UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2021

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File number 001-38605

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION

(Exact name of registrant as specified in charter)

 

British Virgin Islands   001-38605
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
     

50 Millstone Road, Building 400 Suite 130

East Windsor, NJ

United States

  08512
(Address of principal executive offices)   (Zip Code)

 

1 (888) 827-4832

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Ordinary shares, no par value   GTEC    The NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐ No

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

 

As of August 11, 2021, there were 11,371,171 ordinary shares, no par value, issued and outstanding. 

 

 

 

 

 

INDEX

 

    Page
    Number  
     
PART I. FINANCIAL INFORMATION 1
     
ITEM 1. Financial Statements (unaudited) 1
     
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 2
     
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 15
     
ITEM 4. Controls and Procedures 15
     
PART II. OTHER INFORMATION 17
     
ITEM 1. Legal Proceedings 17
     
ITEM 1A. Risk Factors 17
     
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 17
     
ITEM 3. Defaults Upon Senior Securities. 17
     
ITEM 4. Mine Safety Disclosures. 17
     
ITEM 5. Other Information. 17
     
ITEM 6. Exhibits 18
     
Signatures   19

  

i

 

 

FORWARD LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q, Financial Statements and Notes to Financial Statements contain forward-looking statements that discuss, among other things, future expectations and projections regarding future developments, operations and financial conditions. Forward-looking statements may appear throughout this report and other documents we file with the Securities and Exchange Commission (SEC), including without limitation, the following sections: Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.

 

Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “may,” “could,” “will likely result,” and similar expressions. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those reflected in the forward-looking statements. In addition, there is uncertainty about the future development of the COVID-19 pandemic and the impact it may have on the Company’s operations, the demand for the Company’s products or services, global supply chains and economic activity in general. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

 

ii

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2021

 

TABLE OF CONTENTS

 

 PAGE F-1-F-2   CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2021 (UNAUDITED) AND DECEMBER 31, 2020 
         
 PAGE F-3   CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (UNAUDITED) 
         
 PAGE F-4   CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY FOR THE THREE AND SIX  MONTHS ENDED JUNE 30, 2021 AND 2020 (UNAUDITED) 
         
 PAGE F-5-F-6   CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (UNAUDITED) 
         
 PAGE F-7-F-33   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 

 

1

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

AS OF JUNE 30, 2021 AND DECEMBER 31, 2020

 

(IN U.S. DOLLARS)

 

   June 30,   December 31, 
   2021   2020 
   (Unaudited)     
ASSETS        
Current assets        
Cash and cash equivalents  $10,756,968   $7,159,015 
Restricted cash   9,767,210    2,244,038 
Notes receivables   33,113,729    30,803,772 
Accounts receivable, net of allowance for doubtful accounts of $996,984 and $986,532, respectively   20,519,818    12,408,548 
Inventories   17,731,415    15,380,063 
Due from related parties-current   38,946,503    38,535,171 
Advance to suppliers   732,019    447,901 
Prepayments and other current assets   542,882    664,926 
Total Current Assets  $132,110,544   $107,643,434 
           
Non-current asset          
Property, plant, equipment and construction in progress, net   19,534,056    20,135,339 
Land use rights, net   4,030,352    4,035,254 
Other intangible assets   
-
    
-
 
Due from related parties – non-current   
-
    
-
 
Deferred tax assets   158,698    158,455 
Goodwill   3,890    3,890 
Other non-current assets   41,860    158,455 
Total non-current assets  $23,768,856   $24,335,303 
TOTAL ASSETS  $155,879,400   $131,978,737 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-1

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

AS OF JUNE 30, 2021 AND DECEMBER 31, 2020 (Continued)

 

(IN U.S. DOLLARS)

 

   June 30,   December 31, 
   2021   2020 
   (Unaudited)     
Current Liabilities        
Short-term bank loans  $11,899,452   $18,487,356 
Notes payable-bank acceptance notes   38,202,952    25,889,067 
Accounts payable   28,300,234    22,005,260 
Customer deposits   163,435    366,029 
Due to related parties   7,904,430    9,051,119 
Other current liabilities   1,475,090    2,212,325 
Long-term payable- current portion   584,003    797,179 
Total current liabilities  $88,529,596   $78,808,335 
           
