplies transmission systems to forklift
truck manufacturers. Its transmission systems fit for forklift trucks ranging from 1 to 15 tons, with either mechanical shift or
automatic shift. All the products are currently manufactured at the Company’s facility in Xinchang, Zhejiang Province, PRC
and are sold to both domestic and oversea markets. The Company has moved to its new factory in Meizhu, Xinchang, Zhejiang Province,
PRC, in October of 2019.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)
Shengte
Shengte is a limited liability Company
registered on February 24, 2006 in Xinchang High-Tech Industrial Park, Zhejiang, PRC.
Shengte manufactures parts of transmission
boxes for Zhejiang Zhongchai. All parts were manufactured in the Company’s Xinchang facility and were sold internally to
Zhejiang Zhongchai. In January 2019 Shengte has stopped its business and transferred its most assets to Zhejiang Zhongchai and
only maintain its employee social benefit function in the local region.
Hengyu
Hengyu is a limited liability Company registered
on September 10, 2015 in Shanghai Free Trade Zone, Shanghai, and PRC. Hengyu holds no assets other than an account receivable owed
by Cenntro Holding Limited. Main business of Hengyu are investment management and consulting services.
Hangzhou Greenland
Hangzhou Greenland is a limited liability
Company registered on August 9, 2019 in Hangzhou Sunking Plaza, Zhejiang, PRC. Hangzhou Greenland is designed to open robotic cargo
carrier business based on a conceptual prototype of a robotic cargo carrier developed by our R&D team in 2018.
Greenland Tech
On January
14, 2020, Greenland established its wholly owned subsidiary in the state of Delaware named Greenland Technologies Corporation (“Greenland
Tech”). The Company aims to use it as the US operation
site of the Company and promotes sales of robotic
products for the North American market in the near future. Greenland Tech currently does not conduct any business activities.
Details
of the Company’s subsidiaries, which are included in these unaudited consolidated
financial statements as of March 31, 2020, are as follows:
Name
|
|
Domicile and Date
of Incorporation
|
|
Paid-in Capital
|
|
Percentage of
Effective
Ownership
|
|
|
Principal Activities
|
Zhongchai Holding (Hong Kong) Limited
|
|
Hong Kong
April 23, 2009
|
|
HKD
|
10,000
|
|
|
|
100
|
%
|
|
Holding
|
Zhejiang Zhongchai Machinery Co., Ltd.
|
|
PRC
November 21, 2005
|
|
USD
|
28,612,943
|
|
|
|
89.47
|
%
|
|
Manufacture, sale of various transmission boxes
|
Zhejiang Shengte Transmission Co., Ltd.
|
|
PRC
February 24, 2006
|
|
RMB
|
5,000,000
|
|
|
|
89.47
|
%
|
|
Manufacture and sale of parts of transmission box
|
Shanghai Hengyu Enterprise Management Consulting Co., Ltd.
|
|
PRC
September 10, 2015
|
|
RMB
|
251,500,000
|
|
|
|
62.5
|
%
|
|
Investment management and consulting services.
|
Hangzhou Greenland Robotic Technologies Co., Ltd.
|
|
PRC
August 9, 2019
|
|
RMB
|
252,862
|
|
|
|
100
|
%
|
|
Manufactures and sales carrier cargo robotics.
|
Greenland Technologies Corporation
|
|
Delaware, USA
January 14, 2020
|
|
|
USD 0
|
|
|
|
100
|
%
|
|
US operation and promote robotic enabled automated warehouse system for North American market
|
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include
the accounts of Greenland Technologies Holding Corporation and its subsidiaries and have been prepared in accordance with U.S.
generally accepted accounting principles (“U.S. GAAP”). Intercompany accounts and transactions have been eliminated
upon consolidation. Certain reclassifications to previously reported financial information have been made to conform to the current
period presentation.
The Business Combination was accounted
for as a reverse recapitalization (the “Recapitalization Transaction”) in accordance with Accounting Standard Codification
(“ASC”) 805, Business Combinations. For accounting and financial reporting purposes, Zhongchai Holding is considered
the acquirer based on facts and circumstances, including the following:
|
●
|
Zhongchai Holding’s
operations comprise the ongoing operations of the combined entity;
|
|
●
|
The officers of the newly
combined company consist of Zhongchai Holding’s executives, including the Chief Executive Officer, Chief Financial Officer
and General Counsel; and,
|
|
●
|
The former shareholders of
Zhongchai Holding own a majority voting interests in the combined entity.
|
As a result of Zhongchai Holding being
the accounting acquirer, the financial reports filed with the SEC by the Company subsequent to the Business Combination are prepared
“as if” Zhongchai Holding is the predecessor and legal successor to the Company. The historical operations of Zhongchai
Holding are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical
operating results of Zhongchai Holding prior to the Business Combination; (ii) the combined results of the Company and Zhongchai
Holding following the Business Combination in October 24, 2019; (iii) the assets and liabilities of Zhongchai Holding at their
historical cost, and (iv) Greenland’s equity structure for all periods presented. Zhongchai Holding received 7,500,000 shares
of Greenland in exchange for all the share capital, which is reflected retroactively to December 31, 2017 and will be utilized
for calculating earnings per share in all prior periods. No step-up basis of intangible assets or goodwill was recorded in the
Business Combination transaction consistent with the treatment of the transaction as a reverse capitalization of Zhongchai Holding.
Use of Estimates
The preparation of the consolidated financial
statements in conformity with U.S. GAAP 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 consolidated financial statements
and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best
information available at the time the estimates are made. Actual results could differ from those estimates. Significant estimates
in the three months ended March 31, 2020 and 2019 include allowance for doubtful accounts, reserve for inventories, useful life
of property, plant and equipment, assumptions used in assessing impairment of long-term assets and valuation of deferred tax assets
and accruals for taxes due.
Non-controlling Interest
Non-controlling interests in the Company’s
subsidiaries are recorded in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification 810 Consolidation (“ASC 810”) and are reported as a component of equity, separate from the parent’s
equity. Purchase or sale of equity interests that do not result in a change of control are accounted for as equity transactions.
Results of operations attributable to the non-controlling interest are included in our consolidated results of operations and,
upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or
loss recognized in earnings.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Foreign Currency Translation
The accompanying consolidated financial
statements are presented in United States dollars (“US$” or “$”). The functional currency of the Company
is Renminbi (“RMB”). Transactions in foreign currencies are initially recorded at the functional currency
rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded
as a gain or loss on foreign currency transaction in the consolidated statements of operations.
|
|
For the three months ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Period end RMB: US$ exchange rate
|
|
|
7.0851
|
|
|
|
6.7112
|
|
Period average RMB: US$ exchange rate
|
|
|
7.0307
|
|
|
|
6.6994
|
|
The RMB is not freely convertible into
foreign currency and all foreign exchange transactions must take place through authorized institutions The PRC government
imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations.
Revenue Recognition
In accordance with ASC Topic 606, “Revenue
from Contracts with Customers”, the Company recognizes revenues when goods or services are transferred to customers in an
amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. In determining
when and how revenues are recognized from contracts with customers, the Company performs the following five-step analysis: (i)
identification of contract with customer; (ii) determination of performance obligations; (iii) measurement of the transaction
price; (iv) allocation of the transaction price to the performance obligations and (v) recognition of revenues when (or as)
the Company satisfies each performance obligation. The Company derives revenues from the processing, distribution and sale of its
products. The Company recognizes its revenues net of value-added taxes (“VAT”). The Company is subject to VAT which
had been levied at the rate of 17% on the invoiced value of sales until April 30, 2018, after which date the rate was reduced to
16%. VAT rate was further reduced to 13% starting from April 1, 2019. Output VAT is borne by customers in addition to the invoiced
value of sales and input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded
for export sales.
Revenues are recognized at a point in time
once the Company has determined that the customer has obtained control over the product. Control is typically deemed to have been
transferred to the customer when the performance obligation is fulfilled, usually at the time of customers’ acceptance or
consumption, at the net sales price (transaction price) and each of the criteria under ASC 606 have been met. Contract terms may
require the Company to deliver the finished goods to the customers’ location or the customer may pick up the finished goods
at the Company’s factory. International sales are recognized when shipment clears customs and leaves the port.
