Greenland Technologies (US:GTEC)2023-05-18 16:00PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (unaudited) This section presents the unaudited consolidated financial statements for Q1 2023, including Balance Sheets, Income, Equity, and Cash Flow Statements, with detailed notes Consolidated Balance Sheets As of March 31, 2023, total assets increased to $157.4 million from $155.1 million at year-end 2022, with liabilities decreasing and equity growing | Balance Sheet Highlights | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $135,163,335 | $132,364,160 | | Total Assets | $157,425,580 | $155,115,341 | | Total Current Liabilities | $65,902,134 | $66,208,689 | | Total Liabilities | $69,731,911 | $70,197,578 | | Total Equity | $87,693,669 | $84,917,763 | Consolidated Statements of Operations and Comprehensive Income (Loss) For Q1 2023, revenues decreased 24.4% to $22.1 million, with net income attributable to the company at $1.45 million, resulting in diluted EPS of $0.11 | Income Statement Highlights | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Revenues | $22,149,360 | $29,306,957 | | Gross Profit | $5,523,430 | $6,367,974 | | Income from Operations | $2,374,150 | $3,365,987 | | Net Income | $2,458,574 | $2,914,798 | | Net Income Attributable to Greenland | $1,446,975 | $1,787,052 | | Basic and Diluted EPS | $0.11 | $0.16 | Consolidated Statements of Cash Flows In Q1 2023, net cash from operations significantly improved to $3.76 million, with a net cash outflow from financing, increasing total cash and restricted cash to $20.26 million | Cash Flow Summary | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $3,756,318 | $1,261,046 | | Net Cash Provided by (Used in) Investing Activities | $195,216 | $1,012 | | Net Cash Provided by (Used in) Financing Activities | ($3,464,491) | ($5,956,538) | | Net Increase (Decrease) in Cash | $487,043 | ($4,694,480) | | Cash and Restricted Cash at End of Period | $20,260,617 | $13,184,452 | Notes to Consolidated Financial Statements The notes detail the company's structure, accounting policies, and financial items, including its core transmission business, EV expansion, customer concentration, and related party receivables - The company's main business is developing and manufacturing traditional transmission products for material handling machinery in the PRC, while also expanding into the production and sale of electric industrial vehicles in the U.S. market through its subsidiary HEVI Corp313235 | Revenue by Product (Q1 2023 vs Q1 2022) | For the three months ended March 31, 2023 | For the three months ended March 31, 2022 | | :--- | :--- | :--- | | Transmission boxes for Forklift | $20,868,739 | $25,405,541 | | Transmission boxes for Non-Forklift (EV, etc.) | $1,280,621 | $3,901,416 | | Total | $22,149,360 | $29,306,957 | - The company has significant customer concentration risk, with two customers accounting for 19.55% and 11.49% of total revenues for Q1 2023110 - A significant related party balance of $36.61 million is due from Cenntro Holding Limited, the controlling shareholder, as of March 31, 2023184 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis attributes Q1 2023 revenue decline to market conditions, notes improved gross margin from product mix, and discusses liquidity Results of Operations In Q1 2023, revenue fell 24.4% to $22.15 million due to lower sales volume, while gross margin improved to 24.9% from product mix, despite increased operating expenses and decreased net income | Metric | Q1 2023 | Q1 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $22,149,360 | $29,306,957 | (24.4)% | | Gross Profit | $5,523,430 | $6,367,974 | (13.3)% | | Gross Margin | 24.9% | 21.7% | +3.2 p.p. | | Income from Operations | $2,374,150 | $3,365,987 | (29.5)% | | Net Income | $2,458,574 | $2,914,798 | (15.7)% | - The decrease in revenue was primarily a result of a decrease in sales volume, driven by poor market conditions199209 - The increase in gross margin was primarily due to a shift in the product mix towards higher value and more sophisticated products, such as hydraulic transmission products211 - General and administrative expenses increased by 28.3% year-over-year, driven by increased allowance for doubtful accounts, higher staff salaries, and increased lease costs215 Liquidity and Capital Resources The company primarily funds operations via cash from operations, bank loans, and shareholder support, with cash and equivalents at $15.40 million and working capital increasing to $69.26 million as of March 31, 2023 - The company funds working capital and other capital requirements primarily by equity contributions, cash flow from operations, and short-term bank loans225227 | Liquidity Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $15,401,387 | $16,295,695 | | Restricted Cash | $4,859,230 | $3,433,361 | | Working Capital | $69,261,201 | $66,155,471 | - A significant balance of $36.61 million is due from the controlling shareholder, Cenntro Holding Limited, as of March 31, 2023236 - Net cash from operating activities was $3.76 million for Q1 2023, compared to $1.26 million for Q1 2022241 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Greenland Technologies is not