Exhibit 99.2
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Mingteng International Corporation Inc.
F-1
MINGTENG INTERNATIONAL CORPORATION INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Other receivables-bank acceptance notes | ||||||||
| Advances to suppliers | ||||||||
| Other receivables | ||||||||
| Inventories, net | ||||||||
| Total current assets | ||||||||
| Non-current Assets | ||||||||
| Property and equipment, net | ||||||||
| Other assets | ||||||||
| Deferred offering costs | ||||||||
| Total non-current assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current Liabilities | ||||||||
| Short-term loans | $ | $ | ||||||
| Accounts payable | ||||||||
| Advances from customers | ||||||||
| Other liabilities | ||||||||
| Amounts due to related parties | ||||||||
| Total current liabilities | ||||||||
| Non-current Liabilities | ||||||||
| Deferred tax liabilities, net | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders’ Equity: | ||||||||
| Ordinary shares (Par value US$ | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserves | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
F-2
MINGTENG INTERNATIONAL CORPORATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| For the Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Selling expenses | ||||||||
| General and administrative expenses | ||||||||
| Research and development expenses | ||||||||
| Total operating expenses | ||||||||
| (Loss) income from operations | ( | ) | ||||||
| Other income (expenses): | ||||||||
| Government subsidies | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Other income, net | ||||||||
| Total other income (expenses), net | ( | ) | ||||||
| (Loss) income before income taxes | ( | ) | ||||||
| Benefit from (provision for) income taxes | ( | ) | ||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Comprehensive income (loss) | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Foreign currency translation loss | ( | ) | ( | ) | ||||
| Total comprehensive (loss) income | $ | ( | ) | $ | ||||
| (Losses)/earnings per share | ||||||||
| – Basic and diluted | $ | ( | ) | $ | ||||
| Weighted average number of ordinary shares outstanding | ||||||||
| – Basic and diluted | ||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
F-3
MINGTENG INTERNATIONAL CORPORATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
| Ordinary shares | Additional paid-in | Statutory | Retained | Accumulated other comprehensive | Total shareholders’ | |||||||||||||||||||||||
| Shares | Amount | capital | reserves | earnings | loss | equity | ||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Net income for the period | - | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance as of June 30, 2023 (Unaudited) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Ordinary shares | Additional paid-in | Statutory | Retained | Accumulated other comprehensive | Total shareholders’ | |||||||||||||||||||||||
| Shares | Amount | capital | reserves | earnings | loss | equity | ||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Shares issued in connection with initial public offering | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance as of June 30, 2024 (Unaudited) | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
F-4
MINGTENG INTERNATIONAL CORPORATION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of right-of-use assets | ||||||||
| (Recovery of) provision for doubtful accounts | ( | ) | ||||||
| Deferred income tax | ( | ) | ||||||
| Loss on disposal of property and equipment | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( | ) | ( | ) | ||||
| Other receivables-bank acceptance notes | ( | ) | ( | ) | ||||
| Advances to suppliers | ( | ) | ||||||
| Other receivables | ( | ) | ||||||
| Inventories, net | ( | ) | ( | ) | ||||
| Accounts payable | ||||||||
| Advances from customers | ( | ) | ||||||
| Payroll payable | ||||||||
| Taxes payable | ( | ) | ( | ) | ||||
| Amounts due to related parties | ( | ) | ||||||
| Principal payments under operating lease obligations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Deposit made for potential equity-method investment | ( | ) | ||||||
| Prepayments for non-current assets | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from short-term loans | ||||||||
| Repayment of short-term loans | ( | ) | ||||||
| Proceeds from initial public offering, net | ||||||||
| Payments of deferred offering costs | ( | ) | ( | ) | ||||
| Principal payments under finance lease obligations | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of foreign exchange rate change on cash and cash equivalents | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at the beginning of the period | ||||||||
| Cash and cash equivalents at the end of the period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
F-5
MINGTENG INTERNATIONAL CORPORATION INC.
NOTES TO UNAUDTITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – BUSINESS DESCRIPTION
Mingteng International Corporation Inc. (“Mingteng International” or the “Company”) is a holding company incorporated under the laws of the Cayman Islands on September 20, 2021. It is a holding company with no business operations.
