UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 1
For the quarterly period ended
or
For the transition period from ________ to ________
Commission File Number:
(Exact name of small business issuer as specified in its charter)
| (State or other jurisdiction of incorporation) | (I.R.S. Employer Identification Number) |
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 last 90 days. ☒ 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).
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 the 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 | ☐ |
| ☐ | 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
The number of shares of the Registrant’s
common stock, $0.001 par value per share, outstanding as of August 9, 2022, was
Explanatory Note
Background of Restatement
Subsequent to filing of its quarterly report on Form 10-Q for the six months ended June 30, 2022, the Company identified an error in its financial statements related to the accounting for sales commission expense for the six months ended June 30, 2022. In the three-month period ended March 31, 2022, the Company’s product sales plan was significantly and adversely affected by the COVID-19 pandemic and related restrictions enforced in China. In order to develop new customers and expand the sales, the Company verbally agreed to provide and made certain advances to twenty of its sales agents in the aggregate amount $7,853,921 (the “Loans”) during the three-month period ended June 30, 2022, with which funds such sales agents promoted the Company’s products and attracted new customers. Thereafter the Company signed the respective Marketing Promotion Loan Agreements (the “Loan Agreements”) with each of its twenty sales agents dated as of August 22, 2022 to memorialize the terms and conditions of the Loans. Pursuant to the Loan Agreements, each of the Loans will be due on December 31, 2022 with no interest. Therefore, the total cash payments of $7,853,921 to the twenty sales agents should be accounted for as loans to third parties. However, because the arrangement of the Loans and Loan Agreements were not communicated to the Company’s accountant timely, the total cash payments of $7,853,921 to the twenty sales agents were initially accounted for as sales commission payment to the twenty sales agents. As a result, the Company overstated its sales commission expense and understated its loans to third parties, tax payable and income tax provision. The Company restated its financial statements to correct these errors. See Note 2 to the consolidated financial statements for the six months ended June 30, 2022, to which forms a part of the Amendment.
The financial information that has been previously filed or otherwise reported for this period is superseded by the information in this Amendment, and the financial statements and related financial information contained in the Original Form 10-Q should no longer be relied upon. On September 2, 2022, the Company filed a current report on Form 8-K disclosing the non-reliance on the financial statements included in the Original Form 10-Q for the six months ended June 30, 2022. The Company’s Chief Executive Officer and Chief Financial Officer is providing currently dated certifications in connection with this Amendment. See Exhibits 31.1 and 32.1 attached to the Amendment.
TABLE OF CONTENTS
| Page No. | ||
| PART I. - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 27 |
| Item 4. | Controls and Procedures | 27 |
| PART II - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 28 |
| Item 1A. | Risk Factors | 28 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 28 |
| Item 3. | Defaults upon Senior Securities | 28 |
| Item 4. | Mine Safety Disclosures | 28 |
| Item 5. | Other Information | 28 |
| Item 6. | Exhibits | 28 |
| Signatures | 29 | |
i
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TENGJUN BIOTECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Restated) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Advance to suppliers | ||||||||
| Inventories, net | ||||||||
| Prepaid taxes | - | |||||||
| Due from related party | - | |||||||
| Loan to third parties | - | |||||||
| Prepaid expenses and other receivable | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Construction in progress | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Advances from customers | ||||||||
| Due to related parties | ||||||||
| Accrued liabilities and other payables | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Equity (Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings (accumulated deficit) | ( | ) | ||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Noncontrolling interests | ( | ) | ||||||
| Total Equity (Deficit) | ( | ) | ||||||
| Total Liabilities and Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements
1
TENGJUN BIOTECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (Restated) | (Restated) | |||||||||||||||
| Sales revenue, net | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Selling and marketing expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||||||
| Interest income (expense) | ( | ) | ( | ) | ||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) before provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||
| Net income attributable to noncontrolling interests | ||||||||||||||||
| Net income (loss) attributable to Tengjun stockholders | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
| Comprehensive income attributable to noncontrolling interests | ||||||||||||||||
| Comprehensive income (loss) attributable to Tengjun stockholders | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net Income (Loss) Per Common Share: | ||||||||||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | |||||||||
| Weighted average shares outstanding: | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
TENGJUN BIOTECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
(UNAUDITED)
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Noncontrolling | Total | |||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Interests | Equity | ||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Net loss | - | |||||||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance at March 31, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income (restated) | - | |||||||||||||||||||||||||||
| Foreign currency translation (restated) | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Balance at June 30, 2022 (restated) | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Noncontrolling | Total | |||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Interests | Deficit | ||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||||||
| Balance at March 31, 2021 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
TENGJUN BIOTECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| (Restated) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Depreciation | ||||||||
| Changes in net assets and liabilities: | ||||||||
| Inventories | ||||||||
| Prepaid taxes | ( | ) | ||||||
| Loan to third parties | ( | ) | ||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Advance to suppliers | ( | ) | ||||||
| Accounts payable | ||||||||
| Taxes payable | ( | ) | ||||||
| Accrued liabilities and other payable | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Payment for construction in progress | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Repayment of short-term bank loan | ( | ) | ||||||
| Repayment of short-term loan from third parties | ( | ) | ||||||
| (Repayment of) proceeds from loans from related parties | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | ||||||||
| CASH AND CASH EQUIVALENTS, BEGINNING BALANCE | ||||||||
| CASH AND CASH EQUIVALENTS, ENDING BALANCE | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Income tax paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
TENGJUN BIOTECHNOLOGY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ORGANIZATION AND NATURE OF BUSINESS
Tengjun Biotechnology Corp. (formerly known as China Herb Group Holdings Corporation, the “Company”) was incorporated under the name “Island Radio, Inc.” under the laws of the State of Nevada on June 28, 2010. On December 9, 2019, the Company changed its corporate name to Tengjun Biotechnology Corp.
Tengjunxiang Biotechnology Ltd. (“Tengjunxiang”) is a holding company incorporated in the Cayman Islands on July 19, 2021. On August 5, 2021, Tengjunxiang formed a wholly-owned subsidiary, Tengjunxiang Biotechnology HK Limited (“Tengjunxiang HK”), under the laws of Hong Kong. Shandong Minfu Biology Science and Technology Co., Ltd. (“Shandong Minfu”) is a company incorporated under the laws of the People’s Republic of China (the “PRC”) on August 29, 2021. Tengjunxiang HK owns all of the equity interests in Shandong Minfu, a wholly-foreign owned entity formed (“WFOE”) under the laws of PRC.
Shandong Tengjunxiang Biotechnology Co., Ltd (“Shandong Tengjunxiang”) was incorporated under the laws of PRC on June 27, 2014. Jinxiang County Kanglong Water Purification Equipment Co., Ltd (“Jinxiang Kanglong”), a wholly-owned subsidiary of Shandong Tengjunxiang, was formed under the laws of the PRC on January 6, 2015. Shangdong Tengjunxiang and Jinxiang Kanglong have been under common control. Shandong Tengjunxiang and its subsidiary, Jinxiang Kanglong are primarily engaged in processing, packaging, distribution and sale of dandelion teas, and producing and sale of water purifiers in China, and plans to increase its tea processing and water purifier production lines, and expand its sales channels in the next one to two years.
On
December 15, 2021, all shareholders and the Board of Shandong Tengjunxiang agreed to increase its registered capital to RMB
All of the entities of the Restructuring Transaction are under common control of Mr. Xianchang Ma, the controlling shareholder of Tengjunxiang, before and after the Restructuring Transaction, which results in the consolidation of Tengjunxiang and its subsidiaries and has been accounted for as a reorganization of entities under common control at carrying value and for accounting purpose, the reorganization was accounted for as a recapitalization. The consolidated financial statements are prepared on the basis as if the Restructuring Transaction became effective as of the beginning of the first period presented in the accompanying consolidated financial statements.
On December 23, 2021, the Company entered into a Share Purchase/Exchange Agreement (the “Share Exchange Agreement”) with Tenjunxiang, and eleven shareholders of Tengjunxiang (the “Selling Shareholders”). The Selling Shareholders collectively owned 100% of all issued and outstanding shares of Tengjunxiang (the “Tengjunxiang Shares”). Pursuant to the Share Exchange Agreement, the Selling Shareholders jointly agreed to sell or transfer to the Company one hundred percent (100%) of the Tengjunxiang Shares in exchange for a total of 19,285,714 shares of the Company’s common stock. As a result of such exchange (the “Stock Exchange”), Tengjunxiang has become a wholly-owned subsidiary of the Company and the Selling Shareholders collectively have received 19,285,714 shares of the Company’s common stock, representing approximately 29.53% of the then issued and outstanding shares of the Company’s common stock.
In connection with the acquisition of Tengjunxiang pursuant to the Share Exchange Agreement, the Company with its subsidiaries commenced its business operations in processing, packaging, distribution and sale of dandelion teas, producing and sale of water purifiers in China through Tengjunxiang and its subsidiaries in the People’s Republic of China. The acquisition of Tengjunxiang is treated as a reverse acquisition (the “Reverse Acquisition”).
5
COVID-19
A novel strain of coronavirus, or COVID-19, was first identified in China in December 2019, and subsequently declared a pandemic on March 11, 2020 by the World Health Organization. As a result of the COVID-19 pandemic, all travels had been severely curtailed to protect the health of the Company’s employees and comply with local government guidelines. The COVID-19 pandemic has had an adverse effect on the Company’s business. Although China has already begun to recover from the outbreak of COVID-19 and the Company’s business has gone back to normal, the epidemic continues to spread on a global scale and there is a risk of the epidemic returning to China in the future, thereby causing further business interruption. The full impact of the pandemic on the Company’s business, operations and financial results depends on various factors that continue to evolve, which the Company may not be able to accurately predict for now.
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In September 2022, the Board of Directors of
the Company concluded that the loans made to some of its sales agents were mis-recorded under sales commission expense. The unintentional
errors occurred because of a miscommunication between the Company’s management and accountant. The Company made loans to twenty
(20) individual sales agents in the aggregate amount of $
In connection with the correction of sales commission and loans to third party sales agents, the Company restated its sales commission expense, accrued taxes, provision for income taxes, and loan to third parties as of and for the six months ended June 30, 2022. The changes in accrued taxes and provision for income taxes were driven by the correction of the sales commission.
As
a result of the restatement, the cumulative effect as of and for the six months ended June 30, 2022 was an increase in the loan to third
parties of $
The
restatement increased basic and diluted net earnings per share by approximately $
The impacts of these restatements on the consolidated financial statements are summarized below:
| As of June 30, 2022 | ||||||||||||
| Previously Reported | Adjustments | Restated | ||||||||||
| Consolidated Balance Sheets | ||||||||||||
| Loan to third parties | $ | $ | $ | |||||||||
| Total Current Assets | $ | $ | $ | |||||||||
| Total Assets | $ | $ | $ | |||||||||
| Accrued liabilities and other payables | $ | $ | $ | |||||||||
| Total Current Liabilities | $ | $ | $ | |||||||||
| Total Liabilities | $ | $ | $ | |||||||||
| Retained earnings (accumulated deficit) | $ | ( | ) | $ | $ | |||||||
| Accumulated other comprehensive loss | $ | $ | ( | ) | $ | ( | ) | |||||
| Total stockholders’ equity (deficit) | $ | ( | ) | $ | $ | |||||||
| Noncontrolling interests | $ | ( | ) | $ | $ | |||||||
| Total Equity (Deficit) | $ | ( | ) | $ | $ | | ||||||
| Total Liabilities and Equity (Deficit) | $ | $ | $ | |||||||||
6
| For the Three Months Ended June 30, 2022 | ||||||||||||
| Previously Reported | Adjustments | Restated | ||||||||||
| Consolidated Statements of Income and Comprehensive Income (Loss) | ||||||||||||
| Selling and marketing expenses | $ | $ | ( | ) | $ | |||||||
| Total operating expenses | $ | $ | ( | ) | $ | |||||||
| Income (loss) from operations | $ | ( | ) | $ | $ | |||||||
| Income (loss) before provision for income taxes | $ | ( | ) | $ | $ | |||||||
| Provision for income taxes | $ | ( | ) | $ | $ | |||||||
| Net income (loss) | $ | ( | ) | $ | $ | |||||||
| Net income attributable to noncontrolling interests | $ | ( | ) | $ | $ | |||||||
| Net income (loss) attributable to Tengjun stockholders | $ | ( | ) | $ | $ | |||||||
| Foreign currency translation adjustment | $ | $ | ( | ) | $ | ( | ) | |||||
| Comprehensive income (loss) | $ | ( | ) | $ | $ | |||||||
| Comprehensive income attributable to noncontrolling interests | $ | ( | ) | $ | | $ | ||||||
| Comprehensive income (loss) attributable to Tengjun stockholders | $ | ( | ) | $ | $ | |||||||
| $ | ( | ) | $ | $ | ||||||||
| For the Six Months Ended June 30, 2022 | ||||||||||||
| Previously Reported | Adjustments | Restated | ||||||||||
| Consolidated Statements of Income and Comprehensive Income (Loss) | ||||||||||||
| Selling and marketing expenses | $ | $ | ( | ) | $ | |||||||
| Total operating expenses | $ | $ | ( | ) | $ | |||||||
| Income (loss) from operations | $ | ( | ) | $ | $ | |||||||
| Income (loss) before provision for income taxes | $ | ( | ) | $ | $ | |||||||
| Provision for income taxes | $ | $ | $ | |||||||||
| Net income (loss) | $ | ( | ) | $ | $ | |||||||
| Net income attributable to noncontrolling interests | $ | ( | ) | $ | $ | |||||||
| Net income (loss) attributable to Tengjun stockholders | $ | ( | ) | $ | $ | |||||||
| Foreign currency translation adjustment | $ | $ | ( | ) | $ | ( | ) | |||||
| Comprehensive income (loss) | $ | ( | ) | $ | $ | |||||||
| Comprehensive income attributable to noncontrolling interests | $ | ( | ) | $ | $ | |||||||
| Comprehensive income (loss) attributable to Tengjun stockholders | $ | ( | ) | $ | $ | |||||||
| $ | ( | ) | $ | $ | ||||||||
| For the Six Months Ended June 30, 2022 | ||||||||||||
| Previously Reported | Adjustments | Restated | ||||||||||
| Consolidated Statements of Cash Flows | ||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | |||||||
| Changes in net assets and liabilities: | ||||||||||||
| Loan to third parties | $ | $ | ( | ) | $ | ( | ) | |||||
| Taxes payable | $ | $ | $ | |||||||||
7
NOTE 3. GOING CONCERN
These
consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As reflected in the Company’s accompanying consolidated financial
statements, the Company had an accumulated deficit of $
If the Company is unable to successfully commence its business operations in a short period of time, or unable to raise additional capital or secure additional lending, the Company may need to curtail or cease its operations. The Company believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management plans to obtain such resources for the Company include obtaining capital from the sale of its equity, and short-term and long-term borrowings from banks, stockholders or other related parties. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
NOTE 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Principles of consolidation
The
consolidated financial statements include the financial statements of Tengjun Biotechnology Corp., Tengjunxiang and its
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.
