UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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.
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 10, 2023, was
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| Not applicable | Not applicable | Not applicable |
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 | |
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PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TENGJUN BIOTECHNOLOGY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Advance to suppliers | ||||||||
| Inventories, net | ||||||||
| Due from related party | ||||||||
| Other receivables | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Construction in progress | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Advances from customers | ||||||||
| Due to related parties | ||||||||
| Accrued liabilities and other payables | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Shareholders’ Equity | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Subscribed stock | ||||||||
| Accumulated profit (deficit) | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Noncontrolling interests | ||||||||
| Total Equity (Deficit) | ||||||||
| Total Liabilities and Equity | $ | $ | ||||||
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)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Sales revenue, net | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross Profit (Loss) | ( | ) | ||||||||||||||
| Selling and marketing expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (Loss) from operations | ( | ) | ||||||||||||||
| Interest income (expense), net | ||||||||||||||||
| Other (expense) income, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (Loss) before provision for income taxes | ( | ) | ||||||||||||||
| Provision for income taxes | ( | ) | ||||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Net income (loss) attributable to noncontrolling interest | ( | ) | ||||||||||||||
| Net income (loss) attributable to the Company | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Foreign currency translation loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
| Comprehensive income (loss) attributable to noncontrolling interests | ( | ) | ( | ) | ||||||||||||
| Comprehensive income (loss) attributable to Tengjun stockholders | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Net 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
(UNAUDITED)
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Accumulated | Other | ||||||||||||||||||||||||||||||
| Common Stock | Paid-in | Subscribed | Profit | Comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||
| Shares | Amount | Capital | Stock | (Deficit) | Loss | Interests | Equity | |||||||||||||||||||||||||
| Balance at Dec. 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Net loss | - | |||||||||||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at Mar. 31, 2022 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net Income (restated) | - | |||||||||||||||||||||||||||||||
| Foreign currency translation (restated) | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at Jun. 30, 2022 (restated) | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||
| Additional | Accumulated | Other | ||||||||||||||||||||||||||||||
| Common Stock | Paid-in | Subscribed | Profit | Comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||
| Shares | Amount | Capital | Stock | (Deficit) | Loss | Interests | Equity | |||||||||||||||||||||||||
| Balance at Dec. 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||
| Issuance of common stock | ( | ) | ||||||||||||||||||||||||||||||
| Common stock subscriptions received in advance | - | |||||||||||||||||||||||||||||||
| Net income | - | |||||||||||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||||||||||
| Balance at Mar. 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of common stock | ( | ) | ||||||||||||||||||||||||||||||
| Net income | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at Jun. 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||
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, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Inventories | ( | ) | ||||||
| Prepaid taxes | ||||||||
| Other receivables | ( | ) | ( | ) | ||||
| Advance to suppliers | ( | ) | ||||||
| Accounts payable | ||||||||
| Advance from customers | ||||||||
| Taxes payable | ||||||||
| Accrued liabilities and other payable | ( | ) | ||||||
| Net cash provided by 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 | ||||||||
| Proceeds from issuing common stocks | ||||||||
| Net proceeds (repayment of) loans from related parties | ( | ) | ( | ) | ||||
| Net cash used in 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 cash flow information | ||||||||
| 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. (“Tengjun”).
Business Combination
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. Shandong 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 Tengjunxiang,
and eleven shareholders of Tengjunxiang (the “Selling Shareholders”).
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
Unaudited Interim Financial Information
The accompanying unaudited interim consolidated financial statements and information have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the SEC’s regulations for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these financial statements contain all normal and recurring adjustments considered necessary to present fairly the Company’s financial position, results of operations, comprehensive income, cash flows, and stockholders’ equity for the periods presented.
These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on April 17, 2023.
NOTE 2. LIQUIDITY
The Company’s
financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going
concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company
has just started to generate revenues and turned around to be profitable since 2022. As of June 30, 2023, the Company had an accumulated
profit of $
The Company’s ability to continue as a going concern will be dependent upon its ability to execute on its business plan, including the ability to generate revenue and the Company’s ability to raise additional capital. Although no assurances can be given as to the Company’s ability to deliver on its revenue plans or that unforeseen expenses may arise, management has evaluated the significance of the conditions as of June 30, 2023 and has concluded that due to the receipt of the net proceeds from the completion of the Initial Public Offering and cash provided by operating activities during the year of 2022 and the first quarter of the year 2023, the Company has sufficient cash on hand to satisfy its anticipated cash requirements for the next twelve months from the issuance of these financial statements.
NOTE 3. 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. As of June 30, 2023, the Company’s estimates primarily consisted of the allowance for obsolete inventory and impairment assessment on fixed assets and other long-lived assets. These estimates required management’s judgment, and actual results could differ from these estimates.
6
Reclassification
Certain classifications have been made to the prior year’s 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 $
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. Allowance for
obsolete inventory as of June 30, 2023, and December 31, 2022, was $
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.
| 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, 2023, and 2022. 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, 2023, and December 31, 2022, was
$
7
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. Based on management’s evaluation, no impairment of long-live assets was recognized for the six months ended June 30, 2023, and 2022.
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 ranging 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. The Company is also engaged in the sale of certain nutraceutical 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. The selling and marketing expenses for the three months ended June 30, 2023, and 2022 were $
8
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 and six months ended June 30, 2023, the Company had one supplier that accounted for
| For the Three Months Ended June 30, | For the Three Months Ended June 30, | % of total | ||||||||||
| Supplier | 2023 | 2022 | purchase | |||||||||
| A | $ | % | ||||||||||
| B | * | $ | % | |||||||||
| C | * | $ | % | |||||||||
| For the Six Months Ended June 30, | For the Six Months Ended June 30, | % of total | ||||||||||
| Supplier | 2023 | 2022 | purchase | |||||||||
| A | $ | % | ||||||||||
| B | * | $ | % | |||||||||
| C | * | $ | % | |||||||||
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
9
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 the 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.
| June 30, | June 30, | |||||||
| 2023 | 2022 | |||||||
| Period End Exchange Rate (RMB/USD) | ||||||||
| Average Period Exchange Rate (RMB/USD) | ||||||||
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 for 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.
10
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. The Company current does not have any operating or financing leases that last for more than twelve months.
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 in two operating segments, dandelion teas and water purifier, all of which are located in the PRC. All of its revenues are derived from the PRC. All long-lived assets are located in PRC.
The Company’s sale of dandelion teas is affected by the dandelion plants’ life cycle. A dandelion plant’s life cycle generally consists of five main stages and its leaves, flowers, and roots are not ready for production of teas until May of each year. Therefore, if the Company does not have enough storage of the previous year’s dandelion ingredients for producing teas, it will have no sales for the first and second quarter. As a result, for the three and six months ended June 30, 2023, the Company had no sales of dandelion teas.
| For the Three months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2023 | 2022 | |||||||
| 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 | $ | ( | ) | $ | ||||
11
| For the Six months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2023 | 2022 | |||||||
| 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 | $ | $ | ||||||
| June 30, | December 31, | |||||||
| Segment assets | 2023 | 2022 | ||||||
| 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.
12
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.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which provides guidance on the acquirer’s accounting for acquired revenue contracts with customers in a business combination. The amendments require an acquirer recognizes and measures contract assets and contract liabilities acquired in a business combination at the acquisition date in accordance with ASC 606 as if it had originated the contracts. This guidance also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The new guidance is required to be applied prospectively to business combinations occurring on or after the date of adoption. This guidance is effective for the Company for the year ending March 31, 2024, and interim reporting periods during the year ending March 31, 2024. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on the financial position, results of operations and cash flows.