On November 4, 2021, Mingteng International formed its wholly-owned subsidiary, Mingteng International Hong Kong Group Limited (“Mingteng HK”) in Hong Kong. On September 26, 2022, Mingteng HK formed its wholly-owned subsidiary, Wuxi Ningteng Intelligent Manufacturing Co., Ltd. (“Ningteng WFOE”) in the People’s Republic of China (“PRC”).
Wuxi Mingteng Mould Technology Co., Ltd. (“Wuxi Mingteng Mould”) is a limited liability company incorporated on December 15, 2015 under the laws of the PRC. Wuxi Mingteng Mould is a wholly owned subsidiary of Ningteng WFOE and is our operating entity. Wuxi Mingteng Mould is primarily engaged in providing clients with comprehensive and personalized mold services and solutions in the PRC, including mold design and development; mold production, repair, testing and adjustment.
On April 22, 2024, Mingteng International completed
its initial public offering on the Nasdaq Stock Market, issuing
Mingteng International’s current corporate structure is as follows:
Mingteng International conducts all of its operations in China through its operating subsidiary, Wuxi Mingteng Mould.
F-6
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The interim results of operations are not necessarily indicative of results to be expected for any other interim period or for a full year. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of its financial position and operating results have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the Mingteng International’s audited consolidated financial statements and the related notes thereto for the fiscal years ended December 31, 2023 and 2022, included in Form 20-F filed on May 15, 2024.
Principles of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All transactions and balances between the Company and its subsidiaries have been eliminated upon consolidation.
A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power, has the power to appoint or remove the majority of the members of the board of directors, to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
Use of estimates
In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. Significant items subject to such estimates and assumptions include, but are not limited to, the assessment of the allowance for doubtful accounts, the allowance for inventory obsolescence, useful lives of property and equipment, the recoverability of long-lived assets, provision necessary for contingent liabilities. Actual results could differ from those estimates.
Cash and cash equivalents
Cash includes cash on hand and demand deposits
in accounts maintained with commercial banks. The Company considers all highly liquid investments that are readily convertible to known
amounts of cash and with original maturities from the date of purchase of three months or less to be cash equivalents. The Company maintains
its bank accounts in Mainland China, Hong Kong and Cayman Islands. On May 1, 2015, China’s
new Deposit Insurance Regulation became effective, pursuant to which banking financial institutions, such as commercial banks, established
in the PRC are required to purchase deposit insurance for deposits in RMB and in foreign currency placed with them. The insurance limit
is RMB
Accounts receivable, net
Accounts receivable is stated at the original amount less an allowance for credit loss. Accounts receivable is recognized in the period when the Company has provided services to its customers and when its right to consideration is unconditional. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. The Company has developed a current expected credit loss (“CECL”) model based on historical experience, the age of the accounts receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers. The Company considers historical collection rates, current financial status, macroeconomic factors, and other industry-specific factors when evaluating for current expected credit losses. Accounts receivable balances are written off after all collection efforts have been exhausted.
F-7
Current expected credit losses
On January 1, 2023, the Company adopted ASC 326, Financial Instruments—Credit Losses, which requires recognition of allowances upon origination or acquisition of financial assets at an estimate of expected credit losses over the contractual term of the financial assets (the current expected credit loss or the “CECL” model) using the modified retrospective transition method.
The Company’s financial assets subject to the CECL model mainly include accounts receivable and other receivables which are recorded as a component of the prepaid expenses and other current assets.
For accounts receivable, the Company estimates the loss rate based on historical experience, the age of the receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers. For other receivables, the Company reviews other receivables on a periodic basis and makes allowances on an individual basis when there is doubt as to the collectability. Other receivables are written off after all collection efforts have been exhausted.
The cumulative effect from the adoption as of June 30, 2024 was immaterial to the unaudited condensed consolidated financial statements. For the six months ended June 30, 2024 and years ended December 31, 2023, allowance of credit losses made by the Company were mainly generated from accounts receivable.