Reclassification
Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.
8
Cash and Cash Equivalents
The Company considers all cash on hand and in banks, certificates of deposit with banks and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts.
Advance to suppliers
The
Company makes advances to certain vendors for construction and purchase of equipment. The Company had advances to suppliers of $
Inventories
The Company’s inventories primarily consist of dandelion teas and water purifiers. Inventories are valued at the lower of cost (determined on a weighted average basis) and net realizable value. Inventories mainly consist of raw materials, goods in process, and finished goods. The Company reviews its inventories regularly for possible obsolete goods and establishes reserves when determined necessary. No reserve for inventory was established as of June 30, 2022 and December 31, 2021.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in the period of disposal. All ordinary repair and maintenance costs are expensed as incurred.
Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets:
| Estimated Useful Life | ||
| Buildings and improvements | ||
| Machinery and equipment | ||
| Office furniture and equipment | ||
| Vehicles |
Costs incurred in constructing new facilities, including progress payments and other costs related to construction, are capitalized and transferred to property, plant and equipment on completion, at which time depreciation commences.
Construction in Progress
Construction
in progress represents direct costs of construction, interest and design fees incurred. No interest was capitalized for the six months
ended June 30, 2022 and 2021. Capitalization of these costs ceases and the construction in progress is transferred to property, plant,
and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation
is recognized until it is completed and ready for intended use. Construction in progress as of June 30, 2022 and December 31, 2021 was
$
9
Impairment of Long-lived Assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. There was no impairment for the six months ended June 30, 2022 and 2021 based on management’s evaluation.
Value added tax (“VAT”)
All
China-based enterprises are subject to a VAT imposed by the PRC government on their domestic product sales and services. The Company’s
subsidiaries in the PRC are subject to VAT at rates ranged from
Advances from customers
Payments received before all the relevant criteria for revenue recognition are satisfied are recorded as advance from customers. When all revenue recognition criteria are met, the advances from customers are recognized as revenue.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. To determine the revenue to be recognized, the Company applies the following five-step model:
| ● | identify arrangements with customers; |
| ● | identify performance obligations; |
| ● | determine transaction price; |
| ● | allocate transaction price to the separate performance obligations in the arrangement, if more than one exists; and |
| ● | recognize revenue as performance obligations are satisfied. |
The Company generates revenues mainly from sales of packaged dandelion teas and water purifiers. During the three and six months ended June 30, 2022, the Company also engaged in the sale of certain nutritional products and water treatment accessories. Revenue from the sales of goods is recognized when the control over the promised goods is transferred to customers.
Cash payments received or due from customers before revenue recognized are recorded as advances from customers. The advance from customers is recognized as revenue when the Company’s performance obligation is completed.
Cost of goods sold
Cost of goods sold consists primarily of cost of goods purchased, direct raw material cost, direct labor cost, and cost of manufacturing overheads including the depreciation of production equipment.
10
Selling and marketing expenses
Selling and marketing expenses primarily consist of advertising costs, agency fees, costs for promotional materials, and commission costs made to sales force.
Advertising
expenses are charged to the consolidated statements of operations and comprehensive loss in the period incurred. The amounts of advertising
expenses incurred were $
Commission
expense primarily consists of commission costs made to independent sales force. The amount of commission expense incurred were $
General and administrative expenses
General and administrative expenses primarily consist of payroll and benefit costs for corporate employees, legal, consulting, professional expenses, rental expenses and other corporate overhead costs.
Concentration of Credit Risk
The operations of the Company are primarily in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, and by the general state of the PRC economy.
The
Company has cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC. Cash in state-owned banks
is covered by insurance up to RMB
The
Company generated total revenue of $
During the three months ended June 30, 2022, the Company had two major supplier that accounted for over 10% of its total purchases.
| Supplier | Net purchase for the three months ended June 30, 2022 | %
of total purchase | ||||||
| A | $ | % | ||||||
| B | % | |||||||
During the six months ended June 30, 2022, the Company had two major suppliers that accounted for over 10% of its total purchases.
| Supplier | Net purchase for the six months ended June 30, 2022 | %
of total purchase | ||||||
| A | $ | % | ||||||
| B | % | |||||||
No
supplier accounted for over
11
Income Taxes
The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigations based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred.
Related parties
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, shareholder, or a related corporation.
Foreign Currency Translation
The Company uses the United States dollar (“U.S. dollars”) for financial reporting purposes. The functional currency of the Company and its subsidiaries is the Chinese Yuan or Renminbi (“RMB”). The Company’s subsidiaries maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted. For the Company and its subsidiaries whose functional currencies are other than the U.S. dollar, all asset and liability accounts were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at the historical rates and items in the income statement and cash flow statements are translated at the average rate in each applicable period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of shareholders’ equity. The resulting translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
Fair Values of Financial Instruments
ASC 820 defines fair value as the exchange price that would be received for 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 on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – quoted prices in active markets for identical assets or liabilities.
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 – inputs that are unobservable
The Company’s financial instruments primarily consist of cash and cash equivalents, advances to suppliers, prepaid expenses, other receivable, accounts payable, accrued expenses, other payables, and related party borrowings. As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheets. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates.
12
Lease
The Company adopted FASB Accounting Standards Codification, Topic 842, Leases (“ASC 842”) using the modified retrospective approach, electing the practical expedient that allows the Company not to restate its comparative periods prior to the adoption of the standard on January 1, 2019.
The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. The Company’s future minimum based payments used to determine the Company’s lease liabilities mainly include minimum based rent payments. As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
The adoption of ASC 842 had no material impact on the Company’s consolidated balance sheets, results of operations or cash flows. In addition, the adoption of ASC 842 did not result in a cumulative-effect adjustment to the opening balance of retained earnings (accumulated deficit). Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur.
Segment Reporting
ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s chief operating decision maker organizes segments within the Company for making operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
The Company manages its business as two operating segments, dandelion teas and water purifier, all of which are located in the PRC. All of its revenues are derived in the PRC. All long-lived assets are located in PRC.
The following table shows the Company’s operations by business segment for the three and six months ended June 30, 2022 and 2021:
| For the | For the | |||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Net revenue | ||||||||||||||||
| Dandelion teas | $ | $ | $ | $ | ||||||||||||
| Water purifier | ( | ) | ||||||||||||||
| Total revenues, net | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Dandelion teas | $ | $ | $ | $ | ||||||||||||
| Water purifier | ( | ) | ||||||||||||||
| Total cost of goods sold | $ | $ | $ | $ | ||||||||||||
| Gross profit | ||||||||||||||||
| Dandelion teas | $ | $ | $ | $ | ||||||||||||
| Water purifier | ( | ) | ||||||||||||||
| Gross profit | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ||||||||||||||||
| Dandelion teas | $ | $ | $ | $ | ||||||||||||
| Water purifier | ( | ) | ||||||||||||||
| Total operating expenses | $ | $ | $ | $ | ||||||||||||
| Income (loss) from operations | ||||||||||||||||
| Dandelion teas | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Water purifier | ( | ) | ( | ) | ||||||||||||
| Income (loss) from operations | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
13
| As
of June 30, | As
of December 31, | |||||||
| Segment assets | 2022 | 2021 | ||||||
| Dandelion teas | $ | $ | ||||||
| Water purifier | ||||||||
| Total assets | $ | $ | ||||||
Income (Loss) per Share Calculation
Basic net income (loss) per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per shares is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur.
NOTE 5. INVENTORIES, NET
Inventories consisted of the following:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Less: allowance for obsolete inventories | ||||||||
| Inventories, net | $ | $ | ||||||
14
NOTE 6. PROPERTY, PLANT, AND EQUIPMENT, NET
Property, plant, and equipment consisted of the following:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Buildings | $ | $ | ||||||
| Machinery and equipment | ||||||||
| Office equipment | ||||||||
| Vehicles | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expense for the three months ended June 30, 2022 and 2021 were $
NOTE 7. PREPAID TAXES
Prepaid
taxes as of June 30, 2022 and December 31, 2021, primarily consist of prepaid VAT in the amount of $
NOTE 8. LOAN TO THIRD PARTIES
During
the three months ended June 30, 2022, the Company made loans to 20 individual sales agents in the aggregate amount of $
NOTE 9. SHORT-TERM LOAN
On
March 17, 2020, Shandong Tengjunxiang and China Construction Bank entered into a one-year bank loan agreement in an amount of RMB
During
the three months ended June 30, 2022 and 2021, the Company recorded interest expense of $
NOTE 10. ACCRUED LIABILITIES AND OTHER PAYABLES
Accrued liabilities and other payables consisted of the following at June 30, 2022 and December 31, 2021:
| June
30, 2022 | December 31, 2021 | |||||||
| Accrued taxes | $ | $ | ||||||
| Advance from employees | ||||||||
| Payable for construction and improvements | ||||||||
| Payable for machinery and equipment | ||||||||
| Accrued payroll | ||||||||
| Accrued professional fees | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
15
NOTE 11. INCOME TAX
United States
The
Company was incorporated in the United States of America and is subject to United States federal taxation. The U.S. Tax Cuts and Jobs
Act (the “Act”) was enacted on December 22, 2017. Effective in 2018, the Tax Act reduces the U.S. statutory tax rate from
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.
Hong Kong
Tengjunxiang
HK is incorporated in Hong Kong and is subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial
statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is
PRC
Effective
on January 1, 2008, the PRC Enterprise Income Tax Law, EIT Law, and Implementing Rules impose an unified enterprise income tax rate of
Provision for income tax expense (benefit) consists of the following:
| For
the Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Current | ||||||||
| USA | $ | $ | ||||||
| China | ||||||||
| Deferred | ||||||||
| USA | ||||||||
| China | ||||||||
| Total provision for income tax expense (benefit) | $ | $ | ||||||
16
The following is a reconciliation of the statutory tax rate to the effective tax rate:
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| U.S. federal statutory income tax (benefit) | % | ( | )% | |||||
| Foreign tax rate differential | % | ( | )% | |||||
| Utilization of net operating losses (NOL) carryover | ( | )% | % | |||||
| Change in valuation allowances | % | % | ||||||
| Effective income tax rate | % | % | ||||||
The Company periodically evaluates the likelihood of the realization of deferred tax assets, and adjusts the carrying amount of the deferred tax assets by the valuation allowance to the extent that the future realization of the deferred tax assets is not judged to be more likely than not. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors.
As
of June 30, 2022 and December 31, 2021, based on the weight of available evidence, including cumulative losses in recent years and expectations
of future taxable income, the Company determined that it was more likely than not that its deferred tax assets would not be realized
and have a
NOTE 12. RELATED PARTY TRANSACTIONS AND BALANCES
The related party of the company with whom transactions are reported in these financial statements are as follows:
| Name of Individual | Relationship with the Company | |
| Xianchang Ma | ||
| Liuhong Liu | ||
| Pan Shi | ||
| Jin Tian | ||
| Qiuping Lu |
Due from related party:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Pan Shi | $ | |||||||
| $ | $ | |||||||
Due to related parties:
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Xianchang Ma | $ | $ | ||||||
| Qiuping Lu | ||||||||
| Liuhong Liu | ||||||||
| Pan Shi | ||||||||
| Jin Tian | ||||||||
| $ | $ | |||||||
Due to related parties represent advances from its related parties for the Company’s payment for construction, purchase of equipment, and daily operating expenses. The balances are unsecured, non-interest bearing, and payable on demand.