NOTE 4. INVENTORIES, NET
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Less: allowance for obsolete inventories | ( | ) | ||||||
| Inventories, net | $ | $ | ||||||
NOTE 5. PROPERTY, PLANT, AND EQUIPMENT, NET
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Buildings | $ | $ | ||||||
| Machinery and equipment | ||||||||
| Office equipment | ||||||||
| Vehicles | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expenses for the three months ended June 30, 2023, and 2022 were $
Depreciation
expenses for the six months ended June 30, 2023, and 2022 were $
13
NOTE 6. OTHER RECEIVABLE
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Loans to sales agents | $ | $ | ||||||
| Prepaid Expenses | ||||||||
| Security deposit | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
During the
year ended 31, 2022, the Company made loans to various individual sales agents in the aggregate amount of $
NOTE 7. ACCRUED LIABILITIES AND OTHER PAYABLES
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accrued local taxes | $ | $ | ||||||
| Advance from employees | ( | ) | ||||||
| Accrued payroll | ||||||||
| Accrued professional fees | ||||||||
| Total | $ | $ | ||||||
NOTE 8. 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
14
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 a unified enterprise income tax rate of
| For the Six months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| United States | $ | $ | ||||||
| China | ( | ) | ||||||
| Total | $ | ( | ) | $ | ||||
Provision for income tax expense (benefit) consists of the following:
| For the Six months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Income tax expense at federal statutory rate | % | $ | % | |||||
| Increases/(decreases) due to: | ||||||||
| Foreign tax rate differential | % | % | ||||||
| Change in valuation allowance | % | |||||||
| Effective tax rate | % | % | ||||||
15
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, 2023, and December 31, 2022, 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 of USA would not be realized
and have a
NOTE 9. RISKS AND CONTINGENCIES
Covid-19
The global outbreak of the COVID-19 pandemic is having a significant negative impact on the global economy, which has adversely affected the Company’s business and financial results. Starting in late January 2020, the COVID-19 pandemic triggered a series of lockdowns, social distancing requirements and travel restrictions that have significantly and negatively affected, and may continue to negatively affect, our businesses in China. The Company had suspended its normal business operations from early 2020 and did not generate any revenue in the year 2021. The COVID-19 pandemic also presented and may continue to present challenges to the Company’s business operations as well as the business operations of the Company’s merchants, business partners and other participants in the Company’s ecosystem, such as closure of offices and facilities, disruptions to or even suspensions of normal business and logistics operations, as well as restrictions on travel. It is not possible to determine the ultimate impact of the COVID-19 pandemic on the Company’s business operations and financial results, which is highly dependent on numerous factors, including the duration and spread of the pandemic and any resurgence of the COVID-19 pandemic in China or elsewhere, actions taken by governments, the response of businesses and individuals to the pandemic, the impact of the pandemic on business and economic conditions in China, consumer demand, the Company’s ability and the ability of sales agents, logistics service providers and other participants in the Company’s ecosystem to continue operations in areas affected by the pandemic. The COVID-19 pandemic may continue to adversely affect the Company’s business and results of operations.
Concentration Risk
For the
water purifier business segment, the Company relied on one supplier that represented
NOTE 10. RELATED PARTY TRANSACTIONS AND BALANCES
| Name of Individual | Relationship with the Company | |
| Xianchang Ma | ||
| Liuhong Liu | ||
| Pan Shi | ||
| Jin Tian | ||
| Qiuping Lu |
16
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Pan Shi | $ | $ | ||||||
| Xianchang Ma | ||||||||
| Total | $ | $ | ||||||
Due from related party represent advances to its related parties for working capital purpose and receivable from the related party for investment purpose.
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Xianchang Ma | $ | $ | ||||||
| Qiuping Lu | ||||||||
| 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.
NOTE 11. EQUITY
Preferred Stock
The total
number of preferred shares authorized that may be issued by the Company is
As of June 30, 2023, and December 31, 2022, the Company had shares of its preferred stock issued and outstanding.
Common Stock
The
total number of common shares authorized that may be issued by the Company was
17
Common Stock Issued for Reverse Merger
On December
23, 2021, pursuant to the Share Exchange Agreement with Tengjunxiang (see Note 1), the Company issued
On July
7, 2022, the Company sold an aggregate of
On October
4, 2022, the Company sold an aggregate of
Common Stock Issued on Initial Closing of Public Offering
On January
9, 2023, the company conducted its initial closing for the public offering of its common stock (the “initial closing”) pursuant
to the Company’s registration statement on Form S-1 initially filed with the SEC on July 22, 2022 and declared effective on November
4, 2022, whereby the Company sold
Additional Closing of Public Offering
On May 3,
2023, the Company conducted an additional closing of the public offering pursuant to the Company’s registration statement on Form
S-1 initially filed with the SEC July 22, 2022, and declared effective on November 4, 2022, whereby the Company sold
NOTE 12. SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date on which the financial statements are available to be issued. All subsequent events requiring recognition as of June 30, 2023, have been incorporated into these financial statements and there is one subsequent event that requires disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”
Mr. Xianchang Ma, the Chief Executive Officer, Chief Financial Officer, and Director of the Company, passed away on August 3, 2023. Mr. Ma served on the Board of the Company since December 2019. The Company will update stockholders of further developments in this regard.
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 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.
Results of Operations
Results of Operations - Three Months Ended June 30, 2023, Compared to Three Months Ended June 30, 2022
The following table sets forth information from our statements of comprehensive income for the six months ended June 30, 2023, and 2022:
| Three Months Ended | ||||||||||||||||
| June 30, | Change | |||||||||||||||
| 2023 | 2022 | (Amount) | (Percent) | |||||||||||||
| Sales revenue | $ | - | $ | 51,290,462 | $ | (51,290,462 | ) | (100.00 | )% | |||||||
| Cost of Goods Sold | 10,170 | 3,438,949 | (3,428,779 | ) | (99.70 | )% | ||||||||||
| Gross Profit | (10,170 | ) | 47,851,513 | (47,861,683 | ) | (100.02 | )% | |||||||||
| Operating Expenses | 417,334 | 43,221,797 | (42,804,463 | ) | (99.03 | )% | ||||||||||
| Operating Income (Loss) | (427,504 | ) | 4,629,716 | (5,057,200 | ) | (109.23 | )% | |||||||||
| Interest Income (Expense) | 9,540 | 7,397 | 2,143 | 28.97 | % | |||||||||||
| Other Income (Expense) | (51,000 | ) | (74 | ) | (50,926 | ) | 68818.92 | % | ||||||||
| Income Tax Provision (Benefit) | (2,264 | ) | 503,231 | (505,495 | ) | (100.45 | )% | |||||||||
| Net Income (Loss) | (466,700 | ) | 4,133,808 | (4,580,508 | ) | (110.81 | )% | |||||||||
| Comprehensive Income (loss) | $ | (2,598,439 | ) | $ | 4,087,307 | $ | (6,685,746 | ) | (163.57 | )% | ||||||
Revenues
Our total revenue for the three months ended June 30, 2023, was $0, as compared to $51,290,462 for the three months ended June 30, 2022, representing a decrease of $51,290,462 or 100%. The revenue decrease was primarily attributed to that management detected an error in the revenue recognition and decided not to recognize any revenue in this quarter. During the three months ended June 30, 2023, sales of dandelion teas and water purifiers generated $0 in revenue. During the three months ended June 30, 2022, sales of dandelion teas generated $51,444,665 in revenue, constituting approximately 100% of the total revenue for the quarter, and sales of water purifiers generated $154,203 in loss, representing approximately 0% of the total revenue for the quarter.
The following is the sales breakdown by segment during the three months ended June 30, 2023, and 2022:
For the three months ended | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| Dandelion teas | $ | - | - | % | $ | 51,444,665 | 100 | % | ||||||||
| Water purifier | - | - | % | (154,203 | ) | 0 | % | |||||||||
| Total | $ | - | - | % | $ | 51,290,462 | 100 | % | ||||||||
19
The sales of dandelion teas for the three months ended June 30, 2023, were $0, as compared to $51,444,665 for the three months ended June 30, 2022, representing a decrease of $51,444,665 or 100%. The decrease in sales of dandelion teas was mainly due to the fact that management detected an error in the revenue recognition and decided not to recognize any revenue in this quarter.
The sales of water purifiers for the three months ended June 30, 2023, were $0, as compared to $154,203 loss for the three months ended June 30, 2022, representing an increase of $154,203 or 100%. The negative balance as of June 30, 2022, was primarily due to the sales returns. Additionally, as of June 30, 2023,management detected an error in the revenue recognition and decided not to recognize any revenue in this quarter.
Cost of Goods Sold
Our total cost of goods sold was $10,170 for the three months ended June 30, 2023, as compared to $3,438,949 for the three months ended June 30, 2022, representing a decrease of $3,428,779 or 99.19%. The decrease in our total cost of goods sold was mainly caused by the fact that management detected an error in the revenue recognition and decided not to recognize any revenue in this quarter. During the three months ended June 30, 2023, cost of sales of dandelion teas was $0, constituting 0% of the total cost of goods sold, and cost of sales of water purifiers was $10,170, constituting 100% of the total cost of goods sold of the quarter. During the three months ended June 30, 2022, cost of sales of dandelion teas was $3,456,644, constituting approximately 101% of the total cost of goods sold, and cost of sales of water purifiers was $(17,695), constituting approximately negative 1% of the total cost of goods sold of the quarter ending June 30, 2022.
