UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K

 

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD FROM ______ TO ______

 

COMMISSION FILE NUMBER 000-26731

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION

(Exact name of Registrant as specified in its charter)

 

British Virgin Islands		001-38605
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

11-F, Building #12, Sunking Plaza, Gaojiao Road Hangzhou, Zhejiang People’s Republic of China		311122
(Address of principal executive offices)		(Zip Code)

  

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE: (86) 010-53607082

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary shares, no par value		GTEC		The Nasdaq Stock Market LLC

 

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

NONE

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed be Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting Company, or an emerging growth Company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting Company,” and “emerging growth Company” in Rule 12b-2 of the Exchange Act.

 

	Large accelerated filer	☐	Accelerated filer	☐
	Non-accelerated filer	☒	Smaller reporting Company	☒
			Emerging growth Company	☒

 

If an emerging growth Company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of June 28, 2019, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the ordinary shares outstanding held by non-affiliates of the registrant, computed by reference to the closing sales price for the ordinary shares of $3.9, as reported on the Nasdaq Capital Market, was approximately $39.08 million.

 

As of March 31, 2021, there were 10,498,127 shares of the registrant’s ordinary shares outstanding. 

 

 

 

TABLE OF CONTENTS 

 

		Page
Forward-Looking Statements
PART I
ITEM 1.	BUSINESS	1
ITEM 1A.	RISK FACTORS	14
ITEM 1B.	UNRESOLVED STAFF COMMENTS	14
ITEM 2.	PROPERTIES	14
ITEM 3.	LEGAL PROCEEDINGS	14
ITEM 4.	MINE SAFETY DISCLOSURES	14
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	15
ITEM 6.	SELECTED FINANCIAL DATA	16
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	17
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	28
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	28
ITEM 9A.	CONTROLS AND PROCEDURES	30
ITEM 9B.	OTHER INFORMATION	31
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	32
ITEM 11.	EXECUTIVE COMPENSATION	38
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	40
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	41
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	41
PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	42
ITEM 16.	FORM 10-K SUMMARY	44
	SIGNATURES	45

 

 

Cautionary Note Regarding Forward Looking Statements

 

This Annual Report on Form 10-K contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. These statements, which express management’s current views concerning future business, events, trends, contingencies, financial performance, or financial condition, appear at various places in this report and use words like “aim,” “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “see,” “seek,” “should,” “strategy,” “strive,” “target,” “will,” and “would” and similar expressions, and variations or negatives of these words. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include the following:

 

	●	The availability and adequacy of our cash flow to meet our requirements;
	●	Economic, competitive, demographic, business, and other conditions in our local and regional markets;
	●	Changes or developments in laws, regulations, or taxes in our industry;
	●	Actions taken or omitted to be taken by third parties including our suppliers and competitors, as well as legislative, regulatory, judicial, and other governmental authorities;
	●	Competition in our industry;
	●	The loss of or failure to obtain any license or permit necessary or desirable in the operation of our business;
	●	Changes in our business strategy, capital improvements, or development plans;
	●	The Company’s ability to devise and implement effective internal controls and procedures;
	●	The availability of additional capital to support capital improvements and development; and
	●	Global or national health concerns, including the outbreak of epidemic or contagious diseases such as the COVID-19 epidemic; and
	●	Other risks identified in this Report and in our other filings with the Securities and Exchange Commission or the SEC.

 

This Report should be read completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this Report are made as of the date of this Report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Financial Presentation

 

We operate on a December 31 fiscal year end. Unless otherwise indicated, references in this Annual Report on Form 10-K to an individual year means the fiscal year ended December 31. For example, “2020” refers to the fiscal year ended December 31, 2020.

 

 

PART I

 

ITEM 1.

BUSINESS

 

General

 

The registrant was incorporated on December 28, 2017 as a British Virgin Islands Company with limited liability. The registrant was incorporated as a blank check company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more target businesses. Following the Business Combination (as described and defined below) in October 2019, the registrant changed its name from Greenland Acquisition Corporation to Greenland Technologies Holding Corporation (“Greenland”).

 

Greenland serves as the parent Company for the primary operating Company, Zhongchai Holding (Hong Kong) Limited, a holding Company formed under the laws of Hong Kong on April 23, 2009 (“Zhongchai Holding”). Through Zhongchai Holding and other subsidiaries, Greenland develops and manufactures traditional transmission products for material handling machineries in the People’s Republic of China (PRC), as well as develops electric industrial vehicles, which are expected to be produced in the near future.

 

Greenland, through its subsidiaries, is:

 

	●	a leading developer and manufacturer of transmission products for material handling machineries in China; and
	●	since December 2020, a developer of electric industrial vehicles, with our first model of electric industrial vehicle expected to be available in the third or fourth quarter of 2021.

 

Greenland’s transmission products are key components for forklift trucks, used in manufacturing and logistic applications such as factories, workshops, warehouses, fulfilment centers, shipyards, and seaports. Forklifts play an important role in logistics for many enterprises across different industries in the PRC and around the globe. Generally, industries with the largest demand for forklifts are transportation, warehousing logistics, electrical machinery, and automobile.

 

Greenland has experienced an increase in demand for forklifts in the manufacturing industry in the PRC, as its revenue increased from approximately $52.40 million in the fiscal year of 2019 to $66.86 million in the fiscal year of 2020. The increased revenue of approximately $14.46 million was primarily due to the fact that demand for our products has returned to normal and continued to grow. Based on the revenues in the fiscal year ended December 31, 2020 and 2019, Greenland believes that it is one of the major developers and manufacturers of transmission products for small and medium-sized forklift trucks in China.

 

Greenland’s transmission products are used in 1-ton to 15-tons forklift trucks, some with mechanical shift and some with automatic shift. Greenland sells these transmission products directly to forklift-truck manufacturers. In the fiscal year ended December 31, 2020 and 2019, Greenland sold an aggregate of more than 108,913 and 83,567 sets of transmission products, respectively, to more than 100 forklift manufacturers in the PRC.

 

In December 2020, Greenland launched a new division to focus on the electric industrial vehicle market, a market that Greenland intends to develop to diversify its product offerings. With this new division, Greenland plans to develop and deploy the next generation of industrial vehicles. Greenland plans to establish a new facility on the east coast of the U.S. and start producing electric industrial vehicles between the third and fourth quarter of 2021.

 

 

Significant Activities since Inception

 

Initial Public Offering

 

On July 27, 2018, we consummated our initial public offering of 4,400,000 units, including a partial exercise by the underwriters of their over-allotment option in the amount of 400,000 units. Each unit consists of one ordinary share, no par value, one warrant to purchase one-half of one ordinary share and one right to receive one-tenth of one ordinary share upon the consummation of our initial business combination, pursuant to a registration statement on Form S-1. Warrants must be exercised in multiples of two warrants, and each two warrants are exercisable for one ordinary share at an exercise price of $11.50 per share. The units were sold in our initial public offering at an offering price of $10.00 per unit, generated $44,000,000 (before underwriting discounts and offering expenses) in gross proceeds.

 

Simultaneously with the consummation of our initial public offering, we completed a private placement of 282,000 units, issued to Greenland Asset Management Corporation (the “Sponsor”) and Chardan Capital Markets, LLC, which generated $2,820,000 in gross proceeds.

 

Business Combination

 

On October 24, 2019, we consummated our business combination with Zhongchai Holding (the “Business Combination”) after a special meeting, where the shareholders of Greenland considered and approved, among other matters, a proposal to adopt a share exchange agreement (the “Share Exchange Agreement”), dated as of July 12, 2019, among (i) Greenland, (ii) Zhongchai Holding, (iii) the Sponsor in the capacity as the purchaser representative (the “Purchaser Representative”), and (iv) Cenntro Holding Limited, the sole member of Zhongchai Holding (the “Zhongchai Equity Holder” or the “Seller”).

 

Pursuant to the Share Exchange Agreement, Greenland acquired from the Seller all of the issued and outstanding equity interests of Zhongchai Holding in exchange for 7,500,000 newly issued ordinary shares, no par value of Greenland, to the Seller (the “Exchange Shares”). As a result, the Seller became the controlling shareholder of Greenland, and Zhongchai Holding became a directly and wholly owned subsidiary of Greenland. The Business Combination was accounted for as a reverse merger effected by the Share Exchange Agreement, where Zhongchai Holding is considered the acquirer for accounting and financial reporting purposes.

 

The Business Combination was accounted for as a reverse recapitalization (the “Recapitalization Transaction”) in accordance with Accounting Standard Codification (“ASC”) 805, Business Combinations. For accounting and financial reporting purposes, Zhongchai Holding is considered the acquirer based on the following facts and circumstances:

 

	●	Zhongchai Holding’s operations comprise the ongoing operations of the combined entity;
	●	The officers of the newly combined company consist of Zhongchai Holding’s executives, including the Chief Executive Officer, Chief Financial Officer, and General Counsel; and
	●	The former shareholders of Zhongchai Holding own a majority voting interests in the combined entity.

 

As a result of Zhongchai Holding being the accounting acquirer, the financial reports filed with the SEC by the Company subsequent to the Business Combination are prepared “as if” Zhongchai Holding is the predecessor and legal successor to the Company. The historical operations of Zhongchai Holding are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of Zhongchai Holding prior to the Business Combination; (ii) the combined results of Zhongchai Holding and Greenland following the Business Combination in October 2019; (iii) the assets and liabilities of Zhongchai Holding at their historical cost, and (iv) Greenland’s equity structure for all periods presented. Zhongchai Holding received 7,500,000 shares of Greenland in exchange for all the share capital, which is reflected retroactively to December 31, 2017 and will be utilized for calculating earnings per share in all prior periods. No step-up basis of intangible assets or goodwill was recorded in the Business Combination transaction, which is consistent with the treatment of the transaction as a reverse recapitalization of Zhongchai Holding. 

 

Incorporation of Greenland Technologies Corp.

 

On January 14, 2020, Greenland Technologies Corp. was incorporated under the laws of the state of Delaware (“Greenland Tech”). Greenland Tech is a wholly-owned subsidiary of the registrant. We aim to use Green Tech as the US operation site for the Company in order to promote sales of our robotic products for the North American market in the near future.

 

 

Corporate Structure

 

The following diagram illustrates the current corporate structure of Greenland, including the jurisdiction of formation and ownership interest of each of its subsidiaries.

 

 

Greenland was incorporated on December 28, 2017 as a British Virgin Islands Company with limited liability. As a result of the consummation of the Business Combination, Greenland serves as the parent Company for Zhongchai Holding.

 

Zhongchai Holding was incorporated in Hong Kong on April 23, 2009. From April 23, 2009 to November 1, 2011, Zhongchai Holding was a subsidiary of Equicap, Inc., a Nevada corporation with its stock quoted on the OTC Markets until July 29, 2011. 

 

Greenland Technologies Corporation was incorporated in the state of Delaware on January 14, 2020 as a wholly owned subsidiary of Greenland (“Greenland Tech”). The Company aims to use it as its U.S. operation site to promote sales of electric engineering vehicles, including electric forklifts, electric loading vehicles, electric digging vehicles, and other products for the North American market in the near future. Greenland Tech currently does not conduct any business activities.

 

Zhejiang Zhongchai Machinery Co., Ltd. (“Zhejiang Zhongchai”), an 89.47% owned subsidiary of Zhongchai Holding, was incorporated in the PRC on November 21, 2005 and engages in the business of designing, manufacturing, and selling transmission products mainly for forklift trucks. The remaining 10.53% of Zhejiang Zhongchai’s capital stock is owned by Xinchang County Jiuxin Investment Management Partnership (LP) (“Jiuxin”), an entity owned by Mengxing He, director and general manager of Zhejiang Zhongchai and legal representative, executive director, and general manager of Shengte (as defined below).

 

Hangzhou Greenland Energy Technologies Co., Ltd., formerly known as Hangzhou Greenland Robotic Co., Ltd. prior to November 6, 2020 (“Hangzhou Greenland”), a wholly-owned subsidiary of Zhongchai Holding, was incorporated in the PRC on August 9, 2019 and engages in the business of research and development of electric engineering vehicles, including electric forklifts, electric loading vehicles, electric digging vehicles, and other products. Hangzhou Greenland is also committed to product supply chain integration and overseas sales.

 

Zhejiang Shengte Transmission Machinery Co., Ltd. (“Shengte”), a PRC Company incorporated on February 24, 2006, has been a wholly-owned subsidiary of Zhejiang Zhongchai since May 21, 2007. Shengte was engaged in the business of manufacturing and selling of gears used in Zhejiang Zhongchai’s transmission products. In 2019, Shengte ceased its business operations with most of its assets transferred to Zhejiang Zhongchai; only the employee’s social benefit function, in the local region, remains effective.

 

Shanghai Hengyu Business Management Consulting Co., Ltd. (“Hengyu”), a 62.5% owned subsidiary of Zhongchai Holding, was incorporated in PRC on September 10, 2005 and holds no assets other than an account receivable owed by Cenntro Holding Limited (“Cenntro Holding”), the sole member of Zhongchai Holding prior to the closing of the Business Combination. The remaining 37.5% of Hengyu’s capital stock is beneficially owned by Peter Zuguang Wang.

 

 

Products

 

Greenland provides transmission systems and integrated powertrains for material handling machineries, particularly for electric forklift trucks. In order to expand and diversify existing product offerings, Greenland recently has entered into the electric industry vehicles market, by designing and developing.

 

Transmission products for material handling machineries

 

 

Transmission Systems. For 14 years, Greenland, along with its subsidiaries, specialized in designing, developing, and manufacturing a wide range of transmission systems for material handling machineries, in particular forklift trucks. The range of the transmission systems covers from one ton to fifteen tons machineries. Most transmission systems contain auto transmission features. This feature allows for easy machine operations. In addition, Greenland provides transmission system for internal combustion powered machineries as well as for electrical powered machineries. Greenland has experienced an increasing demand for electric powered transmission systems. These transmission systems are key components for material handling machinery assembly. To meet this increasing demand, Greenland is able to providing these transmission systems to major forklift truck original equipment manufacturers (“OEMs”) as well as certain global branded manufacturers.

 

 

Integrated Powertrain. Greenland has newly designed and developed unique powertrains, which integrates electric motor, speed reduction gearbox, and driving axles into a combined integral module, in order to meet a growing demand for advanced electric forklift trucks. This integrated powertrain will enable the OEMs to significantly shorten design cycle, improve machinery efficiency, and simplify manufacturing process. There is a new trend that OEMs would rather use an integrated powertrain than separate electric motor, speed reduction gearbox, and driving axles, particularly in electric forklift trucks. Currently, Greenland makes two tons to three and a half-tons integrated powertrains for few electric forklift truck OEMs. Greenland is in the process to add more integrated powertrain products for electric forklift truck OEMs with different sizes.

 

Electric Industrial Vehicles (to be launched in third or fourth quarter 2021)

 

 

There is an increasing demand for electric industrial vehicles where sustainable energies are used in order to reduce air pollutions and lower carbon monoxide emissions. For Greenland, it plans to enter into the electric industrial vehicles market by utilizing its existing technologies, know-hows, supply chains, and market access. Greenland’s teams have been developing 1.8 tons electric loader vehicle (GEL1800) and plans to setup an assembly facility on the east coast of the United States for final assembly. GEL1800 will be our first electric industry vehicle product and will be available in the third or fourth quarter of 2021. Other models, such as models with loading capacity of one and a half tons or five tons are currently under development. Greenland will co-operate with global parts suppliers to utilize their matured supply chain, which will enable it to shorten its development cycle and make quicker market entrance. 

 

Competitive Strengths

 

Greenland believes that it is in the right position and the right time to supply a new generation of industrial vehicles that is green, safe, and cost-effective. The following is a summary of Greenland’s competitive strengths.

 

Favorable Market Trends

 

Greenland believes that a number of key industry trends in the PRC will continue to benefit Greenland and its subsidiaries and continue to drive its growth, including:

 

	●	Increasingly stringent regulations over carbon emission, which urge market participants to adopt low or zero-emission material handling and construction equipment;
	●	Increasing demand for a safer work environment and better healthy worker’s condition will drive growth of electric material handling equipment or industry vehicle, which generates no exhausts and a low level of noise in operation;
	●	Increasing labor cost, which accelerates labor substitution with machinery in material handling and logistic activities;
	●	Strong competitiveness of USA branded products in the USA, in which the next generation of electric industrial vehicle will be assembled and sold;
	●	Increasing government support for improving efficiency in the PRC’s logistics industry, which is a key market for material handling machinery such as forklifts and loaders; and
	●	Increasing government support for logistic mechanization, including in the form of subsidies.

 

As a result of these favorable industry trends, Greenland believes that it is well-positioned to capitalize on the increasing market demand for transmission products in the PRC as well as on the growing demand for emission-free and labor substitution by electric vehicles in the United States.

 

Well-Developed Manufacturing Capabilities Leading to Higher Efficiency

 

Greenland’s well-developed manufacturing process contributes to manufacturing efficiency and cost-effectiveness. Specifically, a combination of modern operational and management systems, advanced manufacturing equipment, experienced manufacturing know-hows, skilled workforce, and flexible manufacturing system allows Greenland to shorten the “time to market” for its new products. Moreover, the combination allows Greenland to timely adjust its lines of products in anticipation of changes in market demands.

 

Robust Research and Product Development Capabilities

 

Research and product development capabilities have been critical to Greenland’s historical growth and current market position. Such capabilities include the following:

 

	●	Strong R&D team. Greenland’s research and development team is comprised of more than 69 professionals, or over 10% of Greenland’s employees. It is led by Dr. Lei Chen, former professor at The University of Texas – Austin, who has many years of experience in research and development in introducing and adopting new technologies.
	●	Facilities. Greenland’s research and development facilities consist of a transmission technology center and a electric industry vehicle center. The transmission technology center is accredited by the Zhejiang provincial government. The technology center is made up of a product development and design department, a research center, three research departments that focuses on design, application, and manufacturing of internal combustion engines, and a post-doctoral workstation (certified by the PRC Ministry of Human Resource and Social Security).

 

 

Strategic Service Network

 

The ability to provide timely after-sales services is critical in building and maintaining a loyal and solid customer base. We have strategically established an after-sales service network in locations with developed economies. For example, the eastern provinces of the PRC generally have significant demand for logistics services. Accordingly, Greenland, through its subsidiaries, has operated an in-house service center and retained service providers that conduct businesses predominantly in these regions. Users of Greenland’s products are able to reach the Company through a service line, through which Greenland is able to provide prompt on-site technical services.

 

Experienced Management Team with Successful Track Records

 

Greenland’s senior management team is comprised of individuals who have operational experience, market knowledge, international management skill, and technical expertise. In addition, each member of the senior management team has a proven track record in building and turning companies into successful enterprises.

 

	●	Peter Zuguang Wang has served as the sole director of Zhongchai Holding since April 2009 and the chairman of Zhejiang Zhongchai since September 2017. He has over 20 years of experience in technology and management, along with a unique background in research and development, operation, finance and management. Mr. Wang was the co-founder of Unitech Telecom (now a part of UTStarcom, Nasdaq: UTSI).
	●	Raymond Z. Wang has served as the Chief Executive Officer of Zhongchai Holding since April 2019. He has more than ten years of management and corporate governance experience, and has served as president and vice president for two international companies and vice chairman of the board for a non-profit organization. Mr. Wang’s experience includes warehouse management, logistics modernization, financial management, organizational management, business process optimization, and customer channel acquisition.
	●	Jing Jin, Chief Financial Officer, a Certified Public Account, has over 10 years of experience in accounting, budgeting, and financial planning across operations in the PRC and overseas. Prior to August 2019, Mr. Jin has also served as the chief financial officer of Tantech Holdings Ltd. (Nasdaq: TANH).
	●	Lei Chen, Chief Scientist, has over 25 years of experience as a scientist in both U.S. and PRC. He is skillful in unconventional solutions by crossing different science and technology disciplines. Dr. Chen has expertise in laser spectroscopy, high-speed data acquisition, atomic and molecular physics, Nanomaterial, software and hardware architecture and design, combustion engine and electrical motor, and livestock husbandry. Dr. Chen’s experience and scientific knowledge is valuable to Zhongchai Holding’s research and development efforts with respect to transmission products and future robotic products.

 

Customers

 

Greenland, through its subsidiaries, sells most of its products domestically in the PRC. Its customer bases are primarily in the businesses of material handling equipment and forklift trucks. Greenland believes that its customers include some of the leading manufacturers in their respective market segments. Greenland also supplies to the PRC subsidiaries of a number of blue-chip international brands based in Europe and Asia.

 

During the years ended December 31, 2020 and 2019, Greenland’s five largest customers contributed 48.85% and 43.62%, respectively, of its total revenues. In the same periods, Greenland’s single largest customer, Hangcha Group, accounted for 21.25% and 14.03%, respectively, of Greenland’s total revenue. Greenland sells products to Hangcha Group based on purchase orders submitted to its subsidiary, Zhongchai Holding.

 

 

Suppliers

 

Greenland purchases its raw materials from various suppliers for use in the manufacture of its products.

 

The key raw materials used to manufacture its products are processed metal-based parts and components, including iron castings and gears, which are purchased from our domestic suppliers in the PRC. Most of our suppliers are located within close proximity to our manufacturing facilities, which reduces our transportation and inventory costs.

 

The prices for iron and steel and other raw materials have historically fluctuated significantly in the PRC, which in turn has affected the Company’s business and operation results. Greenland closely monitors changes in raw material prices and seeks to adjust its inventory of raw materials during inflation periods. In addition, Greenland seeks to minimize the impact of fluctuations in raw material prices by adopting bidding processes in its raw material procurement process Greenland also seeks to price its products to reflect the expected fluctuations in raw material prices to the extent possible. However, there can be no assurance that Greenland could precisely estimate any increase in raw material price or pass on such increase to its customer.

 

Production

 

Greenland’s products are comprised of a number of major parts and components, including gearbox housing, gears, bearings, oil pumps, gear shafts, hydraulics, and electrical components. The gearbox housing and gears parts are processed in-house at its manufacturing facility in Xinchang County, Zhejiang Province, PRC. Components of such products, in general, are sourced, from third parties, assembled, and integrated to form finished products. The finished products then undergo further adjustments, fine tunings, testing, and quality inspections. At the end of the inspection process and prior to shipment to our warehouses for storage and distribution, the finished products are coated and painted.

 

For the manufacturing of its electric industrial vehicles, Greenland plans to establish a new facility on the east coast of the U.S. and start producing electric industrial vehicles between the third and fourth quarter of 2021.

 

Inventory and Warehousing

 

Greenland undertakes inventory control in order to reduce the risks of under and over-stocking. On average, Greenland typically maintains a 30 days stock piles for production needs. It generally increases its inventories toward the end of the year in order to meet any production demand, in anticipation of any demands increase, from the second quarter of the following year. Furthermore, Greenland maintains higher inventories at year-end because Chinese New Year typically falls in January or February, which affects production and transportation of raw materials. Greenland has installed an enterprise resource planning (“ERP”) system, which provides real-time information about purchases, production schedules, and supplies of the raw materials. The ERP system has substantially improved Greenland’s inventory controls, providing the Company with quick access to various data and easy formulation of operating models, and allowing the Company to keep its inventory at an appropriable level to facilitate the manufacturing process. Due to the COVID-19 outbreak, the Company’s production significantly decreased during the first quarter of the fiscal year 2020. However, since March 2020, the Company’s production has returned to normal, and the Company experienced a substantial increase in production demand in November and December 2020.

 

Research and Development

 

Greenland’s research and development team selects research or development projects or both and draws up preliminary project proposals based on various factors, such as industry and market trends, customer feedback, and input from other departments (i.e. finance and manufacturing departments).

 

Greenland’s management, including the heads and lead managers of various internal departments, such as sales and marketing and finance departments, as well as the Chief Executive Officer and Chief Technology Officer, reviews the preliminary project proposals and its research and development team formulates a final plan for each approved project after considering suggestions and comments by its management. The final plans will include detailed schedules and budgets for the projects. Greenland’s finance department monitors budget overruns. Any increase in the original budget must be reviewed and approved by management before the relevant project can continue.

 

Greenland has also focused on research and development with respect to a new electric industrial vehicle.

 

 

Strategic Growth Opportunity in the Electric Industrial Vehicle Industry

 

Greenland will expand its market presence by entering the electric industrial vehicle industry. With our strategic supply chain partners, we have leveraged our robust research and development capabilities, as well as our industry and market experience to develop a new product line of electric industrial vehicles. By July 2021, Greenland expects to complete its first production-ready model of electric industrial vehicle product. A compact electric loader vehicle with a payload capacity of approximately 1,800 kilograms (or 3,968 lbs.). This new product line of electric industrial vehicles will offer a better return on investment when compared to existing Internal Combustion (“IC”) industrial vehicles by leveraging Greenland’s established global supply chain and expertise in the electrification of material handling vehicles. Following the first electric loader product, Greenland intends to expand its product line to other industrial vehicles and sizes.