17
NOTE 13. LEASE
The Company
leased a facility under an operating lease arrangement. The lease has initial lease term of
The following provides details of the Company’s lease expenses:
Three Months Ended June 30, |
||||||||
| 2022 | 2021 | |||||||
| Operating lease expenses | $ | $ | ||||||
Six Months Ended June 30, |
||||||||
| 2022 | 2021 | |||||||
| Operating lease expenses | $ | $ | ||||||
Other information related to leases is presented below:
| Six
Months Ended June 30, |
||||||||
| 2022 | 2021 | |||||||
| Cash Paid For Amounts Included In Measurement of Liabilities: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| Weighted Average Remaining Lease Term: | ||||||||
| Operating leases | |
|||||||
| Weighted Average Discount Rate: | ||||||||
| Operating leases | % | % | ||||||
NOTE 14. EQUITY
Preferred Stock
The
total number of preferred shares authorized that may be issued by the Company is
As
of June 30, 2022 and December 31, 2021, the Company had
Common Stock
The
total number of common shares authorized that may be issued by the Company is
Common Stock Issued for Reverse Merger
On
December 23, 2021, the Company issued
NOTE 15. SUBSEQUENT EVENTS
In July 2022, the Company sold an aggregate of 25,000,000 shares of its common stock at a price of $0.10 per share, to nine investors pursuant to the stock purchase agreements.
Management has evaluated subsequent events through the date which the financial statements are available to be issued. All subsequent events requiring recognition as of June 30, 2022 have been incorporated into these financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”
18
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the results of operations and financial condition should be read in conjunction with our condensed consolidated financial statements and notes thereto included in Item 1 of this part. This report, including the information incorporated by reference, contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The use of any of the words “believe,” “expect,” “anticipate,” “plan,” “estimate,” and similar expressions are intended to identify such statements. Forward-looking statements include statements concerning our possible or assumed future results. The actual results that we achieve may differ materially from those discussed in such forward-looking statements due to the risks and uncertainties described in the Risk Factors section of this report, in Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in other sections of this report, as well as in our annual report on Form 10-K. We undertake no obligation to update any forward-looking statements.
Overview
Corporate History and Structure
We were incorporated on June 28, 2010 in the State of Nevada under the name “Island Radio, Inc.” and changed our name to “China Herb Group Holdings Corporation” effective July 17, 2012. On December 9, 2019, the Company changed its corporate name to “Tengjun Biotechnology Corp.”
On June 27, 2012, Eric R. Boyer and Nina Edstrom (collectively, the “Sellers”), who were then the major shareholders of the Company, entered into a Share Purchase Agreement with Chin Yung Kong, Qiuping Lu and Fumin Feng (collectively, the “Purchasers”), pursuant to which the Sellers sold to the Purchasers an aggregate 4,000,000 shares of the common stock of the Company, which represented approximately 93% of the then total issued and outstanding stock of the Company, for a total purchase price of $159,970 (the “Change in Control”). As result of this share purchase transaction, Chin Yung Kong, Qiuping Lu and Fumin Feng became the controlling shareholders of the Company.
Acquisitions/Business Combinations
On December 23, 2021, the Company entered into a Share Purchase/Exchange Agreement (the “Share Exchange Agreement”) with Tengjunxiang Biotechnology Ltd. (the “Target”), a Cayman Islands corporation, and the Target’s eleven shareholders (the “Selling Shareholders”): Min Xing Biotechnolgy Ltd, Pastoral Technology Co., Ltd., Shu Zhilin Trading Co., Ltd., Teng Rui Xiang Bio-Tech Ltd., Aihua Trading Co., Ltd, Rock Climbing Technology, Langtaosha Trading Co., Ltd., Min Cheng Biotechnology Ltd, Kangfan Technology Co., Ltd., Chaorong Technology Co., Ltd., and Shengrui Biotechnology Co., Ltd. In accordance with the Share Exchange Agreement, on December 23, 2021, the Selling Shareholders collectively sold and transferred 500,000,000 ordinary shares of the Target, constituting one hundred percent (100%) of the issued and outstanding share capital of the Target, to the Company in exchange for 19,285,714 shares of Company’s common stock, par value $0.001 per share (the “Tengjun Shares”), at an agreed price of $0.19 per share of the Company’s common stock (the “Common Stock”) for a total valuation of $3,675,000 of the Target.
In connection with the acquisition of the Target pursuant to the Share Exchange Agreement, the Company is entering into the Chinese tea and water purifier business through its newly acquired subsidiary the Target Company, which owns four corporate entities: (i) Tengjunxiang Biotechnology HK Limited (“Tengjun HK”), a company formed in Hong Kong and wholly owned by the Target, (ii) Shandong Minfu Biotechnology Co., Ltd. (“WFOE”), a wholly foreign owned entity formed under the laws of China and wholly owned by Tengjun HK, (iii) Shandong Tengjunxiang Biotechnology Co., Ltd. (“Shangdong Tengjunxiang”), a company formed under the laws of China and 94.95% owned by WFOE, and (iv) Jinxiang County Kanglong Water Purification Equipment Co. Ltd. (“Kanglong”), a company formed under the laws of China and wholly-owned subsidiary of Shandong Tengjunxiang. The parties to this Agreement closed the transaction contemplated therein on December 23, 2021.
19
The Target was incorporated on July 19, 2021 under the laws of the Cayman Islands. The authorized capital stock of the Target is 500,000,000 ordinary shares, all of which were issued and outstanding prior to the closing of the Acquisition. Shangdong Tengjunxiang, our operating company, was formed on June 27, 2014, under the laws of China. Promptly after the Closing, the Target shall update the shareholder registration of the Target to effect the Share Exchange Agreement. The Share Exchange Agreement was signed and agreed by and among all of the shareholders and/or beneficial owners of the Target, the Target and the Company.
As a result of the consummation of the Acquisition on December 23, 2021 as discussed above, the Target became a wholly-owned subsidiary of the Company and the business of the Target became the business of the Company.
The diagram below illustrates our corporate structure following the Acquisition:
We had limited operations and generated limited revenues from our business operations before the quarter ended June 30, 2022. Our independent registered public accounting firm has issued a going concern opinion for the year ended December 31, 2021. This means that our auditors believe there is substantial doubt that we can continue as an on-going business for the next 12 months. Accordingly, we may have to raise additional cash from various sources, including operations, controlling shareholders’ investments and debt and equity financing from third party investors.
Results of Operations
Results of Operations – Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021
The following table sets forth information from our statements of comprehensive income for the three months ended June 30, 2022 and 2021:
| Three Months Ended | ||||||||||||||||
| June 30, | Change | |||||||||||||||
| 2022 | 2021 | (Amount) | (Percent) | |||||||||||||
| (Restated) | ||||||||||||||||
| Sales revenue | $ | 51,290,462 | $ | - | $ | 51,290,462 | * | % | ||||||||
| Cost of Goods Sold | (3,438,949 | ) | - | (3,438,949 | ) | * | % | |||||||||
| Gross Profit | 47,851,513 | - | 47,851,513 | * | % | |||||||||||
| Operating Expenses | (43,221,797 | ) | (219,420 | ) | (43,002,377 | ) | 19,598 | % | ||||||||
| Operating Income (Loss) | 4,629,716 | (219,420 | ) | 4,849,136 | (2,210 | )% | ||||||||||
| Interest Income (Expense) | 7,397 | (4 | ) | 7,401 | (185,025 | )% | ||||||||||
| Other Income (Expense) | (74 | ) | (2,657 | ) | 2,583 | (97 | )% | |||||||||
| Income Tax Provision | 503,231 | - | 503,231 | * | % | |||||||||||
| Net Income (Loss) | 4,133,808 | (222,081 | ) | 4,355,889 | (1,961 | )% | ||||||||||
| Comprehensive Income (loss) | $ | 4,087,307 | $ | (241,974 | ) | $ | 4,329,281 | (1,789 | )% | |||||||
Revenues
We generated $51,290,462 and $0 in revenues for the three months ended June 30, 2022 and 2021, respectively. The Company did not generate any revenue during the three months ended June 30, 2021 due to the impact of COVID-19.
During the three months ended June 30, 2022, sales of dandelion teas, certain nutritional products, and water treatment accessories generated $51,444,665 in revenue, constituting approximately 100% of the total revenue for that quarter, and sales of water purifiers generated negative revenue of $154,203 due to sales returns, representing approximately 0% of the total revenue for such quarter.
20
The following is the sales breakdown by segment during the three months ended June 30, 2022 and 2021:
| For the three months ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Dandelion teas | $ | 51,444,665 | 100 | % | $ | - | - | % | ||||||||
| Water purifier | (154,203 | ) | (0 | )% | - | - | % | |||||||||
| Total | $ | 51,290,462 | 100 | % | $ | - | - | % | ||||||||
Cost of Goods Sold
Our cost of goods sold was $3,438,949 and $0 for the three months ended June 30, 2022 and 2021, respectively. During the three months ended June 30, 2022, cost of sales of dandelion teas, certain nutritional products, and water treatment accessories was $3,456,644, constituting approximately 101% of the total cost of goods sold, and cost of sales of water purifiers was $(17,695), representing approximately negative 1% of the total cost of goods sold due to the cost adjustment in connection with the sales returns. The Company did not incur any cost in the three months ended June 30, 2021 because there were no sales during the second quarter of 2021.
The following is the cost of goods sold breakdown by segment during the three months ended June 30, 2022 and 2021:
| For the three months ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Dandelion teas | $ | 3,456,644 | 101 | % | $ | - | - | % | ||||||||
| Water purifier | (17,695 | ) | (1 | )% | - | - | % | |||||||||
| Total | $ | 3,438,949 | 100 | % | $ | - | - | % | ||||||||
Gross Margin
Our gross margin was $47,851,513 and $0 for the three months ended June 30, 2022 and 2021, respectively. The gross profit as a percentage of net revenue for the Dandelion teas was 100% for the three months ended June 30, 2022. The gross profit as a percentage of net revenue for water purifiers was approximately 0% for the three months ended June 30, 2022.
The following table presents gross margin by segment for three months ended June 30, 2022 and 2021:
| For the three months ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Dandelion teas | $ | 47,988,021 | 100 | % | $ | - | - | % | ||||||||
| Water purifier | (136,508 | ) | (0 | )% | - | - | % | |||||||||
| Total | $ | 47,851,513 | 100 | % | $ | - | - | % | ||||||||
Selling and Marketing Expenses
Our selling and marketing expenses primarily consist of sales commission, advertising and product promotion expenses.
Our selling and marketing expenses were $42,952,863 for the three months ended June 30, 2022 as compared to $13,419 for the three months ended June 30, 2021. Our total selling and marketing expenses increased by $42,939,444 or 319,990% during the three months ended June 30, 2022, compared to the same period in 2021. Such increase in selling and marketing expenses was mainly due to the significant increase in sales commission.
21
General and administrative expenses
Our general and administrative expenses primarily consist of payroll and benefit costs for corporate employees, legal, consulting, professional expenses, rental expenses and other corporate overhead costs.
The general and administrative expenses was $268,934 for the three months ended June 30, 2022 as compared to $206,001 for the three months ended June 30, 2021. Our general and administrative expenses increased by $62,933 or 31% during the three months ended June 30, 2022, compared to the same period in 2021. Such increase in general and administrative expenses was mainly due to the increase in legal, accounting, printing, and stock transfer agent fees that were associated with the Company’s merger and SEC public disclosures.
Interest income (expense)
Interest income (expense) was $7,397 for the three months ended June 30, 2022 as compared to $(4) for the three months ended June 30, 2021. Our total interest income increased by $7,401 or 185,025% during the three months ended June 30, 2022, compared to the same period in 2021. The increase in interest income was primarily due to the interest earned from the Company’s bank savings accounts.
Net Income (Loss)
Our net income was $4,133,808 for the three months ended June 30, 2022 as compared to net loss of $222,081 for the three months ended June 30, 2021, increased by $4,355,889 or 1,961% as a result of the above factors.
Foreign Currency Translation Loss
We had $(46,501) in foreign currency translation loss during the three months ended June 30, 2022 as compared to $(19,893) in foreign currency translation loss during the three months ended June 30, 2021, reflecting a change of $ 26,608 or 134%. Such increase in foreign currency translation gain was primarily caused by the currency exchange rate fluctuation.
Results of Operations – Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
The following table sets forth information from our statements of comprehensive income for the six months ended June 30, 2022 and 2021:
| Six Months Ended | ||||||||||||||||
| June 30, | Change | |||||||||||||||
| 2022 | 2021 | (Amount) | (Percent) | |||||||||||||
| (Restated) | ||||||||||||||||
| Sales revenue | $ | 55,574,576 | $ | - | $ | 55,574,576 | * | % | ||||||||
| Cost of Goods Sold | (3,809,013 | ) | - | (3,809,013 | ) | * | % | |||||||||
| Gross Profit | 51,765,563 | - | 51,765,563 | * | % | |||||||||||
| Operating Expenses | (46,810,109 | ) | (380,546 | ) | (46,429,563 | ) | 12,201 | % | ||||||||
| Operating Income (Loss) | 4,955,454 | (380,546 | ) | 5,336,000 | (1,402 | )% | ||||||||||
| Interest Income (Expense) | 7,421 | (4,977 | ) | 12,398 | (249 | )% | ||||||||||
| Other Income (Expense) | (74 | ) | (2,657 | ) | 2,583 | (97 | )% | |||||||||
| Income Tax Provision | 596,186 | - | 596,186 | * | % | |||||||||||
| Net Income (Loss) | 4,366,615 | (388,180 | ) | 4,754,795 | (1,225 | )% | ||||||||||
| Comprehensive Income (loss) | $ | 4,310,676 | $ | (401,476 | ) | $ | 4,712,152 | (1,174 | )% | |||||||
Revenue
We generated $55,574,576 and $0 in revenues for the six months ended June 30, 2022 and 2021, respectively. The Company did not generate any revenue during the six months ended June 30, 2021 due to the impact of COVID-19.
