(Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) | (Zip Code) |
( |
(Registrant’s telephone number, including area code) |
N/A |
(Former name, former address and former fiscal year, if changed since last report) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
Page | ||||
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As of September 30, |
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As of December 31, |
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2023 |
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2022 |
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(Unaudited) |
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ASSETS |
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CURRENT ASSETS |
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Cash |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, net |
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Inventory, net |
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Prepayments |
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Other receivables and other current assets |
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Total current assets |
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NON-CURRENT ASSETS |
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Property, plant and equipment, net |
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Construction in progress |
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Land use rights, net |
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Operating lease right-of-use assets, net |
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Security deposits |
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Deferred financing costs |
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Total non-current assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES |
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Bank borrowings - current |
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Operating lease liabilities, current |
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Accounts and other payables and accruals |
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Taxes payable |
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Unearned revenue |
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Amounts due to related parties |
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Obligation under secured borrowing arrangement |
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- |
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Total current liabilities |
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Bank borrowings – non-current |
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Operating lease liabilities, – non-current |
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- |
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Convertible notes, net, non-current |
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- |
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Total non-current liabilities |
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TOTAL LIABILITIES |
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$ |
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$ |
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COMMITMENTS AND CONTINGENCIES |
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STOCKHOLDERS’ EQUITY |
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Preferred stock – Series A, $ |
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Common stock, $ |
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Subscription receivable |
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( |
) |
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( |
) |
Additional paid-in capital |
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Retained earnings |
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( |
) |
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Accumulated other comprehensive loss |
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( |
) |
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( |
) |
Total stockholders’ equity |