 

We believe that electric industrial vehicles, which include electric loaders, excavators and forklift trucks, have the following advantages over traditional IC vehicles:

 

	●	Zero carbon emission. Fully electric industrial vehicles are completely emission free leading to less pollution from local usage. In addition, electrical power generation produces less carbon emissions when compared to fossil fuel. This results in a more environmentally friendly and sustainable power source.
	●	Lower energy usage and maintenance costs. Electric industrial vehicles offer a significant saving in energy consumption when compared to diesel equipment. Conventional internal combustion power systems require costly routine maintenance that increases with age. Without the need to maintain these internal combustion engines, electric industrial vehicles provide significantly less maintenance costs and less operational downtime resulting in a greater return on investment.
	●	Lower level of noise and vibration. Electric vehicles are proven to produce less sound and vibration when compared to internal combustion vehicles due to the lack of complicated transmission components and coolant pumps. The low noise levels of electric industrial vehicles offer new opportunities to businesses such as working at night in urban areas or during the day close to noise-sensitive locations like parks and hospitals.
	●	Demand for Better Workplace Safety and New Applications. Conventional excavators and loaders that use internal combustion engines create significant fumes, emissions, noises and vibrations which can harm the health of staff and surrounding residents. These problems can be addressed by the adoption of electric powered equipment which produce zero emissions, low levels of noise and minor vibrations. This creates a safer work environment and new business opportunities for indoor applications.

 

We believe that the electric industrial vehicle market presents a substantial opportunity for Greenland’s future business growth:

 

Fast Growing Market. The global construction equipment market is anticipated to grow at a compound annual growth rate (“CAGR”) of 3.9% from 2020 to 2025, reaching US$205 billion¹. The North American market is projected to exhibit one of the fastest growth rates during the forecast period. Consequently, we believe this growth will increase with the introduction of the United State infrastructure overhaul program. Should the program be implemented, then it will be a powerful driver of growth in the engineering and construction industry that will proliferate the demand for industrial vehicles and equipment.

 

Call for Carbon Emission Reduction. Global efforts to reduce greenhouse gas and carbon emissions continue to grow with proposals such as the current US administration seeking a target of net zero emission by 2050. These strategies will result in government and public support for the adoption of emission zero technologies and equipment across industries thus boosting the demand for eco-friendly electric powered industrial vehicles. As such, we expect that the demand for electric industrial vehicles will increase rapidly.

 

Highly Fragmented and Emerging Market. The electric industrial vehicle market is highly fragmented with few, if any, dominant local market participants. Although a few conventional industrial vehicles and construction equipment makers are in the process of electric products development a majority are years away from product deployment. This is to avoid cannibalization with the mature fossil fuel-powered equipment product lines which results in the lack of incentive to launch the full-electric industrial vehicles at the near term. As a result, with the early mover advantage together with Greenland’s strong research and development capability, we believe that Greenland is well positioned to secure a meaningful role in the electric industrial vehicle market.

 

1

- Marketsandmarkets Nov 2020 Report: Construction Equipment Market by Type (Excavator-Crawler & Mini, Loader-Backhoe, Skid-steer, Wheel, Dozer, Dump Truck, Others), Electric Equipment, Propulsion, Power Output, Application, Rental, Aftertreatment Device and Region - Global Forecast to 2025

 

 

High Technology Barriers for New Entrants. To compete in the electric industrial vehicle market, enterprises need a high-level of core technologies and capabilities in order to successfully develop a commercial product. The investment and expertise required create a high barrier of entry for new market players. Greenland’s success in the material handling industry and its achievements in research and development milestones gives Greenland the opportunity and the competitive edge to successfully compete in the industrial vehicle market.

 

Trademarks and Other Intellectual Property

 

Greenland relies on a combination of trademark, copyright, patent, software registration, and trade secret laws to protect its intellectual property rights. Despite these precautions, it may be possible for third parties to infringe our Company’s intellectual property rights.

 

Patents

 

As of December 31, 2020, Greenland held 108 registered patents, with the PRC National Intellectual Property Administration (“CNIPA”), 98 of which are utility patents and 10 of which are invention patents. These patents relate to the manufacturing of products.

 

As of December 31, 2020, Greenland had been granted 2 trademarks registered with the CNIPA.

 

Greenland’s intellectual property also includes technical data such as test results and operating data from projects, drawings, designs, and machinery and manufacturing techniques it developed in-house.

 

Sales and Marketing

 

Greenland sells its products in PRC through its sales and marketing teams. To promote Greenland’s brand, sales employees also attend trade shows and exhibitions to showcase our products.

 

As of December 31, 2020, Greenland’s sales and marketing team consisted of 14 employees. Members of its sales and marketing teams have extensive experience and knowledge in the material handling equipment sector of the manufacturing industry. They are primarily responsible for identifying business opportunities, promoting products, collecting customer feedbacks and market information, bidding for or negotiating orders, and collecting payments.

 

Competition

 

The transmission industry is fragmented and highly competitive in the PRC. Under the current market trend, domestically produced transmissions account for the largest share of the PRC market. International brand manufacturers equipped with better technology and capital resources are also aiming to expand into the PRC. As a result, it is expected that the PRC transmission market will become more competitive.

 

The typical competitive criteria are quality, price, technology, after-sales service, product offering, and performance record. The transmissions market is capital intensive; in capital and operating cost. In addition, the manufacturing process requires technical expertise and significant research and development budgets. As a result, companies entering the market must have significant financial and technical resources. Moreover, the time and cost required to establish a proven track record, necessary for general market acceptance, are substantial. An extensive after-sales service network is essential for a Company to gain general market acceptance.

 

Greenland believes that it is able to compete based on its market position, strong research and development capabilities, high quality products, integrated service systems, and strong relationships with its customers.

 

Our key competitors are Shaoxing Advance Gearbox Co., Ltd., Changsha Zhongchuan Transmission Machinery Co. Ltd., and Ganzhou Wuhuan Machine Co., Ltd.

 

 

Employees

 

As of December 31, 2020, the total number of full-time employees employed at Greenland and its subsidiaries was 328. The following table sets forth the number of its full-time employees by the function as of December 31, 2020:

 

Function		Number
Management			8
Administration			33
Production			186
Research and development			69
Sales and marketing			14
Other			18
Total			328

 

Greenland maintains mandatory social security insurance for its our employees pursuant to Chinese laws. Furthermore, it contributes mandatory social security funds for employees with respect to retirement, medical, work-related injury, maternity, and unemployment benefits.

 

Greenland has not had any labor strikes or other labor disturbances that have materially interfaced with its operations, and it believes that it has maintained a good work relationship with its employees.

 

Regulations

 

PRC Law and Regulation

 

Policy Relating to the Foreign Invested General Equipment Manufacturing Industry

 

PRC implements its guidance on foreign investment in different industries through the Catalogue for the Guidance of Foreign Investment Industries jointly amended and promulgated by the National Development and Reform Commission and the Ministry of Commerce from time to time. According to the new catalogue which became effective on July 28, 2017, the business activities that we engage in are classified as “permitted” or “encouraged” foreign invested industries.

 

Law and Regulation Relating to Product Quality

 

Pursuant to the Product Quality Law of the PRC which was promulgated on February 22, 1993 and amended on December 29, 2018, it is prohibited to produce or sell products that do not meet the standards or requirement for safeguarding human health and ensuring human and property safety.

 

Where a defective product causes physical injury to a person or damage to property, the aggrieved party may claim compensation against the producer or the seller of such product. Where the responsibility for product defects lies with the producer, the seller shall, after settling compensation, have the right to recover such compensation from the producer, and vice versa. Violations of the Product Quality Law may result in the imposition of fines. In addition, the seller or the producer may be ordered to suspend operation and its business license may be revoked. Criminal liability may be incurred in serious cases.

 

Law and Regulation Relating to Production Safety

 

Pursuant to the Production Safety Law of the PRC (the “Production Safety Law”) promulgated by the Standing Committee of the National People’s Congress on June 29, 2002, amended on August 27, 2009 and August 31, 2014 and effective on December 1, 2014, enterprises and institutions shall be equipped with the conditions for safe production as provided in the Production Safety Law and other relevant laws, administrative regulations, national standards and industrial standards. Any entity that is not equipped with such conditions is not allowed to engage in production and business operation activities. 

 

 

The law also requires manufacturers to offer education and training programs to their employees regarding production safety and to hire qualified employees who have completed special trainings to engage in specialized operations. Manufacturers are required to provide protection equipment that meets the national or industry standards to employees and to supervise and educate them regarding the use of such equipment. In addition, the design, manufacture, installation, use, inspection and maintenance of safety equipment are required to conform to applicable national or industry standards. Furthermore, emergency measures shall be established by an enterprise to prepare for the occurrence of any accidents threatening safe production.

 

Law and Regulation Relating to Environmental Protection

 

The laws and regulations governing the environmental requirements for all units that cause environmental pollution and other public hazards in the PRC include but not limited to the Environmental Protection Law of the People’s Republic of China, the Prevention, the Environmental Impact Assessment Law of the People’s Republic of China and the Administrative Regulations on Environmental Protection for Acceptance Examination Upon Completion of Buildings. Pursuant to these laws and regulations, depending on the impacts on the environment caused by the project, an environmental impact study report and impact analysis table or environmental impact registration form shall be submitted by a developer for approval before commencement of construction or property development.

 

In addition, upon completion of the property development, relevant environmental authorities and the construction units will perform inspections to ensure compliance, with the applicable environmental standards and regulations, prior to the delivery of property to the purchasers.

 

Law and Regulation Relating to Labor Protection

 

Pursuant to the Labor Law of the PRC and the Labor Contract Law of the PRC which were promulgated on January 1, 1995 (amended on December 29, 2018) and January 1, 2008 (amended on December 28, 2012), respectively, labor contracts shall be concluded if labor relationships are to be established between the employer and the employees.

 

Pursuant to the Social Insurance Law of the PRC which was promulgated on October 28, 2010 and last amended on December 29, 2018, employees shall participate in basic pension insurance, basic medical insurance and unemployment insurance. Basic pension, medical and unemployment insurance contributions shall be paid by both employers and employees. Employees shall also participate in work-related injury insurance and maternity insurance. Work-related injury insurance and maternity insurance contributions shall be paid by employers rather than employees. An employer shall make registration with the local social insurance agency in accordance with the provisions of the Social Insurance Law of PRC. Moreover, an employer shall declare and make social insurance contributions in full and on time. Pursuant to the Regulations on Management of Housing Provident Fund which was promulgated on April 3, 1999 and amended on March 24, 2019, employers shall undertake registration at the competent administrative center of housing provident fund and then, upon the examination by such administrative center of housing provident fund, undergo the procedures of opening the account of housing provident fund for their employees at the relevant bank. Enterprises are also obliged to timely pay and deposit housing provident fund for their employees in full amount.

 

Law and Regulation Relating to Tax

 

Enterprise Income Tax

 

On March 16, 2007 and December 6, 2007 respectively, the National People’s Congress of China and the State Council of the PRC enacted the Enterprise Income Tax Law of the PRC and the Implementation Regulations of Enterprise Income Tax Law of the PRC (collectively the “PRC EIT Law”), both of which became effective on January 1, 2008. The PRC EIT Law imposes a uniform enterprise income tax rate of 25% on all residence enterprises, including foreign-invested enterprises, and terminates most of the tax exemptions, reductions and preferential treatments available under previous tax laws and regulations. 

 

However, the PRC EIT Law and its implementation rules permit certain “high-technology enterprises strongly supported by the state” which hold independent ownership of core intellectual property and simultaneously meet a list of other criteria, financial or non-financial, as stipulated in the Implementation Rules, to enjoy a 15% enterprise income tax rate subject to certain new qualification criteria. The SAT, the PRC Ministry of Science and Technology and the MOF jointly issued the Administrative Rules for the Certification of High and New Technology Enterprise delineating the specific criteria and procedures for “high and new technology enterprises” certification.

 

 

Under the PRC EIT Law, enterprises are classified as either “resident enterprises” or “non-resident enterprises.” Pursuant to PRC EIT Law and its implementation rules, besides enterprises established within the PRC, enterprises established outside PRC whose “de facto management bodies” are located in PRC are considered “resident enterprises” for PRC enterprise income tax purposes and subject to the uniform 25% enterprise income tax rate for their global income. According to the implementation rules of the PRC EIT Law, “de facto management body” refers to a managing body that exercises, in substance, overall management and control over the manufacture and business, personnel, accounting and assets of an enterprise.

 

Withholding Tax

 

The PRC EIT Law removes the prior tax exemption and imposes a 10% withholding tax on dividends paid by foreign-invested enterprises to foreign investors. However, for foreign investors whose home countries or regions have signed bilateral tax agreements with PRC, the withholding tax rate may be reduced to as low as 5% depending on the terms of the applicable tax treaty. In accordance with the Arrangement between Mainland PRC and Hong Kong for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income signed on August 21, 2006, the 5% withholding tax rate applies to dividends paid by a PRC Company to a Hong Kong tax resident, provided that the recipient is a Company that holds directly at least 25% of the interest of the PRC Company, otherwise, the applicable withholding tax rate should be 10%. Further, pursuant to the Notice on the Issues concerning the Application of the Dividend Clauses of Tax Agreements issued by the SAT on February 20, 2009, the preferential tax rate under the relevant tax treaties shall only apply to a tax resident from the other side that directly holds at least 25% of the interest of a PRC Company for a period of consecutive 12 months prior to receiving the dividends.

 

Value Added Tax

 

The Provisional Regulations of the PRC Concerning Value Added Tax (the “VAT Regulations”), was promulgated on December 13, 1993 and amended by the State Council and became effect on November 19, 2017. Under the VAT Regulations and its implementation regulations, value added tax, or the VAT, is imposed on the sales of goods and provision of processing, repair and replacement services within the PRC and the importation of goods into PRC. The VAT standard rate had been 17% of the gross sale price until April 30, 2018, after which date the rate was reduced to 16%. VAT rate was further reduced to 13% starting from April 1, 2019.

 

On April 4, 2018, the Ministry of Finance and the State Administration of Taxation issued the Circular on Adjustment of VAT Rates, which became effective as of May 1, 2018. According to the Circular on the Adjustment of VAT Rates, relevant VAT rates have been reduced from May 1, 2018, such that VAT rates of 17% and 11% applicable to the taxpayers who have VAT taxable sales activities or imported goods are adjusted to 13% and 9%, respectively.

 

Law and Regulation Relating to Intellectual Property Rights

 

Copyright Law

 

According to the Copyright Law of the PRC, which was amended on February 26, 2010 and became effective on April 1, 2010, Chinese citizens, legal entities or other organizations shall enjoy the copyright in their works, whether published or not, which include works of literature, art, natural sciences, social sciences, engineering and technology, etc. Copyright owners shall enjoy various kinds of rights, including the right of publication, right of authorship and right of reproduction.

 

Patent Law

 

Pursuant to the Patent Law of the PRC which was amended on December 27, 2008 and became effective on October 1, 2009, the patent administration departments of the State Council are responsible for the administration of patents across the nation. The patent administration departments of provincial, autonomous region or municipal governments are responsible for administering patents within their respective jurisdictions. The PRC patent system adopts a “first come, first file” principle, which means where more than one person files a patent application for the same invention, a patent will be granted to the person who files the application first. To be patentable, invention or utility models must meet three criteria: novelty, inventiveness and practicability. Invention patents are valid for 20 years, while utility model patents and design patents are valid for 10 years, commencing from the date of application. The patentee shall pay annual fees commencing from the year when the parent right is granted. If the patentee does not pay annual fees according to the requirements, the patent will be terminated prior to its expiry. Other person must obtain consent or a proper license from the patent owner to use the patent. Otherwise, the use constitutes an infringement of the patent rights. The infringer must, in accordance with the applicable regulations, undertake to cease the infringement, take remedial action and/or pay damages.

 

 

Trademark Law

 

Pursuant to the Trademark Law of the PRC which was amended on August 30, 2013 and became effective on May 1, 2014, the right to exclusive use of a registered trademark shall be limited to trademarks which have been approved for registration and to commodities for which the use of trademark has been approved. The period of validity of a registered trademark shall be 10 years, counted from the day the registration is approved. If a trademark registrant wishes to use a trademark after the expiration of the duration of the trademark registration, according to the requirements, a registration renewal application should be filed within 12 months prior to the expiration. Each registration renewal is valid for 10 years. Using a trademark that is identical with a registered trademark on the same commodities without the licensing of the registrant of the registered trademark; or using a trademark that is similar to a registered trademark on the same commodities, or using a trademark that is identical with or similar to the registered trademark on similar commodities without the licensing of the registrant of the registered trademark, which is likely to cause confusion; selling commodities that infringe upon the exclusive right to use a registered trademark; forging, manufacturing a registered trademark which was registered by others without authorization, or selling a registered trademark forged or manufactured without authorization; changing a registered trademark and putting the commodities with the changed trademark into the market without the consent of the registrant of the registered trademark; providing, intentionally, convenience for activities infringing upon others’ exclusive right to use a registered trademark, and facilitating others to commit infringement on the exclusive right to use a registered trademark, constitutes an infringement of the exclusive right to use a registered trademark. The infringer must undertake to cease the infringement, take remedial action and pay damages. The infringer also may be subject to fines or even criminal punishment.

 

Domain Names

 

The domain names are protected under the Administrative Measures for Internet Domain Names promulgated by Ministry of Industry and Information Technology, or the MIIT, on August 24, 2017, the effective date of which was November 1, 2017. MIIT is the major regulatory body responsible for the administration of the PRC Internet domain names, under supervision of which PRC Internet Network Information Center, or CNNIC, is responsible for the daily administration of CN domain names and Chinese domain names. On September 25, 2002, CNNIC promulgated the Implementation Rules of Registration of Domain Name, or the CNNIC Rules, which was renewed on June 5, 2009 and May 29, 2012, respectively. Pursuant to the Administrative Measures on the Internet Domain Names and the CNNIC Rules, the registration of domain names adopts the “first to file” principle and the registrant shall complete the registration via the domain name registration service institutions. In the event of a domain name dispute, the disputed parties may lodge a complaint to the designated domain name dispute resolution institution to trigger the domain name dispute resolution procedure in accordance with the CNNIC Measures on Resolution of the Top-Level Domains Disputes, file a suit to the People’s Court or initiate an arbitration procedure.

 

Law and Regulation Relating to Foreign Currency Exchange

 

The principal regulations governing foreign currency exchange in the PRC are the Foreign Exchange Administrative Regulations (the “SAFE Regulations”) which was promulgated by the State Council and last amended on August 5, 2008. Under the SAFE Regulations, the RMB is generally freely convertible for current account items, including the distribution of dividends, trade and service related foreign exchange transactions, but not for capital account items, such as direct investment, loan, repatriation of investment and investment in securities outside the PRC, unless the prior approval of the State Administration of Foreign Exchange is obtained.

 

U.S. Laws and Regulations

 

Vehicle Safety and Testing

 

We expect to be required to comply with federal laws administered by National Highway Traffic Safety Administration (“NHTSA”), including the CAFE standards, Theft Prevention Act requirements, consumer information labeling requirements, Early Warning Reporting requirements regarding warranty claims, field reports, death and injury reports and foreign recalls, owner’s manual requirements and additional requirements for cooperating with safety investigations and defect and recall reporting. The U.S. Automobile Information and Disclosure Act also requires manufacturers of motor vehicles to disclose certain information regarding the manufacturer’s suggested retail price, optional equipment and pricing. In addition, federal law requires inclusion of fuel economy ratings, as determined by the U.S. Department of Transportation and the Environmental Protection Agency (the “EPA”), and 5-star safety ratings as determined by NHTSA, if available.

 

Battery Safety and Testing

 

Our battery packs of electric industrial vehicles will be subject to various U.S. regulations that govern transport of “dangerous goods,” defined to include lithium batteries, which may present a risk in transportation. We expect to use lithium battery packs in our electric industrial vehicles. The use, storage and disposal of our battery packs are regulated under existing laws and are the subject of ongoing regulatory changes that may add additional requirements in the future.

 

 

ITEM 1A.

RISK FACTORS

 

Smaller reporting companies are not required to provide the information required by this item. 

 

ITEM 1B.

UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2.

PROPERTIES

 

The address of our principal executive offices and corporate offices is 11-F, Building #12, Sunking Plaza, Gaojiao Road, Hangzhou, Zhejiang Province, People’s Republic of China, 311122.

 

Greenland’s headquarters, manufacturing and R&D facilities are all located in Xinchang County, Zhejiang Province, PRC.

 

Properties Owned by us

 

As of December 31, 2020, Greenland held land use rights of four parcels of land with an aggregate site area of approximately 81,171 square meters, located in Xinchang County, Zhejiang Province, PRC. The terms of these land use rights are due to expire on November 14, 2062.

 

As of December 31, 2020, Greenland held three building ownership certificates for three buildings with an aggregate gross floor area of approximately 44,751 square meters. These properties are primarily used for production and office purposes.

 

Properties Leased by us

 

As of December 31, 2020, Greenland leased one property for its operations with an aggregate gross floor area of approximately 200 square meters. The rent per month is RMB10,950 (approximately $1,580) and the duration of the lease is from June 01, 2019 to May 31, 2020.

 

We consider our current office space adequate for our current operations.

 

ITEM 3.

LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. There are currently no legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results, except the following matter.

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

None.

 

 

PART II

 

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our ordinary shares are traded on the Nasdaq Capital Market under the symbol “GTEC.” Our ordinary shares commenced public trading on August 8, 2018.

 

The market price of our ordinary shares is subject to significant fluctuations in response to variations in our quarterly operating results, general trends in the market, and other factors, over many of which we have little or no control. In addition, broad market fluctuations, as well as general economic, business, and political conditions, may adversely affect the market for our ordinary shares, regardless of our actual or projected performance. We cannot assure you that there will be a market for our ordinary shares in the future.

 

As of March 26, 2021, the last sale price reported on the Nasdaq Capital Market for our ordinary shares was approximately $15.50 per share. 

 

Dividend Policy

 

Prior to the business combination on October 24, 2019, Zhejiang Zhongchai has paid approximately $0.16 million in dividends to its shareholders.

 

Shareholders of Record 

 

As of March 19, 2021, we have 9 recorded holders of our ordinary shares. This number excludes any estimate by us of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed. 

 

Effective August 11, 1993, the SEC adopted Rule 15g-9, which established the definition of a “penny stock,” for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks; and (ii) that the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination; and (ii) states that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

 

Transfer Agent

 

The transfer agent for our capital stock is Continental Stock Transfer & Trust Company, located at 1 State Street 30th Floor, New York, NY 10004-1561. Their telephone number is (212) 509-4000.

 

Equity Compensation Plan Information

 

For information on the securities authorized for issuance under our equity compensation plan, please see “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters.”

 

Recent Sales of Unregistered Securities

 

Since our inception on December 28, 2017, we did not have sales of unregistered securities other than those already disclosed in the quarterly reports on Form 10-Q in the fiscal years 2019 and 2018 and the current affair reports on Form 8-K and the following transactions.

 

Pursuant to the Service Agreement entered into and by The Company and Chineseinvestors.com, Inc., an Indiana corporation (“CIIX”) on August 21, 2019 (the “Service Agreement”), CIIX were to provide certain investor relations services to the Company for a period of three months beginning on August 21, 2019. Pursuant to the Service Agreement, the Company were to pay CIIX fees consisting of three equal monthly instalments of $12,000 and 5,000 restricted ordinary shares, no par value, of the Company on a quarterly basis during the term of the Consulting Agreement. On February 24, 2020, Greenland and CIIX entered into a termination agreement (the “CIIX Termination Agreement”) to terminate their respective obligations under the Service Agreement. Pursuant to the CIIX Termination Agreement, the Company agreed to issue 5,000 ordinary shares, no par value (the “CIIX Termination Shares”) to CIIX. Upon CIIX’s receipt of the CIIX Termination Shares, the Company will have fully satisfied its payment obligations under the Service Agreement.

 

Pursuant to the Investor Relations Consulting Agreement entered into and by The Company and Skyline Corporate Communication Group, LLC, a Massachusetts limited liability Company (“SCCG”) on August 15, 2019 (the “Consulting Agreement”), SCCG were to provide certain investor relations services to the Company for a period of twelve months beginning on August 15, 2019. Pursuant to the Consulting Agreement, the Company were to pay SCCG fees consisting of $5,000 per month and 1,250 restricted ordinary shares, no par value, of the Company on a quarterly basis during the term of the Consulting Agreement. On February 25, 2020, Greenland and SCCG entered into a termination agreement (the “SCCG Termination Agreement”) to terminate their respective obligations under the Consulting Agreement. Pursuant to the SCCG Termination Agreement, the Company agreed to issue 10,000 ordinary shares, no par value (the “SCCG Termination Shares”) to SCCG. Upon SCCG’s receipt of the SCCG Termination Shares, the Company will have fully satisfied its payment obligations under the Consulting Agreement.