Bank acceptance notes
Receivable generally due within six months and with specific payment terms and definitive due dates, are comprised of the notes issued by some customers to pay certain outstanding receivable balances to the Company. Bank acceptance notes do not bear interest. From time to time, the Company endorse bank acceptance notes receivable to its suppliers as the payment of material purchase. The bank acceptance notes receivable is considered sold and derecognized from balance sheets when they are transferred beyond the reach of the Company and its creditors, the purchaser has the right to pledge or exchange the note receivables, and the Company has surrendered control over the transferred note receivable. If the Company does not surrender control, the cash received from the purchaser is account for as a secured borrowing.
Advances to suppliers
Advances to suppliers consist of balances paid to suppliers for services that have not been provided or received. The Company reviews its advances to suppliers on a periodic basis and makes general and specific allowances when there is doubt as to the ability of a supplier to provide goods or services to the Company or refund an advance. As of June 30, 2024 and December 31, 2023, there was no allowance of advances to suppliers.
Inventories, net
Inventories consist of raw materials, work in
process and finished goods, and are stated at the lower of cost or net realizable value. Cost is determined using the weighted average
method. The Company periodically evaluates its inventories and will record an allowance for inventories that are either slow-moving, may
not be saleable or whose cost exceeds its net realizable value. As of June 30, 2024 and December 31, 2023, the Company made a provision
for inventory obsolescence of $
Property and equipment, net
Property and equipment are carried at cost and are depreciated on the straight-line basis over the estimated useful lives of the underlying assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation and amortization are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of its property and equipment, when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
F-8
| Category | Estimated useful lives | |
| Electronic equipment | ||
| Vehicles | ||
| Machinery and equipment |
Impairment of long-lived assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment loss, which is the excess of carrying amount over the fair value of the assets, using the expected future discounted cash flows. The Company did not record any impairment charge for the six months ended June 30, 2024 and 2023.
Deferred offering costs
Deferred offering costs are expenses directly related to the Company’s initial public offering (“IPO”). The deferred offering costs were offset against the IPO proceeds and reclassified to additional paid-in capital upon completion of the IPO in April 2024.
Fair value of financial instruments
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 825-10 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| ● | Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| ● | Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs derived from or corroborated by observable market data. |
| ● | Level 3 - inputs to the valuation methodology are unobservable. |
Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, other receivables-bank acceptance notes, prepayments, non-current, short-term loans, accounts payable, amounts due to related parties approximate their recorded values due to their short-term maturities. The fair value of longer-term leases approximates their recorded values as their stated interest rates approximate the rates currently available.
The Company’s non-financial assets, such as property and equipment would be measured at fair value only if they were determined to be impaired.
F-9
Leases
The Company accounts for leases following FASB ASC 842, Leases (“Topic 842”).
Leases are classified at the inception date as
either a financial lease or an operating lease. A lease is a financial lease if any of the following conditions exists: (a) ownership
is transferred to the lessee by the end of the lease term, (b) there is a bargain purchase option, (c) the lease term is at least
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of obligations under operating lease liabilities, and non-current obligations under long-term portion of operating lease liabilities, on the Company’s consolidated balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expenses for minimum lease payments are recognized on a straight-line basis over the lease term.
The initial underlying lease contracts was expired
during the fiscal year ended December 31, 2023, and the related ROU assets were fully amortized and lease liabilities satisfied. A new
office space lease contracts was signed during the six months ended June 30, 2024, of which the lease term was less than 12 months according
to the agreement, and the management’s consideration not to extend the lease term assessment at inception, the Company elected to
treat the agreement as a short-term lease. The principal payments for lease obligations amounted to approximately $
Revenue recognition
The Company accounts for revenue recognition under FASB ASC 606, Revenue from Contracts with Customers (“ASC 606”). In accordance with ASC 606, Revenue from Contracts with Customers, the Company recognizes revenue to represent the transfer of products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of the product or the benefit of the services transfers to the customer. Under the guidance of ASC 606, the Company is required to (a) identify the contract with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract and (e) recognize revenue when (or as) the Company satisfies its performance obligations.
The Company’s main business income is divided into three categories, one is mold production, that is, contracts are signed to sell molds widely used in automobile, valve, water pump and other industries according to the customer’s needs. Second is mold repair, which provides customers with mold repair service, or provides sales of mold components. Last is providing customers with machining services, using the Company’s remaining capacity to provide customers with external processing services. Revenues represent the amount of consideration that the Company is entitled to in exchange for the transfer of promised goods or services in the ordinary course of the Company’s activities and is recorded net of value-added tax (“VAT”). Consistent with the criteria of ASC 606, the Company recognizes revenue when the performance obligation in a contract is satisfied by transferring the control of promised goods or services to the customer.
