China Natural Resources(US:CHNR)2022-05-16 16:00Financial Performance - Revenue decreased by CNY 23.76 million (US$ 3.74 million) from CNY 42.50 million in 2020 to CNY 18.74 million in 2021, primarily due to the completion of the Wujiang Project and cessation of copper ore trading [274]. - Cost of sales decreased by CNY 20.73 million (US$ 3.26 million) from CNY 39.22 million in 2020 to CNY 18.49 million in 2021, attributed to the completion of the Wujiang Project [275]. - The operating loss for 2021 was CNY 23.73 million (US$ 3.73 million), compared to an operating loss of CNY 14.71 million in 2020 [273]. - The net loss for the year 2021 was CNY 54.97 million (US$ 8.65 million), compared to a profit of CNY 22.92 million in 2020 [273]. - Net loss increased by CNY 77.89 million (US$ 12.25 million) from net profits of CNY 22.92 million (US$ 3.56 million) in 2020 to a net loss of CNY 54.97 million (US$ 8.65 million) in 2021 [281]. Expenses - Selling and distribution expenses increased by CNY 0.16 million (US$ 0.03 million) from CNY 0.76 million in 2020 to CNY 0.92 million in 2021, due to enhanced business development efforts [276]. - Administrative expenses rose by CNY 4.02 million (US$ 0.63 million) from CNY 18.85 million in 2020 to CNY 22.87 million in 2021, mainly due to professional service fees related to private placement and acquisition of PST Technology [276]. - Finance costs increased by CNY 0.61 million (US$ 0.10 million) from CNY 3.75 million in 2020 to CNY 4.36 million in 2021, due to interest expense from a bank loan related to the Wujiang Project [279]. Cash Flow - Net cash used in operating activities was CNY 12.07 million (US$ 1.90 million) in 2021, a decrease from CNY 46.53 million in 2020, due to fewer payments related to completed projects [299]. - Net cash from investing activities was CNY 53.35 million (US$ 8.40 million) in 2021, compared to a cash outflow of CNY 5.17 million in 2020, mainly from loan repayments [300]. - Net cash used in financing activities was CNY 38.79 million (US$ 6.10 million) in 2021, compared to net cash from financing activities of CNY 48.60 million in 2020, due to repayments to related parties [301]. Corporate Structure and Governance - The company has a total of 5 directors, all of whom are male, with no female or non-binary representation on the board [337]. - The company has a Compensation Committee responsible for evaluating executive compensation and formulating corporate goals [361]. - The Audit Committee ensures the accuracy and effectiveness of the annual audit of the financial statements [357]. - The company is subject to Nasdaq's corporate governance requirements and has elected to comply with certain provisions voluntarily [362]. Related Party Transactions - The company issued 9,077,166 common shares to Feishang Group in exchange for 120 million shares of FARL, valued at approximately HK$87,522,000 [374]. - Payables to Feishang Group increased significantly to CNY 14,050,000 in 2021 from CNY 7,149,000 in 2020 [382]. - The company received letters from Feishang Group and Feishang Enterprise, stating they will provide continuous financial support in the form of interest-free loans [372]. Taxation and Regulatory Environment - The company’s subsidiaries in the PRC are subject to a corporate income tax rate of 25%, with certain subsidiaries enjoying preferential rates [271]. - The Company is exempt from income and corporate tax under the BVI Business Companies Act, and there is no capital gains tax for companies registered under this act [429]. - If deemed a "resident enterprise" by PRC tax authorities, a 10% withholding tax may apply to dividends paid to non-PRC resident holders [431]. Market and Competition - The company faces intense market competition in the environmental protection sector, which may affect Shanghai Onway's profitability due to potential advancements by competitors and stricter government standards [312]. - The company is highly dependent on government policies for its rural wastewater treatment business, which could significantly impact its operations [290]. Management and Personnel - Mr. Ma Xiongbing has been the General Manager of Shanghai Onway since May 2017, with over 20 years of experience in administration and finance [329]. - Mr. Yu Jun has served as General Manager of Bayannaoer Mining since January 2015, with over 25 years of experience in corporate finance [332]. - The company employed a total of 75 full-time employees, with 66 in rural wastewater treatment, 6 in metal exploration, and 3 in corporate services [364]. Financial Instruments and Risks - The company has not used derivative financial instruments in its investment portfolio, indicating a conservative approach to managing financial risks [437]. - The company has not been exposed to material interest rate risks, as none of its outstanding debt bears interest at a floating rate [437]. - As of December 31, 2021, the company had no exposure to commodity price risk, with no copper ore in inventory [438]. Audit and Internal Controls - The total audit fees paid to Ernst & Young Hua Ming LLP for fiscal year 2021 amounted to $694,222, a significant increase from $160,781 in fiscal year 2020 [454]. - The company's internal control over financial reporting was assessed as effective as of December 31, 2021, providing reasonable assurance regarding the reliability of financial reporting [446]. - There were no changes in the company's internal control over financial reporting during fiscal year 2021 that materially affected its effectiveness [447].