The Company has adopted ASC 606 on January
1, 2018, using the transition method of Modified-Retrospective Method (“MRM”). The adoption of ASC 606 had no impact
on the Company’s beginning balance of retained earnings.
The Company’s contracts are all short-term
in nature with a contract term of one year or less. Receivables are recorded when the Company has an unconditional right to consideration.
Contracts do not offer any price protection,
but allow for the return of certain goods if quality problem, which is standard warranty. The Company product returns and recorded
reserve for sales returns were minimal for the three months ended March 31, 2020 and 2019. The total rebates amount is accounting
for around 0.43% and 0.56% of the total revenue of Greenland.
The following table sets forth disaggregation
of revenue:
|
|
For the three months ended
March 31,
|
|
Major Product
|
|
2020
|
|
|
2019
|
|
Transmission boxes for Forklift
|
|
|
9,872,057
|
|
|
|
15,624,890
|
|
Transmission boxes for Non-Forklift (EV, etc.)
|
|
|
10
|
|
|
|
186,598
|
|
Total
|
|
|
9,872,067
|
|
|
|
15,811,488
|
|
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Cost of Goods Sold
Cost of goods sold consists primarily of
material costs, freight charges, purchasing and receiving costs, inspection costs, internal transfer costs, wages, employee compensation,
amortization, depreciation and related costs, which are directly attributable to the production of products. Write-down of inventory
to lower of cost or net realizable value is also recorded in cost of goods sold.
Selling Expenses
Selling expenses include operating expenses
such as payroll and traveling and transportation expenses.
General and Administrative Expenses
General and administrative expenses include
management and office salaries and employee benefits, depreciation for office facility and office equipment, travel and entertainment,
legal and accounting, consulting fees and other office expenses.
Research and Development
Research and development costs are expensed
as incurred and totaled approximately $564,298 and $737,774 for the three months ended March 31, 2020 and 2019, respectively.
Government subsidies
Government
subsidies are recognized when there is reasonable assurance that the subsidy will be received and all attaching conditions will
be complied with. When the subsidy relates to an expense item, it is recognized as income over the periods necessary to match the
subsidy on a systematic basis to the costs that it is intended to compensate. Where the subsidy relates to an asset, it is recognized
as other long-term liabilities and is released to the statement of operations over the expected useful life in a consistent manner
with the depreciation method for the relevant asset. Total government subsidies recorded in the other long-term liabilities were
$2.33 million and $2.18 million at March 31, 2020 and December 31, 2019,
respectively.
Income Taxes
The Company accounts for income taxes following
the liability method pursuant to FASB ASC 740 “Income Taxes”. Under this method, deferred tax assets and liabilities
are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax
rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance
to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all,
of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in income in
the period that includes the enactment date.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
The Company also follows FASB ASC 740,
which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded
in the financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely
than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest
benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance
on recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
As of March 31, 2020 and December 31, 2019, the Company did not have a liability for unrecognized tax benefits. It is the Company’s
policy to include penalties and interest expense related to income taxes as a component of other expense and interest expense,
respectively, as necessary. The Company’s historical tax years will remain open for examination by the local authorities
until the statute of limitations has passed.
Value-Added Tax
Enterprises or individuals, who sell commodities,
engage in repair and maintenance or import or export goods in the PRC are subject to a value added tax in accordance with PRC Laws.
The VAT standard rate had been 17% of the gross sale price until April 30, 2018, after which date the rate was reduced to 16%.
VAT rate was further reduced to 13% starting from April 1, 2019. A credit is available whereby VAT paid on the purchases of semi-finished
products or raw materials used in the production of the Company’s finished products can be used to offset the VAT due on
the sales of the finished products.
Statutory Reserve
In accordance with the PRC Regulations
on Enterprises with Foreign Investment, an enterprise established in the PRC with foreign investment is required to provide for
certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund,
which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A wholly-owned foreign enterprise
is required to allocate at least 10% of its annual after-tax profit to the General Reserve Fund until the balance of such fund
has reached 50% of its respective registered capital. A non-wholly-owned foreign invested enterprise is permitted to provide for
the above allocation at the discretion of its board of directors. Appropriations to the Enterprise Expansion Fund and Staff Welfare
and Bonus Fund are at the discretion of the board of directors for all foreign invested enterprises. The aforementioned reserves
can only be used for specific purposes and are not distributable as cash dividends.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income (Loss)
Comprehensive income (loss) is defined
as the change in equity during the year from transactions and other events, excluding the changes resulting from investments by
owners and distributions to owners, and is not included in the computation of income tax expense or benefit. Accumulated comprehensive
income consists of foreign currency translation. The Company presents comprehensive income (loss) consists in accordance with ASC
Topic 220, “Comprehensive Income”.
Earnings per share
The Company calculates earnings per share
in accordance with ASC Topic 260 “Earnings per Share.” Basic earnings per share is computed by dividing the net income
by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed similar to
basic earnings per share except that the denominator is increased to include the number of additional common shares that would
have been outstanding if the potential ordinary shares equivalents had been issued and if the additional common shares were dilutive.
On October 24, 2019, the Company completed a reverse merger with Greenland Acquisition Corporation whereby the Company received
7,500,000 shares in exchange for all the share capital, which is reflected retroactively to December 31, 2017 and will be utilized
for calculating earnings per share in all prior periods. The per share amounts have been updated to show the effect of the exchange
on earnings per share as if the exchange occurred at the beginning of both years for the annual financial statements of the Company.
The impact of the stock exchange is also shown on the Company’s Statements of Shareholders’ Equity.
Pursuant
to the CIIX Termination Agreement and the SCCG Termination Agreement, 5,000 and 10,000 restricted ordinary shares, no par value,
were issued to CIIX and SCCG on March 12, 2020 and March 13, 2020 respectively, and will be utilized for calculating earnings per
share in three months ended March 31, 2020 .
Cash and Cash Equivalents
For financial reporting purposes, the Company
considers all highly liquid investments purchased with original maturity of three months or less to be cash equivalents. The Company
maintains no bank account in the United States of America. The Company maintains its bank accounts in PRC and Hong Kong Special
Administrative Region (“SAR”). Balances at financial institutions or state-owned banks within PRC and Hong Kong SAR
are not covered by insurance.
Restricted Cash
Restricted cash represents amounts held
by a bank as security for bank acceptance bills, as well as the financial product secured for the short-term bank loan and therefore
is not available for the Company’s use until such time as the bank acceptance notes and bank loans have been fulfilled or
expired, normally within a twelve-month period.
Fair Value of Financial Instruments
The Company applies the provisions of ASC
820, Fair Value Measurements and Disclosures, to the financial instruments that are required to be carried at fair
value. Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement
date. The Company uses a three-tier fair value hierarchy based upon observable and non-observable inputs that prioritizes the information
used to develop our assumptions regarding fair value. Fair value measurements are separately disclosed by level within the fair
value hierarchy.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
|
●
|
Level 1—defined as
observable inputs such as quoted prices in active markets for identical assets or liabilities;
|
|
●
|
Level 2—defined as
inputs other than quoted prices in active markets, that are either directly or indirectly observable; and
|
|
●
|
Level 3—defined as
unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
|
The Company’s financial instruments
primarily consist of cash and cash equivalents, restricted cash, accounts receivable, notes receivable, accounts payable, other
payables and accrued liabilities, short-term bank loans, and notes payable.
The carrying value of cash and cash equivalents,
restricted cash, accounts receivable, accounts payable, and other current assets and liabilities approximate fair value because
of the short-term nature of these items. The estimated fair values of short-term bank loans were not materially different from
their carrying value as presented due to the short maturities and that the interest rates on the borrowing approximate those that
would have been available for loans of similar remaining maturity and risk profile. As the carrying amounts are reasonable estimates
of the fair value, these financial instruments are classified within Level 1 of the fair value hierarchy.
Accounts Receivable
Accounts receivable are carried at net
realizable value. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when
there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances,
the Company considers many factors, including the age of the balance, customer’s historical payment history, its current
creditworthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. The Company only
grants credit terms to established customers who are deemed to be financially responsible. Credit periods to customers are within
90 days after customers received the purchased goods. If accounts receivable are to be provided for, or written off, they would
be recognized in the consolidated statement of operations within operating expenses. Balance of allowance of doubtful accounts
was $1.08 million and $1.04 million as of March 31, 2020 and December 31, 2019, respectively.