Long-term liabilities          
Long-term payables   
-
    166,292 
Other long-term liabilities   2,240,949    2,342,648 
Total long-term liabilities  $2,240,949   $2,508,940 
TOTAL LIABILITIES  $90,770,545   $81,317,275 
COMMITMENTS AND CONTINGENCIES   
 
    
 
 
EQUITY          
Ordinary shares, no par value, unlimited shares authorized; 11,448,327 and 10,225,142 shares issued and outstanding as of June 30, 2021 and December 31, 2020.   
-
    
-
 
Additional paid-in capital   21,983,495    
13,707,39
 
Statutory reserves   3,842,331    4,517,117 
Retained earnings   32,312,439    26,728,332 
Accumulated other comprehensive loss   339,456    (62,925)
Total shareholders’ equity  $58,477,721   $44,889,922 
Non-controlling interest   6,631,134    5,771,540 
TOTAL EQUITY  $65,108,855   $50,661,462 
           
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $155,879,400   $131,978,737 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-2

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

 

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

 

(UNAUDITED, IN U.S. DOLLARS)

 

   For the three months ended
June 30,
   For the six months ended
June 30,
 
   2021   2020   2021   2020 
REVENUES  $28,204,307   $16,576,345   $52,815,201   $26,448,412 
COST OF GOODS SOLD   22,499,138    13,694,235    42,005,645    21,642,354 
GROSS PROFIT   5,705,169    2,882,110    10,809,556    4,806,058 
Selling expenses   495,462    304,535    874,692    521,376 
General and administrative expenses   752,212    443,476    1,663,351    1,517,885 
Research and development expenses   1,005,296    475,649    1,964,841    1,039,947 
Total operating expenses  $2,252,970   $1,223,660   $4,502,884   $3,079,208 
INCOME FROM OPERATIONS  $3,452,199   $1,658,450   $6,306,672   $1,726,850 
Interest income   4,833    42,521    9,428    75,831 
Interest expense   (221,664)   (389,072)   (401,853)   (710,764)
Other income   311,114    255,580    598,090    852,832 
INCOME BEFORE INCOME TAX  $3,546,482   $1,567,479   $6,512,337   $1,944,749 
INCOME TAX   394,159    95,971    916,775    145,158 
NET INCOME  $3,152,323   $1,471,508   $5,595,562   $1,799,591 
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST   371,570    212,411    686,241    283,830 
NET INCOME ATTRIBUTABLE TO GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES  $2,780,753   $1,259,097   $4,909,321   $1,515,761 
OTHER COMPREHENSIVE INCOME (LOSS):   833,963    58,835    575,734    (1,246,925)
Unrealized foreign currency translation income (loss) attributable to Greenland technologies holding corporation and subsidiaries   591,484    45,180    402,381    (559,814)
Unrealized foreign currency translation income (loss) attributable to Noncontrolling interest   242,479    13,655    173,353    (687,111)
Comprehensive income   3,372,237    1,304,277    5,311,702    955,947 
Noncontrolling interest   614,049    226,066    859,594    (403,281)
WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING:                    
Basic and diluted   10,814,479    10,021,142    10,574,223    10,015,203 
NET INCOME PER ORDINARY SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY:                    
Basic and diluted   0.26    0.13    0.46    0.15 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-3

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

 

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

 

(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, 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 
Net income   -    
-
    
-
    
-
    
-
    1,259,097    212,411    1,471,508 
Transfer to statutory reserve   -    
-
    
-
    
-
    195,723    (195,723)   
-
    
-
 
Dividend   -    
-
    
-
    
-
    
-
    (13,447)   
-
    (13,447)
Foreign currency translation adjustment   -    
-
    
-
    45,180    
-
    
-
    13,655    58,835 
Balance at June 30, 2020   10,021,142    
-
    15,269,485    (920,795)   4,122,550    21,109,938    7,962,965    47,544,143 
                                         