Mold production:
The Company signs contracts with customers and provides products according to the sales contract or sales list. The clients check the quantity and quality of products received, and then issue a confirmation as the proof of payment. Certain clients may also test the finished products as part of the confirmation process. Revenue is recognized when the Company receives the confirmation of product acceptance.
F-10
The Company provides design and production services according to the sales contract or lists. The Company then transports and installs the finished products when clients give their order.
The design services are inseparable from project sales. A mold production contract may include two or more machine components, but all components are customized according to customer requirements. These components need to be combined under the guidance of design plans to produce qualified products to meet the needs of clients. Therefore, these services are highly interdependent and are never transferred to the customer on their own. Customers do not have the option to purchase these services separately principally due to the customization of each project. Accordingly, these services are not considered separate performance obligations and no revenue is associated with these services under ASC 606 until the point in time when the project is complete and client confirmation is received.
The Company provides maintenance services and according to the contracts and the clients do not have the option to purchase these services separately. The promised warranty does not provide the clients with a service in addition to the assurance that the product complies with agreed-upon contract specifications and is considered an assurance warranty. The maintenance services and the warranty are not considered separate performance obligations and no revenue is associated with these services under ASC 606. Historically, the Company has not experienced material costs for quality assurance and, therefore, does not believe an accrual for these costs are necessary.
Mold repair:
The Company signs contracts with customers and provides repair services according to the contract or list and charges a certain fee. Revenue is recognized only after the repair service has passed the customer’s inspection.
Machining services:
The Company signs contracts with customers and provides machining services and charges a certain fee. The Company identifies the fulfillment of its obligation when transferring the product and issuing the VAT invoice to customers at which time revenue is recognized.
For the six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Mold production | $ | $ | ||||||
| Mold repair | ||||||||
| Machining services | ||||||||
| Total | $ | $ | ||||||
Cost of revenues
Cost of revenues consists of the cost of raw material, direct labor and manufacturing costs. During the production process, production department records the material consumption quantity and production hours of each order. Raw material cost is allocated according to the consumption of the material. Direct labor and manufacturing costs are allocated according to the production hours.
Research and development expenses
Research and development (“R&D”) expenses include costs directly attributable to the conduct of R&D projects, including the cost of salaries and use of raw materials. Such projects include the research and development of adjustable casting molds for automotive parts. All costs associated with research and development are expensed as incurred.
F-11
General and administrative expenses
General and administrative expenses consist primarily of costs of salary and welfare for our general administrative and management staff, consulting fee, depreciation expenses, professional fees, meals and entertainment, office expenses, business travel expenses, additional expenses for public offering, and other miscellaneous expenses incurred in connection with general operations.
Government subsidies
Government subsidies refer to the monetary or non-monetary assets that a company obtains from the government for free. The government subsidies received by Wuxi Mingteng Mould mainly include high-tech enterprise recognition bonus. The Company believes that these government subsidies are not related to daily business activities and are treated as other income.
Government subsidies for the six months ended
June 30, 2024 and 2023, were and $
Income taxes
Mingteng International’s subsidiaries in the PRC and Hong Kong are subject to the income tax laws of the PRC and Hong Kong. No taxable income was generated outside the PRC for the six months ended June 30, 2024 and 2023. The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows 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 future deductibility is uncertain.
The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes”, prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. It also provides guidance on the recognition of income tax assets and liabilities, classification accounting for interest and penalties associated with tax positions, years open for tax examination, accounting for income taxes in interim periods and income tax disclosures. There were no material uncertain tax positions as of June 30, 2024 and December 31, 2023.
Value added tax
Sales revenue represents the invoiced value of
goods, net of VAT. The VAT is based on gross sales price and VAT rate is approximately
Earnings per share
Mingteng International computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS are computed by dividing income available to ordinary shareholders of Mingteng International by the weighted average ordinary shares outstanding during the period. Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised and converted into ordinary shares.