Inventories
Inventories are stated at the lower
of cost or net realizable value, which is based on estimated selling prices less any further costs expected to be incurred
for completion and disposal. Cost of raw materials is calculated using the weighted average method and is based on purchase
cost. Work-in-progress and finished goods costs are determined using the weighted average method and comprise direct
materials, direct labour and an appropriate proportion of overhead. As of March 31, 2020 and December 31, 2019, the Company
had reserves for inventories of $0.12 million and $0.13 million, respectively. The Company records inventory reserves for
excess or obsolete inventories based upon assumptions about our current and future demand forecasts.
Advance to Suppliers
Advance to suppliers represents interest-free
cash paid in advance to suppliers for purchases of parts and/or raw materials. The balance of advance to suppliers was $0.06 million
and $0.05 million as of March 31, 2020 and December 31, 2019.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Property, Plant, and Equipment
Property, plant, and equipment are stated
at cost less accumulated depreciation, and include expenditure that substantially increases the useful lives of existing assets.
Expenditures for repairs and maintenance, which do not extend the useful life of the assets, are expensed as incurred.
Depreciation is provided over their estimated
useful lives, using the straight-line method. Estimated useful lives are as follows:
Plant, buildings and improvements
|
|
|
20 years
|
|
Machinery and equipment
|
|
|
2~10 years
|
|
Motor vehicles
|
|
|
4 years
|
|
Office Equipment
|
|
|
3~5 years
|
|
Fixed Assets decoration
|
|
|
5 years
|
|
When assets are sold or retired, their
costs and accumulated depreciation are eliminated from the consolidated financial statements and any gain or loss resulting from
their disposal is recognized in the period of disposition as an element of other income. The cost of maintenance and repairs is
charged to income as incurred, whereas significant renewals and betterments are capitalized.
Land Use Rights
According to the PRC laws, the government
owns all the land in the PRC. Companies or individuals are authorized to possess and use the land only through land use rights
granted by the Chinese government. The land use rights granted to the Company are being amortized using the straight-line method
over the lease term of fifty years.
Impairment of Long-Lived Assets
Long-lived assets are evaluated for impairment
periodically whenever events or changes in circumstances indicate that their related carrying amounts may not be recoverable in
accordance with FASB ASC 360, “Property, Plant and Equipment”.
In evaluating long-lived assets for recoverability,
the Company uses its best estimate of future cash flows expected to result from the use of the asset and eventual disposition in
accordance with FASB ASC 360-10-15. To the extent that estimated future, undiscounted cash inflows attributable to the asset, less
estimated future, undiscounted cash outflows, are less than the carrying amount, an impairment loss is recognized in an amount
equal to the difference between the carrying value of such asset and its fair value. Assets to be disposed of and for which there
is a committed plan of disposal, whether through sale or abandonment, are reported at the lower of carrying value or fair value
less costs to sell.
There was no impairment loss recognized
for the three months ended March 31, 2020 and 2019.
Segments and Related Information
ASC 280 “Segment reporting”
establishes standards for reporting information on operating segments in interim and annual financial statements. All of the Company’s
operations are considered by the chief operating decision maker to be aggregated in one reportable operating segment.
The Company is engaged in the business
of manufacturing and selling various transmission boxes. The Company’s manufacturing process is essentially the same for
the entire Company and is performed in-house at the Company’s facilities in PRC. The Company’s customers primarily
consist of entities in the automotive, construction machinery or warehousing equipment industries. The distribution of the Company’s
products is consistent across the entire Company. In addition, the economic characteristics of each customer arrangement are similar
in that the Company maintains policies at the corporate level.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Commitments and contingencies
In the normal course of business, the Company
is subject to contingencies, including legal proceedings and environmental claims arising out of the normal course of businesses
that relate to a wide range of matters, including among others, contracts breach liability. The Company records accruals for such
contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability.
Management may consider many factors in making these assessments including past history, scientific evidence and the specifics
of each matter. The Company’s management has evaluated all such proceedings and claims that existed as of March 31, 2020
and December 31, 2019. Normal course of businesses that relate to a wide range of matters, including among others, contracts breach
liability. The Company records accruals for such contingencies based upon the assessment of the probability of occurrence and,
where determinable, an estimate of the liability. Management may consider many factors in making these assessments including past
history, scientific evidence and the specifics of each matter. The Company’s management has evaluated all such proceedings
and claims that existed as of March 31, 2020 and December 31, 2019.
Related Party
In general, related parties exist when
there is a relationship that offers the potential for transactions at less than arm’s-length, favorable treatment, or the
ability to influence the outcome of events different from that which might result in the absence of that relationship. A related
party may be any of the following: a) an affiliate, which is a party that directly or indirectly controls, is controlled by, or
is under common control with another party; b) a principle owner, owner of record or known beneficial owner of more than 10% of
the voting interest of an entity; c) management, which are persons having responsibility for achieving objectives of the entity
and requisite authority to make decision; d) immediate family of management or principal owners; e) a parent Company and its subsidiaries;
and f) other parties that have ability to significant influence the management or operating policies of the entity. The Company
discloses all significant related party transactions.
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 the political,
economic and legal environment in the PRC, and by the general state of the PRC economy.
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.
Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. All of the Company’s
cash is maintained with state-owned banks within the PRC, and none of these deposits are covered by insurance. The Company has
not experienced any losses in such accounts. A portion of the Company’s sales are credit sales which are primarily to customers
whose abilities to pay are dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk
with respect to trade accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit
evaluations of its customers to help further reduce credit risk
Exchange Risk
The Company cannot guarantee that the current
exchange rate will remain steady. Therefore, there is a possibility that the Company could post the same amount of profit for two
comparable periods and yet, because of a fluctuating exchange rates, record higher or lower profit depending on exchange rate of
PRC Renminbi (RMB) converted to U.S. dollars on the relevant dates. The exchange rate could fluctuate depending on changes in the
political and economic environment without notice.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Recently Issued Accounting Pronouncements
Recent accounting pronouncements that the
Company has adopted or may be required to adopt in the future are summarized below:
In June 2016, the FASB issued ASU 2016-13,”
Measurement of Credit Losses on Financial Instruments”, to require financial assets carried at amortized cost to be presented
at the net amount expected to be collected based on historical experience, current conditions and forecasts. Subsequently, the
FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives
and Hedging, and Topic 825, Financial Instruments, in April 2019. To clarify that receivables arising from operating leases are
within the scope of lease accounting standards. In October 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit
Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842), which defers the effective date for public filers
that are considered small reporting companies as defined by the Securities and Exchange Commission to fiscal years beginning after
December 15, 2022, including interim periods within those fiscal years. Since the Company is a smaller reporting company, implementation
is not needed until January 1, 2023. Adoption of the standard requires using a modified retrospective approach through a cumulative-effect
adjustment to retained earnings as of the effective date to align existing credit loss methodology with the new standard. The Company
is evaluating the impact of this standard on its consolidated financial statements, including accounting policies, processes, and
systems, and expects the standard will have a minor impact on its consolidated financial statements.
In January 2017, the FASB issued ASU No.
2017-04 (Topic 350) Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment, which removes
Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the amended guidance, a
goodwill impairment charge will now be recognized for the amount by which the carrying value of a reporting unit exceeds its fair
value, not to exceed the carrying amount of goodwill. This ASU will be applied on a prospective basis and is effective for interim
and annual periods beginning after December 15, 2019, with early adoption permitted for any impairment tests performed after January
1, 2017. The Company adopted ASU 2017-04 on January 1, 2020. The adoption of the ASU 2017-04 did not have a material impact on
the Company’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13 Disclosure
Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds, and modifies
certain disclosure requirements for fair value measurements under ASC 820. This ASU is to be applied on a prospective basis for
certain modified or new disclosure requirements, and all other amendments in the standard are to be applied on a retrospective
basis. The new standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted.
The Company adopted Topic 820 on January 1, 2020. The adoption of the ASU 2018-13 did not have a material impact on the Company’s
consolidated financial statements.
In December 2019, the FASB issued
ASU No. 2019-12, “Income Taxes” (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”).
ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.
The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending
existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years
beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company does
not expect that the requirements of ASU 2019-12 will have a material impact on its consolidated financial statements.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – CONCENTRATION ON REVENUES
AND COST OF GOODS SOLD
Concentration of major customers and suppliers:
|
|
For the three months ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Major customers representing more than 10% of the Company’s revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Company A
|
|
$
|
2,307,990
|
|
|
|
23.38
|
%
|
|
$
|
2,303,804
|
|
|
|
14.57
|
%
|
Total Revenues
|
|
$
|
2,307,990
|
|
|
|
23.38
|
%
|
|
$
|
2,303,804
|
|
|
|
14.57
|
%
|
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Major customers of the Company’s accounts receivable, net
|
|
|
|
|
|
|
|
|
|
|
|
|
Company A
|
|
|
1,804,651
|
|
|
|
14.56
|
%
|
|
|
1,662,078
|
|
|
|
13.88
|
%
|
Company B
|
|
|
1,378,830
|
|
|
|
11.13
|
%
|
|
|
1,106,955
|
|
|
|
9.25
|
%
|
Company C
|
|
|
911,084
|
|
|
|
7.35
|
%
|
|
|
1,061,972
|
|
|
|
8.87
|
%
|
Total
|
|
$
|
4,094,565
|
|
|
|
33.04
|
%
|
|
$
|
3,831,005
|
|
|
|
32.00
|
%
|
Accounts receivable from the Company’s
major customers accounted for 33.04% and 32.00% of total accounts receivable balances as of March 31, 2020 and December 31, 2019,
respectively.
There
were no suppliers representing more than 10% of the Company’s total purchases for the three months ended March 31, 2020 and
2019 , respectively.
NOTE 4 – ACCOUNTS RECEIVABLE
Accounts receivable is net of allowance for doubtful accounts.
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Accounts receivable
|
|
$
|
13,471,750
|
|
|
$
|
13,009,686
|
|
Less: allowance for doubtful accounts
|
|
|
(1,078,664
|
)
|
|
|
(1,037,797
|
)
|
Accounts receivable, net
|
|
$
|
12,393,086
|
|
|
$
|
11,971,889
|
|
Changes in the allowance for doubtful accounts are as follows:
|
|
For the three months ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Beginning balance
|
|
$
|
1,037,797
|
|
|
$
|
906,138
|
|
Provision for doubtful accounts
|
|
|
40,867
|
|
|
|
94,289
|
|
Ending balance
|
|
$
|
1,078,664
|
|
|
$
|
1,000,427
|
|
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 5 – INVENTORIES
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Raw materials
|
|
$
|
4,511,796
|
|
|
$
|
3,626,104
|
|
Revolving material
|
|
|
615,842
|
|
|
|
744,887
|
|
Consigned processing material
|
|
|
44,235
|
|
|
|
63,608
|
|
Work-in-progress
|
|
|
1,450,531
|
|
|
|
1,465,767
|
|
Finished goods
|
|
|
3,434,271
|
|
|
|
3,084,128
|
|
Goods in transit
|
|
|
2,167,514
|
|
|
|
1,122,918
|
|
Less: reserve for inventories
|
|
|
(121,410
|
)
|
|
|
(134,535
|
)
|
Inventories, net
|
|
$
|
12,102,779
|
|
|
$
|
9,972,877
|
|
NOTE 6 – NOTES RECEIVABLE
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Bank notes receivable:
|
|
$
|
13,797,029
|
|
|
$
|
15,865,267
|
|
Commercial notes receivable
|
|
|
211,923
|
|
|
|
291,425
|
|
Total
|
|
$
|
14,008,952
|
|
|
$
|
16,156,692
|
|
Bank notes and commercial notes are means
of payment from customers for the purchase of the Company’s products and are issued by financial institutions or business
entities, respectively, that entitle the Company to receive the full nominal amount from the issuer at maturity, which bears no
interest and generally ranges from three to six months from the date of issuance. As of March 31, 2020, the Company pledged
notes receivable for an aggregate amount of $11.78 million to Bank of Communications and Bank of Hangzhou as a means of security
for issuance of bank acceptance notes for an aggregate amount of $11.23 million. As of December 31, 2019, the Company pledged notes
receivable for an aggregate amount of $11.17 million to Bank of Communications as a means of security for issuance of bank acceptance
notes for an aggregate amount of $8.98 million. The Company expects collection of notes receivable within 6 months. Allowance for
notes receivables as of March 31, 2020 and December 31, 2019 was $11,154 and $15,338 respectively, determined according to the
collectability of commercial notes receivable.
NOTE 7 – PROPERTY, PLANT AND EQUIPMENT AND CONSTRUCTION
IN PROGRESS
(a) At March 31, 2020 and December 31, 2019, property, plant
and equipment consisted of the following:
|
|
As of
|
|
|
|
March 31,
2019
|
|
|
December 31,
2019
|
|
Buildings
|
|
$
|
11,391,549
|
|
|
$
|
11,188,399
|
|
Machinery
|
|
|
19,121,793
|
|
|
|
19,416,746
|
|
Motor vehicles
|
|
|
250,545
|
|
|
|
254,456
|
|
Electronic equipment
|
|
|
177,491
|
|
|
|
177,153
|
|
Total property plant and equipment, at cost
|
|
|
30,941,378
|
|
|
|
31,036,754
|
|
|
|
|
|
|
|
|
|
|
Less: accumulated depreciation
|
|
|
(11,022,764
|
)
|
|
|
(10,650,893
|
)
|
Property, plant and equipment, net
|
|
$
|
19,918,614
|
|
|
$
|
20,385,861
|
|
Construction in process
|
|
|
240,633
|
|
|
|
244,390
|
|
Total
|
|
$
|
20,159,247
|
|
|
$
|
20,630,251
|
|
For the three months ended March 31, 2020 and
2019, depreciation expense amounted to $0.37 million and $0.69 million, respectively, of which $0.19 million and $0.51 million,
respectively, was included in cost of revenue and inventories, and the remainder was included in general and administrative expense
and research and development expenses etc.
For the three months ended March 31, 2020 and
2019, $375,119 and $0 of construction in progress were converted into fixed assets.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 7 – PROPERTY, PLANT AND EQUIPMENT AND CONSTRUCTION
IN PROGRESS (CONTINUED)
Restricted assets consist of the following:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Buildings, net
|
|
$
|
10,561,110
|
|
|
$
|
10,459,597
|
|
Machinery, net
|
|
|
8,608,059
|
|
|
|
9,066,066
|
|
Total
|
|
|
19,169,169
|
|
|
|
19,525,663
|
|
As of March 31, 2020, the Company pledged
its buildings ownership of buildings for net book value of RMB74.83 million ($10.56 million) as security with ABC Xinchang and
Rural commercial bank, for its loan facility with maximum exposure of RMB112.63 million.
As of December 31, 2019, the Company pledged
its buildings ownership of buildings for net book value of RMB72.97 million ($10.46 million) as security with ABC Xinchang and
Rural commercial bank, for its loan facility with maximum exposure of RMB112.63 million.
On January 3, 2019, the Company sold a
set of manufacturing equipment to third parties for aggregate proceeds of $3.08 million (RMB21.25 million) and the Company
entered into lease agreements under which the Company agreed to lease back each of the properties for an initial term of 3
years. On April 26, 2019, the Company sold various equipment including the general assembly line and the differential assembly
line to third parties for aggregate proceeds of $2.12 million (RMB14.66 million) and the Company entered into lease agreements
under which the Company agreed to lease back each of the properties for an initial term of 2 years. The Company determined
it did not relinquish control of the assets to the buyer-lessor. Therefore, the Company accounted for the transaction as a failed
sale-leaseback whereby the Company continues to depreciate the assets and recorded a financing obligation for the consideration
received from the buyer-lessor.
NOTE 8 – LAND USE RIGHTS
Land use rights consisted of the following:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Land use rights, cost
|
|
$
|
4,342,437
|
|
|
$
|
4,410,224
|
|
Less: Accumulated amortization
|
|
|
(560,971
|
)
|
|
|
(547,677
|
)
|
Land use rights, net
|
|
$
|
3,781,466
|
|
|
$
|
3,862,547
|
|
As of March 31, 2020, there was land use
rights with net book value of $3.78 million, which approximately were used as collateral for the Company’s short-term bank
loans. As of December 31, 2019, there was land use rights with net book value of $3.86 million, which approximately were used as
collateral for the Company’s short-term bank loans.
