Item 1. Business
ITEM 1. BUSINESS
Overview of Our Business
Planet Green Holdings Corp. (the “Planet
Green”), headquartered in Flushing, NY, is not an operating company in the PRC but a Nevada holding company with its operations
conducted through its subsidiaries in the PRC, U.S., Hong Kong and Canada (the “Subsidiaries”) and through contractual arrangements
with its variable interest entity, Jilin Chuanyuan (the “VIE”), which is a company incorporated in the PRC. Planet Green is
engaged in a number of diverse business activities, including consumer products, chemical products, and online advertising and mobile
game. The VIE is consolidated for accounting purpose only and Planet Green does not own any equity interest in the VIE. Investors may
never directly hold equity interests in the VIE. The VIE structure is used to provide investors with exposure to foreign investment in
China-based companies where Chinese law prohibits or limits direct foreign investment in the operating companies. However, our contractual
arrangements with the VIE are not equivalent of an investment in the VIE. Investors of our securities thus are not purchasing equity interest
in the VIE and their subsidiaries in China but instead are purchasing equity interest in a Nevada holding company. Such VIE arrangement
is not identical to owning such entities directly, and investors will own shares in a holding company with contracts with the VIE and
will not have any equity ownership of such VIE itself. The VIE arrangement may not be as effective as direct ownership in providing us
with control over the VIE. Direct ownership would allow us, for example, to directly or indirectly exercise our rights as a shareholder
to effect changes in the boards of directors, which, in turn, could affect changes, subject to any applicable fiduciary obligations at
the management level. However, under the VIE arrangement, as a legal matter, if the VIE or its shareholders fail to perform their respective
obligations under the VIE arrangement, we may have to incur substantial costs and expend significant resources to enforce those arrangements
and resort to litigation or arbitration and rely on legal remedies under PRC laws. These remedies may include seeking specific performance
or injunctive relief and claiming damages, any of which may not be effective. In the event we are unable to enforce these VIE Agreements
or we experience significant delays or other obstacles in the process of enforcing the VIE arrangement, we may lose control over the assets
owned by the VIE.
Our corporate structure is subject to risks relating
to our contractual arrangements with our VIE and its shareholders. Such contractual arrangements have not been tested in any of the PRC
courts. There are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations,
and rules relating to these contractual arrangements. If the PRC government finds these contractual arrangements non-compliant with the
restrictions on direct foreign investment in the relevant industries, or if the relevant PRC laws, regulations, and rules or the interpretation
thereof change in the future, we could be subject to severe penalties or be forced to relinquish our interests in the VIE or forfeit our
rights under the contractual arrangements. We and investors face uncertainty about potential future actions by the PRC government, which
could affect the enforceability of our contractual arrangements with our VIE and consequently, significantly affect the financial condition
and results of operations of us. If we are unable to claim our right to control the assets of the VIE, our common stock may decline in
value or become worthless. The PRC government could even disallow the VIE structure completely, which would likely result in a material
adverse change in our operations and our common stock may significantly decline in value or become worthless.
2
Under our corporate structure, our ability to pay
dividends and to service any debt we may incur and pay our operating expenses principally depends on dividends paid by our PRC subsidiaries
and VIE. Cash is transferred through our organization in the manner as follows: (1) we may transfer funds to our WFOEs through our Hong
Kong subsidiaries, Promising Prospect HK Limited, and Bless Chemical Co., Ltd. (HK) by additional capital contributions or shareholder
loans, as the case may be; (2) the VIE may pay service fees to our PRC subsidiaries for services rendered by our PRC subsidiaries; (3)
our PRC subsidiaries may pay service fees to the VIE for services rendered by the VIE; and (4) our PRC subsidiaries may make dividends
or other distributions to the Planet Green. We do not have cash management policies dictating how funds are transferred throughout our
organization. We may encounter difficulties in our ability to transfer cash between PRC subsidiaries and non-PRC subsidiaries largely
due to various PRC laws and regulations imposed on foreign exchange. If we intend to distribute dividends to the Planet Green, our WFOEs
will transfer the dividends to our Hong Kong subsidiaries in accordance with the laws and regulations of the PRC, and then our Hong Kong
subsidiaries will transfer the dividends to the Planet Green, and the dividends can be distributed from the Planet Green to all shareholders
respectively in proportion to the shares they hold, regardless of whether the shareholders are U.S. investors or investors in other countries
or regions. However, there can be no assurance that the PRC government will not intervene or impose restrictions on the Company’s
ability to transfer cash out of China. In 2023, our PRC subsidiaries did not receive any cash benefits from the VIE for services rendered
to the VIE and its subsidiaries. As of December 31, 2023, the VIE owns $2,823,782 to our WFOE. As of December 31, 2023, we were not subject
to any actual foreign exchange restrictions. The foregoing cash flows include all distributions and transfers between Planet Green, our
PRC subsidiaries and the VIE as of the date of this annual report. As of the date of this annual report, none of our subsidiaries have
ever issued any dividends or made other distributions to the Planet Green nor have Planet Green ever paid dividends or made other distributions
to U.S. investors. We currently intend to retain all future earnings to finance the VIE’s and our subsidiaries’ operations
and to expand their business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Any limitation on the
ability of our subsidiaries to distribute dividends to us or on the ability of the VIE to make payments to us may restrict our ability
to satisfy our liquidity requirements. To the extent cash or assets in the business is in the PRC or Hong Kong or in a PRC or Hong Kong
entity, and may need to be used to fund operations outside of the PRC or Hong Kong, the funds and assets may not be available to fund
operations or for other uses outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations
by the government on our subsidiaries’ or the VIE’s ability to transfer cash and assets.