 

On October 24, 2020, the board of directors held a meeting and executed resolutions to approve the issuance of 120,000 ordinary shares to Raymond Wang, our chief executive officer, to offset unpaid salary to him in the amount of $120,833.33 and the issuance of 135,000 ordinary shares to Jing Jin, our chief financial officer, to offset unpaid salary to him in the amount of $60,000 and his personal loan to us in the amount of $75,000. On November 10, 2020, we issued 135,000 ordinary shares to Jing Jin. On December 30, 2020 and February 8, 2021, we issued 69,000 and 51,000 ordinary shares to Raymond Wang, respectively.

 

ITEM 6.

SELECTED FINANCIAL DATA

 

As a smaller reporting Company, as defined by Item 10(f)(1) of Regulation S-K, we are not required to provide the information requested by this Item.

 

 

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF GREENLAND TECHNOLOGIES HOLDING CORPORATION

 

The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in the consolidated financial statements of the Company thereto, which appear elsewhere in this Report, and should be read in conjunction with such financial statements and related notes included in this Report. Except for the historical information contained herein, the following discussion, as well as other information in this Report, contain “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the “safe harbor” created by those sections. Actual results and the timing of the events may differ materially from those contained in these forward-looking statements due to many factors, including those discussed in the “Forward-Looking Statements” set forth elsewhere in this Report.

 

Overview

 

The registrant was incorporated on December 28, 2017 as a British Virgin Islands Company with limited liability. The registrant was incorporated as a blank check Company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more target businesses. Following the Business Combination (as described and defined below) in October 2019, the registrant changed its name from Greenland Acquisition Corporation to Greenland Technologies Holding Corporation (“Greenland”).

 

On July 27, 2018, we consummated our initial public offering of 4,400,000 units, including a partial exercise by the underwriters of their over-allotment option in the amount of 400,000 units. Each unit consists of one ordinary share, no par value, one warrant to purchase one-half of one ordinary share, and one right to receive one-tenth of one ordinary share upon the consummation of our initial business combination, pursuant to a registration statement on Form S-1. Warrants must be exercised in multiples of two warrants, and each two warrants are exercisable for one ordinary share at an exercise price of $11.50 per share. The units were sold in our initial public offering at an offering price of $10.00 per unit, generated $44,000,000 (before underwriting discounts and offering expenses) in gross proceeds.

 

Simultaneously with the consummation of our initial public offering, we completed a private placement of 282,000 units, issued to Greenland Asset Management Corporation (the “Sponsor”) and Chardan Capital Markets, LLC, generated $2,820,000 in gross proceeds.

 

On October 24, 2019, we consummated our business combination with Zhongchai Holding (the “Business Combination”) following a special meeting, where the shareholders of Greenland considered and approved, among other matters, a proposal to adopt and entered into the Share Exchange Agreement that allowed Greenland to acquire from the Seller all of the issued and outstanding equity interests of Zhongchai Holding in exchange for 7,500,000 newly issued ordinary shares, no par value of Greenland, issued to the Seller. As a result, the Seller became the controlling shareholder of Greenland, and Zhongchai Holding became a directly and wholly owned subsidiary of Greenland. The Business Combination was accounted for as a reverse merger effected by a share exchange, wherein Zhongchai Holding is considered the acquirer for accounting and financial reporting purposes.

 

In connection with the Business Combination, all the outstanding rights of the Company were converted into 468,200 ordinary shares on a one-tenth (1/10) ordinary share per right basis if holders of the rights elected to convert their rights into the underlying ordinary shares.

 

 

On December 17, 2019, the Company’s warrants, which were trading under the ticker symbol “GTECW,” were delisted from the Nasdaq Capital Market by the Nasdaq Listing Qualifications Staff.

 

On January 14, 2020, Greenland Technologies Corp. was incorporated under the laws of the State of Delaware (“Greenland Tech”). Greenland Tech is the 100% owned subsidiary of the registrant. We aim to use it as the US operation site of the Company and promote sales of our robotic products for the North American market in the near future.

 

Greenland serves as the parent Company for the primary operating Company, Zhongchai Holding (Hong Kong) Limited, a holding Company formed under the laws of Hong Kong on April 23, 2009 (“Zhongchai Holding”). Through Zhongchai Holding and other subsidiaries, Greenland develops and manufactures traditional transmission products for material handling machineries in the People’s Republic of China (PRC), as well as develops electric industrial vehicles, which are expected to be produced in the near future.

 

Greenland, through its subsidiaries, is:

 

	●	a leading developer and manufacturer of transmission products for material handling machineries in China; and
	●	a developer of electric industrial vehicles, which is expected to be available in the third or fourth quarter of  2021.

 

Greenland’s transmission products are key components for forklift trucks, used in manufacturing and logistic applications such as factories, workshops, warehouses, fulfilment centers, shipyards, and seaports. Forklifts play an important role in logistics for many enterprises across different industries in the PRC and around the globe. Generally, industries with the largest demand for forklifts are transportation, warehousing logistics, electrical machinery, and automobile.

 

Greenland has experienced increased demand for forklifts in the manufacturing industry in the PRC, as its revenue increased from approximately $52.40 million in the fiscal year 2019 to approximately $66.86 million in the fiscal year 2020. Based on revenues in the fiscal year ended December 31, 2020 and 2019, Greenland believes that it is one of the major developers and manufacturers of transmission products for small and medium-sized forklift trucks in PRC.

 

Greenland’s transmission products are used in 1-ton to 15-tons forklift trucks, some with mechanical shift and some with automatic shift. Greenland sells these transmission products directly to forklift truck manufacturers. In the fiscal year ended December 31, 2020 and 2019, Greenland sold an aggregate of more than 108,913 and 83,567 sets of transmission products, respectively, to more than 100 forklift manufacturers in the PRC.

 

In December 2020, Greenland launched a new division to focus on the electric industrial vehicle market, a market that Greenland intends to develop to diversify its product offerings. With this new division, Greenland plans to develop and deploy the next generation of industrial vehicles. Greenland plans to establish a new facility on the east coast of the U.S. and start producing electric industrial vehicles between the third and fourth quarter of 2021.

 

 

Impact of COVID-19 Pandemic on Our Operations and Financial Performance 

 

The COVID-19 pandemic has severely affected China and the rest of the world. In an effort to contain the spread of the COVID-19 pandemic, China and many other countries have taken precautionary measures, such as imposing travel restrictions, quarantining individuals infected with or suspected of being infected with COVID-19, encouraging or requiring people to work remotely, and canceling public activities, among others. These ongoing measures adversely affected our operations and financial performance in 2020.

 

Specifically, the COVID-19 pandemic adversely affected our revenue in the first half of 2020. For example, from February 3, 2020 to the end of February 2020, the Company closed all of its operating offices in Zhejiang Province, including manufactory, in response to the emergency measures imposed by local government. The pandemic also significantly limited suppliers’ ability to provide low-cost, high-quality merchandise to the Company on a timely basis.

 

Since late March 2020, the Company’s business operations have gradually recovered from the negative impacts due to lockdown, and the Company’s backlogged orders were mostly processed during the rest of fiscal year 2020, which contributed to an increase in its revenues for the year ended December 31, 2020.

 

Starting from the fourth quarter of 2020, a few waves of COVID-19 infection emerged in various regions of China, and varying levels of restrictions have been reinstated. The extent to which the COVID-19 pandemic may affect our operations and financial performance in the future will depend on future developments, which are highly uncertain and cannot be predicted.

 

Results of Operations

 

For the fiscal year ended December 31, 2020 and 2019

 

Overview

 

		For the fiscal year ended December 31,
		2020				2019				$ Change				% Variance
Revenues			66,864,375				52,400,844				14,463,531				27.60
Cost of Goods Sold			54,051,367				40,022,243				14,029,124				35.05
Gross Profit			12,813,008				12,378,601				434,407				3.51
Selling expenses			1,588,302				1,187,263				401,039				33.78
General and administrative expenses			2,131,405				2,231,953				(100,548	)			(4.50	)
Research and development expenses			2,384,951				2,355,307				29,644				1.26
Total Operating Expenses			6,104,658				5,774,523				330,135				5.72
Income from operations			6,708,350				6,604,078				104,272				1.58
Interest income			2,645				151,532				(148,887	)			98.25
Interest expenses, net			(930,634	)			(1,289,133	)			358,499				(27.81	)
Loss on disposal of property and equipment			(79,216	)			(252,556	)			173,340				(68.63	)
Other income			1,002,642				720,612				282,030				39.14
Remeasurement gain from change in functional currency			1,940,773				-				1,940,773				N/A
Income before income tax			8,644,560				5,934,533				2,710,027				45.67
Income tax			2,272,997				847,367				1,425,630				168.24
Net income			6,371,563				5,087,166				1,284,397				25.25

 

 

 

Components of Results of Operations

 

		For the Fiscal Year ended December 31,
Component of Results of Operations		2020				2019
Revenues		$	66,864,375			$	52,400,844
Cost of Goods Sold			54,051,367				40,022,243
Gross Profit			12,813,008				12,378,601
Operating Expenses			6,104,658				5,774,523
Net Income			6,371,563				5,087,166

 

Revenue

 

Greenland’s revenue increased by approximately $14.46 million, or approximately 27.60%, to approximately $66.86 million for the fiscal year ended December 31, 2020, compared to approximately $52.40 million for the fiscal year ended December 31, 2019. Due to the COVID-19 pandemic, the Company’s PRC subsidiaries were temporary shut down due to local governments’ mandate until the end of February 2020. Since late March 2020, the Company’s business operations have gradually recovered from the negative impacts due to lockdown, and the Company’s backlogged orders were mostly processed during the rest of fiscal year 2020, which contributed to an increase in its revenues for the year ended December 31, 2020, as compared to fiscal year 2019. On a RMB basis, revenue for the fiscal year ended December 31, 2020 increased by approximately 32.8%.

 

Cost of Goods Sold

 

Greenland’s cost of goods sold consists primarily of material costs, freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs, wages, employee compensation, amortization, depreciation and related costs, which are directly attributable to the production of products. The write down of inventory using NRV impairment test is also recorded in cost of goods sold. The total cost of goods sold increased by approximately $14.03 million, or approximately 35.05%, to approximately $54.05 million for the fiscal year ended December 31, 2020, compared to approximately $40.02 million for the fiscal year ended December 31, 2019. Cost of goods sold increased due to our increase in sales volume.

 

Gross Profit

 

Greenland’s gross profit increased by approximately $0.43 million, or 3.51%, to approximately $12.81 million for the fiscal year ended December 31, 2020, compared to approximately $12.38 million for the fiscal year ended December 31, 2019. For the fiscal year ended December 31, 2020 and 2019, Greenland’s gross margin was approximately 19.16% and 23.6%, respectively. The increase in gross profit was mainly due to a decrease in procurement costs.

 

Operating Expense

 

Greenland’s operating expenses consist of selling expenses, general and administrative expenses and research and development expenses

 

Selling Expense

 

Selling expenses mainly include operating expenses such as sales staff payroll, traveling expenses and transportation expenses. Selling expenses increased by $0.40 million or 33.78%, to approximately $1.59 million for the fiscal year ended December 31, 2020, as compared to approximately $1.19 million for the fiscal year ended December 31, 2019. The increase of selling expense was primarily due to the increase in sales.

 

General and Administrative Expenses

 

General and administrative expenses include management and office staff salaries and employee benefits, depreciation for office facility and office furniture and equipment, travel and entertainment, legal and accounting, consulting fees and other office expenses. General and administrative expenses decreased by approximately $0.10 million, or approximately 4.50%, to approximately $2.13 million for the fiscal year ended December 31, 2020, as compared to approximately $2.23 million for the fiscal year ended December 31, 2019. The increase in general and administrative expenses was primarily attributable to the additional administrative expenditure incurred.

 

 

Research and Development Expenses

 

R&D expenses consist of R&D personnel compensation, costs of materials used in R&D projects, and depreciation costs for research-related equipment. R&D expenses increased by approximately $0.02 million, or 1.26%, to approximately $2.38 million for the fiscal year ended December 31, 2020, as compared to approximately $2.36 million for the fiscal year ended December 31, 2019. Such increase was primarily attributable to a significant increase in the Company’s R&D activities during the year ended December 31, 2020.

 

Income from Operations

 

As a result of the foregoing, income from operations for the fiscal year ended December 31, 2020 was approximately $6.71 million, an increase of approximately $0.11 million, as compared to the income from operations of approximately $6.60 million for the fiscal year ended December 31, 2019.

 

Interest Income and Interest Expenses

 

Greenland’s interest income was approximately $0 million for the fiscal year ended December 31, 2020, a decrease of approximately $0.15 million, or 98.25%, as compared to approximately $0.15 million for the fiscal year ended December 31, 2019. The decrease in interest income was primarily due to the reason that less cash was deposited in banks during the year ended December 31, 2020.

 

Greenland’s interest expenses were approximately $0.93 million for the fiscal year ended December 31, 2020, a decrease of approximately $0.36 million, or 27.81%, as compared to approximately $1.29 million for the fiscal year ended December 31, 2019. The decrease was primarily due to a reduction of our short-term loans for the year ended December 31, 2020, compared to those for the year ended December 31, 2019.

 

Other Income

 

Greenland’s other income was approximately $1.00 million for the fiscal year ended December 31, 2020, an increase of approximately $0.28 million, or 39.14%, as compared to approximately $0.72 million of other income for the fiscal year ended December 31, 2019. The increase was primarily due to the growth in ancillary product and service in Zhejiang Zhongchai for the year ended December 31, 2020.

 

Remeasurement Gain from Change in Functional Currency

 

The Company incurred a one-time gain on remeasurement of foreign currency as the result of the Company changing the functional currency of its subsidiary Zhongchai Holding (Hong Kong) Limited from RMB to USD. The one-time gain, which amounted to approximately $1.94 million, significantly impacted the net result of operations for the Company during the year ended December 31, 2020.

 

Income Taxes

 

Greenland’s income tax was approximately $2.27 million for the fiscal year ended December 31, 2020, compared to approximately $0.85 million for the fiscal year ended December 31, 2019.

 

PRC operating subsidiary, Zhejiang Zhongchai, obtained a “high-tech enterprise” status near the end of the fiscal year of 2019. Such status enables Zhejiang Zhongchai to enjoy a reduced statutory income tax rate of 15%, rather than the common PRC corporate tax rate of 25%. The “high-tech enterprise” status is reevaluated by relevant Chinese government agencies every three years. Zhejiang Zhongchai’s current “high-tech enterprise” will be reevaluated near the end of 2022.

 

Greenland’s other PRC subsidiaries are subject to different income tax rates. Shengte, the wholly owned subsidiary of Zhejiang Zhongchai, is subject to a 10% income tax rate for small and micro size businesses. Hengyu, the 62.5% owned subsidiary of Zhongchai Holding, is subject to the 25% standard income tax rate. Hangzhou Greenland, the wholly owned subsidiary of Zhongchai Holding, is subject to the 25% standard income tax rate.

 

Greenland is a holding Company registered in the British Virgin Islands and is not subject to tax on income or capital gains under the current British Virgin Islands law. In addition, upon payments of dividend to its shareholders, the Company will not be subject to any British Virgin Islands withholding tax.

 

 

On January 14, 2020, Greenland established Greenland Tech, its wholly owned subsidiary in the state of Delaware. We aim to use it as the U.S. operation site of our Company and promote sales of our robotic products for the North American market in the near future. Greenland Tech currently does not conduct any business activities. On December 22, 2017, the U.S. federal government enacted the 2017 Tax Act. The 2017 Tax Act includes a number of changes in existing tax law impacting businesses, including the transition tax, a one-time deemed repatriation of cumulative undistributed foreign earnings and a permanent reduction in the U.S. federal statutory rate from 35% to 21%, effective on January 1, 2018. ASC 740 requires companies to recognize the effect of tax law changes in the period of enactment, accordingly, the effects must be recognized on companies’ calendar year-end financial statements, even though the effective date for most provisions is January 1, 2018. Since Greenland Tech was established in year 2020, the one-time transition tax did not have any impact on the Company’s tax provision and there was no undistributed accumulated earnings and profits as of December 31, 2020.

 

Net Income

 

As a result of the foregoing, net income was approximately $6.37 million for the fiscal year ended December 31, 2020, an increase of approximately $1.28 million, as compared to a net income of approximately $5.09 million for the fiscal year ended December 31, 2019.

 

Liquidity and Capital Resources

 

Greenland is a holding Company incorporated in the British Virgin Islands. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiaries are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. Our PRC subsidiaries may also allocate a portion of their after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends.

 

We have funded working capital and other capital requirements primarily by equity contributions, cash flow from operations, short-term bank loans and bank acceptance notes, and long-term bank loans. Cash is required primarily to purchase raw materials, repay debts and pay salaries, office expenses, income taxes and other operating expenses.

 

For the fiscal year ended December 31, 2020, our PRC subsidiary, Zhejiang Zhongchai, has paid off approximately $21.56 million in bank loan, approximately $0.71 million in related parties loan, approximately $5.72 million in third parties loan, and maintained $9.40 million cash on hand. We plan to maintain the current debt structure and rely on governmentally supported loans with lower cost, if necessary.

 

The government subsidy mainly consists of an incentive granted by the Chinese government to encourage transformation of fixed assets in China and other miscellaneous subsidy from the Chinese government. Government subsidies are recognized when there is reasonable assurance that the subsidy will be received and all conditions be completed. Total government subsidies recorded under long-term liabilities were $2.34 million and $2.18 million at December 31, 2020 and 2019, respectively.

 

The Company currently plans to fund its operations mainly through cash flow from its operations, renewal of bank borrowings, additional equity financing, and continuation of financial support from its shareholders and affiliates controlled by its principal shareholders, if necessary. The Company might implement a stricter policy on sales to less creditworthy customers and plans to continue to improve its collection efforts on accounts with outstanding balances. The Company is actively working with customers and suppliers and expects to fully collect the remaining balance.

 

We believe that the Company has sufficient cash, even with uncertainty in the Company’s manufacturing and sale of electric industrial vehicles in the future and decline on sale of transmission products. However, our capital contribution from existing funding sources, to operate for the next 12 months will be sufficient. We remain confident and are expected to generate positive cash flow from our operations.

 

 

We may need additional cash resources in the future, if the Company experiences failure in collecting account receivables, changes in business condition, changes in financial condition, or other developments. We may also need additional cash resources, if the Company wishes to pursue opportunities for investment, acquisition, strategic cooperation, or other similar actions. If the Company’s management and its Board determine that the cash required for specific corporate activities exceed Greenland’s cash and cash equivalents on hand, the Company may issue debt or equity securities to raise cash.

 

Historically, we have expended considerable resources on building a new factory and paid off a considerable amount of debt, resulting in less available cash. However, we anticipate that our cash flow will continue to improve for the fiscal year 2021. We have completed Zhejiang Zhongchai’s new factory construction and the PRC government has provided subsidies to ease the local business-related financing conditions caused by the COVID-19 outbreak. Furthermore, we pledged the deed of our new factory as a collateral to banks to obtain additional loans, refinance expiring loans, restructure short-term loans, and fund other working capital needs upon acceptable terms to Greenland.

 

Cash and Cash Equivalents

 

Cash equivalents refers to all highly liquid investments purchased with original maturity of three months or less. As of December 31, 2020, Greenland had approximately $7.16 million of cash and cash equivalents, an increase of approximately $5.04 million, or 237.14%, as compared to approximately $2.12 million as of December 31, 2019. The increase of cash was mainly due to the increase of accounts payable and short-term bank loans, as compared to that as of December 31, 2019.

 

Restricted Cash

 

Restricted cash represents the amount held by a bank as security for bank acceptance notes and therefore is not available for use until the bank acceptance notes are fulfilled or expired, which typically takes less than twelve months. As of December 31, 2020, Greenland had approximately $2.24 million of restricted cash, a decrease of approximately $1.35 million, or 37.56%, as compared to approximately $3.59 million as of December 31, 2019. The decrease of restricted cash was due to the increase of mortgaged assets.

 

Accounts Receivable

 

As of December 31, 2020, Greenland had approximately $12.41 million of accounts receivables, an increase of approximately $0.44 million, or 3.65%, as compared to approximately $11.97 million as of December 31, 2019. The increase in accounts receivable was due to our slowed-down effort in receivables collections due to the COVID-19 outbreak.

 

Greenland recorded approximately $0.99 million of provision for doubtful accounts as of December 31, 2020. Greenland conducted an aging analysis of each customer’s delinquent payments to determine whether allowance for doubtful accounts is adequate. In establishing the allowance for doubtful accounts, Greenland considers historical experience, economic environment, and expected collectability of past due receivables. An estimate of doubtful accounts is recorded when collection of the full amount is no longer probable. When bad debts are identified, such debts are written off against the allowance for doubtful accounts. Greenland will continuously assess its potential losses based on the credit history of and relationships with its customers on a regular basis to determine whether its bad debt allowance on its accounts receivables is adequate. Greenland believes that its collection policies are generally in line with the transmissions industry’s standard in the PRC.

 

Due from Related Party

 

Due from related party was $38.54 million and $36.47 million as of December 31, 2020 and December 31, 2019. The current portion of due from related party was $38.54 million as of December 31, 2020, the non-current portion of due from related party was $0 million as of December 31, 2019. We expect the amount due from our controlling shareholder, Cenntro Holding, to be paid back on April 27, 2022, as mutually agreed by the Company and Cenntro Holding Limited, for an extension of repayment from the end of October 2020 in accordance with the original maturity date.

 

However, there is no guarantee that such amount will be repaid in whole or in part before the end of April 2022, if at all. Such failure to pay back by Cenntro Holding could have a material negative impact on our balance sheet.

 

 

Notes Receivable

 

As of December 31, 2020, Greenland had approximately $30.80 million of notes receivables, which will be collected by us within twelve months. The increase was approximately $14.65 million, or 90.66%, as compared to approximately $16.16 million as of December 31, 2019. 

 

Working Capital 

 

Our working capital was approximately $28.84 million as of December 31, 2020, as compared to $24.25 million at December 31, 2019. The working capital increase of $4.59 million in the fiscal year 2020 as compared with the same period in 2019 was primarily contributed to the increase of notes receivables.

 

Cash Flow

 

		For the Fiscal Year Ended December 31,
		2020				2019
Net cash provided by operating activities		$	2,695,570			$	7,999,230
Net cash (used in) investing activities		$	(822,769	)		$	(1,600,288	)
Net cash provided/(used) in financing activities		$	2,307,164			$	(9,644,359	)
Net increase (decrease) in cash and cash equivalents and restricted cash		$	4,179,965			$	(3,245,417	)
Effect of exchange rate changes on cash and cash equivalents		$	(494,119	)		$	(5,553	)
Cash and cash equivalents and restricted cash at beginning of year		$	5,717,207			$	8,968,177
Cash and cash equivalents and restricted cash at end of year		$	9,403,053			$	5,717,207

 

Operating Activities 

 

Greenland’s net cash provided by operating activities was approximately $2.70 million and $8.00 million for the fiscal years ended December 31, 2020 and 2019, respectively.

 

In the fiscal year ended December 31, 2020, the main sources of cash inflow from operating activities were net income, changes in accounts payable, and due to related parties, of approximately $6.37 million, $5.94 million and $4.77 million, respectively. The main causes of changes in cash outflow were changes in notes receivable and inventories, of approximately $12.79 million and $4.33 million, respectively.

 

In the fiscal year ended December 31, 2019, the main sources of cash inflow from operating activities were net income, change in depreciation and amortization, and inventories, of approximately $5.09 million, $2.30 million and $2.23 million, respectively. The main causes of cash outflow were change in account receivable and other current liability, of approximately $(2.13) million and $(1.65) million, respectively.

 

Investing Activities

 

Net cash used in investing activities resulted a cash outflow of approximately $0.82 million for the fiscal year ended December 31, 2020. Cash used in investing activities for the fiscal year ended December 31, 2020 was mainly due to $0.25 million in proceeds from government grants for construction, offset by approximately $1.08 million used for purchases of long-term assets.

 

Net cash used in investing activities was approximately $(1.60) million for the fiscal year ended December 31, 2019. Cash used in investing activities for the fiscal year ended December 31, 2019 was mainly due to offset by approximately $ (1.28) million and $(0.91) million used for purchases of plant and equipment and equipment construction in process, respectively.

 

 

Financing Activities

 

Net cash provided by financing activities resulted a cash inflow of approximately $2.31 million for the fiscal year ended December 31, 2020, which was mainly attributable to approximately $21.13 million proceeds from short-term bank loans and approximately $4.38 million proceeds from third parties. Such amounts were further offset by repayment of loans lent by third parties for approximately $5.72 million, and repayment of short-term bank loans for approximately $21.56 million.