Estimated future amortization expense is as follows as of March
31, 2020:
Years ending March 31,
|
|
Amortization expense
|
|
2021
|
|
$
|
87,521
|
|
2022
|
|
|
87,521
|
|
2023
|
|
|
87,521
|
|
2024
|
|
|
87,521
|
|
2025
|
|
|
87,521
|
|
Thereafter
|
|
|
3,343,861
|
|
Total
|
|
$
|
3,781,466
|
|
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – NOTES PAYABLE
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Bank acceptance notes
|
|
$
|
12,645,068
|
|
|
$
|
15,050,902
|
|
Total
|
|
$
|
12,645,068
|
|
|
$
|
15,050,902
|
|
The interest-free notes payable, ranging
from nine months to one year from the date of issuance, were secured by $1.41 million and $3.59 million restricted cash, $11.78
million and $11.17 million notes receivable, and $0 million and $1.95 million land use rights, as of March 31, 2020 and December
31, 2019, respectively.
All the notes payable are subject to bank
charges of 0.05% of the principal amount as commission, included in the financial expenses in the statement of operations, on each
loan transaction. The interest charge of notes payable is free.
NOTE 10 – ACCOUNTS PAYABLE
Accounts payable are summarized as follow:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Procurement of Materials
|
|
$
|
17,363,431
|
|
|
$
|
14,248,095
|
|
Infrastructure & Equipment
|
|
|
400,696
|
|
|
|
381,843
|
|
Freight fee
|
|
|
206,598
|
|
|
|
83,070
|
|
Total
|
|
$
|
17,970,725
|
|
|
$
|
14,713,008
|
|
NOTE 11 – SHORT TERM BANK LOANS
Short-term loans are summarized as follow:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Collateralized bank loans
|
|
$
|
17,308,155
|
|
|
$
|
16,144,892
|
|
Guaranteed bank loans
|
|
|
2,540,542
|
|
|
|
716,723
|
|
Total
|
|
$
|
19,848,697
|
|
|
$
|
16,861,615
|
|
Short-term loans as of March 31, 2020 are as follow:
Maturity Date
|
|
Type
|
|
Bank Name
|
|
Interest Rate per Annum (%)
|
|
|
March 31,
2020
|
|
Nov.26, 2020
|
|
Operating Loans
|
|
Agricultural bank of PRC
|
|
|
4.57
|
|
|
$
|
5,758,565
|
|
Dec.24, 2020
|
|
Operating Loans
|
|
Agricultural bank of PRC
|
|
|
4.70
|
|
|
$
|
6,891,928
|
|
Dec.16, 2020
|
|
Operating Loans
|
|
Rural commercial bank of Xinchang
|
|
|
5.45
|
|
|
$
|
2,117,119
|
|
Dec.16, 2020
|
|
Operating Loans
|
|
Rural commercial bank of Xinchang
|
|
|
4.40
|
|
|
$
|
1,129,130
|
|
Dec.16, 2020
|
|
Operating Loans
|
|
Rural commercial bank of Xinchang
|
|
|
4.80
|
|
|
$
|
705,706
|
|
Dec.15, 2020
|
|
Operating Loans
|
|
Rural commercial bank of Xinchang
|
|
|
5.45
|
|
|
$
|
1,411,413
|
|
Jan.10, 2021
|
|
Operating Loans
|
|
Bank of communications
|
|
|
4.79
|
|
|
$
|
705,706
|
|
Mar.16, 2021
|
|
Operating Loans
|
|
SPD Rural Bank of Xinchang
|
|
|
4.05
|
|
|
$
|
1,129,130
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
19,848,697
|
|
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 11 – SHORT TERM BANK LOANS (CONTINUED)
Short-term loans as of December 31, 2019 are as follow:
Maturity Date
|
|
Type
|
|
Bank Name
|
|
Interest Rate per Annum (%)
|
|
|
December 31,
2019
|
|
Nov.26, 2020
|
|
Operating Loans
|
|
Agricultural bank of PRC
|
|
|
4.57
|
|
|
$
|
5,848,455
|
|
Dec.24, 2020
|
|
Operating Loans
|
|
Agricultural bank of PRC
|
|
|
4.70
|
|
|
$
|
6,999,513
|
|
Dec.16, 2020
|
|
Operating Loans
|
|
Rural commercial bank of Xinchang
|
|
|
5.45
|
|
|
$
|
2,150,168
|
|
Dec.16, 2020
|
|
Operating Loans
|
|
Rural commercial bank of Xinchang
|
|
|
4.40
|
|
|
$
|
1,146,756
|
|
Dec.16, 2020
|
|
Operating Loans
|
|
Rural commercial bank of Xinchang
|
|
|
4.80
|
|
|
$
|
716,723
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
16,861,615
|
|
All short-term bank loans are obtained
from local banks in PRC and are repayable within one year.
The average annual interest rate of the
short-term bank loans was 4.7247% and 4.900% for the three months ended March 31, 2020 and 2019, respectively. The Company was
in compliance with its loan financial covenants at March 31, 2020 and December 31, 2019, respectively.
NOTE 12 – OTHER CURRENT LIABILITIES
Other current liabilities are summarized as follow:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Employee payables
|
|
|
155,703
|
|
|
|
476,859
|
|
Other tax payables
|
|
|
234,028
|
|
|
|
439,398
|
|
Borrowing from third party
|
|
|
217,483
|
|
|
|
1,576,790
|
|
Others
|
|
|
771,317
|
|
|
|
593,812
|
|
Total
|
|
$
|
1,378,531
|
|
|
$
|
3,086,859
|
|
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 13 – OTHER LONG-TERM LIABILITIES
Other long-term liabilities are summarized as follow:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Subsidy
|
|
|
2,331,591
|
|
|
|
2,178,548
|
|
Total
|
|
$
|
2,331,591
|
|
|
$
|
2,178,548
|
|
The subsidy mainly consists of an incentive
granted by the Chinese government to encourage transformation of fixed assets in China and other miscellaneous subsidy from the
Chinese government. As of March 31, 2020, grant income increased by $0.15 million, as compared to December 31, 2019. The change
was mainly due to timing of incurring qualifying expenses.
NOTE 14 –LONG TERM PAYABLES
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Long-term payables current portion
|
|
$
|
2,562,321
|
|
|
$
|
2,654,230
|
|
Long-term payables– non-current portion
|
|
|
811,222
|
|
|
|
1,349,850
|
|
Total
|
|
$
|
3,373,543
|
|
|
$
|
4,004,080
|
|
On January 3, 2019, the Company sold
a set of manufacturing equipment to third parties for aggregate proceeds of $3.08 million (RMB21.25 million) and the Company
entered into lease agreements under which the Company agreed to lease back each of the properties for an initial term of 3
years. On April 26, 2019, the Company sold its equipment including the general assembly line and the differential assembly
line to third parties for aggregate proceeds of $2.12 million (RMB14.66) million and the Company entered into lease agreements
under which the Company agreed to lease back each of the properties for an initial term of 2 years. The Company determined
it did not relinquish control of the assets to the buyer-lessor. Therefore, the sale of the goods does not qualify for sale-leaseback
accounting. As a result, the aggregate proceeds have been recorded as a financing obligation and the assets related to the sold
and leased manufacturing equipment remain on the Company’s Consolidated Balance Sheet and continue to be depreciated. The
current and long-term portions of the financing obligation are included within long-term payables-current portion and long-term
payables-non-current portion, respectively.
NOTE 15 – STOCKHOLDER’S EQUITY
Preferred Shares —
The Company is authorized to issue an unlimited number of no par value preferred shares, divided into five classes, Class A through
Class E, each with such designation, rights and preferences as may be determined by a resolution of the Company’s board of
directors to amend the Memorandum and Articles of Association to create such designations, rights and preferences. The Company
has five classes of preferred shares to give the Company flexibility as to the terms on which each Class is issued. All shares
of a single class must be issued with the same rights and obligations. Accordingly, starting with five classes of preferred shares
will allow the Company to issue shares at different times on different terms. At March 31, 2020 and December 31, 2019, there were
no preferred shares designated, issued or outstanding.