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( |
) |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
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$ |
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F-1 |
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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(Unaudited)
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(Unaudited)
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(Unaudited)
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(Unaudited)
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REVENUES |
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$ |
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$ |
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$ |
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$ |
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COST OF REVENUES |
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GROSS PROFIT |
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( |
) |
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OPERATING EXPENSES |
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Selling expenses |
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General and administrative expenses |
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Research and development expenses |
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Total operating expenses |
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INCOME FROM OPERATIONS |
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( |
) |
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( |
) |
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OTHER INCOME (EXPENSE) |
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Interest expense |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Amortization of debt discounts |
|
|
-
|
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( |
) |
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( |
) |
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( |
) |
Other income |
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Other expenses |
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( |
) |
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( |
) |
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|
Total other income (expenses), net |
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|
( |
) |
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( |
) |
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( |
) |
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( |
) |
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INCOME BEFORE TAXES |
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( |
) |
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( |
) |
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Income tax expense |
|
|
- |
|
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( |
) |
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( |
) |
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NET (LOSS) INCOME |
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( |
) |
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( |
) |
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Other comprehensive income: |
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Foreign currency translation adjustment |
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|
( |
) |
|
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( |
) |
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|
( |
) |
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( |
) |
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Total comprehensive (loss) income |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
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|
Basic and diluted earnings per share* |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
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Weighted average number of shares of common stock outstanding – basic* |
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Weighted average number of shares of common stock outstanding – diluted* |
|
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|