 

Net cash used in financing activities was approximately $(9.64) million for the fiscal year ended December 31, 2019, mainly attributable to approximately $38.67 million proceeds from short-term bank loans and approximately $5.21 million proceeds from long-term payables, offset by repayments of short-term bank loans for approximately $(41.14) million, repayments of long-term bank loans for approximately $(6.53) million, repayment of loans lent by third parties for approximately $(2.90) million, and repayment of loans lent by related parties for approximately $(5.43) million.

 

Credit Risk

 

Credit risk is one of the most significant risks for Greenland’s business. Accounts receivable are typically unsecured and derived from revenues earned from customers, thereby exposing Greenland to credit risk. Credit risk is controlled by the application of credit approvals, limits, and monitoring procedures. Greenland identifies credit risk collectively based on industry, geography, and customer type. This information is monitored regularly by the Company’s management. In measuring the credit risk of sales to customers, Greenland mainly reflects the “probability of default” by the customer on its contractual obligations and considers the current financial position of the customer and the exposures to the customer and its future development.

 

Liquidity Risk

 

Greenland is exposed to liquidity risk when it is unable to provide sufficient capital resources and liquidity to meet its commitments and/or business needs. Liquidity risk is managed by the application of financial position analysis to test if Greenland is in danger of liquidity issues and also by application of monitoring procedures to constantly monitor its conditions and movements. When necessary, Greenland resorts to other financial institutions to obtain additional short-term funding to meet the liquidity shortage.

 

Inflation Risk

 

Greenland is also exposed to inflation risk. Inflationary factors, such as increases in raw material and overhead costs, could impair Greenland’s operating results. Although Greenland does not believe that inflation has had a material impact on its financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on its ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenues if the selling prices of its products do not increase with such increased costs.

 

Critical Accounting Policies and Estimates

 

We prepare our consolidated financial statements in accordance with U.S. GAAP. In applying accounting principles, it is often required to use estimates. These estimates consider the facts, circumstances and information available, and may be based on subjective inputs, assumptions and information known and unknown to us. Material changes in certain of the estimates that we use could potentially affect, by a material amount, our consolidated financial position and results of operations. Although results may vary, we believe our estimates are reasonable and appropriate. See Note 2 to our consolidated financial statements included in “Item 8 - Financial Statements and Supplementary Data” for a summary of our significant accounting policies. The following describes certain of our significant accounting policies that involve more subjective and complex judgments where the effect on our consolidated financial position and operating performance could be material.

 

 

Revenue Recognition

 

In accordance with ASC Topic 606, “Revenue from Contracts with Customers”, the Company recognizes revenues when goods or services are transferred to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. In determining when and how revenues are recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contract with customer; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations, and (v) recognition of revenues when (or as) the Company satisfies each performance obligation. The Company derives revenues from the processing, distribution and sale of its products. The Company recognizes its revenues net of value-added taxes (“VAT”). The Company is subject to VAT which had been levied at the rate of 17% on the invoiced value of sales until April 30, 2018, after which date the rate was reduced to 16%. VAT rate was further reduced to 13% starting from April 1, 2019. Output VAT is borne by customers in addition to the invoiced value of sales and input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales.

 

Revenues are recognized at a point in time once the Company has determined that the customer has obtained control over the product. Control is typically deemed to have been transferred to the customer when the performance obligation is fulfilled, usually at the time of customers’ acceptance or consumption, at the net sales price (transaction price) and each of the criteria under ASC 606 have been met. Contract terms may require the Company to deliver the finished goods to the customers’ location or the customer may pick up the finished goods at the Company’s factory. International sales are recognized when shipment clears customs and leaves the port.

 

The Company has adopted ASC 606 on January 1, 2018, using the transition method of Modified-Retrospective Method (“MRM”). The adoption of ASC 606 had no impact on the Company’s beginning balance of retained earnings.

 

The Company’s contracts are all short-term in nature with a contract term of one year or less. Receivables are recorded when the Company has an unconditional right to consideration.

 

Business Combination

 

On October 24, 2019, we consummated our business combination with Zhongchai Holding (the “Business Combination”) following a special meeting, where the shareholders of Greenland considered and approved, among other matters, a proposal to adopt and entered into the Share Exchange Agreement, dated as of July 12, 2019, among (i) Greenland, (ii) Zhongchai Holding, (iii) the Sponsor in the capacity as the purchaser representative (the “Purchaser Representative”), and (iv) Cenntro Holding Limited, the sole member of Zhongchai Holding (the “Zhongchai Equity Holder” or the “Seller”).

 

Pursuant to the Share Exchange Agreement, Greenland acquired from the Seller all of the issued and outstanding equity interests of Zhongchai Holding in exchange for 7,500,000 newly issued ordinary shares, no par value of Greenland, to the Seller (the “Exchange Shares”). As a result, the Seller became the controlling shareholder of Greenland, and Zhongchai Holding became a directly and wholly owned subsidiary of Greenland. The Business Combination was accounted for as a reverse merger effected by a share exchange, wherein Zhongchai Holding is considered the acquirer for accounting and financial reporting purposes.

 

Pursuant to the Finder Agreement, 50,000 newly issued ordinary shares issued to Zhou Hanyi is the finder fee for business combination.

 

Inventories

 

Inventories are stated at the lower of cost or net realizable value, which is based on estimated selling prices less any further costs expected to be incurred for completion and disposal. Cost of raw materials is calculated using the weighted average method and is based on purchase cost. Work-in-progress and finished goods costs are determined using the weighted average method and comprise direct materials, direct labor and an appropriate proportion of overhead.

 

 

Income Taxes

 

The Company accounts for income taxes following the liability method pursuant to FASB ASC 740 “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in income in the period that includes the enactment date.

 

The Company also follows FASB ASC 740, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2020, the Company did not have a liability for unrecognized tax benefits. It is the Company’s policy to include penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary. The Company’s historical tax years will remain open for examination by the local authorities until the statute of limitations has passed.

 

Emerging growth Company

 

Pursuant to the JOBS Act, an emerging growth Company is provided the option to adopt new or revised accounting standards that may be issued by FASB or the SEC either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. We intend to continue to take advantage of the exemption for complying with new or revised accounting standards within the same time periods as private companies. Accordingly, the information contained herein may be different than the information you receive from other public companies. We also intend to continue to take advantage of some of the reduced regulatory and reporting requirements of emerging growth companies pursuant to the JOBS Act so long as we qualify as an emerging growth Company, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments.

 

Off Balance Sheet Arrangements

 

None.

 

 

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Certain information regarding this Item is contained in Item 7 under the headings “Credit Risk,” “Liquidity Risk,” and “Inflation Risk.”

 

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The consolidated financial statements and supplementary data required with respect to this Item 8, and as identified in Item 15 of this Report, are included in this Report.

 

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

(a)	Previous independent registered public accounting firm:

 

Marcum LLP

 

On January 6, 2020, the Board of Directors of the Company (the “Board”) approved the dismissal of Marcum LLP (“Marcum”) as the Company’s independent registered public accounting firm, effective January 6, 2020.

 

For the period from December 28, 2017, the date of our inception, through November 30, 2018, the Company’s previous fiscal year end prior to its reverse merger in October 2019, Marcum’s audit report on the Company’s financial statements did not contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles.

 

During the period from December 28, 2017, the date of our inception, through January 6, 2020, the date of Marcum’s dismissal, (i) there were no “disagreements” (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Marcum on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to Marcum’s satisfaction, would have caused Marcum to make reference in connection with Marcum’s opinion to the subject matter of the disagreement; and (ii) there were no “reportable events” as the term is described in Item 304(a)(1)(v) of Regulation S-K. 

 

We furnished a copy of the disclosures in this report to Marcum and have requested that Marcum furnish us with a letter addressed to the SEC stating whether such firm agrees with the above statements or, if not, stating the respects in which it does not agree. We have received the requested letter from Marcum, and a copy of the letter is filed as an exhibit attached to the form 8-K we filed with the SEC on January 10, 2020.

 

BDO China Sun Lun Pan Certified Public Accountants LLP

 

On November 13, 2020, the Board approved the dismissal of BDO China Shu Lun Pan Certified Public Accountants LLP (“BDO”) as the Company’s independent registered public accounting firm, effective November 13, 2020.

 

BDO’s reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 31, 2018 and December 31, 2019 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

 

During the fiscal years ended December 31, 2018, and December 31, 2019, and the subsequent interim period through November 13, 2020, the date of BDO’s dismissal, (i) there were no “disagreements” (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and BDO on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to BDO’s satisfaction, would have caused BDO to make reference in connection with BDO’s opinion to the subject matter of the disagreement; and (ii) there were no “reportable events” as the term is described in Item 304(a)(1)(v) of Regulation S-K. 

 

 

We furnished a copy of the disclosures in our current report on Form 8-K filed with the SEC on November 17, 2020 to BDO and have requested that BDO furnish us with a letter addressed to the SEC stating whether such firm agrees with the above statements or, if not, stating the respects in which it does not agree. We have received the requested letter from BDO, and a copy of the letter was filed as an exhibit to the Form 8-K filed with the SEC on November 17, 2020.

 

(b)	New independent registered public accounting firm:

 

BDO China Sun Lun Pan Certified Public Accountants LLP

 

On January 6, 2020, the Board approved the appointment of BDO as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements as of and for the fiscal year ending December 31, 2019, effective January 6, 2020.

 

During the period from our inception through January 5, 2020, the Company has not consulted with BDO regarding (1) any matter that was the subject of a disagreement or a reportable event described in Items 304(a)(1)(iv) or (v), respectively, of Regulation S-K.

 

WWC Professional Corporation

 

On November 13, 2020, the Board approved the appointment of WWC Professional Corporation (“WWC”) as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for the fiscal year ending December 31, 2020, effective November 16, 2020.

 

During the fiscal years ended December 31, 2018, and December 31, 2019, and the subsequent interim period through November 17, 2020, the Company has not consulted with WWC regarding any matter that was the subject of a disagreement or a reportable event described in Items 304(a)(1)(iv) or (v), respectively, of Regulation S-K.

 

 

ITEM 9A.

CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls, as under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), defined are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

As of December 31, 2020, the end of the fiscal year covered by this report, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures.

 

Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, our disclosure controls and procedures were ineffective. They reached this conclusion due to the presence of material weakness in internal controls over financial reporting as described below. Greenland’s management anticipates that the Company’s disclosure controls and procedures will remain ineffective until such material weaknesses are remediated. 

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such item is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

 

Under the supervision and with the participation of our Chief Executive Officer, we conducted an evaluation on the effectiveness of our internal control over financial reporting as of December 31, 2020 based on the framework set forth in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation under this framework, Greenland’s management concluded that the Company’s internal control over financial reporting was ineffective as of the evaluation date due to the following material weakness:

 

●

The lack of sufficient and competent financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to prepare consolidated financial statements and related disclosures in accordance with U.S. GAAP and SEC reporting requirements.

 

Based on the above factors, management concluded that our insufficient knowledge of U.S. GAAP and SEC rules represents a material weakness in the Company’s internal control over financial reporting as of December 31, 2020.

 

As a result, the Company has developed a remedial plan to strengthen its accounting and financial reporting functions. To strengthen the Company’s internal control over financial reporting, the Company expects to implement the following remedial actions during fiscal year 2021:

 

	●	Developing and formalizing of key accounting and financial reporting policies and procedures;
	●	Recruiting more financial reporting and accounting personnel who have adequate U.S. GAAP knowledge;

 

 

	●	Training key position staff by U.S. accountant with U.S. corporate accounting experiences, and gaining additional knowledge and professional skills about SEC regulations and U.S. GAAP;
	●	Planning to acquire additional resources to strengthen the financial reporting function and set up a financial and system control framework; and
	●	establishing effective oversight and clarifying reporting requirements for non-recurring and complex transactions to ensure consolidated financial statements and related disclosures are accurate, complete and in compliance with U.S. GAAP and SEC reporting requirements.

 

Inherent limitation on the effectiveness of internal control

 

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

 

Notwithstanding the material weakness in our internal control over financial reporting, the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America. 

 

Changes in Internal Control over Financial Reporting

 

There was no change in our internal control over financial reporting during the fiscal year ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B.

OTHER INFORMATION

 

None.

 

 

PART III

 

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

The following table sets forth information regarding each of our current directors and executive officers:

 

Name		Age		Position
Peter Zuguang Wang(5)		66		Chairman of the Board
Raymond Z. Wang		37		Chief Executive Officer and President
Jing Jin		37		Chief Financial Officer
Lei Chen		61		Chief Scientist
Ming Zhao(1)(4)		52		Independent Director
Charles Athle Nelson(1)(2)(3)(4)		67		Independent Director
Everett Xiaolin Wang(2)(3)(4)		59		Independent Director
Frank Shen(1)(2)(3)(5)		51		Independent Director

 

(1)	Member of the audit committee
(2)	Member of the compensation committee
(3)	Member of the nominating and corporate governance committee
(4)	Class I director
(5)	Class II director

 

Mr. Peter Zuguang Wang has served as the chairman of the Board since October 24, 2019. In addition, Mr. Wang has served as Zhongchai Holding’s sole director since its inception in April, 2009. He has also served as the Chief Executive Officer of Cenntro Automotive Group, a Company that designs and manufactures all-electric utility vehicles for sale in the United States, Europe and PRC, since February 2014. Mr. Wang co-founded UTStarcom in 1990 and was the Executive Vice President until August 30, 1995. From August 1995 to December 2000, Mr. Wang was the Chairman and Chief Executive Officer of World Communication Group, an international telecommunication Company. From December 2000 to August 2009, Mr. Wang was the Chairman and Chief Executive Officer of PRC Quantum Communication Limited (later changed to Techedge, Inc. and then to PRC Biopharma, Inc.), a telecommunication services Company. Previously, Mr. Wang worked at AT&T Bell Labs and Racal-Milgo Information System. Mr. Wang was also the Co-Chairman of Business Advisory Council of the National Republican Congressional Committee during the period of 1994 to 1995. Mr. Wang earned his dual Bachelor of Science degrees in Mathematics and Computer Science and Master of Science degree in Electrical Engineering from University of Illinois at Urbana-Champaign. He received a Master of Business Administration degree in Marketing from Nova South-eastern University.

 

Mr. Raymond Z. Wang has served as our Chief Executive Officer and President since October 24, 2019. He has also served as the Chief Executive Officer of Zhongchai Holding since April 2019. From November 2017 to March 2019, Mr. Wang was the President of Devirra Corporation, a warehousing management and logistic Company. From August 2007 to July 2017, Mr. Wang worked as the Vice President at Bank of America Merrill Lynch, developing a client acquisition channel for an online platform. From December 2005 to March 2007, Mr. Wang served as the Financial Advisor at Cowan Financial Group, a full-service financial planning and consulting firm, in New York. Mr. Wang received his Bachelor’s degree in Economics from Rutgers University. Mr. Wang serves as Vice Chairman of the board of ONE Project, a non-profit organization that unifies local communities to collectively tackle social issues such as hunger.

 

Mr. Jing Jin has served as our Chief Financial Officer since October 24, 2019. He has also served as the Chief Financial Officer of Zhongchai Holding since August 2019. Prior to that, Mr. Jin served as the Chief Financial Officer of Tantech Holdings Ltd. (Nasdaq: TANH), a manufacturer of bamboo-based charcoal products in PRC, from May 2016 to June 2019. From January 2014 to February 2015, Mr. Jin served as Senior Adviser for AAIC (Shanghai) Co., Ltd., a consulting Company in PRC, responsible for overseeing M&A transactions. From September 2011 to November 2013, he worked as a senior financial adviser in CanAccess Int’l Financial Consultants Ltd. in Vancouver, Canada, responsible for small-medium enterprises’ financing both in private and public sectors. From December 2008 to August 2011, Mr. Jin was an audit associate at MaloneBailey LLP, an accounting firm, in its offices in Canada and PRC. Mr. Jin graduated from Simon Fraser University in June 2008 in Burnaby, Canada with a Bachelor of Business Administration degree.

 

 

Mr. Lei Chen has served as our Chief Scientist since October 24, 2019. He has also served as the Chief Scientist of Zhongchai Holding since April 2019. Prior to that, he was the Chief Scientist of Cenntro Automotive Group from July 2016 to March 2019 and responsible for technology development. Prior to that, Dr. Chen was a development consultant to Pinnacle Engines, Inc., a technology Company specializing in four-stroke engines from July 2013 to January 2016. He served as a Vice President of KLD Energy Technologies, Inc., a Company that develops sustainable propulsion technologies for the electric vehicle markets, and was in charge of the research and development of electrical motors from June 2009 to July 2013. He also founded GOTOAUTO.COM, a data engine software Company, and served as its Chief Technology Officer from March 1999 to September 2002. Prior to that, he was the principal consultant to E2 Capital Partners, a marketing consulting Company, from 1996 to 1999, and a sales director of PcBX Systems, Inc., a technology Company with PC based-PBX products, from 1994 to 1995. Dr. Chen has a Ph.D. in Physics from the University of Texas at Austin and a Bachelor degree in Physics from Shandong University, PRC.

 

Mr. Ming Zhao has served as our independent director since December 2020. Mr. Zhao has served as the chief financial officer at China Jo-Jo Drugstores Inc (Nasdaq: CJJD) since August 2011. From December 2006 through August 2011, Mr. Ming Zhao served as a senior auditor at Sherb & Co., LLP. From January through June 2003, Mr. Zhao served as a financial analyst at Microsoft Corporation. Mr. Zhao is a licensed certified public accountant. He received his bachelor’s degree in accounting from Central University of Finance and Economic in Beijing in July 1999 and his master’s degree in professional accounting from the University of Washington in December 2002.

 

Mr. Charles Athle Nelson has served as our independent director since December 2020. Mr. Nelson has been active in the capital markets for the past 35 years. He began his financial career as a market representative with American International Group and in 1979 joined Dean Witter Reynolds as a Financial Advisor, working with high net worth and institutional clients. In 1980, he joined Drexel Burnham and Lambert, and subsequently, at Ladenberg, Thalmann and then at Auerbach Pollack and Richardson originated equity and investment banking transactions. Over the last 20 years, Mr. Nelson has been involved with financing companies in the fintech, healthcare and bio-pharma spaces through private equity and public financing including listings on the Nasdaq and the NYSE. Mr. Nelson holds a Bachelor in Arts degree from Villanova University and an MBA from Rutgers University.

 

Mr. Everett Xiaolin Wang has served as our director since October 24, 2019. Dr. Wang serves as a professor at School of Information Engineering of Guangdong University of Technology in Guangdong, PRC and a distinguished professor under the University 100 Talents Plan. He has served as session or local chairs of IEEE International Conference in 2013, 2015, 2016 and 2018. Since 2014, he has been reviewer for IEEE Transaction on Intelligent Transportation Systems, as well as Journal of Nonlinear Dynamics. From October 1993 to June 2006, Dr. Wang worked as an engineer at Intel Corporation and was responsible for stress modelling, quantum tunnelling, quantum size effect, 3D mesh generation, hydrodynamic simulation, Monte Carlo modelling and photonic IC design. Dr. Wang received his Bachelor of Science degree in Physics from Peking University, his Master of Science degree in Theoretical Physics from Institute of Theoretical Physics, Academy of Sciences of PRC and his Ph.D. degree from the University of Texas at Austin in Electrical and Computer Engineering.

 

Mr. Frank Shen has served as our independent director since December 2020. Mr. Shen has more than 20 years of research and development and operation experience in telecommunication and networking technology. Since 2006, he serves as the founder and CEO of Eastern international, an export trading company that specializes in the shipment of wastes and recycling materials from America manufacturing companies to China. Since 2010, Mr. Shen also served in many non-profit organizations and community service groups. Mr. Shen serves as the president of New Jersey Chinese Computer Professionals Society, the principal of HUAXIA Chinese school. Mr. Shen received his bachelor degree in Electrical & Computer Engineering and his master of telecommunication from Zhejiang University. 

 

Family Relationships

 

Mr. Peter Zuguang Wang and Mr. Raymond Z. Wang are father and son, respectively. None of our other directors or executive officers has a family relationship as defined in Item 401 of Regulation S-K.

 

 

Involvement in Certain Legal Proceedings

 

To the best of our knowledge, none of our directors or executive officers has, during the past ten years:

 

	●	Been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
	●	Had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
	●	Been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity
	●	Been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
	●	Been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
	●	Been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a) (26) of the Exchange Act), any registered entity (as defined in Section 1(a) (29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Director Independence

 

Rule 5605 of the Nasdaq Listing Rules requires a majority of a listed Company’s board of directors to be comprised of independent directors within one year of listing. In addition, the Nasdaq Listing Rules require that, subject to specified exceptions, each member of a listed Company’s audit, compensation, and nominating and corporate governance committees be independent, that audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act, and that compensation committee members also satisfy heightened independence requirements contained in the Nasdaq Listing Rules as well as Rule 10C-1 under the Exchange Act.

 

Under Nasdaq Rule 5605(a) (2), a director will only qualify as an “independent director” if, in the opinion of our Board, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of 10A-3 under the Exchange Act, a member of an audit committee of a listed Company may not, other than in his or her capacity as a member of the audit committee, the Board, or any other Board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed Company or any of its subsidiaries or otherwise be an affiliated person of the listed Company or any of its subsidiaries. When determining the independence of the members of our compensation committee under the heightened independence requirements contained in the Nasdaq Listing Rules and Rule 10C-1 under the Exchange Act, our Board is required to consider all factors specifically relevant to determining whether a director has a relationship with us that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (1) the source of compensation of that director, including any consulting, advisory, or other compensatory fee paid by us to that director; and (2) whether that director is affiliated with our Company, a subsidiary of our Company, or an affiliate of a subsidiary of our Company.

 

 

Our Board has reviewed the composition of our Board and its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment, and affiliations, including family relationships, our Board has determined that Mr. Ming Zhao, Mr. Charles Athle Nelson, Mr. Everett Xiaolin Wang and Mr. Frank Shen, are “independent directors” as defined under Rule 5605(a) (2) of the Nasdaq Listing Rules.

 

Our Board also determined that Mr. Ming Zhao, Mr. Charles Athle Nelson, and Mr. Frank Shen, who comprise our audit committee, and Mr. Everett Xiaolin Wang, Mr. Charles Athle Nelson and Mr. Frank Shen, who comprise our compensation committee, satisfy the independence standards for such committees established by the Securities and Exchange Commission (“SEC”) and the Nasdaq Listing Rules, as applicable. In making such determinations, our Board considered the relationships that each such non-employee director has with our Company and all other facts and circumstances our Board deemed relevant in determining independence, including the beneficial ownership of our capital stock by each non-employee director.

 

Number and Terms of Office of Officers and Directors

 

The directors of the Board consist of two classes, being the class I directors (the Class I Directors) and the class II directors (the Class II Directors). The term of office of the first class of directors, consisting of Mr. Ming Zhao, Mr. Everett Xiaolin Wang, and Mr. Charles Athle Nelson will expire at the annual general meeting in 2022. The term of office of the second class of directors, consisting of Mr. Peter Zuguang Wang and Mr. Frank Shen, will expire at the annual general meeting in 2021. Directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the second annual meeting following their election. Except as the BVI Business Companies Act, 2004 (the “Act”) or any applicable law may otherwise require, in the interim between an annual general meeting, or general meeting called for the election of directors, and the removal of one or more directors, any vacancy on the Board may be filled by the majority vote of the remaining directors.

 

Each director holds office for the term, if any, fixed by the Resolution of Members or Resolution of Directors appointing him or pursuant to Regulation 9.1 or 9.8 of our amended and restated Memorandum of Association and Articles of Association, or until his earlier death, resignation or removal. If no term is fixed on the appointment of a Director, the Director serves indefinitely until his earlier death, resignation or removal.

 

The minimum number of directors shall be one and there shall be no maximum number of directors.

 

Board Meetings

 

The Board held one meeting during the fiscal year ended December 31, 2020. All directors attended the meeting of the Board.

 

Committees of the Company’s Board of Directors

 

Our Board has three standing committees: an audit committee, a compensation committee, and a corporate governance committee. All the directors consisting of the audit committee, the compensation committee, and the corporate governance committee are independent.

 

Audit Committee

 

We have established an audit committee of the Board. Mr. Ming Zhao, Mr. Frank Shen and Mr. Charles Athle Nelson serve as members of our audit committee. Mr. Ming Zhao serves as chairman of the audit committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to have three members of the audit committee all of whom must be independent. Mr. Ming Zhao, Mr. Frank Shen and Mr. Charles Athle Nelson are independent.

 

Each member of the audit committee is financially literate and our Board has determined that Mr. Zhao qualifies as an “audit committee financial expert” as defined in applicable SEC rules.

