Greenland Technologies Holding Corp. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Financial statements are unaudited and presented in U.S. dollars. Greenland manufactures transmission products for material-handling equipment in China and is developing electric industrial vehicles.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $28.20 million | $16.58 million | $52.82 million | $26.45 million |
| Gross profit | $5.71 million | $2.88 million | $10.81 million | $4.81 million |
| Gross margin | 20.2% | 17.4% | 20.5% | 18.2% |
| Operating income | $3.45 million | $1.66 million | $6.31 million | $1.73 million |
| Net income | $3.15 million | $1.47 million | $5.60 million | $1.80 million |
| Net income attributable to Greenland | $2.78 million | $1.26 million | $4.91 million | $1.52 million |
| Basic and diluted EPS | $0.26 | $0.13 | $0.46 | $0.15 |
- Six-month revenue increased 99.7%; management attributed the rebound to recovery from pandemic-related disruption and processing of backlogged orders. Transmission-box sales for forklifts were $46.39 million, the majority of revenue. The company sold 79,032 transmission sets versus 45,380 a year earlier.
- Management said higher gross profit reflected lower procurement costs. Six-month operating expenses rose 46.2%, including an 88.9% increase in R&D spending to $1.96 million.
- Six-month operating cash flow was negative $0.78 million, versus positive $4.83 million in 2020, despite higher net income. Increased accounts receivable used $7.97 million and higher inventory used $2.18 million; accounts payable provided $6.05 million.
- Investing cash outflow was $0.30 million. Financing provided $12.07 million, including $8.23 million of proceeds described as equity and debt financing and $12.02 million from notes payable, partly offset by $7.55 million of short-term bank-loan repayments.
- At June 30, cash and cash equivalents were $10.76 million and restricted cash was $9.77 million. Current assets were $132.11 million and current liabilities $88.53 million; reported working capital was approximately $43.58 million. Current assets included $33.11 million of notes receivable and $38.95 million due from related parties.
- Total liabilities were $90.77 million. Short-term bank loans were $11.90 million and bank-acceptance notes payable were $38.20 million. The bank loans carried stated annual rates of 4.35%–5.30%; acceptance notes were interest-free but subject to bank charges and were secured by restricted cash and other pledged assets.
Material changes and notable items
- Revenue and profit rose sharply year over year as operations recovered from the 2020 COVID-19 shutdown and orders were fulfilled. The company said revenue growth in RMB terms was 83.25% for the six-month period, compared with 99.7% in reported U.S. dollars.
- Receivables increased to $20.52 million from $12.41 million at year-end; management cited slower collection efforts during the pandemic. Notes receivable rose to $33.11 million.
- The $38.94 million receivable from controlling shareholder Cenntro Holding Limited was extended for repayment to April 27, 2022. The company cautioned that full or timely repayment is not assured and nonpayment could materially harm its balance sheet.
- Shares issued and outstanding were 11,448,327 at June 30, versus 10,225,142 at December 31, 2020. The cover reports 11,371,171 shares as of August 11, 2021; investors should reconcile the reported change.
Outlook, risks and controls
- Greenland expected to begin deliveries of its GEL1800 electric loader and GEX-8000 electric excavator in Q4 2021. It launched a lithium-powered electric forklift series in July 2021 and was developing additional loader models. These are forward-looking plans, not guaranteed results; the filing gives no quantified revenue or earnings guidance.
- Management said existing funding sources should support operations for the next 12 months and expected positive operating cash flow, while noting that additional financing could be needed. It cited renewal of bank borrowings, equity financing, operating cash flow, and potential shareholder or affiliate support as funding sources.
- Key risks include COVID-19 and supply-chain disruption, customer collections and credit exposure, reliance on PRC operations and rules restricting transfers of funds abroad, RMB exchange-rate movements, inflation in materials and overhead, and dependence on bank financing. Two customers represented 29.3% of first-half revenue.
- Disclosure controls and procedures were deemed ineffective due to a material weakness involving accounting staff’s U.S. GAAP and SEC-reporting experience and inadequate supervisory review. Management described remediation efforts, including hiring, training, formalizing procedures, and strengthening oversight.
- The company reported no material subsequent event requiring disclosure. A prior lawsuit challenging the 2019 business combination was dismissed; the filing says the fee discussions were completed and a counterparty paid $65,000.
Most important facts for investors to verify
- Whether the large receivable from Cenntro Holding is collected by the extended April 2022 due date, and the terms and collectability of related-party balances.
- Whether receivables and notes receivable convert to cash as expected, given negative operating cash flow and the increase in receivables.
- Availability and renewal terms of bank loans and acceptance-note facilities, including collateral, restricted cash, and upcoming maturities.
- Progress, customer demand, production readiness, and actual delivery timing for the new electric vehicles.
- Remediation and independent assessment of the disclosed material weakness in financial reporting controls, and reconciliation of June and August share counts.