During the six months ended June 30, 2022, sales of dandelion teas, certain nutritional products, and water treatment accessories generated $54,908,343 in revenue, constituting approximately 99% of the total revenue for that period, and sales of water purifiers generated $666,233 in revenue, representing approximately 1% of the total revenue for such period.
22
The following is the sales breakdown by segment during the six months ended June 30, 2022 and 2021:
| For the six months ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Dandelion teas | $ | 54,908,343 | 99 | % | $ | - | - | % | ||||||||
| Water purifier | 666,233 | 1 | % | - | - | % | ||||||||||
| Total | $ | 55,574,576 | 100 | % | $ | - | - | % | ||||||||
Cost of Goods Sold
Our cost of goods sold was $3,809,013 and $0 for the six months ended June 30, 2022 and 2021, respectively. During the six months ended June 30, 2022, cost of sales of dandelion teas, certain nutritional products, and water treatment accessories was $3,730,491, constituting approximately 98% of the total cost of goods sold, and cost of sales of water purifiers was $78,522, representing approximately 2% of the total cost of goods sold. The Company did not incur any cost in the six months ended June 30, 2021 because there were no sales during the same period of 2021.
The following is the cost of goods sold breakdown by segment during the six months ended June 30, 2022 and 2021:
| For the six months ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Dandelion teas | $ | 3,730,491 | 98 | % | $ | - | - | % | ||||||||
| Water purifier | 78,522 | 2 | % | - | - | % | ||||||||||
| Total | $ | 3,809,013 | 100 | % | $ | - | - | % | ||||||||
Gross Margin
Our gross margin was $51,765,563 and $0 for the six months ended June 30, 2022 and 2021, respectively. The gross profit as a percentage of net revenue for the Dandelion teas was 99% for the six months ended June 30, 2022. The gross profit as a percentage of net revenue for water purifiers was approximately 1% for the six months ended June 30, 2022.
The following table presents gross margin by segment for six months ended June 30, 2022 and 2021:
| For the six months ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Dandelion teas | $ | 51,177,852 | 99 | % | $ | - | - | % | ||||||||
| Water purifier | 587,711 | 1 | % | - | - | % | ||||||||||
| Total | $ | 51,765,563 | 100 | % | $ | - | - | % | ||||||||
Selling and Marketing Expenses
Our selling and marketing expenses primarily consist of sales commission, advertising and product promotion expenses.
Our selling and marketing expenses were $46,310,836 for the six months ended June 30, 2022 as compared to $16,878 for the six months ended June 30, 2021. Our total selling and marketing expenses increased by $46,293,958 or 274,286% during the six months ended June 30, 2022, compared to the same period in 2021. Such increase in selling and marketing expenses was mainly due to the significant increase in sales commission.
23
General and administrative expenses
Our general and administrative expenses primarily consist of payroll and benefit costs for corporate employees, legal, consulting, professional expenses, rental expenses and other corporate overhead costs.
The general and administrative expenses was $499,273 for the six months ended June 30, 2022 as compared to $363,668 for the six months ended June 30, 2021. Our general and administrative expenses increased by $135,605 or 37% during the six months ended June 30, 2022, compared to the same period in 2021. Such increase in general and administrative expenses was mainly due to the increase in legal, accounting, printing, and stock transfer agent fees that were associated with the Company’s merger and SEC public disclosures.
Interest income (expense)
Interest income (expense) was $7,421 for the six months ended June 30, 2022 as compared to $(4,977) for the six months ended June 30, 2021, representing an increase from interest expense to interest income by $12,398, or 249% during the six months ended June 30, 2022, compared to the same period in 2021, primarily due to the repayment of a short-term bank loan on March 17, 2021 and the interest earned from Company’s bank savings accounts.
Net Income (Loss)
Our net income was $4,366,615 for the six months ended June 30, 2022 as compared to net loss of $388,180 for the six months ended June 30, 2021, increased by $4,754,795 or 1,225% as a result of the above factors.
Foreign Currency Translation Loss
We had $(55,939) in foreign currency translation loss during the six months ended June 30, 2022 as compared to $(13,296) in foreign currency translation loss during the six months ended June 30, 2021, reflecting a change of $ 42,643 or 321%. Such increase in foreign currency translation gain was primarily caused by the currency exchange rate fluctuation.
Liquidity and Capital Resources
Working Capital
| June 30, | December 31, | Change | ||||||||||||||
| 2022 | 2021 | (Amount) | (Percent) | |||||||||||||
| (Restated) | ||||||||||||||||
| Current Assets | $ | 16,384,130 | $ | 4,628,531 | 11,755,599 | 254 | % | |||||||||
| Current Liabilities | $ | 23,351,482 | $ | 16,316,116 | 7,035,366 | 43 | % | |||||||||
| Working Capital (deficit) | $ | (6,967,352 | ) | $ | (11,687,585 | ) | 4,720,233 | (40 | )% | |||||||
Our working capital deficit was $6,967,352 as of June 30, 2022 as compared to $11,687,585 as of December 31, 2021, a decrease of $4,720,233 or 40%. The decrease in working capital deficiency is primarily due to the increase in cash inflow from revenue and the increase in the loans to third parties that are related to our operating activities during the six months ended June 30, 2022.
Cash Flow from Operating Activities
Our net cash provided by operating activities were $7,691,850 for the six months ended June 30, 2022 as compared to $141,967 of net cash used in operating activities for the six months ended June 30, 2021, reflecting an increase of $7,833,817 or 5518%. The increase was primarily due to the increase in net income, the decrease in inventories, prepaid taxes, and increase in accounts payable and taxes payable, partially offset by the increase in loan to third parties during the six months ended June 30, 2022 compared to the six months ended June 30, 2021.
24
Cash Flow from Investing Activities
Our net cash used in investing activities was $212,875 for the six months ended June 30, 2022 as compared to that of $271,331 for the six months ended June 30, 2021, reflecting a decrease of $58,456 or 22%. The decrease in net cash used in investing activities was primarily due to the decrease in payment for construction in progress and acquisition of equipment during the six months ended June 30, 2022 as compared to those items in the six months ended June 30, 2021.
Cash Flow from Financing Activities
Our net cash used in financing activities were $776,804 for the six months ended June 30, 2022 as compared to $593,382 of net cash provided by financing activities for the six months ended June 30, 2021, representing a decrease of $1,370,186 or 231%. The decrease was primarily due to the decreased cash inflow from loans from related parties during the six months ended June 30, 2022.
Off-Balance Sheet Arrangements
As of June 30, 2022, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
Critical Accounting Policies and Estimates
We prepare our financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) of the United States, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared. On a regular basis, we review our accounting policies and how they are applied and disclosed in our financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
Inventories
Our inventories primarily consist of dandelion teas and water purifiers. Inventories are valued at the lower of cost (determined on a weighted average basis) and net realizable value. Inventories consist of raw materials, goods in process, and finished goods. We review our inventories regularly for possible obsolete goods and establishes reserves when determined necessary. As of June 30, 2022 and December 31, 2021, the allowance for obsolete inventories was $0 and $0, respectively.
Construction in Progress
Construction in progress represents direct costs of construction, interest and design fees incurred. No interest was capitalized for the three months ended June 30, 2022 and 2021. Capitalization of these costs ceases and the construction in progress is transferred to property, plant, and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is recognized until it is completed and ready for intended use. Construction in progress as of June 30, 2022 and December 31, 2021 was $8,506,821 and $8,726,299, respectively.
25
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. To determine the revenue to be recognized, the Company applies the following five-step model:
| ● | identify arrangements with customers; | |
| ● | identify performance obligations; | |
| ● | determine transaction price; | |
| ● | allocate transaction price to the separate performance obligations in the arrangement, if more than one exists; and | |
| ● | recognize revenue as performance obligations are satisfied. |
The Company generates revenues mainly from sales of packaged dandelion teas and water purifiers. During the three and six months ended June 30, 2022, the Company also engaged in the sale of certain nutritional products and water treatment accessories. Revenue from the sales of goods is recognized when the control over the promised goods is transferred to customers.
Cash payments received or due from customers before revenue recognized are recorded as advances from customers. The advance from customers is recognized as revenue when the Company’s performance obligation is completed.
Related parties
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, shareholder, or a related corporation.
Recent Accounting Pronouncements
See Note 4 to our unaudited consolidated financial statements for the three and six months ending June 30, 2022 and 2021.
26
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this report, we conducted an evaluation under the supervision and with the participation of our chief (principal) executive officer and chief (principal) accounting officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act).
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be presented or detected on a timely basis.
Based on management’s assessment, we have concluded that, as of June 30, 2022, our disclosure controls and procedures were not effective in timely alerting management to the material information relating to us required to be included in our annual and interim filings with the SEC.
Our chief executive officer and principal financial officer have concluded that our disclosure controls and procedures had the following material weaknesses:
| ● | We were unable to maintain any segregation of duties within our financial operations due to our reliance on limited personnel in the finance function. While this control deficiency did not result in any audit adjustments to our 2021 interim or annual financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties; |
| ● | We lack sufficient resources to perform the internal audit function and does not have an Audit Committee; |
| ● | Documentation of all proper accounting procedures is not yet complete; and |
| ● | We have no formal control process related to the identification and approval of related party transactions. |
These weaknesses were identified in our Annual Report on Form 10-K for the year ended December 31, 2021. These weaknesses have existed since our inception on June 28, 2010 and, as of June 30, 2022, have not been remediated.
To the extent reasonably possible given our limited financial and personnel resources, we intend to take measures to cure the aforementioned material weaknesses, including, but not limited to, the following:
| ● | Consider the engagement of consultants to assist in ensuring that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures; |
| ● | Hire additional qualified financial personnel, including a Chief Financial Officer, on a full-time basis; |
| ● | Expand our board of directors to include additional independent individuals willing to perform directorial functions; and |
| ● | Increase our workforce in preparation for commencing revenue producing operations. |
Since the recited remedial actions will require that we hire or engage additional personnel, these material weaknesses may not be overcome in the near-term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the limited advice of outside professionals and consultants.
Changes in Controls and Procedures
There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
27
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not currently a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on us or our business.
ITEM 1A. RISK FACTORS
Not applicable for smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 7, 2022, the Company and nine non-U.S. investors entered into the securities purchase agreements (the “Securities Purchase Agreements”), pursuant to which the Company issued and sold an aggregate of 25,000,000 shares of its common stock (the “Private Offering”), par value $0.001 per share, at a price of $0.10 per share, to such nine investors. The shares of common stock were sold to such non-U.S. investors in reliance upon the exemption pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “Act”) and Regulation S promulgated under the Act. The Company did not engage any placement agent with respect to the Private Offering. As of July 31, 2022, the Company received the gross proceeds of $2,500,000 as a result of the Private Offering.