 

 

The Company’s audit committee will be responsible for, among other things:

 

	●	Selecting a qualified firm to serve as the independent registered public accounting firm to audit the Company’s financial statements;
	●	Helping to ensure the independence and performance of the independent registered public accounting firm;
	●	Discussing the scope and results of the audit with the independent registered public accounting firm and reviewing, with management and the independent registered public accounting firm, the Company’s interim and year-end financial statements;
	●	Developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
	●	Reviewing the Company’s policies on and oversees risk assessment and risk management, including enterprise risk management;
	●	Reviewing the adequacy and effectiveness of internal control policies and procedures and the Company’s disclosure controls and procedures;
	●	Reviewing related person transactions; and
	●	Approving or, as required, pre-approving, all audit and all permissible non-audit services, other than de minimis non-audit services, to be performed by the independent registered public accounting firm.

 

Compensation Committee

 

Subject to the requirement of law or the Nasdaq listing rules, we have established a compensation committee of the Board. The members of our Compensation Committee are Mr. Everett Xiaolin Wang, Mr. Frank Shen and Mr. Charles Athle Nelson. Mr. Charles Athle Nelson serves as chairman of the compensation committee. The Company’s compensation committee will be responsible for, among other things:

 

	●	Reviewing, approving and determining the compensation of the Company’s officers and key employees;
	●	Reviewing, approving and determining compensation and benefits, including equity awards, to directors for service on the Board or any committee thereof;
	●	Administering the Company’s equity compensation plans;
	●	Reviewing, approving and making recommendations to the Board regarding incentive compensation and equity compensation plans; and
	●	Establishing and reviewing general policies relating to compensation and benefits of the Company’s employees.

 

Compensation Committee Interlocks and Insider Participation

 

None of the Company’s officers currently serves, and in the past year has not served, (i) as a member of the compensation committee or the board of another entity, one of whose officers served on the Company’s compensation committee, or (ii) as a member of the compensation committee of another entity, one of whose officers served on our Board. 

 

 

Nominating and Corporate Governance Committee

 

Subject to the requirement of law or the Nasdaq listing rules, we have established a nominating and corporate governance committee of the Board. The members of our nominating and corporate governance Committee are Mr. Everett Xiaolin Wang, Mr. Frank Shen and Mr. Charles Athle Nelson. Mr. Frank Shen serves as chairman of the nominating committee. We have adopted a compensation committee charter, which details the principal functions of the compensation committee, including:

 

Each of the members of the nominating and corporate governance committee will meet the requirements for independence under the applicable rules and regulations of the SEC and rules of Nasdaq. The nominating and corporate governance committee is responsible for, among other things:

 

	●	Identifying, evaluating and selecting, or making recommendations to the Board regarding, nominees for election to the Board and its committees;
	●	Evaluating the performance of the Board and of individual directors;
	●	Considering, and making recommendations to the Board regarding, the composition of the Board and its committees;
	●	Reviewing developments in corporate governance practices;
	●	Evaluating the adequacy of the corporate governance practices and reporting;
	●	Reviewing related person transactions; and
	●	Developing, and making recommendations to the Board regarding, corporate governance guidelines and matters.

 

Code of Ethics

 

We have adopted a code of ethics that applies to all of our executive officers, directors and employees. The code of ethics codifies the business and ethical principles that govern all aspects of our business. Our code of ethics is filed as an exhibit attached to the Form 8-K we filed with the SEC on October 30, 2019. If we amend or grant a waiver of one or more of the provisions of our code of ethics, we intend to satisfy the requirements under Item 5.05 of Form 8-K regarding the disclosure of amendments to or waivers from provisions of our code of ethics that apply to our principal executive officer, principal financial officer and principal accounting officer by posting the required information on our website at the above address.

 

Delinquent Section 16(a) Reports

 

Section 16(a) of the Exchange Act requires our directors, executive officers, and greater than 10% beneficial owners of our ordinary shares to file reports of ownership and changes in ownership with the SEC. Directors, executive officers, and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish us with copies of all Section 16(a) reports they file. Based solely on the Company’s review of the copies of such forms it has received and written representations from certain reporting persons, the Company believes that all of its officers, directors and greater than 10% beneficial owners, complied with all Section 16(a) filing requirements applicable to them during the Company’s most recently completed fiscal year, except that Mr. Jing Jin filed one Form 4 late reporting one transaction.

 

 

ITEM 11.

EXECUTIVE COMPENSATION

 

Compensation of Executive Officers

 

The following table presents summary information concerning compensation that was paid for services rendered by our named executive officers during the fiscal years ended December 31, 2020 and 2019.

 

Name and Principal Position		Year				Salary ($)				Bonus ($)				Stock Awards ($)				Option Awards ($)				Non-Equity Incentive Plan Compensation ($)				Nonqualified deferred compensation earnings ($)				All Other Compensation ($)				Total ($)
Raymond Z. Wang,			2020				145,000				-				69,000				-				-				-				-				214,000
Chief Executive Officer and President(1)			2019				108,750				-				-				-				-				-				-				108,750
Jing Jin, Chief Financial Officer(2)			2020				72,000								135,000				-				-				-				-				207,000
			2019				30,000				-				-				-				-				-				-				30,000
Lei Chen, Chief Scientist(3)			2020				-				-				-				-				-				-				-				-
			2019				33,750				-				-				-				-				-				-				33,750
Yanming Liu(4)			2020				-				-				-				-				-				-				-				-
			2019				-				-				-				-				-				-				-				-
River Chi, Chief Financial Officer(4)			2020				-				-				-				-				-				-				-				-
			2019				-				-				-				-				-				-				-				-
Jerry Zheng, Chief Operating Officer(5)			2020				-				-				-				-				-				-				-				-
			2019				-				-				-				-				-				-				-				-

  

(1)	Mr. Wang has served as the Chief Executive Officer and President of the Company since October 24, 2019.
(2)	Mr. Jin has served as the Chief Financial Officer of the Company since October 24, 2019.
(3)	Mr. Chen has served as the Chief Scientist of the Company since October 24, 2019.
(4)	Mr. Liu resigned as the Chairman and Chief Executive Officer of the Company on October 24, 2019 and remained as a director of the Company until December 15, 2020.

 

During the period from the date when our ordinary shares were first listed on Nasdaq Capital Market to the consummation of our Business Combination on October 24, 2019, we paid an affiliate of a member of our Sponsor a total of $10,000 per month, which were used to pay for office space, utilities, secretarial and administrative services. We believe that such fees are at least as favorable as we could have obtained from an unaffiliated third party for such services. Except as set forth above, no other compensation was paid to our Sponsor, officers and directors, or any of their respective affiliates, prior to or in connection with the consummation of our Business Combination.

 

 

Employment Agreements

 

On October 24, 2019, the Company entered into employment agreements (each an “Employment Agreement,” collectively, the “Employment Agreements”) with Mr. Raymond Z. Wang, Mr. Jing Jin, and Mr. Lei Chen (each an “officer,” collectively, “Officers”), all of which are filed as exhibits to the form 8-K we filed with the SEC on October 30, 2019.

 

Under the Employment Agreements, each Officer is employed for a specific period. We may terminate the employment with any Officer for cause, at any time, without advance notice or remuneration, for certain acts of the Officer, including, but not limited to, conviction or plea of guilty to a crime, gross negligence, dishonest act that has caused detriment to the Company, or a failure to perform agreed duties. The Company may terminate the employment with the Officer without cause, at any time, upon one-month prior written notice. Upon termination without cause, the Company shall provide certain severance payments and benefits to the executive specified in the Employment Agreements. The Officer may terminate the Employment at any time with a one-month prior written notice to the Company, if (1) there is a material reduction in the Officer’s authority, duties and responsibilities, or (2) there is a material reduction in the Officer’s annual salary. 

 

Each of the Officers agreed, at all times during the term of the employment and after his termination, to hold in the strictest confidence, and not to use, except for the benefit of the Company, or to disclose to any person, corporation or other entity without prior written consent of the Company, any confidential information defined therein.

 

Outstanding Equity Awards at 2020 Fiscal Year-End

 

Our non-employee directors did not hold any outstanding option awards as of December 31, 2020.

 

Pension Benefits

 

We do not offer our executive officers or employees any pension plan or similar plan that provides for payments or other benefits at, following or in connection with retirement.

 

Compensation of Directors

 

We did not pay any compensation to our non-executive directors during the fiscal year 2020.

 

We do not pay our directors in connection with attending individual Board meetings, but we reimburse our directors for expenses incurred in connection with such meetings.

 

 

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth the beneficial ownership of our ordinary shares by:

 

	●	Each person known to us to beneficially own more than 5% of any class of our outstanding voting securities based on our review of filings with the SEC;
	●	Each of our directors, persons chosen to become a director and named executive officers; and
	●	Our directors and named executive officers as a group.

 

The numbers of ordinary shares outstanding and the percentage of beneficial ownership are based on 10,498,127 ordinary shares issued and outstanding as of March 19, 2021. Beneficial ownership is in each case determined in accordance with the rules of the SEC, and includes equity securities of which that person has the right to acquire beneficial ownership within 60 days of April 3^rd, 2020. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities as to which he has no economic interest.

 

Title of Class		Name and Address of Beneficial Owner(1)		Amount				Percent of Class
Directors and named Executive Officers
Ordinary Shares		Peter Zuguang Wang(2)			7,306,949				69.602	%
Ordinary Shares		Raymond Z. Wang(2)			120,000				1.143	%
Ordinary Shares		Jing Jin(2)			135,000				1.286	%
Ordinary Shares		Lei Chen(2)			-				-
Ordinary Shares		Ming Zhao(2)			-				-
Ordinary Shares		Charles Athle Nelson(2)			-				-
Ordinary Shares		Everett Xiaolin Wang(2)			-				-
Ordinary Shares		Frank Shen(2)			-				-
Ordinary Shares		All Directors and executive officers as a group (8 persons)			7,561,949				72.949	%
Other 5% Security Holders
		N/A

 

(1)	Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all ordinary shares shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table.
(2)	The business address of such individual is 11-F, Building #12, Sunking Plaza, Gaojiao Road, Hangzhou, Zhejiang, PRC, 311122.

 

 

Securities Authorized for Issuance under Equity Compensation Plan

 

The following table provides certain information about ordinary shares that may be issued under our 2020 Equity Incentive Plan as of December 31, 2020.

 

(a)

(c)

Number of

Number of securities

securities

(b)

remaining available

to be issued upon

Weighted-average

for future issuance

the exercise of

exercise price

under equity

outstanding

of outstanding

compensation plans

options,

options,

(excluding securities

warrants and

warrants

reflected in column

Plan Category

rights

and rights

(a))

Equity compensation plans approved by security holders

-

$

-

-

Equity compensation plans not approved by security holders

Total

-

$

-

-

 

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

The information required by this item is incorporated by reference to the sections entitled “Certain Relationships and Related Transactions” and “Corporate Governance” in the Definitive Proxy Statement the Company filed with the SEC on December 1, 2020.

 

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following table provides information about the fees billed to us for professional services rendered by external accounting firms and auditing firms during fiscal years 2020 and 2019:

 

		2020				2019
Audit Fees		$	300,000			$	379,303
Audit-Related Fees			30,000				-
Tax Fees							-
All Other Fees							-
Total		$	330,000			$	379,303

 

Audit Fees. Audit fees consist of fees for the audit of our annual financial statements or services that are normally provided in connection with statutory and regulatory annual and quarterly filings or engagements.

 

Audit-Related Fees. Audit-related fees consist of fees for accounting, assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported as Audit Fees.

 

Tax Fees. Tax fees consist of fees for tax compliance services, tax advice and tax planning. During the fiscal years of 2019 and 2018, the services provided in this category include assistance and advice in relation to the preparation of corporate income tax returns.

 

All Other Fees. Any other fees not included in Audit Fees, Audit-Related Fees, or Tax Fees.

 

Pre-Approval Policy

 

Prior to the consummation of our initial public offering on July 27, 2018, our audit committee did not pre-approve all the auditing services rendered, since the committee was formed upon the consummation of our initial public offering. Notwithstanding, any services rendered prior to the formation of our audit committee were approved by our Board.

 

Since the consummation of our initial public offering, pursuant to audit committee charter, our audit committee has approved in advance all audit and non-audit related services to be provided by our independent registered public accounting firm in accordance with the audit and non-audit related services pre-approval policy.

 

 

PART IV

 

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

	(a)	(1)	Index to Financial Statements

 

Reports of Independent Registered Public Accounting Firms	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations and Comprehensive Income	F-5
Consolidated Statements of Shareholders’ Equity	F-6
Consolidated Statements of Cash Flows	F-7
Notes to Consolidated Financial Statements	F-9

 

		(2)	ALL OTHER SCHEDULES HAVE BEEN OMITTED BECAUSE THEY ARE NOT APPLICABLE OR THE REQUIRED INFORMATION IS SHOWN IN THE FINANCIAL STATEMENTS OR NOTES THERETO.
		(3)	List of Exhibits

 

Exhibit		Exhibit Description
3.1		Memorandum and Articles of Association (incorporated herein by reference to Exhibit 3.1 to the registration statement on Form S-1 (File Number: 333-226001), as amended, initially filed with the Securities and Exchange Commission on June 29, 2018)
3.2		Amended and Restated Articles of Association (incorporated herein by reference to Exhibit 3.3 to the registration statement on Form S-1 (File Number: 333-226001), as amended, initially filed with the Securities and Exchange Commission on June 29, 2018)
3.3		Second Amended and Restated Articles of Association (incorporated herein by reference to Exhibit 3.1 to the current report on Form 8-K (File Number: 001-38605), as amended, initially filed with the Securities and Exchange Commission on July 30, 2018)
3.4		Amended and Restated Memorandum and Articles of Association, effective on October 24, 2019 (incorporated herein by reference to Exhibit 3.1 to the current report on Form 8-K (File Number: 001-38605), as amended, initially filed with the Securities and Exchange Commission on October 30, 2019)
4.1		Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated herein by reference to Exhibit 4.1 to the annual report on Form 10-K (File Number: 001-38605), as amended, initially filed with the Securities and Exchange Commission on April 3, 2020)
4.2		Warrant Agreement, dated July 24, 2018, between Continental Stock Transfer & Trust Company and the Company (incorporated herein by reference to Exhibit 4.1 to the current report on Form 8-K (File Number: 001-38605), as amended, initially filed with the Securities and Exchange Commission on July 30, 2018)
4.3		Rights Agreement, dated July 24, 2018, between Continental Stock Transfer & Trust Company and the Company (incorporated herein by reference to Exhibit 4.2 to the current report on Form 8-K (File Number: 001-38605), as amended, initially filed with the Securities and Exchange Commission on July 30, 2018)
10.1		Investment Management Trust Account Agreement, dated July 24, 2018, between Continental Stock Transfer & Trust Company and the Company (incorporated herein by reference to Exhibit 10.1 to the current report on Form 8-K (File Number: 001-38605), as amended, initially filed with the Securities and Exchange Commission on July 30, 2018)
10.2		Registration Rights Agreement, dated July 24, 2018, between the Company and initial shareholders (incorporated herein by reference to Exhibit 10.2 to the current report on Form 8-K (File Number: 001-38605), as amended, initially filed with the Securities and Exchange Commission on July 30, 2018)
10.3		Letter Agreement, dated July 24, 2018, by and between the Company, Greenland Asset Management Corporation and the Company’s officers and directors (incorporated herein by reference to Exhibit 10.3 to the current report on Form 8-K (File Number: 001-38605), as amended, initially filed with the Securities and Exchange Commission on July 30, 2018)

 

 

10.4		Administrative Services Agreement, dated July 24, 2018, between the Company and Puhui Wealth Investment Management (Beijing) Co., Ltd (incorporated herein by reference to Exhibit 10.4 to the current report on Form 8-K (File Number: 001-38605), as amended, initially filed with the Securities and Exchange Commission on July 30, 2018)
10.5		Securities Subscription Agreement, dated March 28, 2018, between the Company and Greenland Asset Management Corporation (incorporated herein by reference to Exhibit 10.4 to the registration statement on Form S-1 (File Number: 333-226001), as amended, initially filed with the Securities and Exchange Commission on June 29, 2018)
10.6		Unit Subscription Agreement, dated June 28, 2018, between the Company and Greenland Asset Management Corporation (incorporated herein by reference to Exhibit 10.5 to the registration statement on Form S-1 (File Number: 333-226001), as amended, initially filed with the Securities and Exchange Commission on June 29, 2018)
10.7		Unit Subscription Agreement, dated June 28, 2018, between the Company and Chardan Capital Markets, LLC (incorporated herein by reference to Exhibit 10.6 to the registration statement on Form S-1 (File Number: 333-226001), as amended, initially filed with the Securities and Exchange Commission on June 29, 2018)
10.8		Share Exchange Agreement, dated as of July 12, 2019, by and among the Company, Greenland Asset Management Corporation, in the capacity as the Purchaser Representative thereunder, Zhongchai Holing (Hong Kong) Limited and Cenntro Holding Limited (incorporated herein by reference to Exhibit 10.1 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on July 12, 2019)
10.9		Registration Rights Agreement, dated as of July 12, 2019, by and among the Company, Greenland Asset Management Corporation, in the capacity as the Purchaser Representative, and Cenntro Holding Limited (incorporated herein by reference to Exhibit 10.2 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on July 12, 2019)
10.10		Lock-Up Agreement, dated as of July 12, 2019, by and among the Company, Greenland Asset Management Corporation, in the capacity as the Purchaser Representative, and Cenntro Holding Limited (incorporated herein by reference to Exhibit 10.3 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on July 12, 2019)
10.10		Non-Competition and Non-Solicitation Agreement, dated as of July 12, 2019, executed and delivered by Cenntro Holding Limited in favor of and for the benefit of the Company, Zhongchai Holding (Hong Kong) Limited and each of Greenland Acquisition Corporation’s and/or Zhongchai Holding (Hong Kong) Limited Purchaser’s respective present and future affiliates, successors and direct and indirect subsidiaries (incorporated herein by reference to Exhibit 10.4 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on July 12, 2019)
10.11		Escrow Agreement, by and among the Company, Greenland Asset Management Corporation, Cenntro Holding Limited, and Continental Stock Transfer & Trust Company (incorporated herein by reference to Exhibit 10.5 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on July 12, 2019)
10.12		Promissory note, dated July 24, 2019, issued by the Company to Greenland Asset Management Corporation (incorporated herein by reference to Exhibit 10.1 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on July 24, 2019)
10.13		Amended and restated promissory note, dated July 24, 2019, issued by the Company to Greenland Asset Management Corporation (incorporated herein by reference to Exhibit 10.2 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on July 24, 2019)
10.14		Promissory note, dated September 12, 2019, issued by the Company to Greenland Asset Management Corporation (incorporated herein by reference to Exhibit 10.1 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on September 12, 2019)
10.15		Form of Subscription Agreement (incorporated herein by reference to Exhibit 10.1 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on September 12, 2019)

 

 

10.16		Termination Agreement, dated October 17, 2019, by and between the Company and CCWW Holdings LLC (incorporated herein by reference to Exhibit 10.1 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on October 18, 2019)
10.17		Employment Agreement, dated October 24, 2019 by and between the Company and Raymond Z. Wang ((incorporated herein by reference to Exhibit 10.1 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on October 30, 2019)
10.18		Employment Agreement, dated October 24, 2019 by and between the Company and Lei Chen (incorporated herein by reference to Exhibit 10.2 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on October 30, 2019)
10.19		Employment Agreement, dated October 24, 2019 by and between the Company and Jing Jin (incorporated herein by reference to Exhibit 10.3 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on October 30, 2019)
10.20		Termination Agreement between the Registrant and SCCG, dated February 25, 2020 (incorporated herein by reference to Exhibit 4.8 to the registration statement on Form S-3 (File Number: 333-237321), as amended, initially filled with the Securities and Exchange Commission on March 20, 2020)
10.21		Extension Agreement entered into by and between the Company and Cenntro Holdings Limited dated November 21, 2020 (incorporated herein by reference to Exhibit 10.1 to the periodic report on Form 10-Q (File Number: 001-38605) filed with the Securities and Exchange Commission on November 23, 2020)
14.1		Form of Code of Business Conduct and Ethics (incorporated herein by reference to Exhibit 14.1 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on October 30, 2019)
16.1		Letter from Marcum LLP to the Securities and Exchange Commission, dated January 10, 2020 (incorporated herein by reference to Exhibit 16.1 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on January 10, 2020)
16.2		Letter from BDO China Shu Lun Pan Certified Public Accountants LLP to the Securities and Exchange Commission, dated November 17, 2020 (incorporated herein by reference to Exhibit 16.1 to the current report on Form 8-K (File Number: 001-38605) filed with the Securities and Exchange Commission on November 17, 2020)
21.1*		Subsidiaries of the Registrant
23.1*		Consent of WWC Corporation, independent registered public accounting firm
31.1*		Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

 

	*	Filed herewith.
	**	Furnished herewith.

 

ITEM 16.

FORM 10-K SUMMARY

 

None.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 31, 2021.

 

	GREENLAND TECHNOLOGIES HOLDING CORPORATION
	By:	/s/ Raymond Z. Wang
	Name:	Raymond Z. Wang
	Title:	Chief Executive Officer and President (Principal Executive Officer)

 

POWER OF ATTORNEY

 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Raymond Z. Wang and Jing Jin, his attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: 

 

Signatures		Title		Date
/s/ Raymond Z. Wang		Chief Executive Officer and President		March 31, 2021
Raymond Z. Wang		(Principal Executive Officer)
/s/ Jing Jin		Chief Financial Officer and Corporate Secretary		March 31, 2021
Jing Jin		(Principal Financial Officer and Principal Accounting Officer)
*				March 31, 2021
Peter Zuguang Wang		Chairman of the Board and Director
*				March 31, 2021
Everett Xiaolin Wang		Independent Director
*				March 31, 2021
Ming Zhao		Independent Director
*				March 31, 2021
Charles Athle Nelson		Independent Director
*				March 31, 2021
Frank Shen		Independent Director

 

  

GREENLAND TECHNOLOGIES HOLDING CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and 2019

 

INDEX

 

Reports of Independent Registered Public Accounting Firms	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Income and Comprehensive Income	F-5
Consolidated Statements of Shareholders’ Equity	F-6
Consolidated Statements of Cash Flows	F-7
Notes to the Consolidated Financial Statements	F-9

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To:

The Board of Directors and Stockholders of

Greenland Technologies Holding Corporation

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Greenland Technologies Holding Corporation and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income and comprehensive income, shareholders’ equity, and cash flows for the two-year period ended December 31, 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

 

Emphasis of Matter

 

The Company incurred a one-time gain on remeasurement of foreign currency as the result of the Company changing the functional currency of its subsidiary Zhongchai Holding (Hong Kong) Limited. The one time gain significantly impacted the net result of operations for the Company during the year ended December 31, 2020. Our audit opinion is not qualified as a result of this emphasis of matter.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

The critical audit matter communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) related to the accounts or disclosures that are material to the financial statements and 2.) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in anyway our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

 

The critical audit matter related to the Company’s fair valuation of the Company’s accounts receivables and related allowance for doubtful accounts. The principal considerations in determining that this was a critical audit matter was that this account requires significant subjective judgment and complexity; accounting for the allowance for doubtful accounts requires estimation and the consideration of historical data, both internal and external, and potential future events. We addressed this critical auditing matter by testing the reasonableness of the Company’s accounting policy, by considering the logic, testing them against the terms within contracts with customers, as well as the Company’s assumptions against other similar businesses in the same or comparable industries. We also gathered data from the Company and from external sources, and performed our own independent analysis, and compared our conclusion against the Company’s own assessment. The outcome of our testing supports our audit opinion above. We believe that the Company will need to devote resources to regularly revisit and monitor it policies and procedures regarding these accounts given their susceptibility to changes in the general economic climate. The accounts that are affected by these critical matters are account receivables, allowance for doubtful accounts, bad debt expense, and net income, and the related disclosures found in Note 2 – Significant Accounting Policies – Accounts Receivable and Note 4 Accounts Receivable.

 

/s/ WWC, P.C.

WWC, P.C.

Certified Public Accountants

 

We have served as the Company’s auditor since November 16, 2020.