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|
F-2 |
|
|
Preferred Stock – Series A |
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|
Common Stock |
|
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|
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Accumulated |
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|
|||||||||||||||
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|
Number of shares* |
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Amount |
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|
Number of shares* |
|
|
Amount |
|
|
Subscription receivable |
|
|
Additional paid in capital |
|
|
Accumulated deficit s |
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|
other comprehensive loss |
|
|
Total |
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|||||||||
Balance, December 31, 2022 |
|
|
|
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|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
|
|
|
( |
) | |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2023 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Preferred Stock – Series A |
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
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|
|||||||||||||||
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|
Number of shares* |
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|
Amount |
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|
Number of shares* |
|
|
Amount |
|
|
Subscription receivable |
|
|
Additional paid in capital |
|
|
Accumulated deficit s |
|
|
other comprehensive loss |
|
|
Total |
|
|||||||||
Balance, June 30, 2023 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2023 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
Preferred Stock – Series A |
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
Number of shares* |
|
|
Amount |
|
|
Number of shares* |
|
|
Amount |
|
|
Subscription receivable |
|
|
Additional paid in capital |
|
|
Retained earnings |
|
|
Accumulated other comprehensive loss |
|
|
Total |
|
|||||||||
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Balance, December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Preferred Stock – Series A |
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
Number of shares* |
|
|
Amount |
|
|
Number of shares* |
|
|
Amount |
|
|
Subscription receivable |
|
|
Additional paid in capital |
|
|
Retained earnings |
|
|
Accumulated other comprehensive loss |
|
|
Total |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Balance, June 30, 2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2022 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
F-3 |
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(Unaudited) |
|
|
(Unaudited) |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
|
|
|
|
|
|
|
Changes in assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Other receivables |
|
|
|
|
|
|
( |
) |
Prepayments |
|
|
( |
) |
|
|
|
|
Inventory |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses |
|
|
|
|
|
|
|
|
Right of use assets |
|
|
( |
) |
|
|
|
|
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Accruals and other payables |
|
|
|
|
|
|
|
|
Unearned revenue |
|
|
|
|
|
|
( |
) |
Payroll payable |
|
|
|
|
|
|
( |
) |
Taxes payable |
|
|
( |
) |
|
|
|
|
Accrued interest |
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
|
|
( |
) |
Other assets |
|
|
|
|
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
(Payments for) proceeds from disposal equipment |
|
|
( |
) |
|
|
|
|
Payments for or transfer from construction |
|
|
- |
|
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
(Repayment of) proceeds from bank borrowings |
|
|
( |
) |
|
|
|
|
Amount received from secured borrowing arrangement |
|
|
|
|
|
|
- |
|
Amounts received from or (paid to) related party |
|
|
|
|
|
|
|
|
Net proceeds from issuance of convertible notes |
|
|
- |
|
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Cash at beginning of year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Supplemental of cash flow information |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
|
|
|
$ |
|
|
Cash paid for income taxes |
|
$ |
|
|
|
$ |
|
|
F-4 |