The foregoing description of the Securities Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the entire Agreement, which is filed as Exhibit 10.1 hereto, and incorporated herein by reference.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| Exhibit Number |
Description | |
| 10.1 | ||
| 31.1* | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 | |
| 32.1** | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | INLINE XBRL INSTANCE DOCUMENT | |
| 101.SCH* | INLINE XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT | |
| 101.CAL* | INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT | |
| 101.DEF* | INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT | |
| 101.LAB* | INLINE XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT | |
| 101.PRE* | INLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed along with this document |
| ** | The certification attached as Exhibit 32.1 accompanying this quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Tengjun Biotechnology Corp. | ||
| Date: September 16, 2022 | By: | /s/ Xianchang Ma |
| Name: | Xianchang Ma | |
| Title: | Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive Officer, Principal Financial and Accounting Officer) | ||
29
Exhibit 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Xianchang Ma, certify that:
| 1. | I have reviewed this Amendment No. 1 to the quarterly report on Form 10-Q/A of Tengjun Biotechnology Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: September 16, 2022 | ||
| By: | /s/ Xianchang Ma | |
| Name: | Xianchang Ma | |
| Title: | Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer) |
|
Exhibit 32.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
In connection with the Amendment No. 1 to the quarterly report of Tengjun Biotechnology Corp. (the “Company”) on Form 10-Q/A for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Xianchang Ma, Chief Executive Officer and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. |
| Date: September 16, 2022 | ||
| By: | /s/ Xianchang Ma | |
| Name: | Xianchang Ma | |
| Title: | Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer) |
|
This certification is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company. under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Document And Entity Information - shares |
6 Months Ended | |
|---|---|---|
Jun. 30, 2022 |
Aug. 09, 2022 |
|
| Document Information Line Items | ||
| Entity Registrant Name | Tengjun Biotechnology Corp. | |
| Document Type | 10-Q/A | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Common Stock, Shares Outstanding | 90,309,169 | |
| Amendment Flag | true | |
| Amendment Description | Tengjun Biotechnology Corp. (the “Company,” “we,” “us” or “our”) is filing this Amendment No.1 (the “Amendment”) to its Quarterly Report on Form 10-Q/A for the six months ended June 30, 2022 to amend and restate the financial statements in its Quarterly Report on Form 10-Q (the “Original Form 10-Q”) for the six months ended June 30, 2022 that was originally filed with the Securities and Exchange Commission (the “SEC”) on August 15, 2022.Background of RestatementSubsequent to filing of its quarterly report on Form 10-Q for the six months ended June 30, 2022, the Company identified an error in its financial statements related to the accounting for sales commission expense for the six months ended June 30, 2022. In the three-month period ended March 31, 2022, the Company’s product sales plan was significantly and adversely affected by the COVID-19 pandemic and related restrictions enforced in China. In order to develop new customers and expand the sales, the Company verbally agreed to provide and made certain advances to twenty of its sales agents in the aggregate amount $7,853,921 (the “Loans”) during the three-month period ended June 30, 2022, with which funds such sales agents promoted the Company’s products and attracted new customers. Thereafter the Company signed the respective Marketing Promotion Loan Agreements (the “Loan Agreements”) with each of its twenty sales agents dated as of August 22, 2022 to memorialize the terms and conditions of the Loans. Pursuant to the Loan Agreements, each of the Loans will be due on December 31, 2022 with no interest. Therefore, the total cash payments of $7,853,921 to the twenty sales agents should be accounted for as loans to third parties. However, because the arrangement of the Loans and Loan Agreements were not communicated to the Company’s accountant timely, the total cash payments of $7,853,921 to the twenty sales agents were initially accounted for as sales commission payment to the twenty sales agents. As a result, the Company overstated its sales commission expense and understated its loans to third parties, tax payable and income tax provision. The Company restated its financial statements to correct these errors. See Note 2 to the consolidated financial statements for the six months ended June 30, 2022, to which forms a part of the Amendment.The financial information that has been previously filed or otherwise reported for this period is superseded by the information in this Amendment, and the financial statements and related financial information contained in the Original Form 10-Q should no longer be relied upon. On September 2, 2022, the Company filed a current report on Form 8-K disclosing the non-reliance on the financial statements included in the Original Form 10-Q for the six months ended June 30, 2022. The Company’s Chief Executive Officer and Chief Financial Officer is providing currently dated certifications in connection with this Amendment. See Exhibits 31.1 and 32.1 attached to the Amendment. | |
| Entity Central Index Key | 0001499785 | |
| Entity Current Reporting Status | Yes | |
| Entity Filer Category | Non-accelerated Filer | |
| Document Period End Date | Jun. 30, 2022 | |
| Document Fiscal Year Focus | 2022 | |
| Document Fiscal Period Focus | Q2 | |
| Entity Small Business | true | |
| Entity Emerging Growth Company | false | |
| Entity Shell Company | false | |
| Document Quarterly Report | true | |
| Document Transition Report | false | |
| Entity File Number | 333-169397 | |
| Entity Incorporation, State or Country Code | NV | |
| Entity Tax Identification Number | 27-3042462 | |
| Entity Address, Address Line One | East Jinze Road and South Huimin Road | |
| Entity Address, Address Line Two | Food Industry Economic and Technology Development District | |
| Entity Address, Address Line Three | Jianxiang County | |
| Entity Address, City or Town | Jining City | |
| Entity Address, Country | CN | |
| City Area Code | (86) | |
| Local Phone Number | 0537-8711599 | |
| Entity Interactive Data Current | Yes | |
| Entity Address, Postal Zip Code | 00000 |
Consolidated Balance Sheets (Unaudited) (Parentheticals) - $ / shares |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 200,000,000 | 200,000,000 |
| Common stock, shares issued | 65,309,169 | 65,309,169 |
| Common stock, shares outstanding | 65,309,169 | 65,309,169 |
Consolidated Statements of Income and Comprehensive Income (Loss) (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Income Statement [Abstract] | ||||
| Sales revenue, net | $ 51,290,462 | $ 55,574,576 | ||
| Cost of goods sold | 3,438,949 | 3,809,013 | ||
| Gross profit | 47,851,513 | 51,765,563 | ||
| Selling and marketing expenses | 42,952,863 | 13,419 | 46,310,836 | 16,878 |
| General and administrative expenses | 268,934 | 206,001 | 499,273 | 363,668 |
| Total operating expenses | 43,221,797 | 219,420 | 46,810,109 | 380,546 |
| Income (loss) from operations | 4,629,716 | (219,420) | 4,955,454 | (380,546) |
| Interest income (expense) | 7,397 | (4) | 7,421 | (4,977) |
| Other income (expense), net | (74) | (2,657) | (74) | (2,657) |
| Income (loss) before provision for income taxes | 4,637,039 | (222,081) | 4,962,801 | (388,180) |
| Provision for income taxes | 503,231 | 596,186 | ||
| Net income (loss) | 4,133,808 | (222,081) | 4,366,615 | (388,180) |
| Net income attributable to noncontrolling interests | 212,665 | 226,649 | ||
| Net income (loss) attributable to Tengjun stockholders | 3,921,143 | (222,081) | 4,139,966 | (388,180) |
| Net income (loss) | 4,133,808 | (222,081) | 4,366,615 | (388,180) |
| Other comprehensive income (loss): | ||||
| Foreign currency translation adjustment | (46,501) | (19,893) | (55,939) | (13,296) |
| Comprehensive income (loss) | 4,087,307 | (241,974) | 4,310,676 | (401,476) |
| Comprehensive income attributable to noncontrolling interests | 210,317 | 223,824 | ||
| Comprehensive income (loss) attributable to Tengjun stockholders | $ 3,876,990 | $ (241,974) | $ 4,086,852 | $ (401,476) |
| Net Income (Loss) Per Common Share: | ||||
| Net income (loss) per common share - basic and diluted (in Dollars per share) | $ 0.06 | $ (0.01) | $ 0.06 | $ (0.02) |
| Weighted average shares outstanding: | ||||
| Basic and diluted (in Shares) | 65,309,169 | 19,285,714 | 65,309,169 | 19,285,714 |
Consolidated Statements of Income and Comprehensive Income (Loss) (Unaudited) (Parentheticals) - $ / shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Income Statement [Abstract] | ||||
| Net loss per common share - basic and diluted (in Shares) | $ (0.06) | $ (0.01) | $ (0.06) | $ (0.02) |
| Basic and diluted (in Dollars per share) | 65,309,169 | 19,285,714 | 65,309,169 | 19,285,714 |
Consolidated Statements of Changes in Equity (Deficit) (Unaudited) - USD ($) |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss |
Noncontrolling Interests |
Total |
|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2020 | $ 19,286 | $ 1,549,018 | $ (2,605,211) | $ (141,208) | $ (1,178,115) | |
| Balance (in Shares) at Dec. 31, 2020 | 19,285,714 | |||||
| Net Income (loss) | (166,099) | (166,099) | ||||
| Foreign currency translation (restated) | 6,597 | 6,597 | ||||
| Balance at Mar. 31, 2021 | $ 19,286 | 1,549,018 | (2,771,310) | (134,611) | (1,337,617) | |
| Balance (in Shares) at Mar. 31, 2021 | 19,285,714 | |||||
| Balance at Dec. 31, 2020 | $ 19,286 | 1,549,018 | (2,605,211) | (141,208) | (1,178,115) | |
| Balance (in Shares) at Dec. 31, 2020 | 19,285,714 | |||||
| Net Income (loss) | (388,180) | |||||
| Balance at Jun. 30, 2021 | $ 19,286 | 1,549,018 | (2,993,391) | (154,504) | (1,579,591) | |
| Balance (in Shares) at Jun. 30, 2021 | 19,285,714 | |||||
| Balance at Mar. 31, 2021 | $ 19,286 | 1,549,018 | (2,771,310) | (134,611) | (1,337,617) | |
| Balance (in Shares) at Mar. 31, 2021 | 19,285,714 | |||||
| Net Income (loss) | (222,081) | (222,081) | ||||
| Foreign currency translation (restated) | (19,893) | (19,893) | ||||
| Balance at Jun. 30, 2021 | $ 19,286 | 1,549,018 | (2,993,391) | (154,504) | (1,579,591) | |
| Balance (in Shares) at Jun. 30, 2021 | 19,285,714 | |||||
| Balance at Dec. 31, 2021 | $ 65,309 | 1,099,599 | (3,187,804) | (168,535) | (94,299) | (2,285,730) |
| Balance (in Shares) at Dec. 31, 2021 | 65,309,169 | |||||
| Net Income (loss) | 218,823 | 13,984 | 232,807 | |||
| Foreign currency translation (restated) | (8,961) | (477) | (9,438) | |||
| Balance at Mar. 31, 2022 | $ 65,309 | 1,099,599 | (2,968,981) | (177,496) | (80,792) | (2,062,361) |
| Balance (in Shares) at Mar. 31, 2022 | 65,309,169 | |||||
| Balance at Dec. 31, 2021 | $ 65,309 | 1,099,599 | (3,187,804) | (168,535) | (94,299) | (2,285,730) |
| Balance (in Shares) at Dec. 31, 2021 | 65,309,169 | |||||
| Net Income (loss) | 4,366,615 | |||||
| Balance at Jun. 30, 2022 | $ 65,309 | 1,099,599 | 952,162 | (221,649) | 129,525 | 2,024,946 |
| Balance (in Shares) at Jun. 30, 2022 | 65,309,169 | |||||
| Balance at Mar. 31, 2022 | $ 65,309 | 1,099,599 | (2,968,981) | (177,496) | (80,792) | (2,062,361) |
| Balance (in Shares) at Mar. 31, 2022 | 65,309,169 | |||||
| Net Income (loss) | 3,921,143 | 212,665 | 4,133,808 | |||
| Foreign currency translation (restated) | (44,153) | (2,348) | (46,501) | |||
| Balance at Jun. 30, 2022 | $ 65,309 | $ 1,099,599 | $ 952,162 | $ (221,649) | $ 129,525 | $ 2,024,946 |
| Balance (in Shares) at Jun. 30, 2022 | 65,309,169 |
Organization and Nature of Business |
6 Months Ended |
|---|---|
Jun. 30, 2022 | |
| Organization and Nature of Business [Abstract] | |
| ORGANIZATION AND NATURE OF BUSINESS | NOTE 1. ORGANIZATION AND NATURE OF BUSINESS
Tengjun Biotechnology Corp. (formerly known as China Herb Group Holdings Corporation, the “Company”) was incorporated under the name “Island Radio, Inc.” under the laws of the State of Nevada on June 28, 2010. On December 9, 2019, the Company changed its corporate name to Tengjun Biotechnology Corp.
Tengjunxiang Biotechnology Ltd. (“Tengjunxiang”) is a holding company incorporated in the Cayman Islands on July 19, 2021. On August 5, 2021, Tengjunxiang formed a wholly-owned subsidiary, Tengjunxiang Biotechnology HK Limited (“Tengjunxiang HK”), under the laws of Hong Kong. Shandong Minfu Biology Science and Technology Co., Ltd. (“Shandong Minfu”) is a company incorporated under the laws of the People’s Republic of China (the “PRC”) on August 29, 2021. Tengjunxiang HK owns all of the equity interests in Shandong Minfu, a wholly-foreign owned entity formed (“WFOE”) under the laws of PRC.
Shandong Tengjunxiang Biotechnology Co., Ltd (“Shandong Tengjunxiang”) was incorporated under the laws of PRC on June 27, 2014. Jinxiang County Kanglong Water Purification Equipment Co., Ltd (“Jinxiang Kanglong”), a wholly-owned subsidiary of Shandong Tengjunxiang, was formed under the laws of the PRC on January 6, 2015. Shangdong Tengjunxiang and Jinxiang Kanglong have been under common control. Shandong Tengjunxiang and its subsidiary, Jinxiang Kanglong are primarily engaged in processing, packaging, distribution and sale of dandelion teas, and producing and sale of water purifiers in China, and plans to increase its tea processing and water purifier production lines, and expand its sales channels in the next one to two years.
On December 15, 2021, all shareholders and the Board of Shandong Tengjunxiang agreed to increase its registered capital to RMB 100 million, of which RMB 94.95 million shall be contributed by Shandong Minfu and the remaining RMB 5.05 million shall be contributed by fourteen other shareholders. On December 16, 2021, Tengjunxiang completed its restructuring transaction (the “Restructuring Transaction”). As a result of the Restructuring Transaction, Tengjunxiang, through its subsidiaries, directly owns 94.95% of the ownership of Shandong Tengjunxiang and therefore became the controlling shareholder of Shandong Tengjunxiang.
All of the entities of the Restructuring Transaction are under common control of Mr. Xianchang Ma, the controlling shareholder of Tengjunxiang, before and after the Restructuring Transaction, which results in the consolidation of Tengjunxiang and its subsidiaries and has been accounted for as a reorganization of entities under common control at carrying value and for accounting purpose, the reorganization was accounted for as a recapitalization. The consolidated financial statements are prepared on the basis as if the Restructuring Transaction became effective as of the beginning of the first period presented in the accompanying consolidated financial statements.
On December 23, 2021, the Company entered into a Share Purchase/Exchange Agreement (the “Share Exchange Agreement”) with Tenjunxiang, and eleven shareholders of Tengjunxiang (the “Selling Shareholders”). The Selling Shareholders collectively owned 100% of all issued and outstanding shares of Tengjunxiang (the “Tengjunxiang Shares”). Pursuant to the Share Exchange Agreement, the Selling Shareholders jointly agreed to sell or transfer to the Company one hundred percent (100%) of the Tengjunxiang Shares in exchange for a total of 19,285,714 shares of the Company’s common stock. As a result of such exchange (the “Stock Exchange”), Tengjunxiang has become a wholly-owned subsidiary of the Company and the Selling Shareholders collectively have received 19,285,714 shares of the Company’s common stock, representing approximately 29.53% of the then issued and outstanding shares of the Company’s common stock.
In connection with the acquisition of Tengjunxiang pursuant to the Share Exchange Agreement, the Company with its subsidiaries commenced its business operations in processing, packaging, distribution and sale of dandelion teas, producing and sale of water purifiers in China through Tengjunxiang and its subsidiaries in the People’s Republic of China. The acquisition of Tengjunxiang is treated as a reverse acquisition (the “Reverse Acquisition”).