 

San Mateo, California

March 31, 2021

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2020 AND 2019

(IN U.S. DOLLARS)

 

		December 31,				December 31,
		2020				2019
ASSETS
Current assets
Cash and cash equivalents		$	7,159,015			$	2,123,485
Restricted cash			2,244,038				3,593,722
Notes receivable			30,803,772				16,156,692
Accounts receivable, net of allowance for doubtful accounts of $986,532 and $1,037,797, respectively			12,408,548				11,971,889
Inventories			15,380,063				9,972,877
Due from related parties-current			38,535,171				36,042,829
Advance to suppliers			447,901				50,664
Prepayments and other current assets			664,926				327,555
Total Current Assets		$	107,643,434			$	80,239,713
Non-current asset
Property, plant, equipment and construction in progress, net			20,135,339				20,630,251
Land use rights, net			4,035,254				3,862,547
Other intangible assets			-				5,174
Due from related parties - non-current			-				430,034
Deferred tax assets			158,455				513,805
Goodwill			3,890				3,890
Other non-current assets			2,365				798,429
Total non-current assets		$	24,335,303			$	26,244,130
TOTAL ASSETS		$	131,978,737			$	106,483,843

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2020 AND 2019 (Continued)

(IN U.S. DOLLARS)

 

		December 31,				December 31,
		2020				2019
Current Liabilities
Short-term bank loans		$	18,487,356			$	16,861,615
Notes payable-bank acceptance notes			25,889,067				15,050,902
Accounts payable			22,005,260				14,713,008
Taxes payables			-				12,529
Customer deposits			366,029				132,194
Due to related parties			9,051,119				3,481,984
Other current liabilities			2,212,325				3,086,859
Lease obligations - current			797,179				2,654,230
Total current liabilities		$	78,808,335			$	55,993,321
Long-term liabilities
Long-term bank loans			-				-
Lease obligations – non-current			166,292				1,349,850
Other long-term liabilities			2,342,648				2,178,548
Total long-term liabilities		$	2,508,940			$	3,528,398
TOTAL LIABILITIES		$	81,317,275			$	59,521,719
COMMITMENTS AND CONTINGENCIES
EQUITY
Ordinary shares, no par value, 10,225,142 shares authorized; 10,225,142 and 10,006,142 shares issued and outstanding as of December 31, 2020 and December 31, 2019.			-				-
Additional paid-in capital			13,707,398				15,226,685
Statutory reserves			4,517,117				3,866,574
Retained earnings			26,728,332				19,863,600
Accumulated other comprehensive income (loss)			(62,925	)			(360,981	)
Total shareholders’ equity		$	44,889,922			$	38,595,878
Non-controlling interest			5,771,540				8,366,246
TOTAL EQUITY		$	50,661,462			$	46,962,124
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	131,978,737			$	106,483,843

 

See accompanying notes to the consolidated financial statements.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEAR ENDED DECEMBER 31, 2020 AND 2019

(IN U.S. DOLLARS)

 

		For the year ended December 31,
		2020				2019
REVENUES		$	66,864,375			$	52,400,844
COST OF GOODS SOLD			54,051,367				40,022,243
GROSS PROFIT			12,813,008				12,378,601
Selling expenses			1,588,302				1,187,263
General and administrative expenses			2,131,405				2,231,953
Research and development expenses			2,384,951				2,355,307
Total operating expenses		$	6,104,658			$	5,774,523
INCOME FROM OPERATIONS		$	6,708,350			$	6,604,078
Interest income			2,645				151,532
Interest expense			(930,634	)			(1,289,133	)
Loss on disposal of property and equipment			(79,216	)			(252,556	)
Other income			1,002,642				720,612
Remeasurement gain from change in functional currency			1,940,773				-
INCOME BEFORE INCOME TAX		$	8,644,560			$	5,934,533
INCOME TAX			2,272,997				847,367
NET INCOME		$	6,371,563			$	5,087,166
LESS: NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST			(386,939	)			622,610
NET INCOME ATTRIBUTABLE TO GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES		$	6,758,502			$	4,464,556
OTHER COMPREHENSIVE INCOME (LOSS):			937,629				(689,290	)
Unrealized foreign currency translation income (loss) attribute to Greenland technologies holding corporation and subsidiaries			298,056				(534,862	)
Unrealized foreign currency translation income (loss) attribute to Non-controlling interest			639,573				(154,428	)
Comprehensive income			7,056,558				3,929,694
Non-controlling interest			252,634				468,182
WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING:
Basic and diluted			10,037,249				7,932,567
NET INCOME PER ORDINARY SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY:
Basic and diluted		$	0.67			$	0.56

 

See accompanying notes to the consolidated financial statements.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2020 AND 2019

(IN U.S. DOLLARS)

 

		Ordinary Shares								Additional				Accumulated Other												Non-
		No Par Value								Paid-in				Comprehensive				Statutory				Retained				controlling
		Shares				Amount				Capital				Income/(loss)				Reserve				Earnings				Interest				Total
Balance as of December 31, 2018			7,500,000				-				12,301,305				173,881				3,334,322				15,931,296				7,898,064				39,638,868
Reverse recapitalization			2,506,142				-				2,925,380				-				-				-				-				2,925,380
Net income			-				-				-				-				-				4,464,556				622,610				5,087,166
Transfer to statutory reserve			-				-				-				-				532,252				(532,252	)			-				-
Foreign currency translation adjustment			-				-				-				(534,862	)			-				-				(154,428	)			(689,290	)
Balance as of December 31, 2019			10,006,142				-			$	15,226,685			$	(360,981	)			3,866,574			$	19,863,600			$	8,366,246			$	46,962,124
Restricted stock grant			219,000				-				246,800				-				-				-				-				246,800
Reduction of capital			-				-				(1,766,087	)							(24,243	)			781,016				(2,847,340	)			(3,856,654	)
Net income			-				-				-				-				-				6,758,502				(386,939	)			6,371,563
Transfer to statutory reserve			-				-				-				-				674,786				(674,786	)			-				-
Foreign currency translation adjustment			-				-				-				298,056				-				-				639,573				937,629
Balance as of December 31, 2020			10,225,142				-			$	13,707,398			$	(62,925	)			4,517,117			$	26,728,332			$	5,771,540			$	50,661,462

 

See accompanying notes to the consolidated financial statements.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2020 AND 2019

(IN U.S. DOLLARS)

 

		For the year ended December 31,
		2020				2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	6,371,563			$	5,087,166
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,435,215				2,298,183
Loss on disposal of property and equipment			79,216				252,556
Increase/(decrease) in allowance for doubtful accounts			(116,466	)			148,073
Increase in allowance for notes receivable			(15,524	)			(160,998	)
Increase/(decrease) in provision for inventory			(136,166	)			22,488
Deferred tax assets			370,033				55,357
Changes in operating assets and liabilities:
Increase (Decrease) In:
Accounts receivable			486,793				(2,131,986	)
Notes receivable			(12,792,748	)			(79,654	)
Inventories			(4,329,801	)			2,230,666
Advance to suppliers			(372,735	)			(18,536	)
Other current and noncurrent assets			(297,736	)			(4,673	)
Increase (Decrease) In:
Accounts payable			5,940,202				(16,118	)
Customer deposits			212,710				65,484
Other current liabilities			317,459				(1,645,646	)
Income tax payable			(12,681	)			(141,965	)
Due to related parties			4,768,555				1,819,778
Long-term payables - unamortized deferred financing costs			29,376				-
Other long-term liabilities			(241,695	)			219,055
NET CASH PROVIDED BY OPERATING ACTIVITES		$	2,695,570			$	7,999,230

 

See accompanying notes to the consolidated financial statements.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2020 AND 2019 (Continued)

(AUDITED, IN U.S. DOLLARS)

 

		For the year ended December 31
		2020				2019
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of long-term assets		$	(1,083,642	)		$	(2,193,447	)
Proceeds from government grants for construction			253,329				633,887
Proceeds from sale of property, plant and equipment			7,544				90,704
Purchases of land use rights and other intangible assets			-				(131,432	)
NET CASH USED BY INVESTING ACTIVITES		$	(822,769	)		$	(1,600,288	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term bank loans		$	21,128,457			$	38,674,867
Repayments of short-term bank loans			(21,563,706	)			(41,144,988	)
Repayments of long-term bank loans			-				(6,527,036	)
Notes payable			9,274,883				(1,813,551	)
Proceeds from related parties			1,508,944				2,900,905
Repayment of loans from related parties			(708,366	)			(5,428,263	)
Repayment of loans from third parties			(5,723,689	)			(2,900,905	)
Proceeds from third parties			4,376,267				-
Dividend paid			-				(159,612	)
Proceeds received from financing lease obligation			1,430,922				5,209,155
Deposits for the financing lease obligation			(2,295,833	)			(805,001	)
Payment of principal on financing lease obligation			(1,510,861	)			(575,310	)
Reverse capitalization			-				2,925,380
Restricted stock grant			246,800				-
Reduction of capital			(3,856,654	)			-
NET CASH PROVIDED/(USED) IN FINANCING ACTIVITES		$	2,307,164			$	(9,644,359	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		$	4,179,965			$	(3,245,417	)
Effect of exchange rate changes on cash			(494,119	)			(5,553	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF YEAR			5,717,207				8,968,177
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD		$	9,403,053			$	5,717,207
Bank balances and cash			7,159,015				2,123,485
Bank balances and cash included in assets classified as restricted cash			2,244,038				3,593,722
Supplemental Disclosure of Cash Flow Information
Income taxes paid			3,063,700				791,760
Interest paid			1,141,108				2,223,630

 

See accompanying notes to the consolidated financial statements.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES

 

Greenland Technologies Holding Corporation, formerly known as Greenland Acquisition Corporation (“Greenland” or the “Company”), was incorporated on December 28, 2017 as a British Virgin Islands Company with limited liability. The Company was incorporated as a blank check Company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more target businesses. On October 24, 2019, the Company acquired all of the outstanding shares of Zhongchai Holding (Hong Kong) Limited via a reverse capitalization and changed its name from Greenland Acquisition Corporation to Greenland Technologies Holding Corporation.

 

Greenland serves as the parent Company for the primary operating Company, Zhongchai Holding (Hong Kong) Limited, a holding Company formed under the laws of Hong Kong on April 23, 2009 (“Zhongchai Holding”). Through Zhongchai Holding and other subsidiaries, Greenland develops and manufactures traditional transmission products for material handling machineries in PRC, as well as develop models for robotic cargo carriers, which are expected to be produced in the near future in PRC.

 

The outbreak of the novel coronavirus, commonly referred to as “COVID-19”, first found in mainland China, then in Asia and eventually throughout the world, has significantly affected business and manufacturing activities within China, including travel restrictions, widespread mandatory quarantines, and suspension of business activities within China. Effective February 3, 2020, the Company announced the temporary closure of its operating offices in Zhejiang Province, including suspension of its manufacturing activities in response to the emergency measures imposed by the local government. The Company’s operating subsidiaries were temporary shut down until the end of February 2020. The Company expects to delay its launch of robotic cargo carriers due to uncertainties of the market demand. Moreover, the outbreak has significantly limited suppliers’ ability to provide low-cost, high-quality parts and materials to the Company on a timely basis. Zhejiang Province, where we conduct a substantial part of our business, is one of the most affected areas in China. As of the date of this report, Chinese industries have gradually resumed businesses as government officials started to ease the restrictive measures since April 2020. However, we remain cautious and prudent when assessing the future impact of COVID-19 on our business due to the current ongoing global pandemic.

 

The Company’s Shareholders

 

As of December 31, 2020, Cenntro Holding Limited owns 69.60% of Greenland’s outstanding ordinary shares. Cenntro Holding Limited is controlled and beneficially owned by Mr. Peter Zuguang Wang, chairman of the Company.

 

The Company’s Subsidiaries

 

Zhongchai Holding, the wholly-owned subsidiary of the Company, owned 89.47% of Zhejiang Zhongchai Machinery Co., Ltd. (“Zhejiang Zhongchai”), 62.5% of Shanghai Hengyu Enterprise Management Consulting Co., Ltd. (“Hengyu”), 100% of Hangzhou Greenland Energy Technologies Co., Ltd Co., Ltd (“Hangzhou Greenland”) and 100% of Greenland Technologies Corporation.

 

Zhejiang Zhongchai, the subsidiary of the Company, is the sole shareholder of Zhejiang Shengte Transmission Co., Ltd. (“Shengte”). It also owned 62.5% of Hengyu until transferred its ownership to Zhongchai Holding on July 15, 2019.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

  

Zhejiang Zhongchai

 

Zhejiang Zhongchai, a limited liability Company registered on November 21, 2005, is the direct operating subsidiary of Zhongchai Holding in PRC. On April 5, 2007, Usunco Automotive Limited (“Usunco”), a British Virgin Islands limited liability Company, invested $8,000,000 USD for purchasing approximately 75.47% equity interest of Zhejiang Zhongchai. On December 16, 2009, Usunco agreed to transfer its 75.47% interest in Zhejiang Zhongchai to Zhongchai Holding. On April 26, 2010, Xinchang County Keyi Machinery Co., Ltd. transferred 24.528% equity interest it owned in Zhejiang Zhongchai to Zhongchai Holding in exchange for a consideration of US$2.6 million. On November 1, 2017, Xinchang County Jiuxin Investment Management Partnership (LP) (“Jiuxin”), an entity controlled and beneficially owned by Mr. He Mengxing, president of Zhejiang Zhongchai, closed its investment of approximately RMB31,590,000 in Zhejiang Zhongchai for 10.53% of its interest. As of September 30, 2020, Zhongchai Holding owns approximately 89.47% of Zhejiang Zhongchai and Jiuxin owns approximately 10.53% of Zhejiang Zhongchai.

 

Through Zhejiang Zhongchai, the Company has been engaging in the manufacture and sale of transmission systems mainly for forklift trucks since 2006. These forklift trucks are used in manufacturing and logistics applications, such as factory, workshop, warehouse, fulfilment centers, shipyards and seaports. The transmission systems are the key components for forklift trucks. The Company supplies transmission systems to forklift truck manufacturers. Its transmission systems fit for forklift trucks ranging from 1 to 15 tons, with either mechanical shift or automatic shift. All the products are currently manufactured at the Company’s facility in Xinchang, Zhejiang Province, PRC and are sold to both domestic and oversea markets. The Company has moved to its new factory in Meizhu, Xinchang, Zhejiang Province, PRC, in October of 2019.

 

Hengyu

 

Hengyu is a limited liability Company registered on September 10, 2015 in Shanghai Free Trade Zone, Shanghai, and PRC. Hengyu holds no assets other than an account receivable owed by Cenntro Holding Limited. Main business of Hengyu are investment management and consulting services.

 

Hangzhou Greenland

 

Hangzhou Greenland is a limited liability Company registered on August 9, 2019 in Hangzhou Sunking Plaza, Zhejiang, PRC. Hangzhou Greenland engages in the business of trading.

 

Greenland Tech

 

Greenland Technologies Corporation was incorporated in the state of Delaware on January 14, 2020 as a wholly owned subsidiary of Greenland (“Greenland Tech”). The Company aims to use it as its U.S. operation site to promote sales of robotic products for the North American market in the near future. 

 

Details of the Company’s subsidiaries, which are included in these consolidated financial statements as of December 31, 2020, are as follows:

 

Name

Domicile and Date of Incorporation

Paid-in Capital

Percentage of Effective Ownership

Principal Activities

Zhongchai Holding (Hong Kong) Limited

HongKong April 23, 2009

HKD

10,000

100

%

Holding

Zhejiang Zhongchai Machinery Co., Ltd.

PRC November 21, 2005

RMB

20,000,000

89.47

%

Manufacture, sale of various transmission boxes

Shanghai Hengyu Enterprise Management Consulting Co., Ltd.

PRC September 10, 2015

RMB

251,500,000

62.5

%

Investment management and consulting services.

Hangzhou Greenland Robotic Technologies Co., Ltd.

PRC August 8, 2020

RMB

252,862

100

%

Trading.

Greenland Technologies Corporation

Delaware January 14, 2020

-

100%

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        

Basis of Presentation

 

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Greenland Technologies Holding Corporation and its subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Intercompany accounts and transactions have been eliminated upon consolidation. Certain reclassifications to previously reported financial information have been made to conform to the current period presentation.

 

The Business Combination was accounted for as a reverse recapitalization (the “Recapitalization Transaction”) in accordance with Accounting Standard Codification (“ASC”) 805, Business Combinations. For accounting and financial reporting purposes, Zhongchai Holding is considered the acquirer based on facts and circumstances, including the following:

 

●

Zhongchai Holding’s operations comprise the ongoing operations of the combined entity;

 

●

The officers of the newly combined company consist of Zhongchai Holding’s executives, including the Chief Executive Officer, Chief Financial Officer and General Counsel; and,

 

●

The former shareholders of Zhongchai Holding own a majority voting interest in the combined entity.

 

As a result of Zhongchai Holding being the accounting acquirer, the financial reports filed with the SEC by the Company subsequent to the Business Combination are prepared “as if” Zhongchai Holding is the predecessor and legal successor to the Company. The historical operations of Zhongchai Holding are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of Zhongchai Holding prior to the Business Combination; (ii) the combined results of the Company and Zhongchai Holding following the Business Combination in October 24, 2019; (iii) the assets and liabilities of Zhongchai Holding at their historical cost, and (iv) Greenland’s equity structure for all periods presented. Zhongchai Holding received 7,500,000 shares of Greenland in exchange for all the share capital, which is reflected retroactively to December 31, 2017 and will be utilized for calculating earnings per share in all prior periods. No step-up basis of intangible assets or goodwill was recorded in the Business Combination transaction consistent with the treatment of the transaction as a reverse capitalization of Zhongchai Holding.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. Actual results could differ from those estimates. Significant estimates in the years ended December 31, 2020 and 2019 include allowance for doubtful accounts, reserve for inventories, useful life of property, plant and equipment, assumptions used in assessing impairment of long-term assets and valuation of deferred tax assets and accruals for taxes due.

 

Non-controlling Interest

 

Non-controlling interests in the Company’s subsidiaries are recorded in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 810 Consolidation (“ASC 810”) and are reported as a component of equity, separate from the parent’s equity. Purchase or sale of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the non-controlling interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Foreign Currency Translation

 

The accompanying consolidated financial statements are presented in United States dollars (“US$” or “$”). The functional currency of the Company is Renminbi (“RMB”).  Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of transaction. Any differences between the initially recorded amount and the settlement amount are recorded as a gain or loss on foreign currency transaction in the consolidated statements of operations.

 

		For the year ended December 31,
		2020				2019
Period end RMB: US$ exchange rate			6.5250				6.9762
Period average RMB: US$ exchange rate			6.8926				6.8944

 

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations.

 

Cash and Cash Equivalents

 

For financial reporting purposes, the Company considers all highly liquid investments purchased with original maturity of three months or less to be cash equivalents. The Company maintains no bank account in the United States of America. The Company maintains its bank accounts in PRC and Hong Kong Special Administrative Region (“SAR”). Balances at financial institutions or state-owned banks within PRC and Hong Kong SAR are not covered by insurance. 

 

Restricted Cash

 

Restricted cash represents amounts held by a bank as security for bank acceptance bills, as well as the financial product secured for the short-term bank loan and therefore is not available for the Company’s use until such time as the bank acceptance notes and bank loans have been fulfilled or expired, normally within a twelve-month period.

 

Fair Value of Financial Instruments

 

The Company applies the provisions of ASC 820, Fair Value Measurements and Disclosures, to the financial instruments that are required to be carried at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The Company uses a three-tier fair value hierarchy based upon observable and non-observable inputs that prioritizes the information used to develop our assumptions regarding fair value. Fair value measurements are separately disclosed by level within the fair value hierarchy.

 

●

Level 1—defined as observable inputs such as quoted prices in active markets for identical assets or liabilities;

 

●

Level 2—defined as inputs other than quoted prices in active markets, that are either directly or indirectly observable; and

 

●

Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

The Company’s financial instruments primarily consist of cash and cash equivalents, restricted cash, accounts receivable, notes receivable, accounts payable, other payables and accrued liabilities, short-term bank loans, and notes payable.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

The carrying value of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and other current assets and liabilities approximate fair value because of the short-term nature of these items. The estimated fair values of short-term bank loans were not materially different from their carrying value as presented due to the short maturities and that the interest rates on the borrowing approximate those that would have been available for loans of similar remaining maturity and risk profile. As the carrying amounts are reasonable estimates of the fair value, these financial instruments are classified within Level 1 of the fair value hierarchy.

 

Accounts Receivable

 

Accounts receivable are carried at net realizable value. The Company reviews its accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s historical payment history, its current creditworthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. The Company only grants credit terms to established customers who are deemed to be financially responsible. Credit periods to customers are within 60 days after customers received the purchased goods. If accounts receivable are to be provided for, or written off, they would be recognized in the consolidated statement of operations within operating expenses. Balance of allowance of doubtful accounts was $0.99 million and $1.04 million as of December 31, 2020 and December 31, 2019, respectively.

 

Inventories

 

Inventories are stated at the lower of cost or net realizable value, which is based on estimated selling prices less any further costs expected to be incurred for completion and disposal. Cost of raw materials is calculated using the weighted average method and is based on purchase cost. Work-in-progress and finished goods costs are determined using the weighted average method and comprise direct materials, direct labor and an appropriate proportion of overhead. As of December 31, 2020 and 2019, the Company had reserves for inventories of $0 million and $0.13 million, respectively. The Company records inventory reserves for excess or obsolete inventories based upon assumptions about our current and future demand forecasts.

 

Advance to Suppliers

 

Advance to suppliers represents interest-free cash paid in advance to suppliers for purchases of parts and/or raw materials. The balance of advance to suppliers was $0.45 million and $0.05 million as of December 31, 2020 and 2019.

 

Property, Plant, and Equipment

 

Property, plant, and equipment are stated at cost less accumulated depreciation, and include expenditure that substantially increases the useful lives of existing assets. Expenditures for repairs and maintenance, which do not extend the useful life of the assets, are expensed as incurred.

 

Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives are as follows:

 

Plant, buildings and improvements			20 years
Machinery and equipment			2~10 years
Motor vehicles			4 years
Office equipment			3~5 years
Fixtures and decorations			5 years

 

When assets are sold or retired, their costs and accumulated depreciation are eliminated from the consolidated financial statements and any gain or loss resulting from their disposal is recognized in the period of disposition as an element of other income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Land Use Rights

 

According to the PRC laws, the government owns all the land in the PRC. Companies or individuals are authorized to possess and use the land only through land use rights granted by the Chinese government. The land use rights granted to the Company are being amortized using the straight-line method over the lease term of fifty years.

 

Impairment of Long-Lived Assets

 

Long-lived assets are evaluated for impairment periodically whenever events or changes in circumstances indicate that their related carrying amounts may not be recoverable in accordance with FASB ASC 360, “Property, Plant and Equipment”.

 

In evaluating long-lived assets for recoverability, the Company uses its best estimate of future cash flows expected to result from the use of the asset and eventual disposition in accordance with FASB ASC 360-10-15. To the extent that estimated future, undiscounted cash inflows attributable to the asset, less estimated future, undiscounted cash outflows, are less than the carrying amount, an impairment loss is recognized in an amount equal to the difference between the carrying value of such asset and its fair value. Assets to be disposed of and for which there is a committed plan of disposal, whether through sale or abandonment, are reported at the lower of carrying value or fair value less costs to sell.

 

There was no impairment loss recognized for the year ended December 31, 2020 and 2019.

 

Lease

 

ASC 842 supersedes the lease requirements in ASC 840 “Leases”, and generally requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. Leases that transfer substantially all of the benefits and risks incidental to the ownership of assets are accounted for as finance leases as if there was an acquisition of an asset and incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases.

 

A sale-leaseback transaction occurs when an entity sells an asset it owns and immediately leases the asset back from the buyer. The seller then becomes the lessee and the buyer becomes the lessor. under ASC 842, both parties must assess whether the buyer-lessor has obtained control of the asset and a sale has occurred.

 

The Company has determined that the leaseback transaction that it newly entered in current year fails to qualify as a sale because control is not transferred to the buyer-lessor. Therefore, the Company has classified the lease portion of the transaction as a finance lease whereby the Company continues to depreciate the assets and recorded a financing obligation for the consideration received from the buyer-lessor, with an implicit interest rate of 4.0038%.

 

Statutory Reserve

 

In accordance with the PRC Regulations on Enterprises with Foreign Investment, an enterprise established in the PRC with foreign investment is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A wholly-owned foreign enterprise is required to allocate at least 10% of its annual after-tax profit to the General Reserve Fund until the balance of such fund has reached 50% of its respective registered capital. A non-wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. Appropriations to the Enterprise Expansion Fund and Staff Welfare and Bonus Fund are at the discretion of the board of directors for all foreign invested enterprises. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

 

Revenue Recognition

 

In accordance with ASC Topic 606, “Revenue from Contracts with Customers”, the Company recognizes revenues when goods or services are transferred to customers in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. In determining when and how revenues are recognized from contracts with customers, the Company performs the following five-step analysis: (i) identification of contract with customer; (ii) determination of performance obligations; (iii) measurement of the transaction price; (iv) allocation of the transaction price to the performance obligations and (v) recognition of revenues when (or as) the Company satisfies each performance obligation. The Company derives revenues from the processing, distribution and sale of its products. The Company recognizes its revenues net of value-added taxes (“VAT”). The Company is subject to VAT which had been levied at the rate of 17% on the invoiced value of sales until April 30, 2018, after which date the rate was reduced to 16%. VAT rate was further reduced to 13% starting from April 1, 2019. Output VAT is borne by customers in addition to the invoiced value of sales and input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Revenues are recognized at a point in time once the Company has determined that the customer has obtained control over the product. Control is typically deemed to have been transferred to the customer when the performance obligation is fulfilled, usually at the time of customers’ acceptance or consumption, at the net sales price (transaction price) and each of the criteria under ASC 606 have been met. Contract terms may require the Company to deliver the finished goods to the customers’ location or the customer may pick up the finished goods at the Company’s factory. International sales are recognized when shipment clears customs and leaves the port.