1. | ORGANIZATION AND BUSINESS |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-5 |
F-6 |
Balance sheet items, except for equity accounts | ||||||||
September 30, 2023 | RMB | HKD | ||||||
September 30, 2022 | RMB | HKD | ||||||
Income statement and cash flows items | ||||||||
For the nine months ended September 30, 2023 | RMB | HKD | ||||||
For the nine months ended September 30, 2022 | RMB | HKD |
F-7 |
Estimated useful lives (years) | ||||
Office and computer equipment |
Estimated useful lives (years) | ||||
Land use right |
F-8 |
Three Months Ended | ||||||||
September 30, | ||||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
Net ( loss ) income | $ | ( | ) | $ | ||||
Weighted average number of shares of common stock outstanding - basic* | ||||||||
Add: potentially dilutive effect of shares issuable upon conversion of notes | ||||||||
Add: potentially dilutive effect of shares issuable upon exercise of warrants | ||||||||
Weighted average number of shares of common stock outstanding - diluted* | ||||||||
Basic and diluted ( loss ) income per share* | $ | ( | ) | $ |
Nine Months Ended | ||||||||
September 30, | ||||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
Net ( loss ) income | $ | ( | ) | $ | ||||
Weighted average number of shares of common stock outstanding - basic* | ||||||||
Add: potentially dilutive effect of shares issuable upon conversion of notes | ||||||||
Add: potentially dilutive effect of shares issuable upon exercise of warrants | ||||||||
Weighted average number of shares of common stock outstanding - diluted* | ||||||||
Basic and diluted ( loss ) income per share* | $ | ( | ) | $ |
F-9 |
F-10 |
3. | ACCOUNTS RECEIVABLE, NET |
September 30, 2023 | December 31, 2022 | |||||||
Gross accounts receivable | $ | $ | ||||||
Less: Allowance for credit losses | ||||||||
$ | $ |
4. | OTHER RECEIVABLES AND OTHER CURRENT ASSETS |
September 30, 2023 | December 31, 2022 | |||||||
Export credit | $ | $ | ||||||
Deposit and other assets | ||||||||
$ | $ |
5. | INVENTORY, NET |
September 30, 2023 | December 31, 2022 | |||||||
Raw materials and work in progress | $ | $ | ||||||
Finished goods | ||||||||
Total | $ | $ | ||||||
less: Impairment | ||||||||
Inventories, net | $ | $ |
6. | EQUIPMENT, NET |
September 30, 2023 | December 31, 2022 | |||||||
Manufacturing equipment | $ | $ | ||||||
Office equipment | ||||||||
less: Accumulated depreciation | ||||||||
$ | $ |
7. | LAND USE RIGHTS, NET |
September 30, 2023 | December 31, 2022 | |||||||
Land use right | $ | $ | ||||||
less: Accumulated amortization | ||||||||
$ | $ |
F-11 |
8. | BANK BORROWINGS |
Bank | Loan period | Interest rate | Balance at September 30, 2023 | Balance at December 31, 2022 | ||||||||||||
Industrial and Commercial Bank of China | % | $ | $ | |||||||||||||
Industrial and Commercial Bank of China | % | |||||||||||||||
Bank of Communications | % | |||||||||||||||
Bank of Communications | % | |||||||||||||||
Bank of Communications | % | |||||||||||||||
Changzhou Changjiang Science and Technology Petty Loan Co., LTD | % | |||||||||||||||
Jiangnan Rural Commercial Bank | % | $ | $ | |||||||||||||
Jiangnan Rural Commercial Bank | % | |||||||||||||||
Bank of America | Prime rate + | % | ||||||||||||||
Total | $ | $ |
Bank | Loan period | Interest rate | Balance at September 30 , 2023 | Balance at December 31, 2022 | ||||||||||||
EIDL Loan | From | % | ||||||||||||||
Total | $ | $ |
F-12 |
|
9. |
BALANCES WITH RELATED PARTY |
|
1) |
Related party transactions |
|
2) |
Related party balances |
Accounts |
|
Name of Related Party |
|
|
Note |
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amount due from related party |
|
Lin Li, Chief Executive Officer and Chairman of the Board |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Amount due to related party |
|
Lin Li, Chief Executive Officer and Chairman of the Board |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
10. |
EQUITY |
|
11. |
CONVERTIBLE NOTES |
F-13 |
Purchaser | Date of Issuance | Security Type | Consideration | |||||||||
Hongyu Wang | US$ | |||||||||||
Sam Yan | US$ |
Convertible Notes | September 30, 2023 | |||
Convertible Notes – Face Value | $ | |||
Discount - Cash | ||||