F-12
Warrant
The accounting treatment of warrants issued is determined pursuant to the guidance provided by ASC 470, Debt, ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging (“ASC 815”), as applicable. Each feature of freestanding financial instruments including, without limitation, any rights relating to subsequent dilutive issuances, equity sales, rights offerings, conversions, optional redemptions and dividends are assessed with determinations made regarding the proper classification in the Company’s consolidated financial statements.
Comprehensive income
Comprehensive income consists of two components, net income and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains, and losses that under U.S. GAAP are recorded as an element of stockholders’ equity but are excluded from net income. Other comprehensive income (loss) consists of foreign currency translation adjustments from the Company’s PRC subsidiaries not using U.S. dollar as its functional currency.
Foreign currency translation
The functional currency of Mingteng International’s operations in the PRC is the Chinese Yuan or Renminbi (“RMB”). The consolidated financial statements are translated to U.S. dollars using the period end rates of exchange for assets and liabilities, equity is translated at historical exchange rates, and average rates of exchange (for the period) are used for revenues and expenses and cash flows. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income/loss. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction 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.
All of the Company’s revenue transactions are transacted in its functional currency. The Company does not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.
| June 30, | December 31, | Six months ended June 30, | ||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Foreign currency | ||||||||||||||||
| RMB:1USD | ||||||||||||||||
Statement of cash flows
In accordance with ASC 230, Statement of Cash Flows, cash flows from the Company’s operations are formulated based upon the local currencies, and then translated at average translation rates for the periods. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
Reclassification
Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications had no impact on net loss or and financial position.
F-13
Significant risks
Currency risk
A majority of the Company’s expense transactions are denominated in RMB and a significant portion of Mingteng International and its subsidiaries’ assets and liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies. In the PRC, certain foreign exchange transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China (“PBOC”). Remittances in currencies other than RMB by the Company in China must be processed through the PBOC or other Company foreign exchange regulatory bodies which require certain supporting documentation in order to affect the remittance.
The Company maintains certain bank accounts in
the PRC. On May 1, 2015, China’s new Deposit Insurance Regulation came into effect, pursuant to which banking financial institutions,
such as commercial banks, established in the PRC are required to purchase deposit insurance for deposits in RMB and in foreign currency
placed with them. Such Deposit Insurance Regulation would not be effective in providing complete protection for the Company’s accounts,
as its aggregate deposits are much higher than the compensation limit, which is RMB
Other than the deposit insurance mechanism in the PRC mentioned above, the Company’s bank accounts are not insured by Federal Deposit Insurance Corporation insurance or other insurance.
Total bank deposit balance was $
Concentration and credit risk
Currently, all the Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic, and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, accounts receivable, other receivables-bank acceptance notes. A portion of the Company’s sales are credit sales which are to the customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk with respect to trade accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.
Interest rate risk
Fluctuations in market interest rates may negatively affect our financial condition and results of operations. The Company is exposed to floating interest rate risk on cash deposit and floating rate borrowings, and the risks due to changes in interest rates is not material. The Company has not used any derivative financial instruments to manage our interest risk exposure.
Other uncertainty risk
The Company’s major operations are conducted in the PRC. Accordingly, the political, economic, and legal environments in the PRC, as well as the general state of the PRC’s economy may influence the Company’s business, financial condition, and results of operations.
F-14
Employee benefits
Pursuant to the relevant laws and regulations
of the PRC, the Company’s subsidiaries in mainland China participate in a defined contribution of basic pension insurance in the
social insurance system established and managed by government organizations. The Company makes contributions to basic pension insurance
plans based on the applicable benchmarks and rates stipulated by the government. Basic pension insurance contributions are charged to
costs of revenues and operating expenses as the related services are rendered by the employees. Employee social benefits included as costs
of revenues and operating expenses were RMB
Recent accounting pronouncements
The Company is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, EGC can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in us including the additional required disclosures when adopted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topics 740): Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. The ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial position, statements of operations and comprehensive income (loss) and cash flows.