The following is the cost of goods sold breakdown by segment during the three months ended June 30, 2023, and 2022:
For the three months ended | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| Dandelion teas | $ | - | 0 | % | $ | 3,456,644 | 101 | % | ||||||||
| Water purifier | 10,170 | 100 | % | (17,695 | ) | (1 | )% | |||||||||
| Total | $ | 10,170 | 100 | % | $ | 3,438,949 | 100 | % | ||||||||
During the three months ended June 30, 2023, cost of sales of dandelion teas were $0 as compared to $3,456,644 for the three months ended June 30, 2022, representing a decrease of $3,456,644 or 100%, because of no sales during the three months ended June 30, 2023.
During the three months ended June 30, 2023, cost of sales of water purifiers were $10,170, as compared to $(17,695) for the three months ended June 30, 2022, representing an increase of $27,865 or 157.47%. The negative balance as of June 30, 2022, was primarily due to sales returns and no such events had occurred as of June 30, 2023.
20
Gross Profit
Our loss was $10,170 and our profit was $47,851,513 for the three months ended June 30, 2023, and 2022, respectively. Our gross profit decreased by $47,841,343 or 100% during the three months ended June 30, 2023, compared to the same period in 2022. The decrease was mainly caused by the fact that management detected an error in the revenue recognition and decided not to recognize any revenue in this quarter.
During the three months ended June 30, 2023, and 2022, the gross profit as a percentage of net revenue for the dandelion teas was 0% and 100%, respectively, and the gross profit as a percentage of net revenue for the water purifiers was approximately 100% and 0%, respectively. The gross profit as a percentage of net revenue for dandelion teas decreased 100% for the three months ended June 30, 2023, as compared to the same period in 2022 due to zero sales of dandelion teas in this quarter. The gross profit as a percentage of net revenue for water purifiers increased 92.55% for the three months ended June 30, 2023, as compared to the same period in 2022, driven by decreased costs incurred in purchasing materials.
The following table presents gross profit and gross profit margin by segment for the three months ended June 30, 2023, and 2022:
For the three months ended | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| Dandelion teas | $ | - | 0 | % | $ | 47,988,021 | 100 | % | ||||||||
| Water purifier | (10,170 | ) | 100 | % | (136,508 | ) | (0 | )% | ||||||||
| Total | $ | (10,170 | ) | 100 | % | $ | 47,851,513 | 100 | % | |||||||
Selling and Marketing Expenses
Our selling and marketing expenses primarily consist of sales commission, advertising, and product promotional expenses.
Our selling and marketing expenses were $0 for the three months ended June 30, 2023, as compared to $42,952,863 for the three months ended June 30, 2022, representing a decrease of $42,952,863 or 100%. Such a decrease was mainly driven by a decrease in sales commission since management detected an error in the revenue recognition and decided not to recognize any revenue in this quarter.
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 were $417,334 for the three months ended June 30, 2023, as compared to $268,934 for the three months ended June 30, 2022, representing an increase of $148,400 or 55.18%. Such an increase was mainly caused by the increase in accounting, legal and stock transfer agent fees that were associated with the Company’s SEC reporting and public disclosures, and the increase in the Company’s office rental expenses.
21
Interest income (expense)
Interest income was $9,540 for the three months ended June 30, 2023, as compared to interest loss of $7,397 for the three months ended June 30, 2022. Our total interest income increased by $2,143 or 28.97% during the three months ended June 30, 2023, compared to the same period in 2022. The increase in interest income was primarily due to the interest earned from the Company’s bank savings accounts.
Other income (expense)
Other expense consists of miscellaneous non-operating cost. The other expense was $51,000 for the three months ended June 30, 2023, as compared to $74 for the three months ended June 30, 2022, representing an increase of $50,926 or 68818.92%. The increase was primarily due to the company has borne some of the handling fees for customers receiving advance payments.
Income tax provision
Income tax provision was negative $2,264 for the three months ended June 30, 2023, as compared to $503,231 for the three months ended June 30, 2022. Our income tax provision decreased by $505,495 or 100.45% during the three months ending June 30, 2023, compared to the same period in 2022. The decrease in income tax provision was primarily due to the decrease in income from operations during the three months ended June 30, 2023.
Net Income (Loss)
Our net loss was $466,700 for the three months ended June 30, 2023, as compared to net income of $4,133,808 for the three months ended June 30, 2022, decreased by $4,600,508 or 111.29%, because of the above factors.
Foreign Currency Translation Loss
We had a foreign currency translation loss of $2,131,739 during the three months ended June 30, 2023, as compared to foreign currency translation loss of $46,501 currency loss during the three months ended June 30, 2022, reflecting a change of $2,085,238 or 4484.29%. Such an increase in foreign currency translation loss was primarily caused by the currency exchange rate fluctuation.
Results of Operations - Six Months Ended June 30, 2023, Compared to Six Months Ended June 30, 2022
The following table sets forth information from our statements of comprehensive income for the six months ended June 30, 2023, and 2022:
| Six Months Ended | ||||||||||||||||
| June 30, | Change | |||||||||||||||
| 2023 | 2022 | (Amount) | (Percent) | |||||||||||||
| Sales revenue | $ | 8,516,646 | $ | 55,574,576 | $ | (47,057,930 | ) | (84.68 | )% | |||||||
| Cost of Goods Sold | 531,818 | 3,809,013 | (3,277,195 | ) | (86.04 | )% | ||||||||||
| Gross Profit | 7,984,828 | 51,765,563 | (43,780,735 | ) | (84.58 | )% | ||||||||||
| Operating Expenses | 7,836,346 | 46,810,109 | (38,973,763 | ) | (83.26 | )% | ||||||||||
| Operating Income (Loss) | 148,482 | 4,955,454 | (4,806,972 | ) | (97.00 | )% | ||||||||||
| Interest Income (Expense) | 21,432 | 7,421 | 14,011 | 188.80 | % | |||||||||||
| Other Income (Expense) | (56,480 | ) | (74 | ) | (56,406 | ) | 76224.32 | % | ||||||||
| Income Tax Provision (Benefit) | 189,547 | 596,186 | (406,639 | ) | (68.21 | )% | ||||||||||
| Net Income (Loss) | (76,113 | ) | 4,366,615 | (4,442,728 | ) | (101.74 | )% | |||||||||
| Comprehensive Income (loss) | $ | (2,080,320 | ) | $ | 4,310,676 | $ | (6,390,996 | ) | (148.26 | )% | ||||||
22
Revenues
Our total revenue for the six months ended June 30, 2023, was $8,516,646, as compared to $55,574,576 for the six months ended June 30, 2022, representing a decrease of $47,057,930 or 84.68%. The revenue decrease was primarily attributed to the fact that management detected an error in the revenue recognition and decided not to recognize any revenue in this quarter. During the six months ended June 30, 2023, sales of dandelion teas were $0, constituting 0% of the total revenue for the quarter, and sales of water purifiers generated $8,516,646 in revenue, representing 100% of the total revenue for the quarter. During the six months ended June 30, 2022, sales of dandelion teas generated $54,908,343 in revenue, constituting approximately 99% of the total revenue for the quarter, and sales of water purifiers generated $666,233 in revenue, representing approximately 1% of the total revenue for the quarter.
The following is the sales breakdown by segment during the six months ended June 30, 2023, and 2022:
For the six months ended | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| Dandelion teas | $ | - | 0 | % | $ | 54,908,343 | 99 | % | ||||||||
| Water purifier | 8,516,646 | 100 | % | 666,233 | 1 | % | ||||||||||
| Total | $ | 8,516,646 | 100 | % | $ | 55,574,576 | 100 | % | ||||||||
The sales of dandelion teas for the six months ended June 30, 2023, were $0, as compared to $54,908,343 for the six months ended June 30, 2022, representing a decrease of $54,908,343 or 100%. The decrease in sales of dandelion teas is primarily attributed to the fact that management detected an error in the revenue recognition and decided not to recognize any revenue in this quarter.
The sales of water purifiers for the six months ended June 30, 2023, were $8,516,646, as compared to $666,233 for the six months ended June 30, 2022, representing an increase of $7,850,413 or 1178.32%. The increase in sales of water purifiers was mainly driven by consumers’ higher demand for the products, the growth of our sales agents, and increased product promotion events.