Discount – Placement agent fees | ||||
Discount – Detachable warrants | ||||
Discount – Beneficial conversion feature | ||||
$ |
12. | INCOME TAXES |
F-14 |
For the three months ended September 30, 2023 | For the three months ended September 30, 2022 | |||||||
Current: | ||||||||
Federal | $ | $ | ( | |||||
State | - | - | ||||||
Foreign | - | ( ) | ||||||
Total current | $ | $ | ( ) | |||||
Deferred: | ||||||||
Federal | $ | - | $ | - | ||||
State | - | - | ||||||
Foreign | - | - | ||||||
Total deferred | $ | $ | ||||||
Total income tax expense | $ | $ | ( |
For the nine months ended September 30, 2023 | For the nine months ended September 30, 2022 | |||||||
Current: | ||||||||
Federal | $ | - | $ | |||||
State | ||||||||
Foreign | ||||||||
Total current | $ | $ | ||||||
Deferred: | ||||||||
Federal | $ | $ | - | |||||
State | - | |||||||
Foreign | - | |||||||
Total deferred | $ | $ | ||||||
Total income tax expense | $ | $ |
F-15 |
|
|
For the three months ended September 30, 2023 |
|
|
For the three months ended September 30, 2022 |
|
||
Income before income tax expense |
|
$ |
( |
) |
|
$ |
|
|
Computed tax benefit with statutory tax rate |
|
|
|
% |
|
|
|
% |
Income tax expense computed at statutory income tax rate |
|
|
( |
) |
|
|
|
|
Impact of different tax rates in other jurisdictions |
|
|
|
|
|
|
( |
|
Tax effect of non-deductible expenses |
|
|
|
|
|
|
( |
|
Total income tax expense |
|
$ |
|
|
|
$ |
( |
|
|
|
For the nine months ended September 30, 2023 |
|
|
For the nine months ended September 30, 2022 |
|
||
Income before income tax expense |
|
$ |
( |
) |
|
$ |
|
|
Computed tax benefit with statutory tax rate |
|
|
|
% |
|
|
|
% |
Income tax expense computed at statutory income tax rate |
|
|
( |
) |
|
|
|
|
Impact of different tax rates in other jurisdictions |
|
|
|
|
|
|
( |
|
Tax effect of non-deductible expenses |
|
|
|
|
|
|
|
|
Total income tax expense |
|
$ |
|
|
|
$ |
|
|
F-16 |
13. | CHINA CONTRIBUTION PLAN |
14. | OPERATING LEASE |
Assets/liabilities | September 30, 2023 | December 31, 2022 | ||||||
Assets | ||||||||
Operating lease right-of-use assets | $ | $ | ||||||
Liabilities | ||||||||
Operating lease liability - current | $ | ( | ) | $ | ||||
Operating lease liability - non-current | ( | ) | ||||||
Total lease liabilities | $ | ( | ) | $ |
F-17 |
Lease Cost | Classification | September 30, 2023 | December 31, 2022 | |||||||||
Operating lease expense | General and administrative expenses | $ | $ |
Maturity of Lease Liabilities | Operating Leases | |||
12 months ending December 31,2023 | ||||
2024 | $ | |||
2025 | ||||
2026 | ||||
Total lease payments | $ | |||
Less: interest | ( | ) | ||
Present value of lease payments | $ |
12 months ending December 31,2023 | ||||
2024 | $ | |||
2025 | ||||
2026 | ||||
Total lease payments | $ |
Lease Term and Discount Rate | September 30, 2023 | December 31, 2022 | ||||||
Weighted-average remaining lease term (years) | ||||||||
Operating leases | 2 . 92 | |||||||
Weighted-average discount rate (%) | ||||||||
Operating leases | % | % |
15. | CONCENTRATIONS AND CREDIT RISK |
(a) | Concentrations |
F-18 |
(b) | Credit risk |
(c) | Tax risk |
16. | CAPITAL COMMITMENTS |
17. | S TOCK SPLT |
18. | SECURED BORROWING ARRANGMENT |
1 9 . | UNRESTRICTED NET ASSETS |
As of September 30, | As of December 31, | |||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
Cash | ||||||||
All other current assets | ||||||||
Amounts due from subsidiaries | ||||||||
Amounts due from related party | ||||||||
Total current assets | ||||||||
All other non-current assets | ||||||||
Interests in a subsidiary | ||||||||
Total Assets | ||||||||
Liabilities and Stockholders’ Equity | - | |||||||
Convertible notes, net, current | ||||||||
All other current liabilities | ||||||||
Amounts due to subsidiaries | ||||||||
Amounts due to related party | ||||||||
Total current liabilities | ||||||||
Non-current liabilities | ||||||||
Total Liabilities | ||||||||
Stockholders’ Equity | ||||||||
Preferred stock – Series A, $ September 30, 2023 and December 31, 2022* | ||||||||
Common stock, $ September 30, 2023 and December 31, 2022* | ||||||||
Subscription receivable | ( | ) | ( | ) | ||||
Additional paid-in capital | ||||||||