NOTE 3 – ACCOUNTS RECEIVABLE, NET
| As of June 30, | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Trade accounts receivable | $ | $ | ||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
F-15
| For The Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Balance at the beginning of the period | $ | ( | ) | $ | ( | ) | ||
| Reduction (addition) during the six months period | ( | ) | ||||||
| Foreign exchange difference | ||||||||
| Balance at end of the June 30 | $ | ( | ) | $ | ( | ) | ||
NOTE 4 – INVENTORIES, NET
| As of June 30, | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Raw material | $ | $ | ||||||
| Work in process | ||||||||
| Goods in transit | ||||||||
| Inventories provision | ( | ) | ( | ) | ||||
| Total inventories | $ | $ | ||||||
The goods in transit to customers are still included in the inventory until the customer inspected and confirmed acceptance. Once we obtain the customer’s acceptance notice, we will recognize the corresponding revenue and cost of sales.
NOTE 5 – OTHER ASSETS
| As of June 30, | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Prepayments, non-currents assets | $ | $ | ||||||
| Deposit made for potential equity-method investment (note a) | ||||||||
| Total other assets | $ | $ | ||||||
Note a:
F-16
NOTE 6 – PROPERTY AND EQUIPMENT, NET
| As of June 30, | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Mechanical equipment | $ | $ | ||||||
| Electronic equipment | ||||||||
| Vehicles | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
For the six months ended June 30, 2024 and 2023,
depreciation expense amounted to $
NOTE 7 – LEASES
On January 31, 2022, Wuxi Mingteng Mould entered
into a new lease agreement with Wuxi Longsheng Boiler Factory (the “Landlord”) for office and production space. The lease
period was from February 1, 2022 to December 31, 2023, with an annual rental of RMB
On May 1, 2023, Wuxi Mingteng Mould entered into
a new lease agreement with the Landlord on a temporary basis for office and production space. The lease period was from May 1, 2023 to
December 31, 2023, with a monthly rental of RMB
On January 1, 2024, Wuxi Mingteng Mould entered
into a new lease agreement with Wuxi Longsheng Boiler Factory (the Landlord) for office and production space. The lease period was from
January 1, 2024 to December 31, 2024, with an annual rental of RMB
The lease agreement with the Landlord neither grants a purchase option nor transfers ownership of the space. The lease term is not a major part of the remaining economic life of the underlying asset and the present value of the sum of the lease payments is insubstantial compared with the fair value of the underlying asset. Wuxi Mingteng Mould considered the lease as operating lease.
On February 23, 2021, Wuxi Mingteng Mould entered
into a lease agreement with Risheng International Leasing Co., Ltd. for manufacturing equipment. The lease period is from February 24,
2021 to January 24, 2023. The advance payment for the equipment is RMB
F-17
On April 14, 2021, Wuxi Mingteng Mould entered
into a lease agreement with Risheng International Leasing Co., Ltd. for manufacturing equipment. The lease period is from April 15, 2021
to March 15, 2023. The advance payment for the equipment is RMB
On September 1, 2023, Wuxi Mingteng Mould entered
into a new lease agreement with Wanjie Construction Machinery Business Department, for office and production space. The lease period was
from September 1, 2023 to August 31, 2024, with a monthly rental of RMB
On January 8, 2024, Wuxi Mingteng Mould entered
into a new lease agreement with Wuxi Mingyu Metal Fence Co., Ltd., for production space. The lease period was from January 8, 2024 to
January 7, 2025, with a monthly rental of RMB
The total lease expenses incurred for the six
months ended June 30, 2024 and 2023 were approximately $
| For The Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Operating lease right-of-use assets | ||||||||
| Balance at beginning of the period | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ||||||
| Foreign exchange difference | ( | ) | ||||||
| Balance at end of the period | $ | $ | ||||||
| For The Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Finance lease right-of-use assets | ||||||||
| Balance at beginning of the period | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ||||||
| Less: Exercised purchase option | ( | ) | ||||||
| Foreign exchange difference | ( | ) | ||||||
| Balance at end of the period | $ | $ | ||||||
F-18
As agreed in the finance leasing contract, the leased machine will be purchased after the end of the lease term, with the purchase amount included in the last lease payment. The Company accounted for this lease as a finance lease and is amortizing the right-of-use asset over the useful life of the underlying asset which is ten years. After the end of the lease term, the Company converted the right-of-use asset into fixed assets based on their net value.