Balance at December 31, 2020   10,225,142    
-
   $13,707,398   $(62,925)   4,517,117   $26,728,332   $5,771,540   $50,661,462 
Restricted stock grants   51,000    
-
    51,000    
-
    
-
    
-
    
-
    51,000 
Sale of stock and warrants   221,985    
-
    1,858,841    
-
    
-
    
-
    
-
    1,858,841 
Net income   -    
-
    
-
    
-
    
-
    2,128,568    314,671    2,443,239 
Foreign currency translation adjustment   -    
-
    
-
    (189,103)   
-
    
-
    (69,126)   (258,229)
Balance at March 31, 2021   10,498,127    
-
   $15,617,239   $(252,028)   4,517,117   $28,856,900   $6,017,085   $54,756,313 
Sale of stock and warrants   950,200    
-
    6,366,256    
-
    
-
    
-
    
-
    6,366,256 
Net income   -    
-
    
-
    
-
    
-
    2,780,753    371,570    3,152,323 
Transfer to statutory reserve   -    
-
    
-
    
-
    (674,786)   674,786    
-
    
-
 
Foreign currency translation adjustment   -    
-
    
-
    591,484    
-
    
-
    242,479    833,963 
Balance at June 30, 2021   11,448,327    
-
    21,983,495    339,456    3,842,331    32,312,439    6,631,134    65,108,855 

  

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-4

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

 

(UNAUDITED, IN U.S. DOLLARS)

 

   For the six months ended
June 30,
 
   2021   2020 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income  $ 5,595,562   $ 1,799,591 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization   1,248,256    1,163,894 
Loss on disposal of property and equipment   (959)   
-
 
Increase  in allowance for doubtful accounts   
-
    127,667 
Increase (Decrease) in allowance for notes receivable   
-
    (11,226)
Increase (Decrease) in provision for inventory   
-
    (44,440)
Deferred tax assets   1,433    (27,502)
Stock based compensation expense   51,000    42,800 
Loss on prepayment of financing lease obligations   
-
    52,684 
Changes in operating assets and liabilities:          
Decrease (Increase) In:          
Accounts receivable   (7,966,860)   (2,869,276)
Notes receivable   (1,980,407)   (76,376)
Inventories   (2,184,865)   (33,550)
Advance to suppliers   (278,919)   (15,617)
Other current and noncurrent assets   128,879    105,609 
Increase (Decrease) In:          
Accounts payable   6,052,012    3,738,130 
Customer deposits   (206,136)   248,949 
Other current liabilities   (604,808)   121,777 
Income tax payable   
-
    118,934 
Due to related parties   (391,343)   316,779 
Long-term payables-unamortized deferred financing costs   (2,470)   185,556 
Other long-term liabilities   (248,796)   (116,086)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES  $(778,421)  $4,828,297 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-5

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020 (Continued)

 

(UNAUDITED, IN U.S. DOLLARS)

 

   For the six months ended
June 30
 
   2021   2020 
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of Long term assets  $(425,860)  $(439,871)
Proceeds from government grants for construction   122,485    242,955 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES  $(303,375)  $(196,916)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from short-term bank loans  $773,144   $3,263,569 
Repayments of short-term bank loans   (7,545,885)   
-
 
Repayments of long-term bank loans   
-
    
-
 
Notes payable   12,020,074    (3,641,089)
Proceeds from related parties   422,324    625,719 
Repayment of loans from related parties   (1,284,631)   (496,630)
Repayment of loans from third parties   (309,258)   (4,965,961)
Proceeds from third parties   154,629    4,331,829 
Dividend paid   
-
    (13,447)
Proceeds received from financing lease obligation   
-
    1,418,943 
Prepayment of lease-financing obligations   
-
    (2,276,612)
Payment of principal on financing lease obligation   (386,572)   (1,306,408)
Proceeds from equity and debt finaning   8,225,097    
 
 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES  $12,068,922   $(3,060,087)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH  $10,987,126   $1,571,294 
Effect of exchange rate changes on cash   133,999    (574,058)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR   9,403,053    5,717,207 
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD  $20,524,178   $6,714,443 
Bank balances and cash   10,756,968    4,527,402 
Bank balances and cash included in assets classified as restricted cash   9,767,210    2,187,041 
           
Supplemental Disclosure of Cash Flow Information          
Income taxes paid   782,596    209,777 
Interest paid   408,582    638,213 

 

The accompanying notes are an integral part of the unaudited consolidated financial statements.