Retained earnings | ( | ) | ||||||
Accumulated other comprehensive income loss | ( | ) | ( | ) | ||||
Total Stockholders’ Equity | ( | ) | ||||||
Total Liabilities and Stockholders’ Equity |
F-19 |
For the nine months ended September 30, | For the nine months ended September 30, | |||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
Revenue | ||||||||
Cost or revenues | ||||||||
Operating expenses | ||||||||
Income taxes | ||||||||
Loss – Parent only | ( | ) | ||||||
Income (loss) – Subsidiaries with unrestricted net assets | ( | ) | ||||||
(Loss) income – Subsidiaries with restricted net assets | ( | ) | ( | ) | ||||
Net ( loss ) income – Consolidated | ( | ) |
For the nine months ended September 30, | For the nine months ended September 30, | |||||||
2023 | 2022 | |||||||
(Unaudited) | ||||||||
Cash used in operating activities | ( | ) | ||||||
Cash (used in) provided by investing activities | ||||||||
Cash provided by financing activities | ||||||||
Effect of exchange rates on cash | ||||||||
Net cash flows | ( | ) | ||||||
Beginning cash balance | ||||||||
Ending cash balance |
(i) | Basis of presentation |
(ii) | Restricted Net Assets |
20 . | SUBSEQUENT EVENTS |
F-20 |
1 |
● | We may fail to innovate or offer new products which align with changing market and customer demand. |
● | Our business may face risks of clients’ default on payment. |
● | We may not manage our growth effectively, and our profitability may suffer. |
● | Our reputation and brand recognition is crucial to our business. Any harm to our reputation or failure to enhance our brand recognition may materially and adversely affect our business, financial condition and results of operations. |
● | Increases in labor costs and market price of raw materials may adversely affect our gross margin and results of operations. |
● | Certain of our products have historically faced significant competition both in the United States and Canada markets, and we have successfully competed against our competitors with our customer service, quality products and rapid fulfilment of customer orders. However, our business could be adversely affected by competitors who reduce prices, improve quality of the products they offer or take other competitive actions, which may reduce our customers’ purchases of products from us. |
● | Our business operations have been and may continue to be materially and adversely affected by the global supply chain disruption as a result of the COVID-19 pandemic. |
● | Rising inflation rate may adversely affect our results of operation. Recently, inflation has trended significantly higher than in prior periods, which may negatively impact our business. Ongoing labor shortages and surge of oil and gas price, driven in part by the COVID-19 pandemic, geopolitical issues and the war in Ukraine, continue to have adverse macroeconomics impact and may result in our cost overruns. In an effort to mitigate the impact, we have raised the price of products to cover increase in costs and slowed down investments on products with low profit-margins. |
2 |
3 |
Three Months Ended September 30, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Amount | of Revenue | Amount | of Revenue | |||||||||||||
Revenues | 2,160,258 | 100.00 | % | 5,480,966 | 100.00 | % | ||||||||||
Cost of revenues | 3,423,295 | 158.47 | % | 2,615,972 | 47.73 | % | ||||||||||
Gross profit | (1,263,037 | ) | (58.47 | )% | 2,864,994 | 52.27 | % | |||||||||
Operating expenses | ||||||||||||||||
Selling expenses | 193,236 | 8.95 | % | 253,484 | 4.62 | % | ||||||||||
General and administrative expenses | 354,902 | 16.43 | % | 1,510,515 | 27.56 | % | ||||||||||
Research and development expenses | 99,161 | 4.59 | % | 383,289 | 6.99 | % | ||||||||||
Finance Cost | - | - | - | - | ||||||||||||
Income from operations | (1,910,336 | ) | (88.43 | )% | 717,706 | 13.09 | % | |||||||||
Other Income (expenses) | ||||||||||||||||
Interest expense | (20,685 | ) | (0.96 | )% | (125,057 | ) | (2.28 | )% | ||||||||
Amortization of debt discounts | - | - | % | (223,566 | ) | ( 4.08 | )% | |||||||||
Other income | 134 | 0.01 | % | 4,056 | 0.07 | % | ||||||||||
Other expenses | (990,725 | ) | (45.86 | )% | 60,293 | 1.10 | % | |||||||||