Cost of Goods Sold
Our total cost of goods sold was $531,818 for the six months ended June 30, 2023, as compared to $3,809,013 for the six months ended June 30, 2022, representing a decrease of $3,277,195 or 86.04%. The decrease in our total cost of goods sold was mainly due to the decrease in sales. During the six months ended June 30, 2023, cost of sales of dandelion teas was $0, constituting 0% of the total cost of goods sold, and cost of sales of water purifiers was $531,818, constituting 100% of the total cost of goods sold of the quarter. During the six months ended June 30, 2022, cost of sales of dandelion teas was $3,730,491, constituting approximately 98% of the total cost of goods sold, and cost of sales of water purifiers was $78,522, constituting approximately 2% of the total cost of goods sold of the quarter ending June 30, 2022.
The following is the cost of goods sold breakdown by segment during the six months ended June 30, 2023, and 2022:
For the six months ended | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| Dandelion teas | $ | - | 0 | % | $ | 3,730,491 | 98 | % | ||||||||
| Water purifier | 531,818 | 100 | % | 78,522 | 2 | % | ||||||||||
| Total | $ | 531,818 | 100 | % | $ | 3,809,013 | 100 | % | ||||||||
23
During the six months ended June 30, 2023, cost of sales of dandelion teas were $0 as compared to $3,730,491 for the six months ended June 30, 2022, representing a decrease of $3,730,491 or 100%. The decrease is attributed to the fact that management detected an error in the revenue recognition and decided not to recognize any revenue in this quarter.
because of no sales during the six months ended June 30, 2023.
During the six months ended June 30, 2023, cost of sales of water purifiers were $531,818, as compared to $78,522 for the six months ended June 30, 2022, representing an increase of $453,296 or 577.29%. The increase in cost of sales of water purifiers was mainly due to the increased sales in the quarter ending June 30, 2023.
Gross Profit
Our gross profit was $7,984,828 and $51,765,563 for the six months ended June 30, 2023, and 2022, respectively.
Our gross profit decreased by $43,780,735 or 84.58% during the six months ended June 30, 2023, compared to the same period in 2022. The gross profit decrease was mainly caused by the fact that management detected an error in the revenue recognition and decided not to recognize any revenue in this quarter.
During the six months ended June 30, 2023, and 2022, the gross profit as a percentage of net revenue for the Dandelion teas was 0% and 99%, respectively, and the gross profit as a percentage of net revenue for the Water purifiers was approximately 100% and 1%, respectively. The gross profit as a percentage of net revenue for dandelion teas decreased 92.1% for the six months ended June 30, 2023, as compared to the same period in 2022 due to zero sales of dandelion teas in this quarter. The gross profit as a percentage of net revenue for water purifiers increased 1258.63% for the six months ended June 30, 2023, as compared to the same period in 2022, driven by decreased costs incurred in purchasing materials and increased demand.
The following table presents gross profit and gross profit margin by segment for the six months ended June 30, 2023, and 2022:
For the six months ended | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| Dandelion teas | $ | - | 0 | % | $ | 51,177,852 | 99 | % | ||||||||
| Water purifier | 7,984,828 | 100 | % | 587,711 | 1 | % | ||||||||||
| Total | $ | 7,984,828 | 100 | % | $ | 51,765,563 | 100 | % | ||||||||
Selling and Marketing Expenses
Our selling and marketing expenses primarily consist of sales commission, advertising, and product promotional expenses.
Our selling and marketing expenses were $7,077,178 for the six months ended June 30, 2023, as compared to $46,310,836 for the six months ended June 30, 2022, representing a decrease of $39,233,658 or 84.72%. Such a decrease was mainly driven by the decrease in sales commission as a result of the decrease in sales.
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 were $759,168 for the six months ended June 30, 2023, as compared to $499,273 for the six months ended June 30, 2022, representing an increase of $259,895 or 52.05%. Such an increase was mainly caused by the increase in accounting, legal and stock transfer agent fees that were associated with the Company’s SEC reporting and public disclosures, and the increase in the Company’s office rental expenses.
24
Interest income (expense)
Interest income was $21,432 for the six months ended June 30, 2023, as compared to $7,421 for the six months ended June 30, 2022. Our total interest income increased by $14,011 or 188.80% during the six months ended June 30, 2023, compared to the same period in 2022. The increase in interest income was primarily due to the interest earned from the Company’s bank savings accounts.
Other income (expense)
Other expense consists of miscellaneous non-operating cost. The other expense was $56,480 for the six months ended June 30, 2023, as compared to $74 for the six months ended June 30, 2022, representing an increase of $56,406 or 76224.32%. The increase was primarily due to the company’s incurring bank fees in receiving the advances from customers.
Income tax provision
Income tax provision was $189,547 for the six months ended June 30, 2023, as compared to $596,186 for the six months ended June 30, 2022. Our income tax provision decreased by $406,639 or 68.21% during the six months ending June 30, 2023, compared to the same period in 2022. The decrease in income tax provision was primarily due to the decrease in sales during the six months ended June 30, 2023.
Net Income (Loss)
Our net loss was $76,113 for the six months ended June 30, 2023, as compared to net income $4,366,615 for the six months ended June 30, 2022, decreased by $4,442,728 or 101.74%, because of the above factors.
Foreign Currency Translation Loss
We had a foreign currency translation loss of $2,004,207 during the six months ended June 30, 2023, as compared to foreign currency translation loss of $55,939 currency loss during the six months ended June 30, 2022, reflecting a change of $1,948,268 or 3482.84%. Such an increase in foreign currency translation loss was primarily caused by the currency exchange rate fluctuation.
Liquidity and Capital Resources
Working Capital
| June 30, | December 31, | Change | ||||||||||||||
| 2023 | 2022 | (Amount) | (Percent) | |||||||||||||
| Current Assets | $ | 430,498,641 | $ | 50,569,077 | $ | 379,930,564 | 751.31 | % | ||||||||
| Current Liabilities | 423,697,343 | 43,656,963 | 380,040,380 | 870.51 | % | |||||||||||
| Working Capital (deficit) | $ | 6,801,298 | $ | 6,912,114 | $ | (110,816 | ) | (1.60 | )% | |||||||
Our working capital was $6,801,298 as of June 30, 2023, as compared to working capital of $6,912,114 as of December 31, 2022, a decrease in working capital of 110,816 or 1.60%. The decrease in working capital is primarily due to the increase in the advance from customers offsetting by the increase in other receivables.
Cash Flow from Operating Activities
Our net cash provided by operating activities was $28,077,623 for the six months ended June 30, 2023, as compared to $7,691,850 for the six months ended June 30, 2022, reflecting an increase of $20,385,773 or 265.03%. The increase was primarily due to the increase in advance from customers, accrued liabilities and other payables partially offset by the increase in other receivables, advance to suppliers, and the decrease in inventories, accrued liabilities and other payables during the six months ended June 30, 2023, as compared to six months ended June 30, 2022.
Cash Flow from Investing Activities
Our net cash used in investing activities was $111,672 for the six months ended June 30, 2023, as compared to that of $212,875 for the six months ended June 30, 2022, reflecting a decrease of $101,203 or 47.54%. The decrease in net cash used in investing activities was primarily due to the decrease in investment in construction in progress during the six months ended June 30, 2023, as compared to those items in the six months ended June 30, 2022.
25
Cash Flow from Financing Activities
Our net cash used in financing activities was $3,680,239 for the six months ended June 30, 2023, as compared to $776,804 of net cash used in financing activities for the six months ended June 30, 2022, representing an increase of $2,903,435 or 373.77%. The increase was primarily due to the repayment of loans from related parties, offset by proceeds received from issuance of the Company’s stock shares during the six months ended June 30, 2023.
Off-Balance Sheet Arrangements
As of June 30, 2023, 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 establish reserves when determined necessary. As of June 30, 2023, and December 31, 2022, the allowance for obsolete inventories was $0 and $36,299, respectively.
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, 2023, and 2022. 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, 2023, and December 31, 2022, was $7,846,534 and $7,734,862, respectively.
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. 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 3 to unaudited consolidated financial statements for the six months ending June 30, 2023, and 2022.
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, 2023, 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, 2022. These weaknesses have existed since our inception on June 28, 2010 and, as of June 30, 2023, 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
None.
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 | |
| 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: August 14, 2023 | By: | /s/ Caihong Qu |
| Name: | Caihong Qu | |
| Title: |
Chief Executive Officer and | |
|
(Principal Executive Officer, | ||
29
Exhibit 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Caihong Qu, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q 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: Aug 14, 2023 | ||
| By: | /s/ Caihong Qu | |
| Name: | Caihong Qu | |
| 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 quarterly report of Tengjun Biotechnology Corp. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Caihong Qu, 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: August 14, 2023 | ||
| By: | /s/ Caihong Qu | |
| Name: | Caihong Qu | |
| 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.
