Sunrise New Energy(EPOW) - 2025 Q2 - Quarterly Report

Financial Performance - Total revenues for the six months ended June 30, 2025, were $27,967,081, representing an increase from $22,283,171 in the same period of 2024, a growth of approximately 25%[5] - Gross profit for the six months ended June 30, 2025, was $3,698,737, compared to $17,389 in the same period of 2024, indicating a significant improvement in profitability[5] - The net loss attributable to Sunrise New Energy Co., Ltd. ordinary shareholders for the six months ended June 30, 2025, was $1,257,060, a reduction from a net loss of $4,451,462 in the same period of 2024[5] - The company reported a total comprehensive loss of $2,366,694 for the six months ended June 30, 2025, compared to a loss of $6,989,680 in the same period of 2024, indicating an improvement in overall financial performance[5] - For the six months ended June 30, 2025, the net loss was $2,840,146, compared to a net loss of $6,040,235 for the same period in 2024, indicating a significant improvement[10] - The company reported a significant increase in accounts receivable, totaling $6,227,109 for the six months ended June 30, 2025, compared to a decrease of $3,981,127 for the same period in 2024[10] - The company incurred a net loss of $2,840,146 for the six months ended June 30, 2025, with net cash used in operating activities amounting to $19,876,814[126] - The company's loss before income taxes for the six months ended June 30, 2025, was $2,840,007, a decrease from $6,020,972 in the same period of 2024[189] Assets and Liabilities - Total current assets increased to $90,717,535 as of June 30, 2025, up from $63,010,873 as of December 31, 2024, reflecting a growth of approximately 44%[2] - Total liabilities rose to $150,122,085 as of June 30, 2025, compared to $115,728,359 as of December 31, 2024, an increase of about 30%[3] - The company’s total assets reached $175,395,240 as of June 30, 2025, up from $143,023,032 as of December 31, 2024, reflecting an increase of approximately 23%[3] - The company had cash and cash equivalents and restricted cash of $27,408,386 as of June 30, 2025, indicating liquidity challenges[130] - As of June 30, 2025, the working capital deficit was $18,698,359, raising concerns about the company's ability to continue as a going concern[126] - The company’s total liabilities remained unchanged at $6,627,374 as of June 30, 2025, compared to the previous reporting period[40] - The total outstanding balance of the long-term facility collateralized by plant and equipment was approximately $6,689,053 as of June 30, 2025[167] Cash Flow and Financing - Cash and cash equivalents significantly increased to $19,921,398 as of June 30, 2025, from $1,264,463 as of December 31, 2024, marking a growth of over 1,475%[2] - Cash used in operating activities for the six months ended June 30, 2025, was $19,876,814, compared to $6,949,921 for the same period in 2024, reflecting increased operational expenditures[10] - The total cash provided by financing activities for the six months ended June 30, 2025, was $46,864,692, compared to $18,067,381 for the same period in 2024, highlighting increased financing efforts[10] - The company received the first installment of subscription proceeds of RMB50,000,000 (approximately $6,979,731) from Xinyang Partnership as part of a capital increase agreement[180] Investments and Expenses - Research and development expenses for the six months ended June 30, 2025, were $754,331, compared to $847,852 in the same period of 2024, showing a decrease in R&D spending[5] - The company made substantial investments in plant, property, and equipment, totaling $4,998,562 for the six months ended June 30, 2025, compared to $983,157 for the same period in 2024[10] - The company reported a depreciation and amortization expense of $2,600,280 for the six months ended June 30, 2025, compared to $2,381,550 for the same period in 2024, showing an increase in asset utilization[10] - The company incurred share-based compensation of $245,176 for the six months ended June 30, 2025, down from $607,742 for the same period in 2024, indicating a reduction in equity-based expenses[10] Related Party Transactions and Agreements - EPOW became the ultimate parent entity of its subsidiaries and the primary beneficiary of the variable interest entity (VIE), SDH, following a reorganization[19] - GIOP BJ has the exclusive right to provide SDH with technical support and consulting services, with service fees based on SDH's earnings before corporate income tax[23] - The Exclusive Option Agreement allows GIOP BJ to purchase equity interests in SDH at a price of RMB 10 (approximately US$1.37) or the minimum amount permitted under PRC law[29] - The Equity Pledge Agreement secures GIOP BJ's rights to collect dividends and dispose of pledged equity interests in case of a breach by SDH or its shareholders[26] - The VIE Agreements were established in June 2019, obligating GIOP BJ to absorb a majority of the risk of loss from SDH's business activities[20] - The CEO of GIOP BJ, Mr. Haiping Hu, manages SDH under the terms of the Exclusive Service Agreement, which allows for related party transactions[25] Taxation and Compliance - The effective tax rate for the six months ended June 30, 2025, was 0.00%, compared to 0.32% for the same period in 2024[189] - The total deferred tax assets, net, as of June 30, 2025, amounted to $316,670, down from $778,778 as of December 31, 2024[190] - The company has established a valuation allowance of $9,722,654 as of June 30, 2025, reflecting the uncertainty of realizing deferred tax assets[190] - As of June 30, 2025, the company did not comply with financial covenants for loans totaling $67,544,444, but the lenders had not declared defaults[128] Inventory and Receivables - Accounts receivable decreased from $36,901,720 as of December 31, 2024, to $31,294,902 as of June 30, 2025, representing a decline of approximately 15.2%[134] - Net accounts receivable also fell from $28,992,149 to $23,305,855, a decrease of about 19.7%[134] - Total inventories decreased significantly from $30,335,511 as of December 31, 2024, to $17,660,390 as of June 30, 2025, reflecting a reduction of approximately 41.8%[135] - The impairment of inventories was nil for the six months ended June 30, 2025, compared to $2,845,727 for the same period in 2024[135] Acquisitions and Impairments - The Company acquired 100% of Sunrise Tech's assets for a gross consideration of RMB 40,000,000, with payments structured over several years[159] - The Company recognized a full impairment of $282,450 for its investment in Yinzhirun in the second half of 2023 due to concerns over its ability to continue as a going concern[148] - A full impairment of $236,053 was provided for the investment in Cheyi in the second half of 2022, reflecting significant concerns about the investee's viability[150] - The Company provided a full impairment of $74,337 for its investment in Outu in the second half of 2022, citing going-concern issues[152] - A full impairment of $74,337 was also recognized for the investment in Qianshier in the second half of 2022 due to enforcement proceedings related to a rental dispute[154] - The investment in Jiamenkou was fully impaired by $74,337 in the second half of 2022, as the investee was involved in legal proceedings[156] - The Company recognized a full impairment of $38,131 for its investment in Funeng in the second half of 2023, attributed to insufficient cash to support operations[157]