Planet Green Holdings Corp. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. The unaudited consolidated statements are presented in U.S. dollars. Planet Green operates across tea and food products, fuels and chemicals, and online advertising and mobile games, primarily through subsidiaries and VIEs in China.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $4.57 million | $15.54 million | $13.11 million | $27.52 million |
| Gross profit | $42,654 | $742,062 | $289,080 | $1.91 million |
| Gross margin | 0.9% | 4.8% | 2.2% | 6.9% |
| Operating loss | $1.25 million | $1.49 million | $2.41 million | $2.59 million |
| Net loss | $12.20 million | $1.50 million | $13.49 million | $2.76 million |
| Basic and diluted loss per share | $(0.17) | $(0.03) | $(0.19) | $(0.06) |
Cash flow (six months): Operating cash use was $2.24 million, versus $8.20 million in 2022. Investing activities provided $2.75 million, primarily including $2.77 million proceeds from an investment disposal. Financing activities provided $34,000, compared with $10.39 million in 2022, when the company raised equity capital. Cash and cash equivalents were $713,196 at June 30, up from $93,487 at year-end.
Liquidity and debt: Current assets were $17.65 million and current liabilities $22.01 million, yielding a $4.36 million working-capital deficit and a current ratio of about 0.80. Bank loans totaled approximately $3.74 million, including $3.46 million current and $277,000 non-current; the current loan is due in November 2023 and bears a stated weighted-average rate of 7.83%. Related-party payables were $5.17 million, generally unsecured and non-interest-bearing. Related-party receivables totaled $1.18 million, unsecured, non-interest-bearing and due on demand.
Material changes and unusual items
- Revenue fell 71% in Q2 and 52% for the first half. Management attributes the decline to continuing COVID-19 effects and the December 2022 disposal of Anhui Ansheng, as well as lower revenue per subsidiary.
- Gross profit declined 94% in Q2 and 85% in the first half; lower revenue and the subsidiary disposal were cited. Selling and administrative expenses also decreased, partly due to cost controls and the disposal.
- A $10.85 million loss was recorded on disposal of the 40% equity-method investment in Xianning Xiangtian Energy Holdings Group. The company says the investment, with a stated balance of $13.62 million, was sold on June 27, 2023 for $2.77 million. This loss drove most of the increase in net loss.
- Long-term investments declined to $2.77 million from $16.49 million at December 31, 2022. Total assets fell to $48.83 million from $60.72 million; stockholders’ equity fell to $26.32 million from $40.59 million, including the first-half net loss and foreign-currency translation losses.
- Customer concentration: two customers represented 19% and 10% of first-half revenue. Four suppliers represented 10% or more each of purchases, with the largest at 22%.
Outlook, risks and other disclosures
- Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing the $13.49 million first-half net loss, $133.37 million accumulated deficit, limited cash, working-capital deficit and $2.24 million operating cash use. Management expects to rely on operating cash flow and, if needed, private financing; it may seek alternative financing or reduce spending. No assurance is given that financing or sufficient cost reductions will be available.
- Controls: The CEO and CFO concluded disclosure controls and procedures were not effective as of June 30, 2023. Management said it performed additional analysis and believes the statements fairly present the company’s financial position and results. No material change in internal control over financial reporting was reported during the quarter.
- Risks: The filing cites PRC political, economic and legal exposure, bank deposit risk in China, interest-rate/refinancing risk, and dependence on key customers and suppliers. The company consolidates certain PRC entities through contractual VIE arrangements, which carry structural and legal risks.
- Guidance and contingencies: No numerical financial guidance was provided. The company reported no legal proceedings and no material changes to previously disclosed risk factors. Management identified no subsequent event requiring adjustment or disclosure. No off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Whether the Xianning Xiangtian investment disposal, sale proceeds and $10.85 million loss are fully supported by transaction documentation and valuation details.
- How the company plans to address its going-concern uncertainty, near-term loan maturity and working-capital deficit, and whether related-party funding will be available.
- Whether supplier advances of $8.34 million and related-party receivables of $1.18 million are recoverable, and the timing of settlement of $5.17 million in related-party payables.
- Whether revenue and gross margins can recover following the decline and the disposal of Anhui Ansheng; assess customer and supplier concentration.
- What remediation steps and timetable management has established for ineffective disclosure controls, and the implications of the company’s VIE structure.