Ordinary Shares —
The Company is authorized to issue an unlimited number of no par value ordinary shares. Holders of the Company’s ordinary
shares are entitled to one vote for each share. At March 31, 2020 and December 31, 2019, there were 10,021,142 and 10,006,142 ordinary
shares issued and outstanding.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 – STOCKHOLDER’S EQUITY (CONTINUED)
On July 27, 2018, the Company consummated
its initial public offering of 4,400,000 units, including a partial exercise by the underwriters of their over-allotment option
in the amount of 400,000 units. Each unit consists of one ordinary share, no par value, one warrant to purchase one-half of one
ordinary share and one right to receive one-tenth of one ordinary share upon the consummation of its initial business combination.
Simultaneously with the consummation of
its initial public offering, the Company completed a private placement of 282,000 units, issued to Greenland Asset Management Corporation
(the “Sponsor”) and Chardan Capital Markets, LLC.
In 2019, in connection with the Business
Combination 3,875,458 redeemable shares have been redeemed and 81,400 redeemable shares have been converted into ordinary shares,
1,906,542 ordinary shares left upon consummation of the reverse recapitalization.
Pursuant to the Share Exchange Agreement,
Greenland acquired from the Seller all of the issued and outstanding equity interests of Zhongchai Holding in exchange for 7,500,000
newly issued ordinary shares, no par value of Greenland, issued to the Seller (the “Exchange Shares”). As a result,
the Seller became the controlling shareholder of Greenland, and Zhongchai Holding became a directly and wholly owned subsidiary
of Greenland. The Business Combination was accounted for as a reverse merger effected by a share exchange, wherein Zhongchai Holding
is considered the acquirer for accounting and financial reporting purposes. The recapitalization of the number of shares of common
stock attributable to the purchase of Zhongchai Holding in connection with the Business Combination is reflected retroactively
to December 31, 2017 and will be utilized for calculating earnings per share in all prior periods presented. The impact of the
stock exchange is also shown on the Company’s Statements of Stockholders’ Equity
Pursuant to certain Finder Agreement
with Hanyi Zhou, dated May 29, 2019, 50,000 newly issued ordinary shares were issued to Zhou Hanyi as the finder fee for the
business combination.
In connection with the Business Combination,
all the outstanding rights of the Company were converted into 468,200 ordinary shares on a one-tenth (1/10) ordinary share per
right basis if holders of the rights elected to convert their rights into the underlying ordinary shares.
Pursuant to the Service Agreement entered
into and by The Company and Chineseinvestors.com, Inc., an Indiana corporation (“CIIX”) on August 21, 2019 (the “Service
Agreement”), CIIX were to provide certain investor relations services to the Company for a period of three months beginning
on August 21, 2019. Pursuant to the Service Agreement, the Company were to pay CIIX fees consisting of three equal monthly instalments
of $12,000 and 5,000 restricted ordinary shares, no par value, of the Company on a quarterly basis during the term of the Consulting
Agreement. On February 24, 2020, Greenland and CIIX entered into a termination agreement (the “CIIX Termination Agreement”)
to terminate their respective obligations under the Service Agreement. Pursuant to the CIIX Termination Agreement, the Company
agreed to issue 5,000 restricted ordinary shares, no par value (the “CIIX Termination Shares”) to CIIX. Upon CIIX’s
receipt of the CIIX Termination Shares, the Company will have fully satisfied its payment obligations under the Service Agreement.
Pursuant to the Investor Relations Consulting
Agreement entered into and by The Company and Skyline Corporate Communication Group, LLC, a Massachusetts limited liability Company
(“SCCG”) on August 15, 2019 (the “Consulting Agreement”), SCCG were to provide certain investor relations
services to the Company for a period of twelve months beginning on August 15, 2019. Pursuant to the Consulting Agreement, the Company
were to pay SCCG fees consisting of $5,000 per month and 1,250 restricted ordinary shares, no par value, of the Company on a quarterly
basis during the term of the Consulting Agreement. On February 25, 2020, Greenland and SCCG entered into a termination agreement
(the “SCCG Termination Agreement”) to terminate their respective obligations under the Consulting Agreement. Pursuant
to the SCCG Termination Agreement, the Company agreed to issue 10,000 restricted ordinary shares, no par value (the “SCCG
Termination Shares”) to SCCG. Upon SCCG’s receipt of the SCCG Termination Shares, the Company will have fully satisfied
its payment obligations under the Consulting Agreement.
Rights — Each
holder of a right will receive one-tenth (1/10) of one ordinary share upon consummation of a Business Combination, even if the
holder of such right redeemed all Public Shares held by it in connection with a Business Combination. No fractional shares will
be issued upon exchange of the rights. No additional consideration will be required to be paid by a holder of rights in order to
receive its additional shares upon consummation of a Business Combination as the consideration related thereto has been included
in the Unit purchase price paid for by investors in the Initial Public Offering. If the Company enters into a definitive agreement
for a Business Combination in which the Company will not be the surviving entity, the definitive agreement provides for the holders
of rights to receive the same per share consideration the holders of the ordinary shares will receive in the transaction on an
as-converted into ordinary share basis and each holder of a right will be required to affirmatively convert its rights in order
to receive the 1/10 of one share underlying each right (without paying additional consideration). The shares issuable upon exchange
of the rights will be freely tradable (except to the extent held by affiliates of the Company).
If the Company is unable to complete a
Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of rights
will not receive any of such funds with respect to their rights, nor will they receive any distribution from the Company’s
assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless. Further, there are
no contractual penalties for failure to deliver securities to the holders of the rights upon consummation of a Business Combination.
Additionally, in no event will the Company be required to net cash settle the rights. Accordingly, the rights may expire worthless.
As of December 31, 2019, all of the existing
Rights were converted into 468,200 ordinary shares as a result of the Business Combination.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 15 – STOCKHOLDER’S EQUITY (CONTINUED)
Warrants — Public
Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants.
The Public Warrants will become exercisable on the later of (a) the consummation of a Business Combination or (b) July 24, 2019.
No Public Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering
the ordinary shares issuable upon exercise of the Public Warrants and a current prospectus relating to such ordinary shares. Notwithstanding
the foregoing, if a registration statement covering the ordinary shares issuable upon the exercise of the Public Warrants is not
effective within 90 days from the consummation of a Business Combination, the holders may, until such time as there is an effective
registration statement and during any period when the Company shall have failed to maintain an effective registration statement,
exercise the Public Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act.
If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis.
The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.
The Company may call the warrants for redemption
(excluding the Private Warrants), in whole and not in part, at a price of $0.01 per warrant:
|
●
|
At any time while the Public
Warrants are exercisable,
|
|
●
|
Upon not less than 30 days’
prior written notice of redemption to each Public Warrant holder,
|
|
●
|
If, and only if, the reported
last sale price of the ordinary shares equals or exceeds $16.50 per share, for any 20 trading days within a 30 trading day period
ending on the third trading day prior to the notice of redemption to Public Warrant holders, and
|
|
●
|
If, and only if, there is
a current registration statement in effect with respect to the ordinary shares underlying such warrants at the time of redemption
and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.
|
If the Company calls the Public Warrants
for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a
“cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable
upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary
dividend or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances
of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle
the warrants. Accordingly, the warrants may expire worthless.
The Private Warrants are identical to the
Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants and the ordinary shares
issuable upon the exercise of the Private Warrants are not transferable, assignable or saleable until 30 days after the completion
of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants are exercisable on a cashless
basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private
Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable
by the Company and exercisable by such holders on the same basis as the Public Warrants.
As of March 31, 2020 there were total 4,682,000 Warrants outstanding,
including 4,400,000 Public Warrants held by CEDE & CO, and 22,000 and 260,000 Private Warrants held by Chardan Capital
Markets, LLC and Greenland Asset Management Corporation, respectively.