Consolidated Balance Sheets (Parentheticals) - $ / shares |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| 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 | 100,711,196 | 96,309,169 |
| Common stock, shares outstanding | 100,711,196 | 96,309,169 |
Consolidated Statements of Income and Comprehensive Income (Loss) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Income Statement [Abstract] | ||||
| Sales revenue, net | $ 51,290,462 | $ 8,516,646 | $ 55,574,576 | |
| Cost of goods sold | 10,170 | 3,438,949 | 531,818 | 3,809,013 |
| Gross Profit (Loss) | (10,170) | 47,851,513 | 7,984,828 | 51,765,563 |
| Selling and marketing expenses | 42,952,863 | 7,077,178 | 46,310,836 | |
| General and administrative expenses | 417,334 | 268,934 | 759,169 | 499,273 |
| Total operating expenses | 417,334 | 43,221,797 | 7,836,347 | 46,810,109 |
| Income (Loss) from operations | (427,504) | 4,629,716 | 148,481 | 4,955,454 |
| Interest income (expense), net | 9,540 | 7,397 | 21,432 | 7,421 |
| Other (expense) income, net | (51,000) | (74) | (56,480) | (74) |
| Income (Loss) before provision for income taxes | (468,964) | 4,637,039 | 113,433 | 4,962,801 |
| Provision for income taxes | (2,264) | 503,231 | 189,547 | 596,186 |
| Net income (loss) | (466,700) | 4,133,808 | (76,114) | 4,366,615 |
| Net income (loss) attributable to noncontrolling interest | (13,588) | 212,665 | 14,331 | 226,649 |
| Net income (loss) attributable to the Company | (453,112) | 3,921,143 | (90,445) | 4,139,966 |
| Net income (loss) | (466,700) | 4,133,808 | (76,114) | 4,366,615 |
| Other comprehensive income (loss): | ||||
| Foreign currency translation loss | (2,131,739) | (46,501) | (2,004,207) | (55,939) |
| Comprehensive income (loss) | (2,598,439) | 4,087,307 | (2,080,321) | 4,310,676 |
| Comprehensive income (loss) attributable to noncontrolling interests | (141,982) | 210,317 | (108,110) | 223,824 |
| Comprehensive income (loss) attributable to Tengjun stockholders | $ (2,456,457) | $ 3,876,990 | $ (1,972,211) | $ 4,086,852 |
| Net Loss Per Common Share: | ||||
| Net income (loss) per common share - basic and diluted (in Dollars per share) | $ 0 | $ 0.06 | $ 0 | $ 0.06 |
| Weighted average shares outstanding: | ||||
| Basic and diluted (in Shares) | 100,187,364 | 65,309,169 | 98,258,980 | 65,309,169 |
Consolidated Statements of Income and Comprehensive Income (Loss) (Parentheticals) - $ / shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Income Statement [Abstract] | ||||
| Net income (loss) per common share - Diluted | $ 0.00 | $ 0.06 | $ 0.00 | $ 0.06 |
| Weighted average shares outstanding, Diluted | 100,187,364 | 65,309,169 | 98,258,980 | 65,309,169 |
Consolidated Statements of Changes in Equity (Unaudited) - USD ($) |
Common Stock |
Additional Paid-in Capital |
Subscribed Stock |
Accumulated Profit (Deficit) |
Accumulated Other Comprehensive Loss |
Noncontrolling Interests |
Total |
|---|---|---|---|---|---|---|---|
| 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 | ||||||
| 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) | 218,823 | 13,984 | 232,807 | ||||
| Foreign currency translation | (8,961) | (477) | (9,438) | ||||
| 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 | ||||||
| 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 | ||||||
| Net income (loss) | 4,366,615 | ||||||
| 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 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 | ||||||
| Net income (loss) | 3,921,143 | 212,665 | 4,133,808 | ||||
| Foreign currency translation | (44,153) | (2,348) | (46,501) | ||||
| Balance at Dec. 31, 2022 | $ 96,309 | 3,868,599 | 2,751,828 | 8,159,037 | (420,376) | 517,140 | 14,972,537 |
| Balance (in Shares) at Dec. 31, 2022 | 96,309,169 | ||||||
| Balance at Mar. 31, 2023 | $ 99,309 | 6,865,612 | 29,582 | 8,521,704 | (298,796) | 551,012 | 15,768,423 |
| Balance (in Shares) at Mar. 31, 2023 | 99,309,169 | ||||||
| Issuance of common stock | $ 3,000 | 2,997,013 | (2,751,828) | 248,185 | |||
| Issuance of common stock (in Shares) | 3,000,000 | ||||||
| Common stock subscriptions received in advance | 29,582 | 29,582 | |||||
| Net income (loss) | 362,667 | 27,920 | 390,587 | ||||
| Foreign currency translation | 121,580 | 5,952 | 127,532 | ||||
| Balance at Dec. 31, 2022 | $ 96,309 | 3,868,599 | 2,751,828 | 8,159,037 | (420,376) | 517,140 | 14,972,537 |
| Balance (in Shares) at Dec. 31, 2022 | 96,309,169 | ||||||
| Balance at Jun. 30, 2023 | $ 100,711 | 8,988,779 | 0 | 8,068,592 | (2,302,142) | 409,030 | 15,264,970 |
| Balance (in Shares) at Jun. 30, 2023 | 100,711,196 | ||||||
| Net income (loss) | (76,114) | ||||||
| Balance at Mar. 31, 2023 | $ 99,309 | 6,865,612 | 29,582 | 8,521,704 | (298,796) | 551,012 | 15,768,423 |
| Balance (in Shares) at Mar. 31, 2023 | 99,309,169 | ||||||
| Balance at Jun. 30, 2023 | $ 100,711 | 8,988,779 | 0 | 8,068,592 | (2,302,142) | 409,030 | 15,264,970 |
| Balance (in Shares) at Jun. 30, 2023 | 100,711,196 | ||||||
| Issuance of common stock | $ 1,402 | 2,123,167 | (29,582) | 2,094,987 | |||
| Issuance of common stock (in Shares) | 1,402,027 | ||||||
| Net income (loss) | (453,112) | (13,588) | (466,700) | ||||
| Foreign currency translation | $ (2,003,346) | $ (128,394) | $ (2,131,740) |
Organization and Nature of Business |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| 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. (“Tengjun”).
Business Combination
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. Shandong 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 Tengjunxiang, 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”).
Unaudited Interim Financial Information
The accompanying unaudited interim consolidated financial statements and information have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the SEC’s regulations for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these financial statements contain all normal and recurring adjustments considered necessary to present fairly the Company’s financial position, results of operations, comprehensive income, cash flows, and stockholders’ equity for the periods presented.
These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on April 17, 2023. |
Liquidity |
6 Months Ended |
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Jun. 30, 2023 | |
| Liquidity [Abstract] | |
| LIQUIDITY | NOTE 2. LIQUIDITY
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has just started to generate revenues and turned around to be profitable since 2022. As of June 30, 2023, the Company had an accumulated profit of $8,068,592, working capital of $6,801,298, and cash of $28,077,623 provided by operating activities. As of June 30, 2022, the Company had an accumulated deficit of $6,228,771, and working capital deficit of $14,282,875, and cash balance of $6,759,713.
The Company’s ability to continue as a going concern will be dependent upon its ability to execute on its business plan, including the ability to generate revenue and the Company’s ability to raise additional capital. Although no assurances can be given as to the Company’s ability to deliver on its revenue plans or that unforeseen expenses may arise, management has evaluated the significance of the conditions as of June 30, 2023 and has concluded that due to the receipt of the net proceeds from the completion of the Initial Public Offering and cash provided by operating activities during the year of 2022 and the first quarter of the year 2023, the Company has sufficient cash on hand to satisfy its anticipated cash requirements for the next twelve months from the issuance of these financial statements. |
Summary of Significant Accounting Policies |
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| Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 3. 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. As of June 30, 2023, the Company’s estimates primarily consisted of the allowance for obsolete inventory and impairment assessment on fixed assets and other long-lived assets. These estimates required management’s judgment, and actual results could differ from these estimates.
Reclassification
Certain classifications have been made to the prior year’s 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 $72,272 and $416,911 as of June 30, 2023, and December 31, 2022, respectively. Based on management’s evaluation, no allowance for advances to suppliers was recorded as of June 30, 2023, and December 31, 2022.
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. Allowance for obsolete inventory as of June 30, 2023, and December 31, 2022, was $0 and $36,299, respectively.
