Planet Green Holdings Corp. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Financial statements are unaudited and presented in U.S. dollars. The company conducts a range of businesses, primarily in China, including tea, fuels and chemicals, petrochemical equipment, food distribution, online advertising and gaming. Revenue growth reflects acquisitions and newly consolidated subsidiaries and VIEs.
Financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $15.54 million | $4.88 million | $27.52 million | $7.11 million |
| Gross profit | $0.74 million | $0.29 million | $1.91 million | $0.50 million |
| Gross margin | 4.8% | 5.9% | 6.9% | 7.0% |
| Operating loss | $1.49 million | $1.11 million | $2.59 million | $2.69 million |
| Net loss | $1.50 million | $1.17 million | $2.76 million | $2.66 million |
| Net loss attributable to common shareholders | $1.48 million | $1.07 million | $2.71 million | $2.46 million |
| Basic and diluted loss per share | $(0.03) | $(0.05) | $(0.06) | $(0.12) |
- Revenue rose 219% in Q2 and 287% for the first half, which management attributed mainly to acquisitions. Cost of revenue rose at a similar pace; gross margin narrowed in Q2 and was broadly flat for the half-year.
- Operating expenses increased year over year, including higher selling and marketing, general and administrative, and research and development expenses. Interest expense was $0.33 million for the first half, versus $0.23 million a year earlier.
- Management’s MD&A describes net loss as having decreased, but the reported statements show it increased: by about 28% in Q2 and 4% for the six months. Investors should note this inconsistency.
Cash flow, balance sheet and liquidity
- At June 30, cash and cash equivalents were $0.30 million and restricted cash was $0.08 million, totaling $0.38 million, down from $1.13 million in cash and equivalents at year-end 2021. First-half operating cash outflow was $8.20 million; investing cash outflow was $3.85 million; financing cash inflow was $10.39 million, including $11.10 million from common-stock issuance.
- Current assets were $27.00 million and current liabilities $35.00 million, a $8.00 million working-capital deficit; the current ratio was approximately 0.77. Total assets were $95.54 million, total liabilities $35.62 million, and stockholders’ equity $59.93 million.
- Bank loans totaled approximately $6.65 million: $6.35 million short-term and $0.30 million long-term. A $2.62 million loan from Anhui Langxi Rural Commercial Bank was overdue at June 30; the company was negotiating an extension. The filing says rollover is probable, but provides no assurance of extension. Buildings and land-use rights valued at $10.18 million collateralize a separate Jilin loan.
- Related-party receivables were $7.58 million, including unsecured, non-interest-bearing loans due on demand. Related-party payables were $10.41 million, up from $5.20 million at year-end.
Material changes, outlook and risks
- The company issued 17.0 million shares for $11.10 million in cash and 7.5 million shares to acquire Allinyson in April. Shares outstanding rose from 35.58 million at year-end to 60.08 million at June 30; 72,081,930 were reported outstanding on August 4.
- After quarter-end, the company completed an acquisition of a 30% interest in Xianning Xiangtian Energy Holdings Group, issuing 12.0 million shares. The transaction was completed July 20, 2022.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing the first-half net loss, $96.79 million accumulated deficit, $8.00 million working-capital deficit and $8.20 million operating cash outflow. It expects to rely on improved operating performance and may need private placements or related-party funding; additional funding is not assured.
- A lawsuit involving Anhui Ansheng and other defendants is pending in a local court. The court temporarily froze $79,044 of Ansheng cash. Management considers an unfavorable outcome remote; no loss estimate is stated.
- Management concluded disclosure controls and procedures were not effective as of June 30, although it reported no material change in internal control during the quarter. The filing reports no material change to previously disclosed risk factors and provides no specific financial guidance.
- Other notable exposures include foreign-currency translation losses of $1.85 million for the first half, dependence on PRC operations and banking, supplier concentration (one supplier represented 31% of first-half purchases), and goodwill of $25.37 million, including $7.19 million recorded for Allinyson.
Key facts for investors to verify
- Whether the overdue $2.62 million loan was extended, and the company’s near-term access to cash and additional financing.
- Recoverability and collection timing of related-party receivables, and terms and purpose of related-party payables.
- The financial contribution, purchase accounting and goodwill impairment risk of recent acquisitions, including Allinyson and the post-quarter Xiangtian investment.
- Details and potential exposure from the Anhui Ansheng litigation and the restricted cash.
- The cause of ineffective disclosure controls, plans to remediate deficiencies, and the MD&A’s conflicting description of net-loss trends.
- Share-count impact and transaction terms for equity issuances, including the 12.0 million shares issued after quarter-end.