 

F-6

 

 

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.

 

Greenland, through its subsidiaries, is:

 

a leading developer and manufacturer of transmission products for material handling machineries in China; and

 

since December 2020, a developer of electric industrial vehicles, and has launched its 1.8 tons electric loader vehicle (GEL1800), GEX-8000 electric excavator and GEF-series lithium powered electric vehicle forklift truck.

 

Greenland’s transmission products are key components for forklift trucks, used in manufacturing and logistic applications such as factories, workshops, warehouses, fulfilment centers, shipyards, and seaports. Forklifts play an important role in logistics for many enterprises across different industries in the PRC and around the globe. Generally, industries with the largest demand for forklifts are transportation, warehousing logistics, electrical machinery, and automobile.

 

Greenland has experienced increased demand for forklifts in the manufacturing industry in the PRC, as its revenue increased from approximately $26.45 million for the six months ended June 30, 2020 to approximately $52.82 million for the six months ended June 30, 2021. Since late March 2020, the Company’s business operations have gradually recovered from the negative impacts due to the lockdown as a result of the COVID-19 pandemic, and part of the Company’s backlogged orders were processed during the six months ended June 30, 2021, which contributed to an increase in its revenues for the six months ended June 30, 2021.

 

Greenland’s transmission products are used in 1-ton to 15-tons forklift trucks, some with mechanical shift and some with automatic shift. Greenland sells these transmission products directly to forklift-truck manufacturers. For the six months ended June 30, 2021 and 2020, Greenland sold 79,032 and 45,380 sets of transmission products, respectively, to more than 100 forklift manufacturers in aggregate in PRC.

 

In December 2020, Greenland launched a new division to focus on the electric industrial vehicle market, a market that Greenland intends to develop to diversify its product offerings. Greenland has setup an assembly facility on the East Coast of the United States for final assembly of its newly developed electric vehicle. Greenland’s teams have completed full beta versions of the 1.8 tons electric loader vehicle (GEL1800), its first electric industry vehicle product, and its GEX-8000 electric excavator. Greenland expects to start deliveries of GEL 1800 and GEX-8000 electric excavator in the fourth quarter of 2021. Other models, such as electric loader vehicles with loading capacity of one and a half tons or five tons are currently under development. In July 2021, Greenland also launched an innovative new GEF-series lithium powered electric vehicle forklift truck, one of the industry’s first electric vehicle forklift trucks to use lithium power. Greenland will cooperate with global parts suppliers to utilize their matured supply chain, which will enable it to shorten its development cycle and make quicker market entrance.

 

F-7

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

 

The COVID-19 pandemic has significantly affected business and manufacturing activities within China, including travel restrictions, widespread mandatory quarantines, and suspension of business activities within China. Effective February 3, 2020, the Company announced the temporary closure of its operating offices in Zhejiang Province, including suspension of its manufacturing activities in response to the emergency measures imposed by the local government. The Company’s operating subsidiaries were temporary shut down until the end of February 2020. Moreover, pandemic has significantly limited suppliers’ ability to provide low-cost, high-quality parts and materials to the Company on a timely basis. Zhejiang Province, where we conduct a substantial part of our business, is one of the most affected areas in China. As of the date of this report, Chinese industries have gradually resumed businesses as government officials started to ease the restrictive measures since April 2020. However, we remain cautious and prudent when assessing the future impact of COVID-19 on our business due to the current ongoing global pandemic.