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, 2023, and 2022. 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, 2023, and December 31, 2022, was $7,846,534 and $7,734,862, 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. Based on management’s evaluation, no impairment of long-live assets was recognized for the six months ended June 30, 2023, and 2022.
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 ranging 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. The Company is also engaged in the sale of certain nutraceutical 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. The selling and marketing expenses for the three months ended June 30, 2023, and 2022 were $0 and $42,952,863, respectively. The selling and marketing expenses for the six months ended June 30, 2023, and 2022 were $7,077,178 and $46,310,836, 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 with their cash in these bank accounts.
The Company generated total revenue of $0 and $8,516,646 during the three and six months ended June 30, 2023. No customer accounted for over 10% of total revenue during the three and six months ended June 30, 2023.
During the three and six months ended June 30, 2023, the Company had one supplier that accounted for 100% of its total purchase.
During the three and six months ended June 30, 2022, the Company had two major suppliers that accounted for over 10% of its total purchases.
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 the 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.
The following exchange rates were used to translate the amounts from RMB into United States dollars (“USD$”) for the prospective periods:
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 for 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. The Company current does not have any operating or financing leases that last for more than twelve months.
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 in two operating segments, dandelion teas and water purifier, all of which are located in the PRC. All of its revenues are derived from the PRC. All long-lived assets are located in PRC.
The Company’s sale of dandelion teas is affected by the dandelion plants’ life cycle. A dandelion plant’s life cycle generally consists of five main stages and its leaves, flowers, and roots are not ready for production of teas until May of each year. Therefore, if the Company does not have enough storage of the previous year’s dandelion ingredients for producing teas, it will have no sales for the first and second quarter. As a result, for the three and six months ended June 30, 2023, the Company had no sales of dandelion teas.
The following table shows the Company’s operations by business segment for the three and six months ended June 30, 2023, and 2022:
The following table shows the Company’s assets by business segment as of June 30, and December 31, 2022:
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.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which provides guidance on the acquirer’s accounting for acquired revenue contracts with customers in a business combination. The amendments require an acquirer recognizes and measures contract assets and contract liabilities acquired in a business combination at the acquisition date in accordance with ASC 606 as if it had originated the contracts. This guidance also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The new guidance is required to be applied prospectively to business combinations occurring on or after the date of adoption. This guidance is effective for the Company for the year ending March 31, 2024, and interim reporting periods during the year ending March 31, 2024. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on the financial position, results of operations and cash flows. |
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| INVENTORIES, NET | NOTE 4. INVENTORIES, NET
Inventories consisted of the following:
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Property, Plant, and Equipment, net |
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| PROPERTY, PLANT, AND EQUIPMENT, NET | NOTE 5. PROPERTY, PLANT, AND EQUIPMENT, NET
Property, plant, and equipment consisted of the following:
Depreciation expenses for the three months ended June 30, 2023, and 2022 were $32,157 and $79,830, respectively.
Depreciation expenses for the six months ended June 30, 2023, and 2022 were $57,577 and $163,941, respectively. |
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Other Receivable |
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| Other Receivable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTHER RECEIVABLE | NOTE 6. OTHER RECEIVABLE
Other receivable consisted of the following on June 30, 2023, and December 31, 2022:
During the year ended 31, 2022, the Company made loans to various individual sales agents in the aggregate amount of $41,775,015 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, 2023. These loans are unsecured and bear no interest. During the six months ending June 30, 2023, approximately $39,178,129 was repaid and the remaining $2,596,886 of the loan shall be repaid before December 31, 2023. |
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Accrued Liabilities and Other Payables |
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| Accrued Liabilities and Other Payables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCRUED LIABILITIES AND OTHER PAYABLES | NOTE 7. ACCRUED LIABILITIES AND OTHER PAYABLES
Accrued liabilities and other payables consisted of the following on June 30, 2023, and December 31, 2022:
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Income Tax |
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| Income Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAX | NOTE 8. 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 a 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 negative $2,264 and $503,231 for the three months ended June 30, 2023, and 2022. The Company had recorded income tax provision of $189,547 and $596,186 for the six months ended June 30, 2023, and 2022.
The following table summarizes the income from operations before income taxes by jurisdiction:
Provision for income tax expense (benefit) consists of the following:
The following table summarizes a reconciliation of income tax expense for operations, calculated at the U.S. statutory federal income tax rate of 21% to total income tax expense (benefit):
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, 2023, and December 31, 2022, 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 of USA would not be realized and have a 100% valuation allowance associated with its deferred tax assets. |
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Risks and Contingencies |
6 Months Ended |
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Jun. 30, 2023 | |
| Risks and Contingencies [Abstract] | |
| RISKS AND CONTINGENCIES | NOTE 9. RISKS AND CONTINGENCIES
Covid-19
The global outbreak of the COVID-19 pandemic is having a significant negative impact on the global economy, which has adversely affected the Company’s business and financial results. Starting in late January 2020, the COVID-19 pandemic triggered a series of lockdowns, social distancing requirements and travel restrictions that have significantly and negatively affected, and may continue to negatively affect, our businesses in China. The Company had suspended its normal business operations from early 2020 and did not generate any revenue in the year 2021. The COVID-19 pandemic also presented and may continue to present challenges to the Company’s business operations as well as the business operations of the Company’s merchants, business partners and other participants in the Company’s ecosystem, such as closure of offices and facilities, disruptions to or even suspensions of normal business and logistics operations, as well as restrictions on travel. It is not possible to determine the ultimate impact of the COVID-19 pandemic on the Company’s business operations and financial results, which is highly dependent on numerous factors, including the duration and spread of the pandemic and any resurgence of the COVID-19 pandemic in China or elsewhere, actions taken by governments, the response of businesses and individuals to the pandemic, the impact of the pandemic on business and economic conditions in China, consumer demand, the Company’s ability and the ability of sales agents, logistics service providers and other participants in the Company’s ecosystem to continue operations in areas affected by the pandemic. The COVID-19 pandemic may continue to adversely affect the Company’s business and results of operations.
Concentration Risk
For the water purifier business segment, the Company relied on one supplier that represented 100% of the total purchases, during the three and six months ended June 30, 2023. In the event of losing the one vendor without alternative providers, the Company’s water purifier business will be materially and adversely affected. |
Related Party Transactions and Balances |
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| Related Party Transactions and Balances [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RELATED PARTY TRANSACTIONS AND BALANCES | NOTE 10. 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 from related party represent advances to its related parties for working capital purpose and receivable from the related party for investment purpose.
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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Equity |
6 Months Ended |
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Jun. 30, 2023 | |
| Equity [Abstract] | |
| EQUITY | NOTE 11. EQUITY
Preferred Stock
The total number of preferred shares authorized that may be issued by the Company is 5,000,000 shares with par value of $0.001 per share.
As of June 30, 2023, and December 31, 2022, the Company had shares of its preferred stock issued and outstanding.
Common Stock
The total number of common shares authorized that may be issued by the Company was 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. As of June 30, 2023, the Company had a total of 79,519,994 restricted common stock shares and a total of 21,191,202 unrestricted common stock shares.
Common Stock Issued for Reverse Merger
On December 23, 2021, pursuant to the Share Exchange Agreement with Tengjunxiang (see Note 1), the Company issued 19,285,714 shares of its common stock to eleven Selling Shareholders of Tengjunxiang.
On July 7, 2022, the Company sold an aggregate of 25,000,000 shares of its common stock at a price of $0.10 per share to unrelated nine investors pursuant to the signed stock purchase agreements.
On October 4, 2022, the Company sold an aggregate of 6,000,000 shares of its common stock at a price of $0.05 per share, to two investors pursuant to the restricted stock agreements with the investors. Of a total of 6,000,000 shares of the common stock sold, 4,000,000 shares were sold to one of the two investors who was a former officer of the Company. As of June 30, 2023, all 6,000,000 common stock shares were issued and outstanding.
Common Stock Issued on Initial Closing of Public Offering
On January 9, 2023, the company conducted its initial closing for the public offering of its common stock (the “initial closing”) pursuant to the Company’s registration statement on Form S-1 initially filed with the SEC on July 22, 2022 and declared effective on November 4, 2022, whereby the Company sold 3,000,000 shares of common stock shares at $1.00 per share for total purchase price of $3,000,000 (the “Initial Closing Amount”) from the investors. The initial Closing amount equals to the minimum offering amount as set forth in the Registration Statement. As of June 30, 2023, all 3,000,000 common stock shares were issued and outstanding.