Exchange loss | - | 0.00 | % | - | 0.00 | % | ||||||||||
Net (loss) income before taxes | ( 2,921,613 | ) | ( 135.24 | )% | 433,433 | 7.91 | % | |||||||||
Income tax benefit (expenses) | - | - | % | 65,867 | 1.20 | % | ||||||||||
Net (loss) income | (2,921,613 | ) | (135.24 | )% | 499,300 | 9.11 | % | |||||||||
Other comprehensive loss | ||||||||||||||||
Foreign currency translation adjustment | (717,044 | ) | (33.19 | )% | (2,422,834 | ) | (44.20 | )% | ||||||||
Total comprehensive (loss) income | (3,638,657 | ) | (168.44 | )% | (1,923,534 | ) | (35.09 | )% |
4 |
Three Months Ended | ||||||||
September 30, | ||||||||
2023 | 2022 | |||||||
Sales of products | $ | 2,135,258 | $ | 5,455,966 | ||||
Patent licensing | $ | 25,000 | $ | 25,000 | ||||
Total | $ | 2,160,258 | $ | 5,480,966 |
Three Months Ended | ||||||||||||||||||||||||
September 30, 2023 | September 30, 2022 | Fluctuation | ||||||||||||||||||||||
Amount | Proportion | Amount | Proportion | Amount | Proportion | |||||||||||||||||||
Salaries and Social Insurance | 98,493 | 50.97 | % | 82,861 | 32.69 | % | 15,632 | 18 . 87 | % | |||||||||||||||
Freight insurance | 12,038 | 6.23 | % | 71,252 | 28.11 | % | (59,214 | ) | ( 83.11 | )% | ||||||||||||||
Rent | 7,575 | 3.92 | % | 12,966 | 5.12 | % | (5,391 | ) | ( 41.58 | )% | ||||||||||||||
Advertising fee | 58,301 | 30.17 | % | 58,453 | 23.06 | % | ( 152 | ) | ( 0.26 | )% | ||||||||||||||
Travel fee | 16,829 | 8.71 | % | 27,952 | 11.03 | % | (11,123 | ) | ( 39.79 | )% | ||||||||||||||
Others | - | 0.00 | % | - | 0.0 0 | % | - | 0.0 0 | % | |||||||||||||||
Total selling expenses | 193,236 | 100.00 | % | 253,484 | 100.00 | % | ( 60 , 248 | ) | ( 23.77 | )% |
September 30, 2023 | September 30, 2022 | Fluctuation | ||||||||||||||||||||||
Amount | Proportion | Amount | Proportion | Amount | Proportion | |||||||||||||||||||
Salary and Social Insurance | 31,640 | 8.92 | % | 32,044 | 2.12 | % | ( 404 | ) | ( 1.26 | )% | ||||||||||||||
Service fees | 215,884 | 60.83 | % | 139,948 | 9.26 | % | 75,936 | ( 54.26 | )% | |||||||||||||||
Royalty fee | 5,772 | 1.63 | % | 6,036 | 0.4 0 | % | ( 264 | ) | ( 4.37 | )% | ||||||||||||||
Entertainment expenses | 6,088 | 1.72 | % | 21,184 | 1.40 | % | (15,096 | ) | ( 71.26 | )% | ||||||||||||||
Taxation | 20,382 | 5.74 | % | 24,669 | 1.63 | % | ( 4 , 287 | ) | ( 17.38 | )% | ||||||||||||||
Depreciation and amortization | 27,206 | 7.67 | % | 36,675 | 2.43 | % | (9,469 | ) | ( 25.82 | )% | ||||||||||||||
Bad debt | - | 0.00 | % | 1,192,840 | 78.97 | % | (1,192,840 | ) | ( 100.00 | )% | ||||||||||||||
Rent | 18,749 | 5.28 | % | ( 23,201 | ) | (1.54 | )% | 41,950 | ( 180.81 | )% | ||||||||||||||
Travel fee | 233 | 0.07 | % | 4,263 | 0. 28 | % | (4,030 | ) | ( 94.53 | )% | ||||||||||||||
Office expenses | 15,693 | 4.42 | % | 66,066 | 4.37 | % | (50,373 | ) | ( 76.25 | )% | ||||||||||||||
Other | 13,255 | 3.73 | % | 9,991 | 0.66 | % | 3,264 | 32.67 | % | |||||||||||||||
Total general and administrative expenses | 354,902 | 100.00 | % | 1,510,515 | 100.00 | % | (1,155,613 | ) | ( 76.50 | )% |
5 |
Nine Months Ended September 30, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Amount | of Revenue | Amount | of Revenue | |||||||||||||
Revenues | 9,436,881 | 100.00 | % | 19,807,551 | 100.00 | % | ||||||||||
Cost of revenues | 8,547,213 | 90.57 | % | 14,851,873 | 74.98 | % | ||||||||||
Gross profit | 889,668 | 9.43 | % | 4,955,678 | 25.02 | % | ||||||||||
Operating expenses | ||||||||||||||||
Selling expenses | 538,672 | 5.71 | % | 822,082 | 4.15 | % | ||||||||||
General and administrative expenses | 1,094,228 | 11.60 | % | 2,061,898 | 10.41 | % | ||||||||||
Research and development expenses | 609,476 | 6.46 | % | 1,299,301 | 6.56 | % | ||||||||||
Finance Cost | - | - | - | - | % | |||||||||||
Income from operations | (1,352,708 | ) | (14.33 | )% | 772,397 | 3.90 | % | |||||||||
Other Income (expenses) | ||||||||||||||||
Interest expense | (439,142 | ) | (4.65 | )% | (264,217 | ) | (1.33 | )% | ||||||||
Amortization of debt discounts | (645,576 | ) | (6.84 | )% | (285,210 | ) | ( 1.44 | )% | ||||||||
Other income | 681 | 0.01 | % | 12,840 | 0.06 | % | ||||||||||