 

The Company’s Shareholders

 

As of June 30, 2021, Cenntro Holding Limited owns 69.60% of Greenland’s outstanding ordinary shares. Cenntro Holding Limited is controlled and beneficially owned by Mr. Peter Zuguang Wang, chairman of the board of directors of the Company.

 

The Company’s Subsidiaries

 

Zhongchai Holding, the 100% owned subsidiary of the Company, owns 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 Energy Technologies 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 June 30, 2021, 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.

 

F-8

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

 

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 engages in the business of trading.

 

Greenland Tech

 

Greenland Technologies Corporation was incorporated in the state of Delaware on January 14, 2020 as a wholly owned subsidiary of Greenland (“Greenland Tech”). The Company aims to use it as its U.S. operation site for the assembly, marketing and sales of electric industrial vehicles for the North American market.

 

Details of the Company’s subsidiaries, which are included in these unaudited consolidated financial statements as of June 30, 2021, 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
  RMB 20,000,000     89.47 %   Manufacture, sale of various transmission boxes.
Shanghai Hengyu Enterprise Management Consulting Co., Ltd.   PRC
September 10, 2015
  RMB 251,500,000     62.5 %   Investment management and consulting services.
Hangzhou Greenland Energy Technologies Co., Ltd.   PRC
August 9, 2019
  RMB 4,794,242     100 %   Trading.
Greenland Technologies Corporation   Delaware, USA
January 14, 2020
   USD 6,363,557     100 %   US operation and distribution of electric industrial vehicles for North American market

 

F-9

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.

 

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 six months ended June 30, 2021 and 2020 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.

 

F-10

 

 

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 six months ended
June 30,
 
   2021   2020 
Period end RMB: US$ exchange rate   6.4566    7.0851 
Period average RMB: US$ exchange rate   6.4671    7.0307 

 

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.

 

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.

 

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.

 

F-11

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 60 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 $1.00 million and $1.08 million as of June 30, 2021 and December 31, 2020, 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 labor and an appropriate proportion of overhead. As of June 30, 2021 and December 31, 2020, the Company had reserves for inventories of $0 million and $0 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 $0.73 million and $0.45 million as of June 30, 2021 and December 31, 2020.

 

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  
Fixtures and decorations 5 years  

 

F-12

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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 six months ended June 30, 2021 and 2020.

 

Lease

 

ASC 842 supersedes the lease requirements in ASC 840 “Leases”, and generally requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. Leases that transfer substantially all of the benefits and risks incidental to the ownership of assets are accounted for as finance leases as if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases.

 

A sale-leaseback transaction occurs when an entity sells an asset it owns and immediately leases the asset back from the buyer. The seller then becomes the lessee and the buyer becomes the lessor. under ASC 842, both parties must assess whether the buyer-lessor has obtained control of the asset and a sale has occurred.

 

The Company has determined that the leaseback transaction that it newly entered in current year fails to qualify as a sale because control is not transferred to the buyer-lessor. Therefore, the Company has classified the lease portion of the transaction as a finance lease whereby the Company continues to depreciate the assets and recorded a financing obligation for the consideration received from the buyer-lessor, with an implicit interest rate of 4.0038%.

 

F-13

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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.

 

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 six months ended June 30, 2021 and 2020. The total rebates amount is accounting for around 0.19% and 0.43% of the total revenue of Greenland.

 

The following table sets forth disaggregation of revenue:

 

   For the three months ended
June 30,
   For the six months ended
June 30,
 
Major Product  2021   2020   2021   2020 
Transmission boxes for Forklift   24,844,007    14,489,369    46,393,363    24,361,426 
Transmission boxes for Non-Forklift (EV, etc.) and parts of transmission boxes   3,360,300    2,086,976    6,421,838    2,086,986 
Total   28,204,307    16,576,345    52,815,201    26,448,412 

 

F-14

 

 

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 $1,005,296 and $475,649 for the three months ended June 30, 2021 and 2020, respectively. Research and development costs are expensed as incurred and totaled approximately $1,964,841 and $1,039,947 for the six months ended June 30, 2021 and 2020, 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 $2.24 million and $2.34 million at June 30, 2021 and December 31, 2020, 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.