Unit Purchase Option
On July 27, 2018, the Company sold to Chardan
(and its designees), for $100, an option to purchase up to 240,000 Units exercisable at $11.50 per Unit (or an aggregate exercise
price of $2,760,000) commencing on the later of July 24, 2019 and the consummation of a Business Combination. The unit purchase
option may be exercised for cash or on a cashless basis, at the holder’s option, and expires July 24, 2023. The Units issuable
upon exercise of the option are identical to those offered in the Initial Public Offering. The Company accounted for the unit purchase
option, inclusive of the receipt of $100 cash payment, as an expense of the Initial Public Offering resulting in a charge directly
to shareholders’ equity. The option and such units purchased pursuant to the option, as well as the ordinary shares underlying
such units, the rights included in such units, the ordinary shares that are issuable for the rights included in such units, the
warrants included in such units, and the shares underlying such warrants, have been deemed compensation by FINRA and are therefore
subject to a 180-day lock-up pursuant to Rule 5110(g) (1) of FINRA’s NASDAQ Conduct Rules. Additionally, the option may not
be sold, transferred, assigned, pledged or hypothecated for a one-year period (including the foregoing 180-day period) following
the date of Initial Public Offering except to any underwriter and selected dealer participating in the Initial Public Offering
and their bona fide officers or partners. The option grants to holders demand and “piggy back” rights for periods of
five and seven years, respectively, from the effective date of the registration statement with respect to the registration under
the Securities Act of the securities directly and indirectly issuable upon exercise of the option. The Company will bear all fees
and expenses attendant to registering the securities, other than underwriting commissions which will be paid for by the holders
themselves. The exercise price and number of units issuable upon exercise of the option may be adjusted in certain circumstances
including in the event of a stock dividend, or the Company’s recapitalization, reorganization, merger or consolidation. However,
the option will not be adjusted for issuances of ordinary shares at a price below its exercise price. As of March 31, 2020, there
was no unit purchase option outstanding.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 – EARNINGS PER SHARE
The Company reports earnings per share
in accordance with the provisions of the FASB’s related accounting
standard. This standard requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the
methodology used in computing such earnings per share. Basic earnings per share excludes dilution, but includes vested restricted
stocks and is computed by dividing income available to shareholders by the weighted average common shares outstanding during the
period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts
to issue ordinary shares were exercised and converted into ordinary shares. On October 24, 2019, the Company completed a reverse
merger with Zhongchai Holding. The recapitalization of the number of shares of common stock attributable to the purchase of Zhongchai
Holding in connection with the Business Combination is reflected retroactively to December 31, 2017 and will be utilized for calculating
earnings per share in all prior periods presented. Pursuant to the CIIX Termination Agreement and the SCCG Termination Agreement,
5,000 and 10,000 restricted ordinary shares, no par value, were issued to CIIX and SCCG on March 12, 2020 and March 13, 2020 respectively.
The following is a reconciliation of the
basic and diluted earnings per share computation:
|
|
Three months ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Net income attributable to the Greenland Corporation and subsidiaries
|
|
$
|
256,664
|
|
|
$
|
1,542,194
|
|
Weighted average basic and diluted computation shares outstanding:
|
|
|
|
|
|
|
|
|
Shares issued in reverse recapitalization
|
|
|
10,006,142
|
|
|
|
7,500,000
|
|
Restricted stock grants
|
|
|
15,000
|
|
|
|
-
|
|
Weighted average shares of common stock
|
|
|
10,009,198
|
|
|
|
-
|
|
Dilutive effect of stock options
|
|
|
-
|
|
|
|
-
|
|
Restricted stock vested not issued
|
|
|
-
|
|
|
|
-
|
|
Common stock and common stock equivalents
|
|
|
10,009,198
|
|
|
|
7,500,000
|
|
Basic and diluted net income per share
|
|
$
|
0.03
|
|
|
$
|
0.21
|
|
NOTE 17 – GEOGRAPHICAL SALES AND SEGMENTS
All of the Company’s operations are
considered by the chief operating decision maker to be aggregated in one reportable operating segment.
Information for the Company’s sales
by geographical area for the three months ended March 31, 2020 and 2019 are as follows:
|
|
For the three months ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Domestic Sales
|
|
$
|
9,863,853
|
|
|
$
|
15,811,488
|
|
International Sales
|
|
|
8,214
|
|
|
|
-
|
|
Total
|
|
$
|
9,872,067
|
|
|
$
|
15,811,488
|
|
NOTE 18 – INCOME TAXES
Income tax expense includes a provision for federal, state and foreign
taxes based on the annual estimated effective tax rate applicable to the Company and its subsidiaries, adjusted for items which
are considered discrete to the period.
The effective tax rates on income before income taxes for the three
months ended March 31, 2020 was 13.04%. The effective tax rate for the three months ended March 31, 2020 was lower than the PRC
tax rate of 25.0% primarily due to the China Super R&D deduction. The effective tax rate is based on forecasted annual results
and these amounts may fluctuate significantly through the rest of the year as a result of the unpredictable impact of COVID-19
on its operating activities.
The effective tax rate on income before income taxes for the three
months ended March 31, 2019 was 13.30%. The effective tax rate for the three months ended March 31, 2019 was lower than the PRC
tax rate of 25.0% primarily due to the China Super R&D deduction.
The Company has recorded $0 unrecognized benefit
as of March 31, 2020. On the information currently available, the Company does not anticipate a significant increase or decrease
to its unrecognized benefit within the next 12 months.
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 – COMMITMENTS AND CONTINGENCIES
Guarantees and pledged collateral for bank loans to other parties:
(1) Pledged collateral for bank loans
On December 6, 2019, Zhejiang Zhongchai
signed a Maximum Amount Pledge Contract with Agricultural Bank of PRC Co., Ltd. Xinchang County Sub-Branch (ABC Xinchang), pledging
its land use rights for original book value of RMB11.08 million and property ownership for original book value of RMB35.12 million
as security with ABC Xinchang, for its loan facility with maximum exposure of RMB48.83 million during the period from December
6, 2019 to May 21, 2022. As of March 31, 2020 and December 31, 2019, outstanding amount of the short-term bank loan under this
Pledge Contract was RMB48.83 million and RMB48.83 million.
On November 28, 2019, Zhejiang Zhongchai
signed a Maximum Amount Pledge Contract with Agricultural Bank of PRC Co., Ltd. Xinchang County Sub-Branch (ABC Xinchang), pledging
its land use rights for original book value of RMB9.84 million and property ownership for original book value of RMB27.82 million,
as security with ABC Xinchang, for its loan facility with maximum exposure of RMB40.80 million during the period from November
28, 2019 to December 26, 2022. As of March 31, 2020 and December 31, 2019, outstanding amount of the short-term bank loan under
this Pledge Contract was RMB40.80 million and RMB40.80 million.
On December 17, 2019, Zhejiang Zhongchai
signed a Maximum Amount Pledge Contract with Rural Commercial Bank of PRC Co., Ltd., pledging its land use rights for original
book value of RMB4.75 million and property ownership for original book value of RMB11.28 million as security, for its loan facility
with maximum exposure of RMB16.95 million during the period from December 16, 2019 to December 15, 2024. As of March 31, 2020 and
December 31, 2019, outstanding amount of the short-term bank loan under this Pledge Contract was RMB15.00 million and RMB15.00
million.
On December 18, 2019, Zhejiang Zhongchai
signed a Maximum Amount Pledge Contract with Rural Commercial Bank of PRC Co., Ltd., pledging its land use rights for original
book value of RMB4.17 million as security, for its loan facility with maximum exposure of RMB8.00 million during the period from
December 16, 2019 to December 15, 2024. As of March 31, 2020 and December 31, 2019, outstanding amount of the short-term bank loan
under this Pledge Contract was RMB8.00 million and RMB8.00 million.
(2) Litigation
On October 14, 2019, the plaintiff, the
Company and all other named defendants in the Action entered into a confidential memorandum of understanding (the “MOU”),
pursuant to which a Stipulation and Order of Dismissal (“Stipulation of Dismissal”) of the Action was filed on October
14, 2019. The Stipulation of Dismissal was approved and entered by the District Court on October 15, 2019. Among other things,
the Stipulation of Dismissal acknowledged that the Definitive Proxy Statement mooted the plaintiff’s claims regarding the
sufficiency of disclosures, dismissed all claims asserted in the Action, with prejudice as to the plaintiff only, permits the plaintiff
to seek an award of attorneys’ fees in connection with the mooted claims, and reserves the defendants’ rights to oppose
such an award, if appropriate. Pursuant to the MOU, the parties have engaged in discussions regarding the amount of attorneys’
fees, if any, to which the plaintiff’s counsel is entitled in connection with the Action. As of March 31, 2020, those
discussions remain ongoing.