Other expenses | (990,725 | ) | (10.50 | )% | 60,200 | 0.30 | % | |||||||||
Net (loss) income before taxes | (3,427,470 | ) | (36.32 | )% | 296,010 | 1.49 | % | |||||||||
Income tax expenses | (5,764 | ) | (0.06 | )% | (61,932 | ) | (0.31 | )% | ||||||||
Net (loss) income | (3,433,234 | ) | (36.38 | )% | 234,077 | (1.18 | )% | |||||||||
Other comprehensive loss | ||||||||||||||||
Foreign currency translation adjustment | (332,853 | ) | (3.53 | )% | (436,812 | ) | (2.21 | )% | ||||||||
Total comprehensive (loss) income | (3,766,087 | ) | (39.91 | )% | (202,735 | ) | (1.02 | )% |
6 |
Nine Months Ended | ||||||||
September 30, | ||||||||
2023 | 2022 | |||||||
Sales of products | $ | 9,361,881 | $ | 19,732,551 | ||||
Patent licensing | $ | 75,000 | $ | 75,000 | ||||
Total | $ | 9,436,881 | $ | 19,807,551 |
Nine Months Ended | ||||||||||||||||||||||||
September 30, 2023 | September 30, 2022 | Fluctuation | ||||||||||||||||||||||
Amount | Proportion | Amount | Proportion | Amount | Proportion | |||||||||||||||||||
Salaries and Social Insurance | 264,871 | 49.17 | % | 249,016 | 30.29 | % | 15,855 | 6.37 | % | |||||||||||||||
Freight insurance | 33,9940 | 6.30 | % | 362,130 | 44.05 | % | (328,190 | ) | ( 90.63 | )% | ||||||||||||||
Rent | 23,942 | 4.44 | % | 29,208 | 3.55 | % | (5,266 | ) | ( 18.03 | )% | ||||||||||||||
Advertising fee | 98,863 | 18.35 | % | 105,708 | 12.86 | % | (6,845 | ) | ( 6.48 | )% | ||||||||||||||
Travel fee | 117,014 | 21.72 | % | 76,020 | 9.25 | % | 40,994 | 53.93 | % | |||||||||||||||
Others | 42 | 0.01 | % | - | 0.00 | % | 42 | N/A | ||||||||||||||||
Total selling expenses | 538,672 | 100.00 | % | 822,082 | 100.00 | % | (283,410 | ) | ( 34.47 | )% |
Nine Months Ended | ||||||||||||||||||||||||
September 30, 2023 | September 30, 2022 | Fluctuation | ||||||||||||||||||||||
Amount | Proportion | Amount | Proportion | Amount | Proportion | |||||||||||||||||||
Salary and Social Insurance | 108,051 | 9.87 | % | 150,847 | 7.32 | % | (42,796 | ) | ( 28.37 | )% | ||||||||||||||
Service fees | 583,003 | 53.28 | % | 312,377 | 15.15 | % | 270,626 | 86.63 | % | |||||||||||||||
Royalty fee | 18,319 | 1.67 | % | 18,553 | 0.90 | % | (234 | ) | ( 1.26 | )% | ||||||||||||||
Entertainment expenses | 43,643 | 3.99 | % | 64,553 | 3.13 | % | (20,910 | ) | ( 32.39 | )% | ||||||||||||||
Taxation | 40,930 | 3.74 | % | 48,558 | 2.36 | % | (7,628 | ) | ( 15.71 | )% | ||||||||||||||
Depreciation and amortization | 96,334 | 8.80 | % | 114,375 | 5.55 | % | (18,041 | ) | ( 15.77 | )% | ||||||||||||||
Bad debt | - | - | 1,192,840 | 57.85 | (1,192,840 | ) | ( 100.00 | ) % | ||||||||||||||||
Rent | 39,171 | 3.58 | % | - | - | % | 39,171 | N/A | ||||||||||||||||
Travel fee | 33,967 | 3.10 | % | 22,187 | 1.08 | % | 11,780 | 53.09 | % | |||||||||||||||
Office expenses | 63,829 | 5.83 | % | 98,751 | 4.79 | % | (34,922 | ) | ( 35.36 | )% | ||||||||||||||
Other | 66,981 | 6.12 | % | 38,857 | 1.88 | % | 28,124 | 72.38 | % | |||||||||||||||
Total general and administrative expenses | 1,094,228 | 100.00 | % | 2,061,898 | 100.00 | % | (967,670 | ) | ( 46.93 | )% |
7 |
Three Months Ended September 30 | ||||||||
2023 | 2022 | |||||||
Net cash used in operating activities | $ | ( 384 , 590 | ) | $ | (1,438,674 | ) | ||
Net cash provided by investing activities | $ | - | $ | 948,585 | ||||
Net cash provided by or financing activities | $ | 1,175,672 | $ | 471,630 |
Nine Months Ended September 30 | ||||||||
2023 | 2022 | |||||||
Net cash (used in) operating activities | $ | ( 1, 447 ,563 | ) | $ | (5,220,616 | ) | ||
Net cash (used in) investing activities | $ | (7,642 | ) | $ | 282,633 | |||
Net cash provided by or (used in) financing activities | $ | 1,291,788 | $ | 1,843,913 |
8 |
9 |
Exhibit No. | Description | |
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 herewith. |
** | Furnished herewith. This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
10 |
Northann Corp. | ||
Date: November 20, 2023 | By: | /s/ Lin Li |
Name: | Lin Li | |
Title: | Chief Executive Officer | |
(Principal Executive Officer) | ||
Date: November 20, 2023 | By: | /s/ David M. Kratochvil |
Name: | David M. Kratochvil | |
Title: | Chief Financial Officer | |
(Principal Accounting and Financial Officer) |
11 |