We face various legal and operational risks and
uncertainties related to being based in and having significant operations in mainland China. The PRC government has significant authority
to exert influence on the ability of a China-based company, such as us, to conduct its business, accept foreign investments or list on
U.S. or other foreign exchanges. For example, we face risks associated with regulatory approvals of offshore offerings, oversight on cybersecurity
and data privacy, as well as the lack of inspection by the Public Company Accounting Oversight Board (the “PCAOB”) on our
auditors. Such risks could result in a material change in our operations and/or the value of the common stock or could significantly limit
or completely hinder our ability to offer common stock and/or other securities to investors and cause the value of such securities to
significantly decline or be worthless. These regulatory risks and uncertainties could become applicable to our Hong Kong subsidiaries
if regulatory authorities in Hong Kong adopt similar rules and/or regulatory actions.
3
Because our operations are primarily located in
the PRC and Hong Kong through our subsidiaries and VIE, we are subject to certain legal and operational risks associated with our operations
in China and Hong Kong, including changes in the legal, political and economic policies of the Chinese government, the relations between
China and the United States, or Chinese or United States regulations may materially and adversely affect our business, financial condition
and results of operations. PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and therefore,
these risks may result in a material change in our operations and the value of our common stock, or could significantly limit or completely
hinder our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline
or be worthless. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations
in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over
China-based companies listed overseas using a variable interest entity structure, adopting new measures to extend the scope of cybersecurity
reviews, and expanding the efforts in anti-monopoly enforcement. We do not believe that our subsidiaries and VIE are directly subject
to these regulatory actions or statements, as we have not implemented any monopolistic behavior and our business does not involve the
collection of user data or implicate cybersecurity. As of the date of this annual report, no relevant laws or regulations in the PRC explicitly
require us to seek approval from the China Securities Regulatory Commission (the “CSRC”), Cyberspace Administration of China
(the “CAC”) or any other PRC governmental authorities for our offering, nor has our Nevada holding company or any of our subsidiaries
or our VIE received any inquiry, notice, warning or sanctions regarding our offering from the CSRC or any other PRC governmental authorities.
However, since these statements and regulatory actions by the PRC government are newly published and official guidance and related implementation
rules have not been issued, it is highly uncertain how soon legislative or administrative regulation making bodies will respond and what
existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential
impact such modified or new laws and regulations will have on our daily business operation, the ability to accept foreign investments
and list on an U.S. or other foreign exchange. The Standing Committee of the National People’s Congress, or the SCNPC, or other
PRC regulatory authorities may in the future promulgate laws, regulations or implementing rules that requires our company or any of our
subsidiaries to obtain regulatory approval from Chinese authorities before offering in the U.S. In other words, although the Company is
currently not required to obtain permission from any of the PRC central or local government to obtain such permission and has not received
any denial to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly; our ability to offer, or
continue to offer, securities to investors would be potentially hindered and the value of our securities might significantly decline or
be worthless, by existing or future laws and regulations relating to its business or industry or by intervene or interruption by PRC governmental
authorities, if we or our subsidiaries (i) do not receive or maintain such permissions or approvals, (ii) inadvertently conclude that
such permissions or approvals are not required, (iii) applicable laws, regulations, or interpretations change and we are required to obtain
such permissions or approvals in the future, or (iv) any intervention or interruption by PRC governmental with little advance notice.
As of the date of this annual report, the two
Hong Kong subsidiaries of Planet Green do not have any material operation in Hong Kong and they have not collected, stored, or managed
any personal information in Hong Kong. Therefore, we have concluded that currently it does not expect that laws and regulations in Mainland
China on data security, data protection, cybersecurity or anti-monopoly to be applied to its Hong Kong subsidiaries or that the oversight
of the Cyberspace Administration of China will be extended to its operations outside of Mainland China.