Additional Closing of Public Offering
On May 3, 2023, the Company conducted an additional closing of the public offering pursuant to the Company’s registration statement on Form S-1 initially filed with the SEC July 22, 2022, and declared effective on November 4, 2022, whereby the Company sold 1,402,027 shares of common stock shares at $1.00 per share for total purchase price of $1,402,027 from the investors. |
Subsequent Events |
6 Months Ended |
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Jun. 30, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 12. SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date on which the financial statements are available to be issued. All subsequent events requiring recognition as of June 30, 2023, have been incorporated into these financial statements and there is one subsequent event that requires disclosure in accordance with FASB ASC Topic 855, “Subsequent Events.”
Mr. Xianchang Ma, the Chief Executive Officer, Chief Financial Officer, and Director of the Company, passed away on August 3, 2023. Mr. Ma served on the Board of the Company since December 2019. The Company will update stockholders of further developments in this regard. |
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. As of June 30, 2023, the Company’s estimates primarily consisted of the allowance for obsolete inventory and impairment assessment on fixed assets and other long-lived assets. These estimates required management’s judgment, and actual results could differ from these estimates.
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| Reclassification | Reclassification Certain classifications have been made to the prior year’s 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 $72,272 and $416,911 as of June 30, 2023, and December 31, 2022, respectively. Based on management’s evaluation, no allowance for advances to suppliers was recorded as of June 30, 2023, and December 31, 2022. |
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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. Allowance for obsolete inventory as of June 30, 2023, and December 31, 2022, was $0 and $36,299, respectively. |
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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, 2023, and 2022. 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, 2023, and December 31, 2022, was $7,846,534 and $7,734,862, 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. Based on management’s evaluation, no impairment of long-live assets was recognized for the six months ended June 30, 2023, and 2022. |
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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 ranging 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. The Company is also engaged in the sale of certain nutraceutical 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. The selling and marketing expenses for the three months ended June 30, 2023, and 2022 were $0 and $42,952,863, respectively. The selling and marketing expenses for the six months ended June 30, 2023, and 2022 were $7,077,178 and $46,310,836, 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 with their cash in these bank accounts. The Company generated total revenue of $0 and $8,516,646 during the three and six months ended June 30, 2023. No customer accounted for over 10% of total revenue during the three and six months ended June 30, 2023. During the three and six months ended June 30, 2023, the Company had one supplier that accounted for 100% of its total purchase. During the three and six months ended June 30, 2022, the Company had two major suppliers that accounted for over 10% of its total purchases.
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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 the 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. The following exchange rates were used to translate the amounts from RMB into United States dollars (“USD$”) for the prospective periods:
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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 for 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. The Company current does not have any operating or financing leases that last for more than twelve months. |
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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 in two operating segments, dandelion teas and water purifier, all of which are located in the PRC. All of its revenues are derived from the PRC. All long-lived assets are located in PRC. The Company’s sale of dandelion teas is affected by the dandelion plants’ life cycle. A dandelion plant’s life cycle generally consists of five main stages and its leaves, flowers, and roots are not ready for production of teas until May of each year. Therefore, if the Company does not have enough storage of the previous year’s dandelion ingredients for producing teas, it will have no sales for the first and second quarter. As a result, for the three and six months ended June 30, 2023, the Company had no sales of dandelion teas. The following table shows the Company’s operations by business segment for the three and six months ended June 30, 2023, and 2022:
The following table shows the Company’s assets by business segment as of June 30, and December 31, 2022:
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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. In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which provides guidance on the acquirer’s accounting for acquired revenue contracts with customers in a business combination. The amendments require an acquirer recognizes and measures contract assets and contract liabilities acquired in a business combination at the acquisition date in accordance with ASC 606 as if it had originated the contracts. This guidance also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The new guidance is required to be applied prospectively to business combinations occurring on or after the date of adoption. This guidance is effective for the Company for the year ending March 31, 2024, and interim reporting periods during the year ending March 31, 2024. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on the financial position, results of operations and cash flows. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Straight-Line Method Over the Estimated Useful Lives of the Assets | Depreciation
for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets:
|
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| Schedule of Major Supplier that Accounted Total Purchases | During the three and six months ended June 30, 2022, the Company had
two major suppliers that accounted for over 10% of its total purchases.
|
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| Schedule of Exchange Rates were used to Translate | The following
exchange rates were used to translate the amounts from RMB into United States dollars (“USD$”) for the prospective periods:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Operations by Business Segment | The following
table shows the Company’s operations by business segment for the three and six months ended June 30, 2023, and 2022:
|
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| Schedule of Segment Assets | The following
table shows the Company’s assets by business segment as of June 30, and December 31, 2022:
|
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Inventories, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventories, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventories | Inventories
consisted of the following:
|
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Property, Plant, and Equipment, net (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant, and Equipment, net [Abstarct] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property, Plant, and Equipment | Property,
plant, and equipment consisted of the following:
|
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Other Receivable (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Receivable [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Other Receivable | Other receivable
consisted of the following on June 30, 2023, and December 31, 2022:
|
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Accrued Liabilities and Other Payables (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued Liabilities and Other Payables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accrued Liabilities and Other Payables | Accrued
liabilities and other payables consisted of the following on June 30, 2023, and December 31, 2022:
|
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Income Tax (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Income from Operations before Income Taxes | The following
table summarizes the income from operations before income taxes by jurisdiction:
|
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| Schedule of Reconciliation of Income Tax Expense for Operations | The following
table summarizes a reconciliation of income tax expense for operations, calculated at the U.S. statutory federal income tax rate of 21%
to total income tax expense (benefit):
|
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Related Party Transactions and Balances (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions and Balances [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Related Party with Transactions | The related
party of the company with whom transactions are reported in these financial statements are as follows:
|
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| Schedule of Due from Related Party | Due from related party:
|
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| Schedule of Due to Related Parties | Due to related parties:
|
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Organization and Nature of Business (Details) - CNY (¥) ¥ in Thousands |
1 Months Ended | ||
|---|---|---|---|
Dec. 23, 2021 |
Dec. 16, 2021 |
Dec. 15, 2021 |
|
| Organization and Nature of Business (Details) [Line Items] | |||
| Capital amount | ¥ 5,050 | ||
| Contributed amount | 94,950 | ||
| Share exchange agreement description | 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] | |||