 

The Company has adopted ASC 606 on January 1, 2018, using the transition method of Modified-Retrospective Method (“MRM”). The adoption of ASC 606 had no impact on the Company’s beginning balance of retained earnings.

 

The Company’s contracts are all short-term in nature with a contract term of one year or less. Receivables are recorded when the Company has an unconditional right to consideration

 

Contracts do not offer any price protection but allow for the return of certain goods if quality problem, which is standard warranty. The Company’s product returns and recorded reserve for sales returns were minimal for the year ended December 31, 2020 and 2019. The total sales return and warranty expenditures amount are accounting for around 0.71% and 0.54% of the total revenue of Greenland.

 

The following table sets forth disaggregation of revenue:

 

		For the year ended December 31,
		2020				2019
Major Product
Transmission boxes for Forklift			58,407,137				52,140,258
Transmission boxes for Non-Forklift (EV, etc.)			8,457,238				260,586
Total			66,864,375				52,400,844

  

Cost of Goods Sold

 

Cost of goods sold consists primarily of material costs, freight charges, purchasing and receiving costs, inspection costs, internal transfer costs, wages, employee compensation, amortization, depreciation and related costs, which are directly attributable to the production of products. Write-down of inventory to lower of cost or net realizable value is also recorded in cost of goods sold.

 

Selling Expenses 

 

Selling expenses include operating expenses such as payroll and traveling and transportation expenses. 

 

General and Administrative Expenses

 

General and administrative expenses include management and office salaries and employee benefits, depreciation for office facility and office equipment, travel and entertainment, legal and accounting, consulting fees and other office expenses.

 

Research and Development

 

Research and development costs are expensed as incurred and totaled approximately $2,384,951 and $2,355,307 for the year ended December 31, 2020 and 2019, respectively. Research and development costs are incurred on a project specific basis.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Government subsidies

 

Government subsidies are recognized when there is reasonable assurance that the subsidy will be received and all attaching conditions will be complied with. When the subsidy relates to an expense item, it is recognized as income over the periods necessary to match the subsidy on a systematic basis to the costs that it is intended to compensate. Where the subsidy relates to an asset, it is recognized as other long-term liabilities and is released to the statement of operations over the expected useful life in a consistent manner with the depreciation method for the relevant asset. Total government subsidies recorded in the other long-term liabilities were $2.34 million and $2.18 million at December 31, 2020 and 2019, respectively.

 

Income Taxes

 

The Company accounts for income taxes following the liability method pursuant to FASB ASC 740 “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in income in the period that includes the enactment date.

 

The Company also follows FASB ASC 740, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2020 and 2019, the Company did not have a liability for unrecognized tax benefits. It is the Company’s policy to include penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary. The Company’s historical tax years will remain open for examination by the local authorities until the statute of limitations has passed.

  

Value-Added Tax

 

Enterprises or individuals, who sell commodities, engage in repair and maintenance or import or export goods in the PRC are subject to a value added tax in accordance with PRC Laws. The VAT standard rate had been 17% of the gross sale price until April 30, 2018, after which date the rate was reduced to 16%. VAT rate was further reduced to 13% starting from April 1, 2019. A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company’s finished products can be used to offset the VAT due on the sales of the finished products.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Comprehensive Income

 

Comprehensive income (loss) is defined as the change in equity during the year from transactions and other events, excluding the changes resulting from investments by owners and distributions to owners, and is not included in the computation of income tax expense or benefit. Accumulated comprehensive income consists of foreign currency translation. The Company presents comprehensive income (loss) in accordance with ASC Topic 220, “Comprehensive Income”.

 

Earnings per share

 

The Company calculates earnings per share in accordance with ASC Topic 260 “Earnings per Share.” Basic earnings per share is computed by dividing the net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential ordinary shares equivalents had been issued and if the additional common shares were dilutive. On October 24, 2019, the Company completed a reverse merger with Greenland Acquisition Corporation whereby the Company received 7,500,000 shares in exchange for all the share capital, which is reflected retroactively to December 31, 2017 and will be utilized for calculating earnings per share in all prior periods. The per share amounts have been updated to show the effect of the exchange on earnings per share as if the exchange occurred at the beginning of both years for the annual financial statements of the Company. The impact of the stock exchange is also shown on the Company’s Statements of Shareholders’ Equity.

 

Pursuant to the Service Agreement entered into and by the Company and Chineseinvestors.com, Inc., an Indiana corporation (“CIIX”) on August 21, 2019 (the “Service Agreement”), CIIX were to provide certain investor relations services to the Company for a period of three months beginning on August 21, 2019.  And later on February 24, 2020, the Company and CIIX entered into a termination agreement (the “CIIX Termination Agreement”) to terminate their respective obligations under the Service Agreement. Pursuant to the CIIX Termination Agreement, the Company agreed to issue 5,000 restricted ordinary shares, no par value (the “CIIX Termination Shares”) to CIIX.

 

Pursuant to the Investor Relations Consulting Agreement entered into and by the Company and Skyline Corporate Communication Group, LLC, a Massachusetts limited liability Company (“SCCG”) on August 15, 2019 (the “Consulting Agreement”), SCCG were to provide certain investor relations services to the Company for a period of twelve months beginning on August 15, 2019. And later on February 25, 2020, the Company and SCCG entered into a termination agreement (the “SCCG Termination Agreement”) to terminate their respective obligations under the Consulting Agreement. Pursuant to the SCCG Termination Agreement, the Company agreed to issue 10,000 restricted ordinary shares, no par value (the “SCCG Termination Shares”) to SCCG.

 

Pursuant to the CIIX Termination Agreement and the SCCG Termination Agreement, 5,000 and 10,000 restricted ordinary shares, no par value, were issued to CIIX and SCCG on March 12, 2020 and March 13, 2020, respectively, and will be utilized for calculating earnings per share for the year ended December 31, 2020.

 

Segments and Related Information

 

ASC 280 “Segment reporting” establishes standards for reporting information on operating segments in interim and annual financial statements. All of the Company’s operations are considered by the chief operating decision maker to be aggregated in one reportable operating segment. 

 

The Company is engaged in the business of manufacturing and selling various transmission boxes. The Company’s manufacturing process is essentially the same for the entire Company and is performed in-house at the Company’s facilities in PRC. The Company’s customers primarily consist of entities in the automotive, construction machinery or warehousing equipment industries. The distribution of the Company’s products is consistent across the entire Company. In addition, the economic characteristics of each customer arrangement are similar in that the Company maintains policies at the corporate level.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Commitments and contingencies

 

In the normal course of business, the Company is subject to contingencies, including legal proceedings and environmental claims arising out of the normal course of businesses that relate to a wide range of matters, including among others, contracts breach liability. The Company records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments including past history, scientific evidence and the specifics of each matter. The Company’s management has evaluated all such proceedings and claims that existed as of December 31, 2020 and 2019. Normal course of businesses that relate to a wide range of matters, including among others, contracts breach liability. The Company records accruals for such contingencies based upon the assessment of the probability of occurrence and, where determinable, an estimate of the liability. Management may consider many factors in making these assessments including past history, scientific evidence and the specifics of each matter. The Company’s management has evaluated all such proceedings and claims that existed as of December 31, 2020 and 2019.

 

Related Party

 

In general, related parties exist when there is a relationship that offers the potential for transactions at less than arm’s-length, favorable treatment, or the ability to influence the outcome of events different from that which might result in the absence of that relationship. A related party may be any of the following: a) an affiliate, which is a party that directly or indirectly controls, is controlled by, or is under common control with another party; b) a principle owner, owner of record or known beneficial owner of more than 10% of the voting interest of an entity; c) management, which are persons having responsibility for achieving objectives of the entity and requisite authority to make decision; d) immediate family of management or principal owners; e) a parent Company and its subsidiaries; and f) other parties that have ability to significant influence the management or operating policies of the entity. The Company discloses all significant related party transactions.

 

Economic and Political Risks

 

The Company’s operations are conducted 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 economy.

 

The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances 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 trade accounts receivable. All of the Company’s cash is maintained with state-owned banks within the PRC, and none of these deposits are covered by insurance. The Company has not experienced any losses in such accounts. A portion of the Company’s sales are credit sales which are primarily to customers whose abilities to pay are 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.

 

Exchange Risk

 

The Company cannot guarantee that the current exchange rate will remain steady. Therefore, there is a possibility that the Company could post the same amount of profit for two comparable periods and yet, because of a fluctuating exchange rates, record higher or lower profit depending on exchange rate of PRC Renminbi (RMB) converted to U.S. dollars on the relevant dates. The exchange rate could fluctuate depending on changes in the political and economic environment without notice.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Recently Issued Accounting Pronouncements

 

Recent accounting pronouncements that the Company has adopted or may be required to adopt in the future are summarized below:

 

In June 2016, the FASB issued ASU 2016-13,” Measurement of Credit Losses on Financial Instruments”, to require financial assets carried at amortized cost to be presented at the net amount expected to be collected based on historical experience, current conditions and forecasts. Subsequently, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, in April 2019. To clarify that receivables arising from operating leases are within the scope of lease accounting standards. In October 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842), which defers the effective date for public filers that are considered small reporting companies as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company is a smaller reporting company, implementation is not needed until January 1, 2023. Adoption of the standard requires using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align existing credit loss methodology with the new standard. The Company is evaluating the impact of this standard on its consolidated financial statements, including accounting policies, processes, and systems, and expects the standard will have a minor impact on its consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-04 (Topic 350) Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment, which removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the amended guidance, a goodwill impairment charge will now be recognized for the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill. As amended by ASU 2019-10, this ASU will be applied on a prospective basis and is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted for any impairment tests performed after January 1, 2017. The Company is evaluating the impact of the application of this standard and does not expect that the adoption of the ASU 2017-04 will have a material impact on the Company’s consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-13 Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds, and modifies certain disclosure requirements for fair value measurements under ASC 820. This ASU is to be applied on a prospective basis for certain modified or new disclosure requirements, and all other amendments in the standard are to be applied on a retrospective basis. The new standard is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. The Company adopted Topic 820 on January 1, 2020. The adoption of the ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements.

 

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes” (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 will simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.  The Company does not expect that the requirements of ASU 2019-12 will have a material impact on its consolidated financial statements.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 3 – CONCENTRATION ON REVENUES AND COST OF GOODS SOLD

 

Concentration of major customers and suppliers:

 

		For the year ended December 31,
		2020								2019
Major customers representing more than 10% of the Company’s revenues
Company A		$	15,311,874				22.90	%		$	7,349,893				14.03	%
Company B			7,699,161				11.51	%			5,753,587				10.98	%
Total Revenues		$	23,011,035				34.41	%		$	13,103,480				25.01	%

 

		As of December 31,
		2020								2019
Major customers of the Company’s accounts receivable, net
Company A			2,002,275				14.95	%			1,662,078				13.88	%
Company B			1,955,113				14.60	%			1,106,955				9.25	%
Company C			1,359,607				10.15	%			1,061,972				8.87	%
Total		$	5,316,995				39.69	%		$	3,831,005				32.00	%

 

Accounts receivable from the Company’s major customers accounted for 39.69% and 32.00% of total accounts receivable balances as of December 31, 2020 and December 31, 2019, respectively.

 

There were no suppliers representing more than 10% of the Company’s total purchases for the year ended December 31, 2020 and 2019, respectively.

 

NOTE 4 – ACCOUNTS RECEIVABLE

 

Accounts receivable is presented net of allowance for doubtful accounts.

 

		As of December 31
		2020				2019
Accounts receivable		$	13,395,080			$	13,009,686
Less: allowance for doubtful accounts			(986,532	)			(1,037,797	)
Accounts receivable, net		$	12,408,548			$	11,971,889

 

Changes in the allowance for doubtful accounts are as follows:

 

Allowance for doubtful accounts		As of December 31,
		2020				2019
Beginning balance		$	1,037,797			$	906,138
Additional provision for doubtful accounts			-				148,073
Reversals			(116,466	)			-
Foreign currency effect			65,201				(16,414	)
Ending balance		$	986,532			$	1,037,797

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 5 – INVENTORIES

 

		As of
		December 31, 2020				December 31, 2019
Raw materials		$	5,682,382			$	3,626,104
Revolving material			742,437				744,887
Consigned processing material			51,290				63,608
Work-in-progress			2,015,677				1,465,767
Finished goods			6,888,277				3,084,128
Goods in transit			-				1,122,918
Less: inventory impairment			-				(134,535	)
Inventories, net		$	15,380,063			$	9,972,877

 

NOTE 6 – NOTES RECEIVABLE

 

		As of
		December 31, 2020				December 31, 2019
Bank notes receivable:		$	30,803,772			$	15,865,267
Commercial notes receivable			-				291,425
Endorsed but undue notes			-				-
Total		$	30,803,772			$	16,156,692

 

Bank notes and commercial notes are means of payment from customers for the purchase of the Company’s products and are issued by financial institutions or business entities, respectively, that entitle the Company to receive the full nominal amount from the issuer at maturity, which bears no interest and generally ranges from three to six months from the date of issuance.  As of December 31, 2020, the Company pledged notes receivable for an aggregate amount of $26.53 million to Bank of Communications as a means of security for issuance of bank acceptance notes for an aggregate amount of $23.70 million. As of December 31, 2019, the Company pledged notes receivable for an aggregate amount of $11.17 million to Bank of Communications as a means of security for issuance of bank acceptance notes for an aggregate amount of $8.98 million. The Company expects collection of notes receivable within 6 months.

 

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT AND CONSTRUCTION IN PROGRESS

 

(a) As of December 31, 2020 and 2019, property, plant and equipment consisted of the following:

 

		As of
		December 31, 2020				December 31, 2019
Buildings		$	12,453,285			$	11,188,399
Machinery			20,907,623				19,416,746
Motor vehicles			325,850				254,456
Electronic equipment			198,955				177,153
Fixtures and decorations			-				-
Total property plant and equipment, at cost			33,885,713				31,036,754
Less: accumulated depreciation			(13,843,189	)			(10,650,893	)
Property, plant and equipment, net		$	20,042,524			$	20,385,861
Construction in process			92,815				244,390
Total		$	20,135,339			$	20,630,251

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT AND CONSTRUCTION IN PROGRESS (CONTINUED)

 

For the years ended December 31, 2020 and 2019, depreciation expense amounted to $2.34 million and $2.21 million, respectively, of which $1.68 million and $1.67 million, respectively, was included in cost of revenue and inventories, and the remainder was included in general and administrative expense, respectively.

 

For the years ended December 31, 2020 and 2019, $0.51 million and $2.26 million of construction in progress were converted into fixed assets.

 

Restricted assets consist of the following:

 

		As of
		December 31, 2020				December 31, 2019
Buildings, net		$	11,050,641			$	11,188,399
Machinery, net			2,150,284				9,264,345
Total			13,200,925				20,452,744

 

As of December 31, 2020, the Company pledged its ownership in its buildings, with net book value of RMB72.11 million ($11.05 million) as security with for its loans with Agricultural Bank of China – Xinchang Branch and Xinchang Rural Commercial Bank, for its loan facility with maximum exposure of RMB104.63 million.

 

As of December 31, 2019, the Company pledged its buildings ownership of net book value of $10.46 million (RMB72.97 million) as security with Agricultural Bank of China – Xinchang Branch and Xinchang Rural Commercial Bank, for its loan facility with maximum exposure of RMB112.63 million.

 

On January 3, 2019, the Company sold a set of manufacturing equipment to third parties for aggregate proceeds of $3.08 million (RMB21.25 million) and the Company entered into lease agreements under which the Company agreed to lease back each of the properties for an initial term of 3 years. On May 12, 2020, the Company prepaid the financing lease obligations for aggregate payment of $1.34 million.

 

On April 26, 2019, the Company sold various equipment including the general assembly line and the differential assembly line to third parties for aggregate proceeds of $2.12 million (RMB14.66 million) and the Company entered into lease agreements under which the Company agreed to lease back each of the properties for an initial term of 2 years. On April 30, 2020, the Company prepaid the financing lease obligations for aggregate payment of $0.94 million.

 

On May 27, 2020, the Company sold various equipment including the general assembly line and the differential assembly line to third parties for aggregate proceeds of $1.42 million (RMB10.00 million) and the Company entered into lease agreements under which the Company agreed to lease back each of the properties for an initial term of 2 years.

 

The Company determined that it did not relinquish control of the assets to the buyer-lessor. Therefore, the Company accounted for the transactions as failed sale-leaseback whereby the Company continues to depreciate the assets and recorded a financing obligation for the consideration received from the buyer-lessor.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 8 – LAND USE RIGHTS

 

Land use rights consisted of the following:

 

		As of
		December 31, 2020				December 31, 2019
Land use rights, cost		$	4,715,188			$	4,410,224
Less: Accumulated amortization			(679,934	)			(547,677	)
Land use rights, net		$	4,035,254			$	3,862,547

 

As of December 31, 2020, there was land use rights with net book value of $4.04 million, which approximately were used as collateral for the Company’s short-term bank loans. As of December 31, 2019, there was land use rights with net book value of $3.86 million, which approximately were used as collateral for the Company’s short-term bank loans.

 

Estimated future amortization expense is as follows as of December 31, 2020:

 

Years ending December 31,		Amortization expense
2021		$	89,274
2022			89,274
2023			89,274
2024			89,274
2025			89,274
Thereafter			3,588,884
Total		$	4,035,254

 

NOTE 9 – NOTES PAYABLE

 

		As of
		December 31, 2020				December 31, 2019
Bank acceptance notes		$	25,889,067			$	15,050,902
Total		$	25,889,067			$	15,050,902

 

The interest-free notes payable, ranging from nine months to one year from the date of issuance, were secured by $2.24 million and $3.59million restricted cash, $26.53 million and $11.17 million notes receivable, and $4.04 million and $1.95 land use rights, as of December 31, 2020 and December 31, 2019, respectively.

 

All the notes payable are subject to bank charges of 0.05% of the principal amount as commission, included in the financial expenses in the statement of operations, on each loan transaction. The interest charge of notes payable is free. The notes are carried at amortized cost, and the Company believes that the amortized cost approximates fair value as result of the short term nature of these notes.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 10 – ACCOUNTS PAYABLE

 

Accounts payable are summarized as follow:

 

		As of
		December 31, 2020				December 31, 2019
Procurement of materials		$	21,140,063			$	14,248,095
Infrastructure and equipment			717,053				381,843
Freight fee			148,144				83,070
Total		$	22,005,260			$	14,713,008

 

NOTE 11 – SHORT TERM BANK LOANS

 

Short-term loans are summarized as follow:

 

		As of
		December 31, 2020				December 31, 2019
Collateralized bank loans		$	17,261,302			$	16,144,892
Guaranteed bank loans			1,226,054				716,723
Total		$	18,487,356			$	16,861,615

 

As mentioned above in Note 7, as of December 31, 2020 and 2019, the Company pledged its buildings as collateral for loans secured from the Agricultural Bank of China - Xinchang Branch and the Xinchang Rural Commercial Bank.

 

Short-term loans as of December 31, 2020 are as follow:

 

Maturity Date		Type		Bank Name		Interest Rate per Annum (%)				December 31, 2020
September 1, 2021		Working capital		Agricultural Bank of China - Xinchang Branch			4.44			$	5,950,958
September 6, 2021		Working capital		Agricultural Bank of China - Xinchang Branch			4.44			$	6,252,874
September 16, 2021		Working capital		Xingchang Rural Commercial Bank			5.30			$	1,226,053
September 22, 2021		Working capital		Xingchang Rural Commercial Bank			4.35			$	1,226,053
September 26, 2021		Working capital		Xingchang Rural Commercial Bank			4.35			$	2,605,364
November 11, 2021		Working capital		SPD Rural Bank - Xinchang			5.50				1,226,054
Total										$	18,487,356

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 11 – SHORT TERM BANK LOANS (CONTINUED)

 

Short-term loans as of December 31, 2019 are as follow:

 

Maturity Date		Type		Bank Name		Interest Rate per Annum (%)				December 31, 2019
November 26, 2020		Working capital		Agricultural Bank of China - Xinchang Branch			4.57			$	5,848,455
December 24, 2020		Working capital		Agricultural Bank of China - Xinchang Branch			4.70			$	6,999,513
December 16, 2020		Working capital		Xingchang Rural Commercial Bank			5.45			$	2,150,168
December 16, 2020		Working capital		Xingchang Rural Commercial Bank			4.40			$	1,146,756
December 16, 2020		Working capital		Xingchang Rural Commercial Bank			4.80			$	716,723
Total										$	16,861,615

 

All short term bank loans are obtained from local banks in PRC and are repayable within one year. These bank loans are carried at amortized cost, and the Company believes amortized cost approximates fair value.

  

The average annual interest rate of the short-term bank loans was 4.547% and 4.900% for the year ended December 31, 2020 and 2019, respectively. As of December 31, 2020 and 2019, the Company was compliant with the financial covenants set forth in the loan agreements.

 

NOTE 12 – OTHER CURRENT LIABILITIES

 

Other current liabilities are summarized as follow:

 

		As of
		December 31, 2020				December 31, 2019
Employee payables			483,922				476,859
Other tax payables			1,208,323				439,398
Borrowing from third party			520,080				2,170,602
Total		$	2,212,325			$	3,086,859

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 13 – OTHER LONG-TERM LIABILITIES

 

Other long-term liabilities are summarized as follow:

 

		As of
		December 31, 2020				December 31, 2019
Subsidy			2,342,648				2,178,548
Total		$	2,342,648			$	2,178,548

 

The subsidy mainly consists of an incentive granted by the Chinese government to encourage transformation of fixed assets in China and other miscellaneous subsidy from the Chinese government. For the year ended December 31, 2020, grant income increased by $0.16 million, as compared to the year ended December 31, 2019. The change was mainly due to timing of incurring qualifying expenses.

 

NOTE 14 – LEASE OBLIGATIONS

 

		As of
		December 31, 2020				December 31, 2019
Lease obligations - current portion		$	797,179			$	2,654,230
Lease obligations - non-current portion			166,292				1,349,850
Total		$	963,471			$	4,004,080

 

On January 3, 2019, the Company sold a set of manufacturing equipment to third parties for aggregate proceeds of $3.08 million (RMB21.25 million) and the Company entered into lease agreements under which the Company agreed to lease back each of the properties for an initial term of 3 years. On May 12, 2020, the Company prepaid the financing lease obligations for aggregate payment of $1.34 million.

 

On April 26, 2019, the Company sold various equipment including the general assembly line and the differential assembly line to third parties for aggregate proceeds of $2.12 million (RMB14.66 million) and the Company entered into lease agreements under which the Company agreed to lease back each of the properties for an initial term of 2 years. On April 30, 2020, the Company prepaid the financing lease obligations for aggregate payment of $0.94 million.

 

On May 27, 2020, the Company sold various equipment including its general assembly line and the differential assembly line to third parties for aggregate proceeds of $1.42 million (RMB10.00 million). The Company also entered into lease agreements under which the Company agreed to lease back each of the properties for an initial term of 2 years.

 

The Company determined that it did not relinquish control of the assets to the buyer-lessor. Therefore, the sale of the equipment does not qualify for sale-leaseback accounting. As a result, the aggregate proceeds have been recorded as a financing obligation and the assets related to the sold and leased manufacturing equipment remain on the Company’s Consolidated Balance Sheet and continue to be depreciated. The current and long-term portions of the financing obligation are included within lease obligations-current portion and lease obligations-non-current portion, respectively.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 15 – STOCKHOLDER’S EQUITY

 

Preferred Shares — The Company is authorized to issue an unlimited number of no par value preferred shares, divided into five classes, Class A through Class E, each with such designation, rights and preferences as may be determined by a resolution of the Company’s board of directors to amend the Memorandum and Articles of Association to create such designations, rights and preferences. The Company has five classes of preferred shares to give the Company flexibility as to the terms on which each Class is issued. All shares of a single class must be issued with the same rights and obligations. Accordingly, starting with five classes of preferred shares will allow the Company to issue shares at different times on different terms. At December 31, 2020 and December 31, 2019, there were no preferred shares designated, issued or outstanding.

 

Ordinary Shares — The Company is authorized to issue an unlimited number of no par value ordinary shares. Holders of the Company’s ordinary shares are entitled to one vote for each share. At December 31, 2020 and December 31, 2019, there were 10,225,142 and 10,006,142 ordinary shares issued and outstanding.