 

F-15

 

 

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 June 30, 2021 and December 31, 2020, 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.

 

F-16

 

 

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 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.  And later on February 24, 2020, the Company 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.

 

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. And later on February 25, 2020, the Company 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.

 

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 for the six months ended June 30, 2021.

 

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. 

 

F-17

 

 

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 June 30, 2021 and December 31, 2020. 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 June 30, 2021 and December 31, 2020.

 

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.

 

F-18

 

 

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. As amended by ASU 2019-10, this ASU will be applied on a prospective basis and is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted for any impairment tests performed after January 1, 2017. The Company is evaluating the impact of the application of this standard and does not expect that the adoption of the ASU 2017-04 will 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.  The Company does not expect that the requirements of ASU 2019-12 will have a material impact on its consolidated financial statements.

 

F-19

 

 

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 six months ended June 30, 
   2021   2020 
Major customers representing more than 10% of the Company’s revenues                
Company A  $8,881,037    16.82%  $6,166,754    23.32%
Company B   6,593,104    12.48%   
-
    
-
 
Total Revenues  $15,474,141    29.30%  $6,166,754    23.32%

 

   As of 
   June 30,
2021
   December 31,
2020
 
Major customers of the Company’s accounts receivable                
Company A   1,990,033    9.70%   2,002,275    14.95%
Company B   1,498,188    7.30%   1,955,113    14.60%
Company C   1,456,398    7.10%   1,359,607    10.15%
Total  $4,944,619    24.10%  $5,316,995    39.69%

 

Accounts receivable from the Company’s major customers accounted for 24.10% and 39.69% of total accounts receivable balances as of June 30, 2021 and December 31, 2020, respectively.

 

There were no suppliers representing more than 10% of the Company’s total purchases for the six months ended June 30, 2021 and 2020, respectively.

 

NOTE 4 – ACCOUNTS RECEIVABLE

 

Accounts receivable is net of allowance for doubtful accounts.

 

   As of 
   June 30,
2021
   December 31,
2020
 
Accounts receivable  $21,516,802   $13,395,080 
Less: allowance for doubtful accounts   (996,984)   (986,532)
Accounts receivable, net  $20,519,818   $12,408,548 

 

Changes in the allowance for doubtful accounts are as follows:

 

   For the three months ended
June 30,
 
   2021   2020 
Beginning balance  $986,532   $1,037,797 
Provision for doubtful accounts   10,452    111,947 
Ending balance  $996,984   $1,149,744 

 

F-20

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 5 – INVENTORIES

 

   As of 
   June 30,
2021
   December 31,
2020
 
Raw materials  $6,789,961   $5,682,382 
Revolving material   928,567    742,437 
Consigned processing material   62,249    51,290 
Work-in-progress   2,226,541    2,015,677 
Finished goods   7,724,097    6,888,277 
Inventories, net  $17,731,415   $15,380,063 

 

NOTE 6 – NOTES RECEIVABLE

 

   As of 
   June 30,
2021
   December  31,
2020
 
Bank notes receivable:  $33,088,948   $30,803,772 
Commercial notes receivable   24,781    
-
 
Total  $33,113,729   $30,803,772 

 

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 June 30, 2021, the Company pledged notes receivable for an aggregate amount of $21.83 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 $26.49 million. As of December 31, 2020, the Company pledged notes receivable for an aggregate amount of $26.53 million to Bank of Communications as a means of security for issuance of bank acceptance notes for an aggregate amount of $23.70 million. The Company expects collection of notes receivable within 6 months.

 

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT AND CONSTRUCTION IN PROGRESS

 

(a) As of June 30, 2021 and December 31, 2020, property, plant and equipment consisted of the following:

 

   As of 
   June 30,
2021
   December 31,
2020
 
Buildings  $14,412,596   $12,453,285 
Machinery   19,723,416    20,907,623 
Motor vehicles   329,302    325,850 
Electronic equipment   201,991    198,955 
Total property plant and equipment, at cost   34,667,305    33,885,713 
           
Less: accumulated depreciation   (15,227,047)   (13,843,189)
Property, plant and equipment, net  $19,440,258   $20,042,524 
Construction in process   93,798    92,815 
Total  $19,534,056   $20,135,339 

 

For the six months ended June 30, 2021 and 2020, depreciation expense amounted to $1.20 million and $0.95 million, respectively, of which $0.77 million and $0.68 million, respectively, was included in cost of revenue and inventories, and the remainder was included in general and administrative expense, research and development expenses, and other expenses.