| For The Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Operating lease liabilities | ||||||||
| Balance at beginning of the period | $ | $ | ||||||
| Less: Principal payments under operating lease obligations | ( | ) | ||||||
| Impact of VAT | ||||||||
| Foreign exchange difference | ( | ) | ||||||
| Balance at end of the period | $ | $ | ||||||
| For The Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Finance lease liabilities | ||||||||
| Balance at beginning of the period | $ | $ | ||||||
| Less: Principal payments under financing lease obligations | ( | ) | ||||||
| Interest expense on finance lease | ||||||||
| Foreign exchange difference | ||||||||
| Balance at end of the period | $ | $ | - | |||||
NOTE 8 – SHORT-TERM LOANS
On March 23, 2022, Wuxi Mingteng Mould entered
into an additional short-term loan agreement with Jiangsu Wuxi Rural Commercial Bank with amount of RMB
On March 4, 2022, Wuxi Mingteng Mould entered
into a secured short-term loan agreement with Bank of Jiangsu with amount of RMB
On January 31, 2023, Wuxi Mingteng Mould entered
into a short-term loan agreement with Wuxi Branch of Bank of China with amount of RMB
On February 28, 2023, Wuxi Mingteng Mould entered
into an additional unsecured short-term loan agreement with Bank of Jiangsu with amount of RMB
On February 21, 2024, Wuxi Mingteng Mould entered
into an additional unsecured short-term loan agreement with Bank of Jiangsu with principal amount of RMB
F-19
NOTE 9 – OTHER LIABILITIES
| As of June 30, | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Corporate income taxes | $ | $ | ||||||
| Value added tax | ||||||||
| Construction tax | ||||||||
| Individual income tax | ||||||||
| Payroll payable | ||||||||
| Others | ||||||||
| Total other liabilities | $ | $ | ||||||
NOTE 10 – RELATED PARTY TRANSACTIONS
| Name of related parties | Relationship with the Company | |
| Yingkai Xu | ||
| Jingzhu Ding | ||
| Wuxi Kaiteng Mold Factory |
| For the Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Purchase from related parties: | ||||||||
| Wuxi Kaiteng Mold Factory | $ | $ | ||||||
| Subtotal | $ | $ | ||||||
The Company purchases processing services from Wuxi Kaiteng Mold Factory.
| As of June 30, | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Amounts due to related parties | ||||||||
| Wuxi Kaiteng Mold Factory | $ | $ | ||||||
| Jingzhu Ding | ||||||||
| Subtotal | $ | $ | ||||||
F-20
Amounts due to Jingzhu Ding represented the loan from Jingzhu Ding to supplement the working capital of the Company. The loan was signed with series of contracts and is non-interest bearing. The loan term is indefinite. According to the contracts, the loan will be repaid when working capital is sufficient.
Amounts due to Wuxi Kaiteng Mold Factory represents amounts provided for processing services that the Company purchased from Wuxi Kaiteng Mold Factory.
NOTE 11 – SHAREHOLDERS’ EQUITY
Mingteng International is authorized to issue
In accordance with the relevant PRC laws and regulations,
Mingteng International’s subsidiaries in the PRC are required to provide for certain statutory reserves, which are appropriated
from net profits as reported in accordance with PRC accounting standards. Mingteng International’s subsidiaries in the PRC are required
to allocate at least
On April 22, 2024, Mingteng International completed
its initial public offering on the Nasdaq Stock Market, issuing
In connection with the initial public offering and the subsequent over-allotment offering, the Company also issued warrants to underwriters for Ordinary shares purchase option.
From April 2024 to May 2024, in connection with
the initial public offering and the subsequent over-allotment offering, warrants were granted to underwriters to purchase up to
As of June 30, 2024, there were
| Ordinary Shares Number Outstanding | Weighted Average Exercise Price | Contractual Years | ||||||||||
| Warrants Outstanding as of December 31, 2023 | $ | |||||||||||
| Warrants Exercisable as of December 31, 2023 | ||||||||||||
| Warrants Granted | ||||||||||||
| Warrants Exercises | - | |||||||||||
| Warrants Expired | - | |||||||||||
| Warrants Outstanding as of June 30, 2024 | ||||||||||||
| Warrants Exercisable as of June 30, 2024 (unaudited) | $ | |||||||||||
F-21
NOTE 12 – OTHER INCOME, NET
| For the Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Waste sales | $ | $ | ||||||
| Loss on disposal of assets | ( | ) | ||||||
| Other, net | ||||||||
| Total other income | $ | $ | ||||||
NOTE 13 – TAXES
Corporation Income Tax (“CIT”)
The Company is subject to income taxes on an entity basis on income derived from the location in which each entity is domiciled.