COVID-19
A novel strain of coronavirus, or COVID-19, was first identified in China in December 2019, and subsequently declared a pandemic on March 11, 2020 by the World Health Organization. As a result of the COVID-19 pandemic, all travels had been severely curtailed to protect the health of the Company’s employees and comply with local government guidelines. The COVID-19 pandemic has had an adverse effect on the Company’s business. Although China has already begun to recover from the outbreak of COVID-19 and the Company’s business has gone back to normal, the epidemic continues to spread on a global scale and there is a risk of the epidemic returning to China in the future, thereby causing further business interruption. The full impact of the pandemic on the Company’s business, operations and financial results depends on various factors that continue to evolve, which the Company may not be able to accurately predict for now. |
Restatement of Previously Issued Financial Statements |
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| Condensed Financial Information Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS | NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In September 2022, the Board of Directors of the Company concluded that the loans made to some of its sales agents were mis-recorded under sales commission expense. The unintentional errors occurred because of a miscommunication between the Company’s management and accountant. The Company made loans to twenty (20) individual sales agents in the aggregate amount of $7,853,921 during the three months ended June 30, 2022. Pursuant to the respective loan agreements with each of the sales agents, the Company made such loans to each of the twenty (20) sales agents for the purpose of market expansion, and all loans should be repaid in full before December 31, 2022. In accordance with the loan agreements, these loans are unsecured and bear no interest.
In connection with the correction of sales commission and loans to third party sales agents, the Company restated its sales commission expense, accrued taxes, provision for income taxes, and loan to third parties as of and for the six months ended June 30, 2022. The changes in accrued taxes and provision for income taxes were driven by the correction of the sales commission.
As a result of the restatement, the cumulative effect as of and for the six months ended June 30, 2022 was an increase in the loan to third parties of $7,853,921, a decrease in sales commission expense of $8,119,391, an increase in accrued taxes of $538,398, and an increase provision for income taxes of $556,597.
The restatement increased basic and diluted net earnings per share by approximately $0.11 for the three and six months ended June 30, 2022.
The impacts of these restatements on the consolidated financial statements are summarized below:
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Going Concern |
6 Months Ended |
|---|---|
Jun. 30, 2022 | |
| Going Concern [Abstract] | |
| GOING CONCERN | NOTE 3. GOING CONCERN
These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the Company’s accompanying consolidated financial statements, the Company had an accumulated deficit of $3,187,804 as of December 31, 2021 and a working capital deficit of $6,967,352 as of June 30, 2022, and has just started to generate revenues since the last quarter. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. The Company can give no assurances that any additional capital that it is able to obtain, if any, will be sufficient to meet its needs.
If the Company is unable to successfully commence its business operations in a short period of time, or unable to raise additional capital or secure additional lending, the Company may need to curtail or cease its operations. The Company believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management plans to obtain such resources for the Company include obtaining capital from the sale of its equity, and short-term and long-term borrowings from banks, stockholders or other related parties. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans. |
Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Principles of consolidation
The consolidated financial statements include the financial statements of Tengjun Biotechnology Corp., Tengjunxiang and its 100% owned subsidiaries, Tengjunxiang HK and WOFE, and its 94.95% owned subsidiaries, Shandong Tengjunxiang and Jinxiang Kanglong. All inter-company transactions and balances are eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.
Reclassification
Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.
Cash and Cash Equivalents
The Company considers all cash on hand and in banks, certificates of deposit with banks and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts.
Advance to suppliers
The Company makes advances to certain vendors for construction and purchase of equipment. The Company had advances to suppliers of $488,060 and $564,846 as of June 30, 2022 and December 31, 2021, respectively. Based on management’s evaluation, no allowance for advances to suppliers was recorded as of June 30, 2022 and December 31, 2021.
Inventories
The Company’s inventories primarily consist of dandelion teas and water purifiers. Inventories are valued at the lower of cost (determined on a weighted average basis) and net realizable value. Inventories mainly consist of raw materials, goods in process, and finished goods. The Company reviews its inventories regularly for possible obsolete goods and establishes reserves when determined necessary. No reserve for inventory was established as of June 30, 2022 and December 31, 2021.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in the period of disposal. All ordinary repair and maintenance costs are expensed as incurred.
Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets:
Costs incurred in constructing new facilities, including progress payments and other costs related to construction, are capitalized and transferred to property, plant and equipment on completion, at which time depreciation commences.
Construction in Progress
Construction in progress represents direct costs of construction, interest and design fees incurred. No interest was capitalized for the six months ended June 30, 2022 and 2021. Capitalization of these costs ceases and the construction in progress is transferred to property, plant, and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is recognized until it is completed and ready for intended use. Construction in progress as of June 30, 2022 and December 31, 2021 was $8,506,821 and $8,726,299, respectively.
Impairment of Long-lived Assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. There was no impairment for the six months ended June 30, 2022 and 2021 based on management’s evaluation.
Value added tax (“VAT”)
All China-based enterprises are subject to a VAT imposed by the PRC government on their domestic product sales and services. The Company’s subsidiaries in the PRC are subject to VAT at rates ranged from 0% to 17% on proceeds received from customers, and are entitled to a deduction for VAT already paid or borne on the products purchased by them. The VAT payable will be presented on the balance sheets when input VAT is less than the output VAT. Receivable balance, prepaid VAT, will be presented on the balance sheets when input VAT is larger than the output VAT.
Advances from customers
Payments received before all the relevant criteria for revenue recognition are satisfied are recorded as advance from customers. When all revenue recognition criteria are met, the advances from customers are recognized as revenue.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. To determine the revenue to be recognized, the Company applies the following five-step model:
The Company generates revenues mainly from sales of packaged dandelion teas and water purifiers. During the three and six months ended June 30, 2022, the Company also engaged in the sale of certain nutritional products and water treatment accessories. Revenue from the sales of goods is recognized when the control over the promised goods is transferred to customers.
Cash payments received or due from customers before revenue recognized are recorded as advances from customers. The advance from customers is recognized as revenue when the Company’s performance obligation is completed.
Cost of goods sold
Cost of goods sold consists primarily of cost of goods purchased, direct raw material cost, direct labor cost, and cost of manufacturing overheads including the depreciation of production equipment.
Selling and marketing expenses
Selling and marketing expenses primarily consist of advertising costs, agency fees, costs for promotional materials, and commission costs made to sales force.
Advertising expenses are charged to the consolidated statements of operations and comprehensive loss in the period incurred. The amounts of advertising expenses incurred were $2,927 and $13,187 for the three months ended June 30, 2022 and 2021, respectively. The amounts of advertising expenses incurred were $4,154 and $16,646 for the six months ended June 30, 2022 and 2021, respectively.
Commission expense primarily consists of commission costs made to independent sales force. The amount of commission expense incurred were $42,949,936 and $0 for the three months ended June 30, 2022 and 2021, respectively. The amount of commission expense incurred were $46,306,682 and $0 for the six months ended June 30, 2022 and 2021, respectively.
General and administrative expenses
General and administrative expenses primarily consist of payroll and benefit costs for corporate employees, legal, consulting, professional expenses, rental expenses and other corporate overhead costs.
Concentration of Credit Risk
The operations of the Company are primarily in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, and by the general state of the PRC economy.
The Company has cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC. Cash in state-owned banks is covered by insurance up to RMB 500,000 ($72,500) per bank. The Company has not experienced any losses in such accounts and believes they are not exposed to any risks on their cash in these bank accounts.
The Company generated total revenue of $51,290,462 and $55,574,576 during the three and six months ended June 30, 2022, respectively. No customer accounted for over 10% of total revenue during the three and six months ended June 30, 2022.
During the three months ended June 30, 2022, the Company had two major supplier that accounted for over 10% of its total purchases.
During the six months ended June 30, 2022, the Company had two major suppliers that accounted for over 10% of its total purchases.
No supplier accounted for over 10% of total purchase during the three and six months ended June 30, 2021.
Income Taxes
The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigations based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred.
Related parties
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, shareholder, or a related corporation.
Foreign Currency Translation
The Company uses the United States dollar (“U.S. dollars”) for financial reporting purposes. The functional currency of the Company and its subsidiaries is the Chinese Yuan or Renminbi (“RMB”). The Company’s subsidiaries maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted. For the Company and its subsidiaries whose functional currencies are other than the U.S. dollar, all asset and liability accounts were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at the historical rates and items in the income statement and cash flow statements are translated at the average rate in each applicable period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of shareholders’ equity. The resulting translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
Fair Values of Financial Instruments
ASC 820 defines fair value as the exchange price that would be received for 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 on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – quoted prices in active markets for identical assets or liabilities.
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 – inputs that are unobservable
The Company’s financial instruments primarily consist of cash and cash equivalents, advances to suppliers, prepaid expenses, other receivable, accounts payable, accrued expenses, other payables, and related party borrowings. As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheets. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates.
Lease
The Company adopted FASB Accounting Standards Codification, Topic 842, Leases (“ASC 842”) using the modified retrospective approach, electing the practical expedient that allows the Company not to restate its comparative periods prior to the adoption of the standard on January 1, 2019.
The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. The Company’s future minimum based payments used to determine the Company’s lease liabilities mainly include minimum based rent payments. As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
The adoption of ASC 842 had no material impact on the Company’s consolidated balance sheets, results of operations or cash flows. In addition, the adoption of ASC 842 did not result in a cumulative-effect adjustment to the opening balance of retained earnings (accumulated deficit). Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur.
Segment Reporting
ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s chief operating decision maker organizes segments within the Company for making operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
The Company manages its business as two operating segments, dandelion teas and water purifier, all of which are located in the PRC. All of its revenues are derived in the PRC. All long-lived assets are located in PRC.
The following table shows the Company’s operations by business segment for the three and six months ended June 30, 2022 and 2021:
Income (Loss) per Share Calculation
Basic net income (loss) per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per shares is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur. |
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Inventories, Net |
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| Schedule of inventories [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORIES, NET | NOTE 5. INVENTORIES, NET
Inventories consisted of the following:
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Property, Plant, and Equipment, net |
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY, PLANT, AND EQUIPMENT, NET | NOTE 6. PROPERTY, PLANT, AND EQUIPMENT, NET
Property, plant, and equipment consisted of the following:
Depreciation expense for the three months ended June 30, 2022 and 2021 were $79,830 and $78,210, respectively. Depreciation expense for the six months ended June 30, 2022 and 2021 were $163,941 and $155,348, respectively. |
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Prepaid Taxes |
6 Months Ended |
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Jun. 30, 2022 | |
| Prepaid Taxes [Abstract] | |
| PREPAID TAXES | NOTE 7. PREPAID TAXES
Prepaid taxes as of June 30, 2022 and December 31, 2021, primarily consist of prepaid VAT in the amount of $0 and $688,272, respectively, which can be used to offset VAT payable when the Company incurs sales. |
Loan to Third Parties |
6 Months Ended |
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Jun. 30, 2022 | |
| Loan to Third Parties [Abstract] | |
| LOAN TO THIRD PARTIES | NOTE 8. LOAN TO THIRD PARTIES
During the three months ended June 30, 2022, the Company made loans to 20 individual sales agents in the aggregate amount of $7,853,921 pursuant to the agreements with each of the sales agents. The loans were made to each of the sales agents for the purpose of market expansion, and all loans shall be repaid in full before December 31, 2022. These loans are unsecured and bear no interest. |
Short-Term Loan |
6 Months Ended |
|---|---|
Jun. 30, 2022 | |
| Debt Disclosure [Abstract] | |
| SHORT-TERM LOAN | NOTE 9. SHORT-TERM LOAN
On March 17, 2020, Shandong Tengjunxiang and China Construction Bank entered into a one-year bank loan agreement in an amount of RMB 3,000,000, equivalent to $459,770. The term started March 17, 2020 with the maturity date on March 17, 2021. The loan balance bore an interest rate of 4.025% per annum. The Company repaid the loan together with the accrued interest in full on March 17, 2021.
During the three months ended June 30, 2022 and 2021, the Company recorded interest expense of $0. During the six months ended June 30, 2022 and 2021, the Company recorded interest expense of $0 and $4,973, respectively. |
Accrued Liabilities and Other Payables |
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| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCRUED LIABILITIES AND OTHER PAYABLES | NOTE 10. ACCRUED LIABILITIES AND OTHER PAYABLES
Accrued liabilities and other payables consisted of the following at June 30, 2022 and December 31, 2021:
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Income Tax |
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| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAX | NOTE 11. INCOME TAX
United States
The Company was incorporated in the United States of America and is subject to United States federal taxation. The U.S. Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Effective in 2018, the Tax Act reduces the U.S. statutory tax rate from 35% to 21%.
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.
Hong Kong
Tengjunxiang HK is incorporated in Hong Kong and is subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5% on its taxable income generated from operations in Hong Kong. The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. Additionally, payments of dividends by the subsidiary incorporated in Hong Kong to the Company are not subject to any Hong Kong withholding tax.
PRC
Effective on January 1, 2008, the PRC Enterprise Income Tax Law, EIT Law, and Implementing Rules impose an unified enterprise income tax rate of 25% on all domestic-invested enterprises and foreign investment enterprises in PRC, unless they qualify under certain limited exceptions. As such, starting from January 1, 2008, the Company’s subsidiaries in PRC are subject to an enterprise income tax rate of 25%. The Company had recorded income tax provision of $596,186 and $0 for the six months ended June 30, 2022 and 2021.