 

For the six months ended June 30, 2021 and 2020, $0 and $430,581 of construction in progress were converted into fixed assets.

 

F-21

 

 

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 
   June 30,
2021
   December 31,
2020
 
Buildings, net  $11,167,710   $11,050,641 
Machinery, net   2,173,063    2,150,284 
Total   13,340,773    13,200,925 

 

As of June 30, 2021, the Company pledged its ownership in buildings for net book value of RMB72.11 million ($11.01 million) as security with ABC Xinchang and Rural commercial bank, for its loan facility with maximum exposure of RMB94.63 million.

 

As of December 31, 2020, the Company pledged its ownership in buildings for net book value of RMB72.11 million ($11.05 million) as security with ABC Xinchang and Rural commercial bank, for its loan facility with maximum exposure of RMB104.63 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 May 12, 2020, the Company prepaid the financing lease obligations for aggregate payment of $1.34 million.

 

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. On April 30, 2020, the Company prepaid the financing lease obligations for aggregate payment of $0.94 million.

 

On May 27, 2020, the Company sold various equipment including the general assembly line and the differential assembly line to third parties for aggregate proceeds of $1.42 million (RMB10.00 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 that it did not relinquish control of the assets to the buyer-lessor. Therefore, the Company accounted for the transactions as 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 
   June 30,
2021
   December 31,
2020
 
Land use rights, cost  $4,765,140   $4,715,188 
Less: Accumulated amortization   (734,788)   (679,934)
Land use rights, net  $4,030,352   $4,035,254 

 

As of June 30, 2021, there was land use rights with net book value of $4.03 million, which approximately were used as collateral for the Company’s short-term bank loans. As of December 31, 2020, there was land use rights with net book value of $4.04 million, which approximately were used as collateral for the Company’s short-term bank loans.

 

Estimated future amortization expense is as follows as of June 30, 2021:

 

Years ending June 30,  Amortization expense 
2022  $95,148 
2023   95,148 
2024   95,148 
2025   95,148 
2026   95,148 
Thereafter   3,554,612 
Total  $4,030,352 

 

F-22

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 9 – NOTES PAYABLE

 

   As of 
   June 30,
2021
   December 31,
2020
 
Bank acceptance notes  $38,202,952   $25,889,067 
Total  $38,202,952   $25,889,067 

 

The interest-free notes payable, ranging from nine months to one year from the date of issuance, were secured by $9.77 million and $2.24 million restricted cash, $33.11 million and $26.53 million notes receivable, and $4.03 million and $4.04 million land use rights, as of June 30, 2021 and December 31, 2020, 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 
   June 30,
2021
   December 31,
2020
 
Procurement of Materials  $26,746,255   $21,140,063 
Infrastructure & Equipment   1,404,610    717,053 
Freight fee   149,369    148,144 
Total  $28,300,234   $22,005,260 

 

NOTE 11 – SHORT TERM BANK LOANS

 

Short-term loans are summarized as follow:

   As of 
   June 30,
2021
   December 31,
2020
 
Collateralized bank loans  $11,125,051   $17,261,302 
Guaranteed bank loans   774,401    1,226,054 
Total  $11,899,452   $18,487,356 

 

Short-term loans as of June 30, 2021 are as follow:

 