  

On July 27, 2018, the Company consummated its initial public offering of 4,400,000 units, including a partial exercise by the underwriters of their over-allotment option in the amount of 400,000 units. Each unit consists of one ordinary share, no par value, one warrant to purchase one-half of one ordinary share and one right to receive one-tenth of one ordinary share upon the consummation of its initial business combination.

 

Simultaneously with the consummation of its initial public offering, the Company completed a private placement of 282,000 units, issued to Greenland Asset Management Corporation (the “Sponsor”) and Chardan Capital Markets, LLC.

 

In 2019, in connection with the Business Combination 3,875,458 redeemable shares have been redeemed and 81,400 redeemable shares have been converted into ordinary shares, 1,906,542 ordinary shares left upon consummation of the reverse recapitalization.

 

Pursuant to the Share Exchange Agreement, Greenland acquired from the Seller all of the issued and outstanding equity interests of Zhongchai Holding in exchange for 7,500,000 newly issued ordinary shares, no par value of Greenland, issued to the Seller (the “Exchange Shares”). As a result, the Seller became the controlling shareholder of Greenland, and Zhongchai Holding became a directly and wholly owned subsidiary of Greenland. The Business Combination was accounted for as a reverse merger effected by a share exchange, wherein Zhongchai Holding is considered the acquirer for accounting and financial reporting purposes. The recapitalization of the number of shares of common stock attributable to the purchase of Zhongchai Holding in connection with the Business Combination is reflected retroactively to December 31, 2017 and will be utilized for calculating earnings per share in all prior periods presented. The impact of the stock exchange is also shown on the Company’s Statements of Stockholders’ Equity

 

Pursuant to certain Finder Agreement with Hanyi Zhou, dated May 29, 2019, 50,000 newly issued ordinary shares were issued to Zhou Hanyi as the finder fee for the business combination.

 

In connection with the Business Combination, all the outstanding rights of the Company were converted into 468,200 ordinary shares on a one-tenth (1/10) ordinary share per right basis if holders of the rights elected to convert their rights into the underlying ordinary shares.

 

Pursuant to the Service Agreement entered into and by The Company and Chineseinvestors.com, Inc., an Indiana corporation (“CIIX”) on August 21, 2019 (the “Service Agreement”), CIIX were to provide certain investor relations services to the Company for a period of three months beginning on August 21, 2019. Pursuant to the Service Agreement, the Company were to pay CIIX fees consisting of three equal monthly instalments of $12,000 and 5,000 restricted ordinary shares, no par value, of the Company on a quarterly basis during the term of the Consulting Agreement. On February 24, 2020, Greenland and CIIX entered into a termination agreement (the “CIIX Termination Agreement”) to terminate their respective obligations under the Service Agreement. Pursuant to the CIIX Termination Agreement, the Company agreed to issue 5,000 restricted ordinary shares, no par value (the “CIIX Termination Shares”) to CIIX. Upon CIIX’s receipt of the CIIX Termination Shares, the Company will have fully satisfied its payment obligations under the Service Agreement.

 

Pursuant to the Investor Relations Consulting Agreement entered into and by The Company and Skyline Corporate Communication Group, LLC, a Massachusetts limited liability Company (“SCCG”) on August 15, 2019 (the “Consulting Agreement”), SCCG were to provide certain investor relations services to the Company for a period of twelve months beginning on August 15, 2019. Pursuant to the Consulting Agreement, the Company were to pay SCCG fees consisting of $5,000 per month and 1,250 restricted ordinary shares, no par value, of the Company on a quarterly basis during the term of the Consulting Agreement. On February 25, 2020, Greenland and SCCG entered into a termination agreement (the “SCCG Termination Agreement”) to terminate their respective obligations under the Consulting Agreement. Pursuant to the SCCG Termination Agreement, the Company agreed to issue 10,000 restricted ordinary shares, no par value (the “SCCG Termination Shares”) to SCCG. Upon SCCG’s receipt of the SCCG Termination Shares, the Company will have fully satisfied its payment obligations under the Consulting Agreement.

 

On November 10, 2020, the Company granted a total of 135,000 shares of restricted common stock to JING JIN.

 

On December 30, 2020, the Company granted a total of 69,000 shares of restricted common stock to RAYMOND Z. WANG.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 15 – STOCKHOLDER’S EQUITY (CONTINUED)

  

Rights — Each holder of a right will receive one-tenth (1/10) of one ordinary share upon consummation of a Business Combination, even if the holder of such right redeemed all Public Shares held by it in connection with a Business Combination. No fractional shares will be issued upon exchange of the rights. No additional consideration will be required to be paid by a holder of rights in order to receive its additional shares upon consummation of a Business Combination as the consideration related thereto has been included in the Unit purchase price paid for by investors in the Initial Public Offering. If the Company enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement provides for the holders of rights to receive the same per share consideration the holders of the ordinary shares will receive in the transaction on an as-converted into ordinary share basis and each holder of a right will be required to affirmatively convert its rights in order to receive the 1/10 of one share underlying each right (without paying additional consideration). The shares issuable upon exchange of the rights will be freely tradable (except to the extent held by affiliates of the Company).

 

If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of rights will not receive any of such funds with respect to their rights, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the rights upon consummation of a Business Combination. Additionally, in no event will the Company be required to net cash settle the rights. Accordingly, the rights may expire worthless.

 

As of December 31, 2019, all of the existing Rights were converted into 468,200 ordinary shares as a result of the Business Combination.

 

Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) the consummation of a Business Combination or (b) July 24, 2019. No Public Warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the ordinary shares issuable upon exercise of the Public Warrants and a current prospectus relating to such ordinary shares. Notwithstanding the foregoing, if a registration statement covering the ordinary shares issuable upon the exercise of the Public Warrants is not effective within 90 days from the consummation of a Business Combination, the holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise the Public Warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is not available, holders will not be able to exercise their Public Warrants on a cashless basis. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.

 

The Company may call the warrants for redemption (excluding the Private Warrants), in whole and not in part, at a price of $0.01 per warrant:

 

●

At any time while the Public Warrants are exercisable,

 

●

Upon not less than 30 days’ prior written notice of redemption to each Public Warrant holder,

 

●

If, and only if, the reported last sale price of the ordinary shares equals or exceeds $16.50 per share, for any 20 trading days within a 30-day trading period ending on the third trading day prior to the notice of redemption to Public Warrant holders, and

 

●

If, and only if, there is a current registration statement in effect with respect to the ordinary shares underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.

 

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. Accordingly, the warrants may expire worthless.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 15 – STOCKHOLDER’S EQUITY (CONTINUED)

 

The Private Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants and the ordinary shares issuable upon the exercise of the Private Warrants are not transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

 

As of December 31, 2020 there were total 4,682,000 Warrants outstanding, including 4,400,000 Public Warrants held by CEDE & CO, and 22,000 and 260,000 Private Warrants held by Chardan Capital Markets, LLC and Greenland Asset Management Corporation, respectively. The Company has accounted for the warrants as part of its equity. Management did not identify and terms or conditions that would have required for the warrants to be classified as liabilities.

 

Unit Purchase Option

 

On July 27, 2018, the Company sold to Chardan (and its designees), for $100, an option to purchase up to 240,000 Units exercisable at $11.50 per Unit (or an aggregate exercise price of $2,760,000) commencing on the later of July 24, 2019 and the consummation of a Business Combination. The unit purchase option may be exercised for cash or on a cashless basis, at the holder’s option, and expires July 24, 2023. The Units issuable upon exercise of the option are identical to those offered in the Initial Public Offering. The Company accounted for the unit purchase option, inclusive of the receipt of $100 cash payment, as an expense of the Initial Public Offering resulting in a charge directly to shareholders’ equity. The option and such units purchased pursuant to the option, as well as the ordinary shares underlying such units, the rights included in such units, the ordinary shares that are issuable for the rights included in such units, the warrants included in such units, and the shares underlying such warrants, have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g) (1) of FINRA’s Nasdaq Conduct Rules. Additionally, the option may not be sold, transferred, assigned, pledged or hypothecated for a one-year period (including the foregoing 180-day period) following the date of Initial Public Offering except to any underwriter and selected dealer participating in the Initial Public Offering and their bona fide officers or partners. The option grants to holders demand and “piggy back” rights for periods of five and seven years, respectively, from the effective date of the registration statement with respect to the registration under the Securities Act of the securities directly and indirectly issuable upon exercise of the option. The Company will bear all fees and expenses attendant to registering the securities, other than underwriting commissions which will be paid for by the holders themselves. The exercise price and number of units issuable upon exercise of the option may be adjusted in certain circumstances including in the event of a stock dividend, or the Company’s recapitalization, reorganization, merger or consolidation. However, the option will not be adjusted for issuances of ordinary shares at a price below its exercise price. As of December 31, 2020, there was no unit purchase option outstanding.

 

NOTE 16 – EARNINGS PER SHARE

 

The Company reports earnings per share in accordance with the provisions of the FASB’s related accounting standard. This standard requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution, but includes vested restricted stocks and is computed by dividing income available to shareholders by the weighted average common shares outstanding during the period. Diluted earnings per share 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. On October 24, 2019, the Company completed a reverse merger with Zhongchai Holding. The recapitalization of the number of shares of common stock attributable to the purchase of Zhongchai Holding in connection with the Business Combination is reflected retroactively to December 31, 2017 and will be utilized for calculating earnings per share in all prior periods presented. Pursuant to the CIIX Termination Agreement and the SCCG Termination Agreement, 5,000 and 10,000 restricted ordinary shares, no par value, were issued to CIIX and SCCG on March 12, 2020 and March 13, 2020 respectively.

 

The following is a reconciliation of the basic and diluted (loss) earnings per share computation:

 

		Year ended December 31,
		2020				2019
Net income attributable to the Greenland Corporation and subsidiaries		$	6,758,502			$	4,464,556
Weighted average basic and diluted computation shares outstanding:
Shares issued in reverse recapitalization			10,006,142				7,932,567
Restricted stock grants			219,000				—
Weighted average shares of common stock			10,037,249				7,932,567
Dilutive effect of stock options			—				—
Restricted stock vested not issued			—				—
Common stock and common stock equivalents			10,037,249				7,932,567
Basic and diluted net income per share		$	0.67			$	0.56

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 17 – GEOGRAPHICAL SALES AND SEGMENTS

 

All of the Company’s operations are considered by the chief operating decision maker to be aggregated in one reportable operating segment.

 

Information for the Company’s sales by geographical area for the year ended December 31, 2020 and 2019 are as follows:

 

		For the year ended December 31,
		2020				2019
Domestic Sales		$	66,693,376			$	52,272,434
International Sales			170,999				128,410
Total		$	66,864,375			$	52,400,844

 

NOTE 18 – INCOME TAXES

 

Income tax expense includes taxes based on the annual estimated effective tax rate applicable to the Company and its subsidiaries, adjusted for items which are considered discrete to the period in each entity’s respective tax jurisdiction. The Company is organized in the British Virgin Islands, and, accordingly, is subject to a permanent income tax holiday. For the years ended December 31, 2020 and 2019, the Company generated substantially all of its taxable income in the PRC. The tax expenses records in the Company’s result of operations are almost entirely attributable to income earned in the PRC. Should the Company’s operations expand or change in the future, where the Company generates taxable income other jurisdictions, the Company’s effective tax rates may substantially change.

 

The effective tax rates on income before income taxes for the year ended December 31, 2020 was 26.29%. The effective tax rate for the year ended December 31, 2020 was lower than the PRC tax rate of 25.0% primarily due to the China Super R&D deduction. The effective tax rate is based on forecasted annual results and these amounts may fluctuate significantly through the rest of the year as a result of the unpredictable impact of COVID-19 on its operating activities.

 

The effective tax rate on income before income taxes for the year ended December 31, 2019 was 14.28%. The effective tax rate for the year ended December 31, 2019 was lower than the PRC tax rate of 25.0% primarily due to the China Super R&D deduction.

 

The Company has recorded $0 unrecognized benefit as of December 31, 2020 and December 31, 2019, respectively. On the information currently available, the Company does not anticipate a significant increase or decrease to its unrecognized benefit within the next 12 months. 

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 19 – COMMITMENTS AND CONTINGENCIES

 

(1) Pledged collateral for bank loans

 

On December 6, 2019, Zhejiang Zhongchai signed a Maximum Amount Pledge Contract with Agricultural Bank of PRC Co., Ltd. Xinchang County Sub-Branch (ABC Xinchang), pledging its land use rights for original book value of RMB11.08 million and property ownership for original book value of RMB35.12 million as security with ABC Xinchang, for its loan facility with maximum exposure of RMB48.83 million during the period from December 6, 2019 to May 21, 2022. As of December 31, 2020 and December 31, 2019, outstanding amount of the short-term bank loan under this Pledge Contract was RMB38.83 million and RMB48.83 million. 

 

On November 28, 2019, Zhejiang Zhongchai signed a Maximum Amount Pledge Contract with Agricultural Bank of PRC Co., Ltd. Xinchang County Sub-Branch (ABC Xinchang), pledging its land use rights for original book value of RMB9.84 million and property ownership for original book value of RMB27.82 million, as security with ABC Xinchang, for its loan facility with maximum exposure of RMB40.80 million during the period from November 28, 2019 to December 26, 2022. As of December 31, 2020 and December 31, 2019, outstanding amount of the short-term bank loan under this Pledge Contract was RMB40.80 million and RMB40.80 million.  

 

On December 17, 2019, Zhejiang Zhongchai signed a Maximum Amount Pledge Contract with Rural Commercial Bank of PRC Co., Ltd., pledging its land use rights for original book value of RMB4.75 million and property ownership for original book value of RMB11.28 million as security, for its loan facility with maximum exposure of RMB16.95 million during the period from December 16, 2019 to December 15, 2024. As of December 31, 2020 and December 31, 2019, outstanding amount of the short-term bank loan under this Pledge Contract was RMB17.00 million and RMB15.00 million.  

 

On December 18, 2019, Zhejiang Zhongchai signed a Maximum Amount Pledge Contract with Rural Commercial Bank of PRC Co., Ltd., pledging its land use rights for original book value of RMB4.17 million as security, for its loan facility with maximum exposure of RMB8.00 million during the period from December 16, 2019 to December 15, 2024. As of December 31, 2020 and December 31, 2019, outstanding amount of the short-term bank loan under this Pledge Contract was RMB8.00 million and RMB8.00 million. 

 

(3) Litigation 

 

On October 14, 2019, the plaintiff, the Company and all other named defendants entered into a confidential memorandum of understanding (the “MOU”), pursuant to which a Stipulation and Order of Dismissal (“Stipulation of Dismissal”) of the Action was filed on October 14, 2019. The Stipulation of Dismissal was approved and entered by the District Court on October 15, 2019.  Among other things, the Stipulation of Dismissal acknowledged that the Definitive Proxy Statement mooted the plaintiff’s claims regarding the sufficiency of disclosures, dismissed all claims asserted in the Action, with prejudice as to the plaintiff only, permits the plaintiff to seek an award of attorneys’ fees in connection with the mooted claims, and reserves the defendants’ rights to oppose such an award, if appropriate.  Pursuant to the MOU, the parties have engaged in discussions regarding the amount of attorneys’ fees, if any, to which the plaintiff’s counsel is entitled in connection with the Action. As of December 31, 2020, those discussions remain ongoing. As of January 25,2021, we have been settled with our counter party which paid into in total $65,000.

 

Facility Leases 

 

The Company entered into a failed sale-leaseback transaction in August 2020. See further discussion in NOTE 14 –LEASE OBLIGATIONS. 

 

Rent expense is recognized on a straight-line basis over the terms of the operating leases accordingly and the Company records the difference between cash rent payments and the recognition of rent expense as a deferred rent liability. 

 

The following are the aggregate non-cancellable future minimum lease payments under operating and financing leases as of December 31, 2020: 

 

Years ending December 31,		Amount
2021			797,179
2022			166,292
Total		$	963,471

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 20 – RELATED PARTY TRANSACTIONS

 

(a) Names and Relationship of Related Parties:

 

		Existing Relationship with the Company
Sinomachinery Holding Limited		Under common control of Peter Zuguang Wang
Cenntro Holding Limited		Controlling shareholder of the Company
Zhejiang Kangchen Biotechnology Co., Ltd.		Under common control of Peter Zuguang Wang
Cenntro Smart Manufacturing Tech. Co., Ltd.		Under common control of Peter Zuguang Wang
Zhejiang Zhonggong Machinery Co., Ltd.		Under common control of Peter Zuguang Wang
Zhejiang Zhonggong Agricultural Equipment Co., Ltd.		Under common control of Peter Zuguang Wang
Jiuxin Investment Management Partnership (LP)		Under control of Mr. Mengxing He, the General Manger and one of the directors of Zhejiang Zhongchai
Zhuhai Hengzhong Industrial Investment Fund (Limited Partnership)		Under common control of Peter Zuguang Wang
Hangzhou Cenntro Autotech Co., Limited		Under common control of Peter Zuguang Wang
Peter Zuguang Wang		Chairman of the Company
Greenland Asset Management Corporation		Shareholder of the Company
Hangzhou Jiuru Economic Information Consulting Co. Ltd		One of the directors of Hengyu

 

(b) Summary of Balances with Related Parties:

 

		As of
		December 31, 2020				December 31, 2019
Due to related parties:
Sinomachinery Holding Limited1		$	1,775,869			$	-
Zhejiang Kangchen Biotechnology Co., Ltd2			64,505				64,505
Zhejiang Zhonggong Machinery Co., Ltd.3			538,166				207,177
Zhejiang Zhonggong Agricultural Equipment Co., Ltd.4			-				1,773,365
Cenntro Smart Manufacturing Tech. Co., Ltd.5			3,602				1,981
Zhuhai Hengzhong Industrial Investment Fund (Limited Partnership)6			514,365				95,302
Cenntro Holding Limited⁷			1,591,627				-
Peter Zuguang Wang⁷			25,000				-
Greenland Asset Management Corporation7			-				1,339,654
Xinchang County Jiuxin Investment Management Partnership (LP)7			4,347,985				-
Hangzhou Jiuru Economic Information Consulting Co. Ltd7			190,000				-
Total		$	9,051,119			$	3,481,984

 

The balance of Due to related parties as of December 31, 2020 and December 31, 2019 consisted of:

 

1	Overpayment from Sinomachinery Holding Limited for certain purchase order;

 

2	Temporary borrowings from Zhejiang Kangchen Biotechnology Co., Ltd.,

 

3	Unpaid balances for purchasing of materials and equipment and temporary borrowing from Zhejiang Zhonggong Machinery Co., Ltd.;

 

4	Unpaid balances for purchasing of materials from Zhejiang Zhonggong Agricultural Equipment Co., Ltd.;

 

5	Prepayment from Cenntro Smart Manufacturing Tech. Co., Ltd.

 

6	Temporary borrowings from Zhuhai Hengzhong Industrial Investment Fund (Limited Partnership); and

 

7	Borrowings from related parties.

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 20 – RELATED PARTY TRANSACTIONS (CONTINUED)

 

		As of
		December 31, 2020				December 31, 2019
Due from related parties-current:
Cenntro Holding Limited		$	38,535,171			$	36,042,829
Total		$	38,535,171			$	36,042,829

 

		As of
		December 31, 2020				December 31, 2019
Due from related parties-non-current:
Cenntro Holding Limited		$	-			$	-
Xinchang County Jiuxin Investment Management Partnership (LP)			-				430,034
Total		$	-			$	430,034

 

The balance of Due from related parties as of December 31, 2020 and December 31, 2019 consisted of:

 

Other receivable from Cenntro Holding Limited was $38.5 million and $36.0 million   as of December 31, 2020 and December 31, 2019, respectively. 

 

The Company expects the amount due from its equity holder, Cenntro Holding will pay back on April 27th, 2022, as mutually agreed by the Company and Cenntro Holding Limited, for an extension of repayment from the end of October 2020 in accordance with the original maturity date.

 

(c) Summary of Related Party Transactions:

 

A summary of trade transactions with related parties for the year ended December 31, 2020 and 2019 are listed below:

 

				For the year ended December 31,
				2020				2019
Purchases from related parties:
Zhejiang Zhonggong Machinery Co., Ltd.		Purchase of materials and equipment			-				4,232

 

				For the year ended December 31,
				2020				2019
Sales to related parties:
Zhejiang Zhonggong Machinery Co., Ltd.		Sale of goods			-				-
Cenntro Smart Manufacturing Tech. Co., Ltd.		Provide service and Sale of goods			-				348,725
Total					-				348,725

 

 

GREENLAND TECHNOLOGIES HOLDING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 20 – RELATED PARTY TRANSACTIONS (CONTINUED)

 

(d) Summary of Related Party Funds Lending:

 

A summary of funds lending with related parties for the year ended December 31, 2020 and 2019 are listed below:

 

		For the year ended December 31,
		2020				2019
Withdraw funds from related parties:
Zhejiang Zhonggong Machinery Co., Ltd.			646,926				2,973,428
Cenntro Holding Limited			251,973				2,454,835
Xinchang County Jiuxin Investment Management Partnership (LP)			435,249				-
Zhuhai Hengzhong Industrial Investment Fund (Limited Partnership)			79,796				-
Peter Wang			25,000				-
Greenland Asset Management Corporation			70,000				-

 

		For the year ended December 31,
		2020				2019
Deposit funds with related parties:
Zhejiang Zhonggong Machinery Co., Ltd.			594,841				2,900,905
Zhuhai Hengzhong Industrial Investment Fund (Limited Partnership)			43,525
Greenland Asset Management Corporation			70,000

 

(e) Summary of Related Party dividend payment:

 

A summary of dividend payment to related parties for the year ended December 31, 2020 and 2019 are listed below:

 

		For the year ended December 31,
		2020				2019
Dividend payment to related parties:
Xinchang County Jiuxin Investment Management Partnership (LP)			1,517,173				159,612

 

NOTE 21 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through the date that the financial statements were available to be issued, which is March 31, 2021. All subsequent events requiring recognition as of September 30, 2019 have been incorporated into these financial statements and there are no other subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events” other than disclosed below.

 

On February 8, 2021, the Company granted a total of 51,000 shares of restricted common stock to RAYMOND Z. WANG.

 

 

 

F-34

Exhibit 21.1

 

Greenland Technologies Holding Corporation

 

Subsidiaries of the Registrant

 

Subsidiary		Place of Incorporation
Zhongchai Holding (HK) Limited		Hong Kong
Greenland Technologies Corporation		Delaware
Hangzhou Greenland Energy Technologies Co., Ltd.		People’s Republic of China
Shanghai Hengyu Business Management Consulting Co., Ltd.		People’s Republic of China
Zhejiang Zhongchai Machinery Co., Ltd.		People’s Republic of China
Zhejiang Shengte Transmission Machinery Co., Ltd.		People’s Republic of China

 

Exhibit 23.1

 

 

Consent of Independent Registered Public Accounting Firm

 

Greenland Technologies Holding Corporation

 

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. [    ]-[xxxxxx]) of Greenland Technologies Holding Corporation of our report dated March 31, 2021 and its subsidiaries which appears in this Form 10-K.

 

/s/ WWC, P.C.

WWC, P.C.

Certified Public Accountants

 

San Mateo, California

March 31, 2021

 

 

Exhibit 31.1

 

Certification by the Principal Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and
15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Raymond Z. Wang, certify that:

 

	1.	I have reviewed this annual report on Form 10-K of Greenland Technologies Holding Corporation;
	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
	4.	The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5.

The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

 

	Date:	March 31, 2021
		/s/ Raymond Z. Wang
	Name:	Raymond Z. Wang
	Title:	Chief Executive Officer  (Principal Executive Officer)

  

Exhibit 31.2

 

Certification by the Principal Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and
15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Jing Jin, certify that:

 

	1.	I have reviewed this annual report on Form 10-K of Greenland Technologies Holding Corporation;
	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
	4.	The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

 

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

 

5.

The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

 

	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

 

	Date:	March 31, 2021
		/s/ Jing Jin
	Name:	Jing Jin
	Title:	Chief Financial Officer (Principal Financial Officer)

 

Exhibit 32.1

 

Certification by the Principal Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Pursuant to U.S.C. Section 1350 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), I, Raymond Z. Wang, Chief Executive Officer of Greenland Technologies Holding Corporation (the “Company”), hereby certify to my knowledge that:

 

The annual report on Form 10-K for the fiscal year ended December 31, 2020 of the Company fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: March 31, 2021

 

	/s/ Raymond Z. Wang
	Raymond Z. Wang
	Chief Executive Officer (Principal Executive Officer)

 

Exhibit 32.2

 

Certification by the Principal Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

Pursuant to U.S.C. Section 1350 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), I, Jing Jin, Chief Financial Officer of Greenland Technologies Holding Corporation (the “Company”), hereby certify to my knowledge that:

 

The annual report on Form 10-K for the fiscal year ended December 31, 2020 of the Company fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: March 31, 2021

 

	/s/ Jing Jin
	Jing Jin
	Chief Financial Officer (Principal Financial Officer)