In order to operate our business, in addition to
the required regular business licenses, Jingshan Sanhe is required to obtain Permit for Hazardous Chemical Products, Jilin Chuangyuan
is required to obtain Safe Production License, and Shandong Yunchu is required to obtain Permit for Food Products. As of the date of this
annual report, our subsidiaries, WFOEs and VIE have received from PRC authorities all requisite licenses, permissions, and approvals needed
to engage in the businesses currently conducted in the PRC, and no permission or approval has been denied. However, we cannot assure
you that any of these entities will be able to receive clearance of such compliance requirements in a timely manner, or at all in the
future. Any failure of these entities to fully comply with such compliance requirements may cause our PRC subsidiaries or the PRC operating
entities to be unable to begin their new businesses or operations in the PRC, subject them to fines, relevant new businesses or operations
suspension for rectification, or other sanctions.
4
As advised by our PRC counsel, Hubei Kaicheng Law
Offices, as of the date of this annual report, our subsidiaries, WFOEs and VIE, (i) are not required to obtain additional permissions
or approvals to operate their current business, (ii) are not required to obtain permission from the CSRC, the CAC, or any other Chinese
authorities to issue our securities to foreign investors based on PRC laws and regulations currently in effect, and (iii) have not
received or were denied such permission by any Chinese authorities. However, we cannot assure you that the PRC regulatory agencies, including
the CAC or the CSRC, would take the same view as we do, and there is no assurance that the VIE and its subsidiaries are always able to
successfully update or renew the licenses or permits required for the relevant business in a timely manner or that these licenses or permits
are sufficient to conduct all of their present or future business. If the VIE, WFOEs or any of its subsidiaries (i) does not receive
or maintain required permissions or approvals, (ii) inadvertently concludes that such permissions or approvals are not required,
or (iii) applicable laws, regulations, or interpretations change and the VIE or any of its subsidiaries is required to obtain such
permissions or approvals in the future, it could be subject to fines, legal sanctions, or an order to suspend their relevant services,
which may materially and adversely affect our financial condition and results of operations and cause our securities to significantly
decline in value or become worthless.
In light of the recent statements and regulatory
actions by the PRC government, such as those related to the use of variable interest entities, data security, and anti-monopoly concerns,
Planet Green may be subject to the risks of uncertainty of any future actions of the PRC government in this regard, and if Chinese regulatory
authorities disallow the VIE structure, that may result in a material change in our operations and/or value of our securities, including
that the value of our securities to significantly decline or become worthless. Planet Green may also be subject to penalties and sanctions
imposed by the PRC regulatory agencies, including the CSRC, if it fails to comply with such rules and regulations, which could adversely
affect the ability of Planet Green to continue to be listed for trading on NYSE American or another foreign exchange, which may cause
the value of Planet Green’s securities to significantly decline or become worthless. The Holding Foreign Companies Accountable Act
(the “HFCA Act”) and related regulations call for additional and more stringent criteria to be applied to emerging market
companies upon assessing the qualification of their auditors and could add uncertainties to Planet Green’s offering that trading
in Planet Green’s securities may be prohibited under the HFCA Act. Planet Green’s auditor, YCM CPA Inc., is headquartered
in California and has been inspected by the Public Company Accounting Oversight Board (United States) (the “PCAOB”) on a regular
basis. Our auditor is not included in the list of PCAOB Identified Firms of having been unable to be inspected or investigated completely
by the PCAOB in the PCAOB Determination Report issued in December 2021. On June 22, 2021, the U.S. Senate passed the Accelerating Holding
Foreign Companies Accountable Act, which, if enacted, would reduce the number of consecutive non-inspection years required for triggering
the prohibitions under the HFCA Act from three years to two. On December 29, 2022, the President signed the Consolidated Appropriations
Act, 2023, which, among other things, amended the HFCAA to reduce the number of consecutive years an issuer can be identified as a Commission-Identified
Issuer before the Commission must impose an initial trading prohibition on the issuer’s securities from three years to two years.
Therefore, once an issuer is identified as a Commission-Identified Issuer for two consecutive years, the Commission is required under
the HCFAA to prohibit the trading of the issuer’s securities on a national securities exchange and in the over-the-counter market.
Although we believe that the HFCA Act and the related regulations do not currently affect us, we cannot assure you that there will not
be any further implementations and interpretations of the Holding Foreign Companies Accountable Act or the related regulations, which
might pose regulatory risks to and impose restrictions on us because of our operations in mainland China.
Planet Green is engaged in a number of diverse
businesses, including consumer products, chemical products, advertising and mobile game.
5
Consumer Products Business
The Company’s consumer products business
is conducted through two subsidiaries: Shandong Yunchu and Xianning Bozhuang.