Maturity Date  Type  Bank Name  Interest
Rate per
Annum (%)
   June 30,
2021
 
Sep.01, 2021  Operating Loans  Agricultural bank of PRC   4.44   $6,014,002 
Sep.16, 2021  Operating Loans  Rural commercial bank of Xinchang   5.30   $1,239,042 
Sep.22, 2021  Operating Loans  Rural commercial bank of Xinchang   4.35   $1,239,042 
Sep.26, 2021  Operating Loans  Rural commercial bank of Xinchang   4.35   $2,632,965 
Jan.21, 2022  Operating Loans  Rural commercial bank of Xinchang   5.30   $774,401 
Total             $11,899,452 

 

F-23

 

 

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, 2020 are as follow:

 

Maturity Date  Type  Bank Name  Interest
Rate per
Annum (%)
   December 31,
2020
 
Sep.01, 2021  Operating Loans  Agricultural bank of PRC   4.44   $5,950,958 
Sep.06, 2021  Operating Loans  Agricultural bank of PRC   4.44   $6,252,874 
Sep.16, 2021  Operating Loans  Rural commercial bank of Xinchang   5.30   $1,226,053 
Sep.22, 2021  Operating Loans  Rural commercial bank of Xinchang   4.35   $1,226,053 
Sep.26, 2021  Operating Loans  Rural commercial bank of Xinchang   4.35   $2,605,364 
Nov.11, 2021  Operating Loans  SPD Rural Bank of Xinchang   5.50    1,226,054 
Total             $18,487,356 

 

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 4.5547% and 4.7467% for the six months ended June 30, 2021 and 2020, respectively. The Company was in compliance with its loan financial covenants at June 30, 2021 and December 31, 2020, respectively.  

 

NOTE 12 – OTHER CURRENT LIABILITIES

 

Other current liabilities are summarized as follow:

 

   As of 
   June 30,
2021
   December 31,
2020
 
Employee payables   135,782    483,922 
Other tax payables   1,078,166    1,208,323 
Borrowing from third party   261,142    520,080 
Total  $1,475,090   $2,212,325 

 

NOTE 13 – OTHER LONG-TERM LIABILITIES

 

Other long-term liabilities are summarized as follow:

 

   As of 
   June 30,
2021
   December 31,
2020
 
Subsidy   2,240,949    2,342,648 
Total  $2,240,949   $2,342,648 

 

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 June 30, 2021, grant income decreased by $0.10 million, as compared to December 31, 2020. The change was mainly due to timing of incurring qualifying expenses.

 

F-24

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 14 – LONG TERM PAYABLES

 

   As of 
   June 30,
2021
   December 31,
2020
 
Long-term payables current portion  $584,003   $797,179 
Long-term payables– non-current portion   
-
    166,292 
Total  $584,003   $963,471 

 

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 May 12, 2020, the Company prepaid the financing lease obligations for aggregate payment of $1.34 million.

 

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. On April 30, 2020, the Company prepaid the financing lease obligations for aggregate payment of $0.94 million.

 

On May 27, 2020, the Company sold various equipment including its general assembly line and the differential assembly line to third parties for aggregate proceeds of $1.42 million (RMB10.00 million). The Company also 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 that it did not relinquish control of the assets to the buyer-lessor. Therefore, the sale of the equipment 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. As of June 30, 2021 and December 31, 2020, 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. As of June 30, 2021 and December 31, 2020, there were 11,448,327 and 10,225,142 ordinary shares issued and outstanding.

 

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.

 

F-25

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 15 – STOCKHOLDER’S EQUITY (CONTINUED)

 

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 (“Chardan”).

 

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 ordinary shares 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.

 

On November 10, 2020, the Company granted a total of 135,000 restricted ordinary shares to JING JIN.

 

On December 30, 2020, the Company granted a total of 69,000 restricted ordinary shares to RAYMOND Z. WANG.

 

On February 8, 2021, the Company granted a total of 51,000 restricted ordinary shares to RAYMOND Z. WANG.

 

F-26

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 15 – STOCKHOLDER’S EQUITY (CONTINUED)

 

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 Company’s 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).

 

 As of June 30, 2021, all of the existing Rights were converted into 468,200 ordinary shares as a result of the Business Combination.

 

Warrants —The Company’s outstanding warrants held by CEDE & CO (“Public Warrants”) may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. 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, the holders may, 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 the 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: