Planet Green Holdings Corp. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021, compared with FY2020. This is an annual report; the filing does not provide standalone fourth-quarter results.
Business context
Planet Green is a Nevada holding company whose operations are conducted primarily through subsidiaries and variable interest entities in China, with a Canadian digital advertising business. Its activities include tea and beef products, chemicals and fuels, refueling and LNG equipment, and digital advertising. Multiple acquisitions during 2021 substantially changed the business and make year-over-year comparisons less like-for-like.
Financial results and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $37.77 million | $3.64 million |
| Gross profit / gross margin | $3.85 million / 10.2% | $1.27 million / 34.9% |
| Operating loss | $6.24 million | $2.79 million |
| Net loss | $9.99 million | $11.05 million |
| Net loss attributable to common shareholders | $9.74 million | $11.05 million |
| Basic and diluted loss per share | $0.39 | $1.09 |
| Cash flow from operations | $(0.52) million | $(3.50) million |
| Cash flow from investing | $(11.81) million | $(0.85) million |
| Cash flow from financing | $8.93 million | $0.24 million |
Revenue rose 938%, principally because of acquired businesses; cost of revenue rose 1,331%. Gross margin contracted materially. Selling and marketing expense was $2.05 million, general and administrative expense $7.22 million, and research and development expense $0.81 million. The net loss narrowed by about 10%, with FY2020 including a $6.08 million write-off of receivables from disposed former subsidiaries.
At year-end, cash and cash equivalents were $0.75 million and restricted cash was $0.38 million, versus $3.42 million cash and no restricted cash in 2020. Current assets were $27.30 million and current liabilities $34.38 million, a working-capital deficit of $7.08 million. Total liabilities were $34.76 million; short-term bank loans were $6.82 million. The filing reports a debt-to-assets ratio of 40.41%, versus 16.65% in 2020. Lease liabilities were approximately $0.44 million.
Operating cash use improved year over year, but investing outflows increased, mainly from acquisitions, a $7.68 million real-estate purchase, and a $3.10 million investment. Financing cash inflow was primarily associated with stock issuance. The company reported an accumulated deficit of $94.07 million.
Material changes and unusual items
- 2021 acquisitions included Jingshan Sanhe, Jilin Chuangyuan, Anhui Ansheng, and Shandong Yunchu; Xianning Bozhuang was converted from a VIE to a wholly owned subsidiary. These transactions expanded and diversified reported operations.
- Shares outstanding increased from 11.81 million at year-end 2020 to 35.58 million at year-end 2021, through cash placements, acquisition consideration, and employee share compensation. The filing reports 42.58 million shares outstanding as of March 29, 2022.
- Goodwill impairment was approximately $3.26 million in FY2021, attributed to the Fast Approach and Jingshan Sanhe reporting units; the filing cites weaker-than-forecast performance and COVID-19-related market conditions.
- Trade receivables, net, were $3.82 million after a $1.66 million allowance for doubtful accounts, up from a $0.05 million allowance in 2020.
- Related-party receivables totaled $7.67 million, described as unsecured, non-interest-bearing and due on demand. Related-party payables were approximately $5.20 million.
Outlook, risks and contingencies
The filing gives no quantified revenue, earnings, or cash-flow guidance. Management says expansion and investment depend on improving revenue, net income, and cash flows. It expects to rely on operations and, if needed, private financing; it also cites alternative financing or spending reductions if liquidity proves inadequate, while cautioning that financing may not be available on acceptable terms.
The auditor and management identify substantial doubt about the company’s ability to continue as a going concern, citing the FY2021 loss, accumulated deficit, working-capital deficit, and operating cash outflow. The statements contain no adjustments for the possible outcome. A $2.90 million Anhui bank loan was overdue at year-end; the company was negotiating an extension. A separate $3.92 million bank loan is due in November 2023 and is secured by buildings and land-use rights.
Contingencies include an Ansheng commercial dispute for which $229,120 of cash was frozen and liabilities were accrued, and a separate case in which $151,630 was temporarily frozen; management said an unfavorable outcome in the latter matter was remote. The filing also identifies PRC political, economic and legal exposure, foreign-exchange restrictions, customer credit risk, and refinancing and interest-rate risk. The company’s disclosure controls and internal control over financial reporting were deemed ineffective due to insufficient U.S. GAAP accounting expertise; management described training and hiring plans.
The auditor issued an unqualified opinion on the financial statements, while emphasizing the going-concern uncertainty. The audit highlighted goodwill valuation as a critical audit matter. The auditor was not engaged to audit internal control effectiveness.
Subsequent events include a January 2022 stock purchase agreement for $7.6 million gross proceeds in exchange for 7.0 million shares, and a February 2022 agreement to acquire an additional 20.58% of Anhui Ansheng for up to $5.25 million. The filing says the company would then hold 86.58% of Anhui Ansheng.
Important facts for investors to verify
- Liquidity and going-concern risk, including status and terms of the overdue Anhui loan, available cash, and access to additional financing.
- Recoverability and collection timing of the $7.67 million related-party receivable, the larger doubtful-account allowance, and the nature of related-party transactions.
- Acquisition accounting, goodwill balances and impairment assumptions, and the acquired businesses’ contribution to revenue, margins, and cash generation.
- Share dilution and the terms and completion of the 2022 stock issuance and Anhui ownership transaction.
- Internal-control remediation progress and the status and potential financial impact of the disclosed disputes and frozen cash.
- Acquisition disclosures contain inconsistent share counts for Shandong Yunchu (5.8 million versus 5.9 million) and inconsistent descriptions of consideration; confirm the final transaction terms in the related filings.