required to provide quantitative and qualitative market risk disclosures - The Company is a smaller reporting company and is therefore not required to provide the information required by this Item262 ITEM 4. Controls and Procedures Management concluded disclosure controls were ineffective as of March 31, 2023, due to a material weakness in accounting personnel, with a remedial plan underway - Based on an evaluation as of March 31, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were ineffective265 - A material weakness was identified due to a lack of sufficient and competent financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements265 - A remedial plan is being implemented, which includes recruiting more qualified personnel, providing training, formalizing policies, and establishing effective oversight266 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings Management is not aware of any pending or threatened legal proceedings involving the company or its properties - As of the date of the report, management is not aware of any pending or threatened legal proceedings against the company270 ITEM 1A. Risk Factors This section outlines significant business risks including cash intensity, customer concentration, and new ventures, alongside China-specific regulatory and delisting risks, and share-related price volatility Risks Related to Our Business and Industry The company's business faces risks including cash intensity, high customer concentration, intense competition, challenges in new EV product lines, and steel price volatility - The business is cash-intensive, and failure to maintain sufficient liquidity could adversely affect operations; as of March 31, 2023, cash and cash equivalents were $15.40 million279280 - Revenues are highly dependent on a limited number of customers, with the five largest accounting for 51.79% of revenues for Q1 2023286287 - The company is introducing new lines of business, such as electric industrial heavy equipment, which presents risks due to limited experience and potential insufficient revenue to cover investments291294 - A substantial balance of $36.61 million is due from Cenntro Holding Limited, the controlling shareholder, posing a credit risk310 Risks Related to Doing Business in China Operating in China exposes the company to risks from changing policies, an uncertain legal system, evolving data security laws, new overseas listing rules requiring CSRC filings, and potential delisting under the HFCA Act - The PRC government exerts substantial influence over business activities, and changes in laws, regulations, or policies could materially and adversely affect operations325332 - Under the new Trial Measures effective March 31, 2023, the company is required to make filings with the China Securities Regulatory Commission (CSRC) for future offerings336340 - The Holding Foreign Companies Accountable Act (HFCA) could lead to delisting if the PCAOB is unable to inspect the company's auditor for two consecutive years; its current auditor, WWC P.C., is U.S.-based and was last inspected in November 2021382385387 - PRC regulations on data security, such as the Cybersecurity Review Measures, are evolving and could subject the company to review, fines, or other penalties if it is deemed a critical information infrastructure operator or holds data on over one million users343346348 Risks Related to Our Ordinary Shares Investment in the company's ordinary shares carries risks including price decline from future sales, reliance on price appreciation due to no expected dividends, and potential negative impact from short sellers - Future sales of ordinary shares by the company or its shareholders could cause the trading price to decline significantly390 - The company does not expect to pay dividends in the foreseeable future, so investors must rely on price appreciation for any return on investment393 - The company may be targeted by short sellers, which could drive down the market price of its ordinary shares and require significant resources to defend against396398 ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds The company confirms no unregistered sales of equity securities during Q1 2023 that were not previously disclosed - There were no unregistered sales of the Company's equity securities during the three months ended March 31, 2023 that were not previously disclosed399 ITEM 3. Defaults Upon Senior Securities The company had no senior securities issued and outstanding during Q1 2023, resulting in no defaults on such securities - No senior securities were issued and outstanding during the three-month period ended March 31, 2023400 ITEM 4. Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable400 ITEM 5. Other Information The company reported no information for this item during the period - None400 ITEM 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, incentive plans, loan agreements, and CEO/CFO certifications - The exhibits filed with this report include: - Amended and Restated Memorandum and Articles of Association - 2020 and 2021 Equity Incentive Plans - A Working Capital Loan Agreement dated February 21, 2023 - Certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002403