| Capital amount | ¥ 100,000 | ||
| Restructuring transaction ownership, percentage | 94.95% |
Liquidity (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Liquidity [Abstract] | ||
| Accumulated profit | $ 8,068,592 | $ 6,228,771 |
| Working capital | 6,801,298 | 14,282,875 |
| Cash | $ 28,077,623 | $ 6,759,713 |
Summary of Significant Accounting Policies (Details) - Schedule of Major Supplier that Accounted Total Purchases - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Supplier A [Member] | ||||
| Summary of Significant Accounting Policies (Details) - Schedule of Major Supplier that Accounted Total Purchases [Line Items] | ||||
| Net purchase, Supplier | $ 143,818 | $ 524,289 | ||
| Percentage of total purchase | 100.00% | |||
| Supplier B [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% | |||
| Supplier C [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% | |||
Summary of Significant Accounting Policies (Details) - Schedule of Exchange Rates were used to Translate |
Jun. 30, 2023 |
Jun. 30, 2022 |
|---|---|---|
| Schedule of Exchange Rates were used to Translate [Abstract] | ||
| Period End Exchange Rate (RMB/USD) | 7.2688 | 6.6981 |
| Average Period Exchange Rate (RMB/USD) | 6.9294 | 6.4791 |
Summary of Significant Accounting Policies (Details) - Schedule of Operations by Business Segment - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Net revenue | ||||
| Total revenues, net | $ 51,290,462 | $ 8,516,646 | $ 55,574,576 | |
| Total cost of goods sold | 10,170 | 3,438,949 | 531,818 | 3,809,013 |
| Gross profit | ||||
| Gross profit | (10,170) | 47,851,513 | 7,984,828 | 51,765,563 |
| Total operating expenses | 417,334 | 43,144,400 | 7,836,346 | 46,688,616 |
| Income (loss) from operations | (427,504) | 4,707,113 | 148,482 | 5,076,947 |
| Dandelion teas [Member] | ||||
| Net revenue | ||||
| Total revenues, net | 51,444,665 | 54,908,343 | ||
| Water purifier [Member] | ||||
| Net revenue | ||||
| Total revenues, net | (154,203) | 8,516,646 | 666,233 | |
| Dandelion teas [Member] | ||||
| Net revenue | ||||
| Total cost of goods sold | 3,456,644 | 3,730,491 | ||
| Water purifier [Member] | ||||
| Net revenue | ||||
| Total cost of goods sold | 10,170 | (17,695) | 531,818 | 78,522 |
| Dandelion teas [Member] | ||||
| Gross profit | ||||
| Gross profit | 47,988,021 | 51,177,852 | ||
| Water purifier [Member] | ||||
| Gross profit | ||||
| Gross profit | (10,170) | (136,508) | 7,984,828 | 587,711 |
| Dandelion teas [Member] | ||||
| Gross profit | ||||
| Total operating expenses | 43,288,325 | 46,259,134 | ||
| Water purifier [Member] | ||||
| Gross profit | ||||
| Total operating expenses | 417,334 | (143,925) | 7,836,346 | 429,482 |
| Dandelion teas [Member] | ||||
| Gross profit | ||||
| Income (loss) from operations | 4,699,696 | 4,918,718 | ||
| Water purifier [Member] | ||||
| Gross profit | ||||
| Income (loss) from operations | $ (427,504) | $ 7,417 | $ 148,482 | $ 158,229 |
Summary of Significant Accounting Policies (Details) - Schedule of Segment Assets - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Schedule of Segment Assets [Abstract] | ||
| Total segment assets | $ 8,516,646 | $ 58,629,500 |
| Dandelion teas [Member] | ||
| Schedule of Segment Assets [Abstract] | ||
| Total segment assets | 8,326,875 | |
| Water purifier [Member] | ||
| Schedule of Segment Assets [Abstract] | ||
| Total segment assets | $ 8,516,646 | $ 50,302,625 |
Inventories, Net (Details) - Schedule of Inventories - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Schedule of Inventories [Abstract] | ||
| Raw materials | $ 257,146 | $ 266,725 |
| Work in process | 273,397 | 203,257 |
| Finished goods | 1,817,590 | 567,346 |
| Inventories, gross | 2,348,133 | 1,037,328 |
| Less: allowance for obsolete inventories | (36,299) | |
| Inventories, net | $ 2,348,133 | $ 1,001,028 |
Property, Plant, and Equipment, net (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Property, Plant, and Equipment, net [Abstarct] | ||||
| Depreciation expense | $ 32,157 | $ 79,830 | $ 57,577 | $ 163,941 |
Property, Plant, and Equipment, net (Details) - Schedule of Property, Plant, and Equipment - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Schedule of property, plant, and equipment [Abstract] | ||
| Property and equipment, gross | $ 1,921,421 | $ 1,574,718 |
| Less: Accumulated depreciation | (1,304,283) | (1,249,157) |
| Property and equipment, net | 617,138 | 325,561 |
| Buildings [Member] | ||
| Schedule of property, plant, and equipment [Abstract] | ||
| Property and equipment, gross | 13,827 | 14,431 |
| Machinery and equipment [Member] | ||
| Schedule of property, plant, and equipment [Abstract] | ||
| Property and equipment, gross | 974,880 | 619,839 |
| Office equipment [Member] | ||
| Schedule of property, plant, and equipment [Abstract] | ||
| Property and equipment, gross | 168,496 | 135,313 |
| Vehicles [Member] | ||
| Schedule of property, plant, and equipment [Abstract] | ||
| Property and equipment, gross | $ 764,218 | $ 805,135 |
Other Receivable (Details) - USD ($) |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2023 |
Jun. 30, 2023 |
|
| Other Receivable (Details) [Line Items] | |||
| Aggregate amount | $ 41,775,015 | ||
| Repaid loan amount | $ 39,178,129 | ||
| Forecast [Member] | |||
| Other Receivable (Details) [Line Items] | |||
| Repaid loan amount | $ 2,596,886 |
Other Receivable (Details) - Schedule of Other Receivable - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Schedule of Other Receivable [Abstract] | ||
| Loans to sales agents | $ 400,024,068 | $ 41,775,015 |
| Prepaid Expenses | 4,740 | |
| Security deposit | 5,600 | 5,600 |
| Other | 423 | |
| Total | $ 400,029,668 | $ 41,785,778 |
Accrued Liabilities and Other Payables (Details) - Schedule of Accrued Liabilities and Other Payables - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Schedule of Accrued Liabilities and Other Payables [Abstract] | ||
| Accrued local taxes | $ 25,198,322 | $ 22,796,102 |
| Advance from employees | (9,654) | 36,139 |
| Accrued payroll | 13,140 | 15,213 |
| Accrued professional fees | 274,779 | |
| Total | $ 25,201,808 | $ 23,122,233 |
Income Tax (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|---|
Jan. 01, 2008 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2018 |
Dec. 31, 2022 |
|
| Income Tax (Details) [Line Items] | |||||||
| U.S. statutory tax rate | 21.00% | 21.00% | |||||
| Applicable tax rate | 16.50% | ||||||
| Income tax rate | 25.00% | ||||||
| Tax rate of enterprise income | 25.00% | ||||||
| Tax provisions | $ 189,547 | $ 596,186 | |||||
| Valuation allowance tax assets | $ 100 | $ 100 | $ 100 | ||||
| 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 | $ 2,264 | $ 503,231 | |||||
Income Tax (Details) - Schedule of Income from Operations before Income Taxes - USD ($) |
6 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Schedule of Income from Operations Before Income Taxes [Abstract] | ||
| Total | $ (2,264) | $ 596,186 |
| United States [Member] | ||
| Schedule of Income from Operations Before Income Taxes [Abstract] | ||
| Total | ||
| China [Member] | ||
| Schedule of Income from Operations Before Income Taxes [Abstract] | ||
| Total | $ (2,264) | $ 596,186 |
Income Tax (Details) - Schedule of Reconciliation of Income Tax Expense for Operations |
6 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Schedule of Reconciliation of Income Tax Expense for Operations [Abstract] | ||
| Income tax expense at federal statutory rate | 21.00% | 21.00% |
| Increases/(decreases) due to: | ||
| Foreign tax rate differential | 4.10% | 4.10% |
| Change in valuation allowance | 0.50% | 0.50% |
| Effective tax rate | 12.00% | 12.00% |
Risks and Contingencies (Details) |
3 Months Ended | 6 Months Ended |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2023 |
|
| Supplier [Member] | ||
| Risks and Contingencies (Details) [Line Items] | ||
| Purchase rate | 100.00% | 100.00% |
Related Party Transactions and Balances (Details) - Schedule of Related Party with Transactions |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Xianchang Ma [Member] | |
| Schedule of related party with whom transaction [Abstract] | |
| Relationship with the Company | Major shareholder, CEO, director of the Company |
| Liuhong Liu [Member] | |
| Schedule of related party with whom transaction [Abstract] | |
| Relationship with the Company | Beneficial owner of the Company’s common stock |
| Pan Shi [Member] | |
| Schedule of related party with whom transaction [Abstract] | |
| Relationship with the Company | Beneficial owner of the Company’s common stock |
| Jin Tian [Member] | |
| Schedule of related party with whom transaction [Abstract] | |
| Relationship with the Company | Beneficial owner of the Company’s common stock |
| Qiuping Lu [Member] | |
| Schedule of related party with whom transaction [Abstract] | |
| Relationship with the Company | Shareholder, former director, and CEO |
Related Party Transactions and Balances (Details) - Schedule of Due from Related Party - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Schedule of Due from Related Party [Abstract] | ||
| Due from related party | $ 2,936,417 | $ 4,534,714 |
| Pan Shi [Member] | ||
| Schedule of Due from Related Party [Abstract] | ||
| Due from related party | 84,714 | 84,714 |
| Xianchang Ma [Member] | ||
| Schedule of Due from Related Party [Abstract] | ||
| Due from related party | $ 2,851,703 | $ 4,450,000 |
Related Party Transactions and Balances (Details) - Schedule of Due to Related Parties - USD ($) |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Schedule of Due to Related Parties [Abstract] | ||
| Due to related parties | $ 7,341,606 | $ 14,992,896 |
| Xianchang Ma [Member] | ||
| Schedule of Due to Related Parties [Abstract] | ||
| Due to related parties | 7,341,141 | 14,992,431 |
| Qiuping Lu [Member] | ||
| Schedule of Due to Related Parties [Abstract] | ||
| Due to related parties | 96 | 96 |
| Pan Shi [Member] | ||
| Schedule of Due to Related Parties [Abstract] | ||
| Due to related parties | 307 | 307 |
| Jin Tian [Member] | ||
| Schedule of Due to Related Parties [Abstract] | ||
| Due to related parties | $ 62 | $ 62 |