Provision for income tax expense (benefit) consists of the following:
The following is a reconciliation of the statutory tax rate to the effective tax rate:
The Company periodically evaluates the likelihood of the realization of deferred tax assets, and adjusts the carrying amount of the deferred tax assets by the valuation allowance to the extent that the future realization of the deferred tax assets is not judged to be more likely than not. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors.
As of June 30, 2022 and December 31, 2021, based on the weight of available evidence, including cumulative losses in recent years and expectations of future taxable income, the Company determined that it was more likely than not that its deferred tax assets would not be realized and have a 100% valuation allowance associated with its deferred tax assets. |
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Related Party Transactions and Balances |
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| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RELATED PARTY TRANSACTIONS AND BALANCES | NOTE 12. RELATED PARTY TRANSACTIONS AND BALANCES
The related party of the company with whom transactions are reported in these financial statements are as follows:
Due from related party:
Due to related parties:
Due to related parties represent advances from its related parties for the Company’s payment for construction, purchase of equipment, and daily operating expenses. The balances are unsecured, non-interest bearing, and payable on demand. |
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Lease |
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| Lease [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASE | NOTE 13. LEASE
The Company leased a facility under an operating lease arrangement. The lease has initial lease term of 2 years. The lease agreement expired in August 2021 and the Company did not renew such lease.
The following provides details of the Company’s lease expenses:
Other information related to leases is presented below:
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Equity |
6 Months Ended |
|---|---|
Jun. 30, 2022 | |
| Stockholders' Equity Note [Abstract] | |
| EQUITY | NOTE 14. EQUITY
Preferred Stock
The total number of preferred shares authorized that may be issued by the Company is 5,000,000 shares with a par value of $0.001 per share.
As of June 30, 2022 and December 31, 2021, the Company had no shares of its preferred stock issued and outstanding.
Common Stock
The total number of common shares authorized that may be issued by the Company is 70,000,000 shares with a par value of $0.001 per share. On March 30, 2022, the board of directors of the Company adopted a resolution to increase its authorized capital from 70,000,000 to 200,000,000 shares of its common stock by amending and restating the Company’s articles of incorporation.
Common Stock Issued for Reverse Merger
On December 23, 2021, the Company issued 19,285,714 shares of Company’s common stock to eleven Selling Shareholders pursuant to the Share Exchange Agreement with Tenjunxiang (see Note 1). |
Subsequent Events |
6 Months Ended |
|---|---|
Jun. 30, 2022 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 15. SUBSEQUENT EVENTS
In July 2022, the Company sold an aggregate of 25,000,000 shares of its common stock at a price of $0.10 per share, to nine investors pursuant to the stock purchase agreements.
Management has evaluated subsequent events through the date which the financial statements are available to be issued. All subsequent events requiring recognition as of June 30, 2022 have been incorporated into these financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.” |
Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Accounting | Basis of Accounting
The consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
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| Principles of consolidation | Principles of consolidation
The consolidated financial statements include the financial statements of Tengjun Biotechnology Corp., Tengjunxiang and its 100% owned subsidiaries, Tengjunxiang HK and WOFE, and its 94.95% owned subsidiaries, Shandong Tengjunxiang and Jinxiang Kanglong. All inter-company transactions and balances are eliminated in consolidation.
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| Use of Estimates | Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.
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| Reclassification | Reclassification
Certain classifications have been made to the prior year financial statements to conform to the current year presentation. The reclassification had no impact on previously reported net loss or accumulated deficit.
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| Cash and Cash Equivalents | Cash and Cash Equivalents
The Company considers all cash on hand and in banks, certificates of deposit with banks and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts.
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| Advance to suppliers | Advance to suppliers
The Company makes advances to certain vendors for construction and purchase of equipment. The Company had advances to suppliers of $488,060 and $564,846 as of June 30, 2022 and December 31, 2021, respectively. Based on management’s evaluation, no allowance for advances to suppliers was recorded as of June 30, 2022 and December 31, 2021.
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| Inventories | Inventories
The Company’s inventories primarily consist of dandelion teas and water purifiers. Inventories are valued at the lower of cost (determined on a weighted average basis) and net realizable value. Inventories mainly consist of raw materials, goods in process, and finished goods. The Company reviews its inventories regularly for possible obsolete goods and establishes reserves when determined necessary. No reserve for inventory was established as of June 30, 2022 and December 31, 2021.
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| Property and Equipment | Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. Gains or losses on disposals are reflected as gain or loss in the period of disposal. All ordinary repair and maintenance costs are expensed as incurred.
Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets:
Costs incurred in constructing new facilities, including progress payments and other costs related to construction, are capitalized and transferred to property, plant and equipment on completion, at which time depreciation commences.
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| Construction in Progress | Construction in Progress
Construction in progress represents direct costs of construction, interest and design fees incurred. No interest was capitalized for the six months ended June 30, 2022 and 2021. Capitalization of these costs ceases and the construction in progress is transferred to property, plant, and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is recognized until it is completed and ready for intended use. Construction in progress as of June 30, 2022 and December 31, 2021 was $8,506,821 and $8,726,299, respectively.
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| Impairment of Long-lived Assets | Impairment of Long-lived Assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. There was no impairment for the six months ended June 30, 2022 and 2021 based on management’s evaluation.
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| Value added tax (“VAT”) | Value added tax (“VAT”)
All China-based enterprises are subject to a VAT imposed by the PRC government on their domestic product sales and services. The Company’s subsidiaries in the PRC are subject to VAT at rates ranged from 0% to 17% on proceeds received from customers, and are entitled to a deduction for VAT already paid or borne on the products purchased by them. The VAT payable will be presented on the balance sheets when input VAT is less than the output VAT. Receivable balance, prepaid VAT, will be presented on the balance sheets when input VAT is larger than the output VAT.
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| Advances from customers | Advances from customers
Payments received before all the relevant criteria for revenue recognition are satisfied are recorded as advance from customers. When all revenue recognition criteria are met, the advances from customers are recognized as revenue.
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| Revenue Recognition | Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. To determine the revenue to be recognized, the Company applies the following five-step model:
The Company generates revenues mainly from sales of packaged dandelion teas and water purifiers. During the three and six months ended June 30, 2022, the Company also engaged in the sale of certain nutritional products and water treatment accessories. Revenue from the sales of goods is recognized when the control over the promised goods is transferred to customers.
Cash payments received or due from customers before revenue recognized are recorded as advances from customers. The advance from customers is recognized as revenue when the Company’s performance obligation is completed.
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| Cost of goods sold | Cost of goods sold
Cost of goods sold consists primarily of cost of goods purchased, direct raw material cost, direct labor cost, and cost of manufacturing overheads including the depreciation of production equipment.
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| Selling and marketing expenses | Selling and marketing expenses
Selling and marketing expenses primarily consist of advertising costs, agency fees, costs for promotional materials, and commission costs made to sales force.
Advertising expenses are charged to the consolidated statements of operations and comprehensive loss in the period incurred. The amounts of advertising expenses incurred were $2,927 and $13,187 for the three months ended June 30, 2022 and 2021, respectively. The amounts of advertising expenses incurred were $4,154 and $16,646 for the six months ended June 30, 2022 and 2021, respectively.
Commission expense primarily consists of commission costs made to independent sales force. The amount of commission expense incurred were $42,949,936 and $0 for the three months ended June 30, 2022 and 2021, respectively. The amount of commission expense incurred were $46,306,682 and $0 for the six months ended June 30, 2022 and 2021, respectively.
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| General and administrative expenses | General and administrative expenses
General and administrative expenses primarily consist of payroll and benefit costs for corporate employees, legal, consulting, professional expenses, rental expenses and other corporate overhead costs.
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| Concentration of Credit Risk | Concentration of Credit Risk
The operations of the Company are primarily in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, and by the general state of the PRC economy.
The Company has cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC. Cash in state-owned banks is covered by insurance up to RMB 500,000 ($72,500) per bank. The Company has not experienced any losses in such accounts and believes they are not exposed to any risks on their cash in these bank accounts.
The Company generated total revenue of $51,290,462 and $55,574,576 during the three and six months ended June 30, 2022, respectively. No customer accounted for over 10% of total revenue during the three and six months ended June 30, 2022.
During the three months ended June 30, 2022, the Company had two major supplier that accounted for over 10% of its total purchases.
During the six months ended June 30, 2022, the Company had two major suppliers that accounted for over 10% of its total purchases.
No supplier accounted for over 10% of total purchase during the three and six months ended June 30, 2021.
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| Income Taxes | Income Taxes
The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigations based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the year incurred.
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| Related parties | Related parties
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. Parties are related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, shareholder, or a related corporation.
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| Foreign Currency Translation | Foreign Currency Translation
The Company uses the United States dollar (“U.S. dollars”) for financial reporting purposes. The functional currency of the Company and its subsidiaries is the Chinese Yuan or Renminbi (“RMB”). The Company’s subsidiaries maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted. For the Company and its subsidiaries whose functional currencies are other than the U.S. dollar, all asset and liability accounts were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at the historical rates and items in the income statement and cash flow statements are translated at the average rate in each applicable period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of shareholders’ equity. The resulting translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
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| Fair Values of Financial Instruments | Fair Values of Financial Instruments
ASC 820 defines fair value as the exchange price that would be received for 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 on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – quoted prices in active markets for identical assets or liabilities.
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 – inputs that are unobservable
The Company’s financial instruments primarily consist of cash and cash equivalents, advances to suppliers, prepaid expenses, other receivable, accounts payable, accrued expenses, other payables, and related party borrowings. As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheets. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates.
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| Lease | Lease
The Company adopted FASB Accounting Standards Codification, Topic 842, Leases (“ASC 842”) using the modified retrospective approach, electing the practical expedient that allows the Company not to restate its comparative periods prior to the adoption of the standard on January 1, 2019.
The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. The Company’s future minimum based payments used to determine the Company’s lease liabilities mainly include minimum based rent payments. As most of the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
The adoption of ASC 842 had no material impact on the Company’s consolidated balance sheets, results of operations or cash flows. In addition, the adoption of ASC 842 did not result in a cumulative-effect adjustment to the opening balance of retained earnings (accumulated deficit). Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur.
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| Segment Reporting | Segment Reporting
ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s chief operating decision maker organizes segments within the Company for making operating decisions assessing performance and allocating resources. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
The Company manages its business as two operating segments, dandelion teas and water purifier, all of which are located in the PRC. All of its revenues are derived in the PRC. All long-lived assets are located in PRC.