Mingteng International is incorporated in Cayman Islands as an offshore holding company and is not subject to tax on income or capital gains under the laws of the Cayman Islands.
Mingteng International HK is incorporated in Hong Kong as a holding company with no activities. Under the Hong Kong tax laws, an entity is not subject to income tax if no revenue is generated in Hong Kong.
Under the Enterprise Income Tax (“EIT”)
Law of the PRC, domestic enterprises and foreign investment enterprises (the “FIE”) are usually subject to a unified
| For the Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Current | ||||||||
| Cayman Islands | $ | $ | ||||||
| Hong Kong | ||||||||
| China | ||||||||
| Deferred | ||||||||
| Cayman Islands | ||||||||
| Hong Kong | ||||||||
| China | ( | ) | ( | ) | ||||
| Income tax (benefit)/provision | $ | ( | ) | $ | ||||
F-22
| For the Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| PRC statutory tax rate | % | % | ||||||
| Additional deduction of research and development expenses | % | ( | )% | |||||
| Non-deductible expenses | % | % | ||||||
| Effect of PRC preferential tax rate | ( | )% | ( | )% | ||||
| Loss from non-PRC entities not subject to PRC tax | ( | )% | % | |||||
| Effective tax rate | % | % | ||||||
For the six months ended June 30, 2024 and 2023,
the tax saving as the result of the favorable tax rate amounted to $ and $
Deferred tax assets and liabilities
| As of June 30, | As of December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| Allowance for doubtful accounts | $ | $ | ||||||
| Inventories valuation allowance | ||||||||
| Depreciation | ( | ) | ( | ) | ||||
| Net deferred tax (liabilities) assets | $ | ( | ) | $ | ( | ) | ||
| For the six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Balance at beginning of the period | $ | ( | ) | $ | ||||
| Current period reduction (addition) | ( | ) | ||||||
| Foreign exchange difference | ( | ) | ||||||
| Balance at end of the period | $ | ( | ) | $ | ( | ) | ||
NOTE 14 – CONCENTRATION OF MAJOR CUSTOMERS AND SUPPLIERS
For the six months ended June 30, 2024, two customers
accounted for approximately
F-23
As of June 30, 2024, two customers accounted
for approximately
For the six months ended June 30, 2024, four suppliers
accounted for approximately
As of June 30, 2024, none of the suppliers accounted
for more than 10% of the Company’s accounts payable balance. As of December 31, 2023, one supplier accounted for approximately
NOTE 15 – COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. Amounts accrued, as well as the total amount of possible losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the consolidated financial statements. As of June 30, 2024, the Company has no outstanding litigation.
Foreign currency risk
The RMB is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into foreign currencies. The value of the RMB is subject to changes in central government policies and international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.
Employment agreements
On September 20, 2022, Mingteng International
entered into an employment agreement with our Chief Executive Officer, Yingkai Xu, for a term of
On September 20, 2022, Mingteng International entered into an employment
agreement with our Chief Financial Officer, Fengting Yin, for a term of
F-24
NOTE 16 – SEGMENT REPORTING
ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments.
The Company uses the management approach to determine reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”) for making decisions, allocating resources and assessing performance. The Company’s CODM has been identified as the CEO, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company.
Based on management’s assessment, the Company
determined that it has only
All of the Company’s long-lived assets are located in the PRC. All of the Company’s products and services are sold or provided in the PRC.
NOTE 17 – SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the unaudited condensed consolidated financial statements were issued and identified the following transactions for financial disclosure purposes.
On August 22, 2024, the Company received a government
subsidy of RMB
On September 1, 2024, Wuxi Mingteng Mould entered
into a new lease agreement with Wanjie Construction Machinery Business Department, for office and production space.
F-25