Facility Leases
The Company entered into a failed sale-leaseback
transaction on January 3, 2019 and April 26, 2019. See further discussion in NOTE 14 –LONG TERM PAYABLES.
Rent expense is recognized on a straight-line
basis over the terms of the operating leases accordingly and the Company records the difference between cash rent payments and
the recognition of rent expense as a deferred rent liability.
The following are the aggregate non-cancellable
future minimum lease payments under operating and financing leases as of March 31, 2020:
Years ending March 31,
|
|
Amount
|
|
2021
|
|
|
2,661,866
|
|
2022
|
|
|
1,017,207
|
|
Total
|
|
$
|
3,679,073
|
|
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 – RELATED PARTY TRANSACTIONS
(a) Names and Relationship of Related
Parties:
|
|
Existing Relationship with the Company
|
Sinomachinery Holding Limited
|
|
Under common control of Peter Zuguang Wang
|
Cenntro Holding Limited
|
|
Controlling shareholder of the Company
|
Zhejiang Kangchen Biotechnology Co., Ltd.
|
|
Under common control of Peter Zuguang Wang
|
Cenntro Smart Manufacturing Tech. Co., Ltd.
|
|
Under common control of Peter Zuguang Wang
|
Zhejiang Zhonggong Machinery Co., Ltd.
|
|
Under common control of Peter Zuguang Wang
|
Zhejiang Zhonggong Agricultural Equipment Co., Ltd.
|
|
Under common control of Peter Zuguang Wang
|
Jiuxin Investment Management Partnership (LP)
|
|
Under control of Mr. Mengxing He, the General Manger and one of the directors of Zhejiang Zhongchai
|
Zhuhai Hengzhong Industrial Investment Fund (Limited Partnership)
|
|
Under common control of Peter Zuguang Wang
|
Hangzhou Cenntro Autotech Co., Limited
|
|
Under common control of Peter Zuguang Wang
|
(b) Summary of Balances with Related
Parties:
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Due to related parties:
|
|
|
|
|
|
|
Sinomachinery Holding Limited1
|
|
$
|
1,775,869
|
|
|
$
|
1,773,365
|
|
Zhejiang Kangchen Biotechnology Co., Ltd2
|
|
|
64,505
|
|
|
|
64,505
|
|
Zhejiang Zhonggong Machinery Co., Ltd.3
|
|
|
507,436
|
|
|
|
207,177
|
|
Zhejiang Zhonggong Agricultural Equipment Co., Ltd.4
|
|
|
13,251
|
|
|
|
-
|
|
Cenntro Smart Manufacturing Tech. Co., Ltd.5
|
|
|
5,999
|
|
|
|
1,981
|
|
Zhuhai Hengzhong Industrial Investment Fund (Limited Partnership)6
|
|
|
102,346
|
|
|
|
95,302
|
|
Cenntro Holding Limited7
|
|
|
1,339,654
|
|
|
|
1,339,654
|
|
Total
|
|
$
|
3,809,060
|
|
|
$
|
3,481,984
|
|
The balance of Due to related parties as
of March 31, 2020 and December 31, 2019 consisted of:
|
1
|
Advance from Sinomachinery Holding Limited for certain purchase order;
|
|
2
|
Temporary borrowings from Zhejiang Kangchen Biotechnology Co., Ltd.;
|
|
3
|
Unpaid balances for purchasing of materials and equipment and temporary borrowing from Zhejiang
Zhonggong Machinery Co., Ltd.;
|
|
4
|
Unpaid balances for purchasing of materials from Zhejiang Zhonggong Agricultural Equipment Co.,
Ltd.;
|
|
5
|
Prepayment from Cenntro Smart Manufacturing Tech. Co., Ltd.;
|
|
6
|
Temporary borrowings from Zhuhai Hengzhong Industrial Investment Fund (Limited Partnership); and
|
|
7
|
Borrowings from Cenntro Holding Limited
|
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 – RELATED PARTY TRANSACTIONS (CONTINUED)
|
|
As of
|
|
|
|
March 31,
2020
|
|
|
December 31,
2019
|
|
Due from related parties-current:
|
|
|
|
|
|
|
Cenntro Holding Limited
|
|
$
|
35,488,842
|
|
|
$
|
36,042,829
|
|
Total
|
|
$
|
35,488,842
|
|
|
$
|
36,042,829
|
|
Due from related parties-non-current:
|
|
|
|
|
|
|
|
|
Xinchang County Jiuxin Investment Management Partnership (LP)
|
|
|
169,370
|
|
|
|
430,034
|
|
Total
|
|
$
|
169,370
|
|
|
$
|
430,034
|
|
The balance of Due from related parties
as of March 31, 2020 and December 31, 2019 consisted of:
Other
receivable from Cenntro Holding Limited was $35.5 million and $36.0 million as of March 31, 2020 and December 31, 2019, respectively. The
Company expects the amount due from its equity holder, Cenntro
Holding will pay back by the end of October 2020 in accordance
with the original maturity date.
(c) Summary of Related Party Transactions:
A summary of trade transactions with related
parties for the three months ended March 31, 2020 and 2019 are listed below:
|
|
|
|
For the three months ended
March 31,
|
|
|
|
|
|
2020
|
|
|
2019
|
|
Purchases from related parties:
|
|
|
|
|
|
|
|
|
Zhejiang Zhonggong Machinery Co., Ltd.
|
|
Purchase of materials and equipment
|
|
|
305,793
|
|
|
|
4,232
|
|
Zhejiang Zhonggong Agricultural Equipment Co., Ltd.
|
|
Purchase of materials and equipment
|
|
|
13,354
|
|
|
|
-
|
|
Total
|
|
|
|
|
319,147
|
|
|
|
4,232
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to related parties:
|
|
|
|
|
|
|
|
|
|
|
Cenntro Smart Manufacturing Tech. Co., Ltd.
|
|
Provide service
|
|
|
29,191
|
|
|
|
40,577
|
|
Total
|
|
|
|
|
29,191
|
|
|
|
40,577
|
|
GREENLAND TECHNOLOGIES HOLDING CORPORATION
AND SUBSIDIARIES
NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 – RELATED PARTY TRANSACTIONS (CONTINUED)
(d) Summary of Related Party Funds Lending:
A summary of funds lending with related
parties for the three months ended March 31, 2020 and 2019 are listed below:
Proceeds
from related parties:
|
|
For the three months ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Zhejiang Zhonggong Machinery Co., Ltd.
|
|
|
355,586
|
|
|
|
1,119,503
|
|
Xinchang County Jiuxin Investment Management Partnership (LP)
|
|
|
256,022
|
|
|
|
-
|
|
Zhuhai Hengzhong Industrial Investment Fund (Limited Partnership)
|
|
|
8,575
|
|
|
|
-
|
|
Total
|
|
|
620,183
|
|
|
|
1,119,503
|
|
|
|
|
|
|
|
|
|
|
Repayment of loans from related parties:
|
|
|
|
|
|
|
|
|
Zhejiang Zhonggong Machinery Co., Ltd.
|
|
|
355,586
|
|
|
|
1,119,503
|
|
Cenntro Holding Limited
|
|
|
-
|
|
|
|
1,310,062
|
|
Hangzhou Cenntro Autotech
Co., Limited
|
|
|
-
|
|
|
|
223,901
|
|
Total
|
|
|
355,586
|
|
|
|
2,653,466
|
|
e) Summary of Related Party dividend
payment:
A summary of dividend payment to related
parties for the three months ended March 31, 2020 and 2019 are listed below:
|
|
For
the three months ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Dividend payment to related parties:
|
|
|
|
|
|
|
Xinchang County Jiuxin Investment Management Partnership (LP)
|
|
|
-
|
|
|
|
164,257
|
|
Dividend was declared during the year 2018 and paid during
the three months ended March 31, 2019.
NOTE 21 – SUBSEQUENT EVENTS
The management has evaluated subsequent events through the date
of the report, and there was no material subsequent event requiring adjustments to the financial statements or disclosure.