The following table shows the Company’s operations by business segment for the three and six months ended June 30, 2022 and 2021:
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| Income (Loss) per Share Calculation | Income (Loss) per Share Calculation
Basic net income (loss) per common share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per shares is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur. |
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Restatement of Previously Issued Financial Statements (Tables) |
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| Condensed Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of consolidated balance sheets |
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| Schedule of consolidated statements of income and comprehensive income (loss) |
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| Schedule of consolidated statements of cash flows |
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Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of straight-line method over the estimated useful lives of the assets |
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| Schedule of major supplier that accounted total purchases |
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| Schedule of major supplier that accounted total purchases |
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| Schedule of segment assets |
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Inventories, Net (Tables) |
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of inventories [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of inventories |
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Property, Plant, and Equipment, net (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property, plant, and equipment |
|
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Accrued Liabilities and Other Payables (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accrued liabilities and other payables |
|
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Income Tax (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of provision for income tax expense (benefit) |
|
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| Schedule of statutory tax rate to the effective tax rate |
|
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Related Party Transactions and Balances (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of related party with whom transaction |
|
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| Schedule of related parties |
|
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Lease (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of company’s lease expenses |
|
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| Schedule of other information related to leases is presented |
|
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Organization and Nature of Business (Details) - CNY (¥) ¥ in Thousands |
Dec. 23, 2021 |
Dec. 16, 2021 |
Dec. 15, 2021 |
|---|---|---|---|
| Organization and Nature of Business (Details) [Line Items] | |||
| Capital amount | ¥ 5,050 | ||
| Share exchange agreement description | On December 23, 2021, the Company entered into a Share Purchase/Exchange Agreement (the “Share Exchange Agreement”) with Tenjunxiang, and eleven shareholders of Tengjunxiang (the “Selling Shareholders”). The Selling Shareholders collectively owned 100% of all issued and outstanding shares of Tengjunxiang (the “Tengjunxiang Shares”). Pursuant to the Share Exchange Agreement, the Selling Shareholders jointly agreed to sell or transfer to the Company one hundred percent (100%) of the Tengjunxiang Shares in exchange for a total of 19,285,714 shares of the Company’s common stock. As a result of such exchange (the “Stock Exchange”), Tengjunxiang has become a wholly-owned subsidiary of the Company and the Selling Shareholders collectively have received 19,285,714 shares of the Company’s common stock, representing approximately 29.53% of the then issued and outstanding shares of the Company’s common stock. | ||
| Shandong Tengjunxiang [Member] | |||
| Organization and Nature of Business (Details) [Line Items] | |||
| Restructuring transaction ownership, percentage | 94.95% | ||
| Shandong Tengjunxiang [Member] | |||
| Organization and Nature of Business (Details) [Line Items] | |||
| Capital amount | 100,000 | ||
| Shandong Minfu [Member] | |||
| Organization and Nature of Business (Details) [Line Items] | |||
| Contributed amount | ¥ 94,950 |
Restatement of Previously Issued Financial Statements (Details) |
3 Months Ended | 6 Months Ended |
|---|---|---|
|
Jun. 30, 2022
USD ($)
$ / shares
|
Jun. 30, 2022
USD ($)
$ / shares
|
|
| Condensed Financial Information Disclosure [Abstract] | ||
| Aggregate amount | $ 7,853,921 | |
| Loans | $ 7,853,921 | |
| Commission expense | 8,119,391 | 8,119,391 |
| Increase in accrued taxes | $ 538,398 | 538,398 |
| Provision for income taxes | $ 556,597 | |
| Basic net earnings per share (in Dollars per share) | $ / shares | $ 0.11 | $ 0.11 |
| Diluted net earnings per share (in Dollars per share) | $ / shares | $ 0.11 | $ 0.11 |
Restatement of Previously Issued Financial Statements (Details) - Schedule of consolidated statements of income and comprehensive income (loss) (Parentheticals) - $ / shares |
3 Months Ended | 6 Months Ended |
|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2022 |
|
| Previously Reported [Member] | ||
| Condensed Income Statements, Captions [Line Items] | ||
| Net income (loss) per common share diluted | $ (0.05) | $ (0.05) |
| Adjustments [Member] | ||
| Condensed Income Statements, Captions [Line Items] | ||
| Net income (loss) per common share diluted | 0.11 | 0.11 |
| Restated [Member] | ||
| Condensed Income Statements, Captions [Line Items] | ||
| Net income (loss) per common share diluted | $ 0.06 | $ 0.06 |
Restatement of Previously Issued Financial Statements (Details) - Schedule of consolidated statements of cash flows |
6 Months Ended |
|---|---|
|
Jun. 30, 2022
USD ($)
| |
| Previously Reported [Member] | |
| CASH FLOWS FROM OPERATING ACTIVITIES | |
| Net income (loss) | $ (3,196,179) |
| Changes in net assets and liabilities: | |
| Loan to third parties | |
| Taxes payable | 7,373,656 |
| Adjustments [Member] | |
| CASH FLOWS FROM OPERATING ACTIVITIES | |
| Net income (loss) | 7,562,794 |
| Changes in net assets and liabilities: | |
| Loan to third parties | (8,119,391) |
| Taxes payable | 556,597 |
| Restated [Member] | |
| CASH FLOWS FROM OPERATING ACTIVITIES | |
| Net income (loss) | 4,366,615 |
| Changes in net assets and liabilities: | |
| Loan to third parties | (8,119,391) |
| Taxes payable | $ 7,930,253 |
Going Concern (Details) - USD ($) |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Organization and Nature of Business [Abstract] | ||
| Accumulated deficit | $ 3,187,804 | |
| Working capital deficit | $ (6,967,352) |
Summary of Significant Accounting Policies (Details) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|---|
|
Jun. 30, 2022
USD ($)
|
Jun. 30, 2021
USD ($)
|
Jun. 30, 2022
USD ($)
|
Jun. 30, 2022
CNY (¥)
|
Jun. 30, 2021
USD ($)
|
Dec. 31, 2021
USD ($)
|
Mar. 31, 2022
USD ($)
|
|
| Summary of Significant Accounting Policies (Details) [Line Items] | |||||||
| Advance to suppliers | $ 488,060 | $ 564,846 | |||||
| Construction in progress | $ 8,726,299 | $ 8,506,821 | |||||
| Advertising expenses | $ 2,927 | $ 13,187 | 4,154 | $ 16,646 | |||
| Commission expense | 42,949,936 | $ 0 | 46,306,682 | $ 0 | |||
| Insurance amount | 72,500 | ¥ 500,000 | |||||
| Total revenue | $ 51,290,462 | $ 55,574,576 | |||||
| Revenue percentage | 10.00% | 10.00% | |||||
| Concentration of credit risk description | During the three months ended June 30, 2022, the Company had two major supplier that accounted for over 10% of its total purchases. | During the six months ended June 30, 2022, the Company had two major suppliers that accounted for over 10% of its total purchases. | During the six months ended June 30, 2022, the Company had two major suppliers that accounted for over 10% of its total purchases. | ||||
| Purchase percentage | 10.00% | 10.00% | |||||
| Minimum [Member] | |||||||
| Summary of Significant Accounting Policies (Details) [Line Items] | |||||||
| Value added tax percentage | 0.00% | 0.00% | |||||
| Maximum [Member] | |||||||
| Summary of Significant Accounting Policies (Details) [Line Items] | |||||||
| Value added tax percentage | 17.00% | 17.00% | |||||
| Tengjunxiang [Member] | |||||||
| Summary of Significant Accounting Policies (Details) [Line Items] | |||||||
| Subsidiaries percentage | 100.00% | 100.00% | |||||
| Tengjunxiang HK [Member] | WOFE [Member] | |||||||
| Summary of Significant Accounting Policies (Details) [Line Items] | |||||||
| Subsidiaries percentage | 94.95% | 94.95% | |||||
Summary of Significant Accounting Policies (Details) - Schedule of major supplier that accounted total purchases |
3 Months Ended | 6 Months Ended |
|---|---|---|
|
Jun. 30, 2022
USD ($)
|
Jun. 30, 2022
USD ($)
|
|
| Supplier A [Member] | ||
| Summary of Significant Accounting Policies (Details) - Schedule of major supplier that accounted total purchases [Line Items] | ||
| Net purchase, Supplier | $ 1,005,275 | $ 1,005,275 |
| Percentage of total purchase | 82.00% | 82.00% |
| Supplier B [Member] | ||
| Summary of Significant Accounting Policies (Details) - Schedule of major supplier that accounted total purchases [Line Items] | ||
| Net purchase, Supplier | $ 227,376 | $ 227,376 |
| Percentage of total purchase | 18.00% | 18.00% |
Summary of Significant Accounting Policies (Details) - Schedule of segment assets - USD ($) |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Segment Reporting, Asset Reconciling Item [Line Items] | ||
| Total Segment assets | $ 25,332,331 | $ 13,776,205 |
| Dandelion teas [Member] | ||
| Segment Reporting, Asset Reconciling Item [Line Items] | ||
| Total Segment assets | 24,481,123 | 12,817,675 |
| Water purifier [Member] | ||
| Segment Reporting, Asset Reconciling Item [Line Items] | ||
| Total Segment assets | $ 851,208 | $ 958,530 |
Inventories, Net (Details) - Schedule of inventories - USD ($) |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Schedule Of Inventories Abstract | ||
| Raw materials | $ 283,095 | $ 300,918 |
| Work in process | 347,837 | 300,711 |
| Finished goods | 631,691 | 2,482,528 |
| Inventories, gross | 1,262,623 | 3,084,157 |
| Less: allowance for obsolete inventories | ||
| Inventories, net | $ 1,262,623 | $ 3,084,157 |
Property, Plant, and Equipment, net (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Property, Plant and Equipment [Abstract] | ||||
| Depreciation expense | $ 79,830 | $ 78,210 | $ 163,941 | $ 155,348 |
Property, Plant, and Equipment, net (Details) - Schedule of property, plant, and equipment - USD ($) |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 1,632,739 | $ 1,714,737 |
| Less: Accumulated depreciation | (1,147,262) | (1,039,181) |
| Property and equipment, net | 485,477 | 675,556 |
| Buildings [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 15,005 | 15,771 |
| Machinery and equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 639,867 | 675,878 |
| Office equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 140,698 | 144,072 |
| Vehicles [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 837,169 | $ 879,016 |
Prepaid Taxes (Details) - USD ($) |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Prepaid Taxes [Abstract] | ||
| Prepaid VAT amount | $ 0 | $ 688,272 |
Loan to Third Parties (Details) |
3 Months Ended |
|---|---|
|
Jun. 30, 2022
USD ($)
| |
| Loan to Third Parties [Abstract] | |
| Aggregate amount | $ 7,853,921 |
Short-Term Loan (Details) |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
|
Jun. 30, 2022
USD ($)
|
Jun. 30, 2021
USD ($)
|
Jun. 30, 2022
USD ($)
|
Jun. 30, 2021
USD ($)
|
Mar. 17, 2020
USD ($)
|
Mar. 17, 2020
CNY (¥)
|
|
| Short-Term Loan (Details) [Line Items] | ||||||
| Maturity date | Mar. 17, 2021 | |||||
| Loan balance bears interest rate percentage | 4.025% | |||||
| Interest expense | $ 0 | $ 0 | $ 0 | $ 4,973 | ||
| China Construction Bank [Member] | Shandong Tengjunxiang [Member] | ||||||
| Short-Term Loan (Details) [Line Items] | ||||||
| Loan agreement | $ 459,770 | ¥ 3,000,000 | ||||
Accrued Liabilities and Other Payables (Details) - Schedule of accrued liabilities and other payables - USD ($) |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Schedule Of Accrued Liabilities And Other Payables Abstract | ||
| Accrued taxes | $ 7,727,783 | $ 59,719 |
| Advance from employees | 7,464 | 45,787 |
| Payable for construction and improvements | 139,807 | 150,102 |
| Payable for machinery and equipment | 95,866 | 58,327 |
| Accrued payroll | 18,836 | 10,220 |
| Accrued professional fees | 14,000 | 42,000 |
| Other | 56,848 | 140,689 |
| Total | $ 8,060,604 | $ 506,844 |
Income Tax (Details) - USD ($) |
6 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|
Jan. 01, 2008 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Dec. 31, 2021 |
Dec. 31, 2018 |
|
| Income Tax (Details) [Line Items] | |||||
| Applicable tax rate | 16.50% | ||||
| Income tax rate | 25.00% | ||||
| Tax rate of enterprise income | 25.00% | ||||
| Valuation allowance tax assets | 100.00% | 100.00% | |||
| Maximum [Member] | |||||
| Income Tax (Details) [Line Items] | |||||
| U.S. statutory tax rate | 35.00% | ||||
| Minimum [Member] | |||||
| Income Tax (Details) [Line Items] | |||||
| U.S. statutory tax rate | 21.00% | ||||
| PRC [Member] | |||||
| Income Tax (Details) [Line Items] | |||||
| Tax provisions (in Dollars) | $ 596,186 | $ 0 | |||
Income Tax (Details) - Schedule of provision for income tax expense (benefit) - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Current | ||
| USA | ||
| China | 596,186 | |
| Deferred | ||
| USA | ||
| China | ||
| Total provision for income tax expense (benefit) | $ 596,186 | |
Income Tax (Details) - Schedule of statutory tax rate to the effective tax rate |
6 Months Ended | |
|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Schedule Of Statutory Tax Rate To The Effective Tax Rate Abstract | ||
| U.S. federal statutory income tax (benefit) | 21.00% | (21.00%) |
| Foreign tax rate differential | 4.10% | (4.00%) |
| Utilization of net operating losses (NOL) carryover | (13.60%) | |
| Change in valuation allowances | 0.50% | 25.00% |
| Effective income tax rate | 12.00% | |
Related Party Transactions and Balances (Details) - Schedule of related party with whom transaction |
6 Months Ended |
|---|---|
Jun. 30, 2022 | |
| Xianchang Ma [Member] | |
| Related Party Transaction [Line Items] | |
| Relationship with the Company | Major shareholder, CEO, director of the Company |
| Liuhong Liu [Member] | |
| Related Party Transaction [Line Items] | |
| Relationship with the Company | Beneficial owner of the Company’s common stock |
| Pan Shi [Member] | |
| Related Party Transaction [Line Items] | |
| Relationship with the Company | Beneficial owner of the Company’s common stock |
| Jin Tian [Member] | |
| Related Party Transaction [Line Items] | |
| Relationship with the Company | Beneficial owner of the Company’s common stock |
| Qiuping Lu [Member] | |
| Related Party Transaction [Line Items] | |
| Relationship with the Company | Shareholder, former director and CEO |
Lease (Details) |
6 Months Ended |
|---|---|
Jun. 30, 2022 | |
| Lease [Abstract] | |
| Lease term | 2 years |
| Lease agreement , description | The lease agreement expired in August 2021 and the Company did not renew such lease. |
Lease (Details) - Schedule of company’s lease expenses - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Schedule Of Company SLease Expenses Abstract | ||||
| Operating lease expenses | $ 1,239 | $ 2,473 | ||
Lease (Details) - Schedule of other information related to leases is presented - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Cash Paid For Amounts Included In Measurement of Liabilities: | ||
| Operating cash flows from operating leases | $ 2,473 | |
| Weighted Average Remaining Lease Term: | ||
| Operating leases | 2 months 1 day | |
| Weighted Average Discount Rate: | ||
| Operating leases | 4.75% | |
Equity (Details) - $ / shares |
Jun. 30, 2022 |
Mar. 30, 2022 |
Dec. 31, 2021 |
Dec. 23, 2021 |
|---|---|---|---|---|
| Equity (Details) [Line Items] | ||||
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 | ||
| Preferred stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 | ||
| Preferred stock outstanding | 0 | 0 | ||
| Preferred stock issued | 0 | 0 | ||
| Common stock, shares authorized | 70,000,000 | |||
| Common stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 | ||
| Minimum [Member] | ||||
| Equity (Details) [Line Items] | ||||
| Increase authorized capital | 70,000,000 | |||
| Maximum [Member] | ||||
| Equity (Details) [Line Items] | ||||
| Increase authorized capital | 200,000,000 | |||
| Common Stock Issued for Reverse Merger [Member] | ||||
| Equity (Details) [Line Items] | ||||
| Common stock, shares issued | 19,285,714 |
Subsequent Events (Details) |
1 Months Ended |
|---|---|
Jul. 31, 2022 | |
| Subsequent Event [Member] | |
| Subsequent Events (Details) [Line Items] | |
| Subsequent event, description | In July 2022, the Company sold an aggregate of 25,000,000 shares of its common stock at a price of $0.10 per share, to nine investors pursuant to the stock purchase agreements. |
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