Shandong Yunchu imports and distributes animal
proteins, mainly beef products in Chinese market. It markets and transports the best beef products from the world’s major agricultural
regions. Shandong Yunchu has the mature global purchasing network and has gained the trust and authority of many international brands
with more than 8 years of development and accumulation. Beef products are marketed domestically to food retailers, foodservice distributors,
restaurant operators, hotel chains and other food processors. Over the past few years, Yunchu develops into a professional integrated
company, which can manage import, storage, whole sale, retail and distribution.
Xianning Bozhuang produces and distributes a variety
of Chinese tea leaves broadly categories including Cyan brick tea, black tea and green tea in China.
Competition
Shandong Yunchu mainly purchased frozen beef from
six countries: Uruguay, Brazil, Chile, Argentina, Australia and New Zealand and 25 factories are involved. The top ten suppliers include:
Marrig, Minerva S.A., G & K O’Connor Pty Ltd, Frigorifico matadero Pando ontilcor S.A., Las Moras, Frigorifico de Osorno S.A.,
Ersinal S.A. ecoparks S.A., lorsinal S.A., and Minerva S.A. The Company has established a stable long term cooperative relationship with
these beef and mutton manufacturers. The stable supply provides competitive advantage for Company to procure various various beef products
with high quality and low price to meet the needs of domestic customers.
Our food products compete with those of other food
producers and processors and certain prepared food manufacturers. We seek to achieve a leading market position for our products via our
principal marketing and competitive strategy, which includes:
●
identifying target markets for value-added products;
●
concentrating production, sales and marketing efforts to appeal to and enhance demand from those markets; and
●
utilizing our national distribution systems and customer support services.
Past efforts indicate customer demand can be increased
and sustained through application of our marketing strategy, as supported by our distribution systems. The principal competitive elements
are price, product safety and quality, brand identification, innovation, breadth and depth of product offerings, availability of products,
customer service and credit terms.
Black tea is produced in Guangxi, Sichuan, Yunnan,
Hunan, Hubei, Shanxi and Anhui provinces in China. Our black tea products are processed in our factory in Hubei province and distributed
nationwide. There are few large players on the market but we face fierce competition from numerous small black tea manufactures and distributors.
However, as our brand has over hundreds of year’s history, we have accumulated loyal consumers and gained favorable market reputation
over years.
6
Chemical Business
Jilin Chuangyuan is a leading chemical enterprise
integrating R & D, production and sales. It is a large-scale enterprise in the production of formaldehyde and urea formaldehyde glue
in Chinese northeast provinces and it is the only enterprise in Jilin province to produce and sell formaldehyde. The main products are
sold to wood-based panel, chemical, pharmaceutical and construction enterprises in Jilin and Liaoning provinces. Jilin Chuangyuan has
two formaldehyde production lines, eight rubber production units, one methylal production line and one clean fuel oil production line,
which produces 270,000 tons of chemical products every year. Its products include mainly Industrial formaldehyde, E1 grade, E0 grade and
UF resin for waterproof particleboard.
Jingshan Sanhe has four production lines on an
11,000-square-meter facility and capacities to complete manufacturing, labeling, and packaging. Jingshan Sanhe researches, manufactures
and distributes ethanol fuel products in China.
Competition
The specialty chemical industry comprises a number
of companies similar in size to the Jilin Chuangyuan, as well as companies larger and smaller than Jilin Chuangyuan. The Company cannot
readily determine its precise competitive position in every industry it serves. However, the Company estimates it holds a leading regional
position in the market for production of formaldehyde and urea formaldehyde glue in Chinese northeast provinces. Competition in the industry
is based primarily on the ability to supply products that meet the needs of the customer and to a lesser extent, on price. Since its inception,
the company has developed rapidly relying on advanced enterprise management and safe, effective, exclusive patented products and strong
marketing strength. The production scale of formaldehyde is ranking top three among provinces in northeast China. The production scale
of urea-formaldehyde glue attains the first place in China. Our enterprise comprehensive strength is considered first tier among all companies
in northeast China.
There are many other companies operating in the
renewable energy. Evolving consumer preferences, regulatory conditions, ongoing industry trends, and project economics have a strong effect
on the competitive landscape. The clean energy markets are heavily fragmented. We believe we are in a strong position to compete for new
project development and supply opportunities. Competition for such opportunities, however, including the prices being offered for fuel
supply, affect the profitability of the opportunities we pursue, and may make opportunities unsuitable to pursue. Jingshan Sanhe is one
of the top ten private enterprises in the region of Jingshan with 12 patents, 17 sets of professional laboratory equipment and 2 advanced
and complete production lines.
The market for vehicle fuels is highly competitive.
The biggest competition for alcohol-based high clean fuel used as a vehicle fuel is gasoline and diesel because most vehicles in our key
markets are powered by these fuels. Many established businesses are in the market for alcohol-based high clean fuels and other alternatives
for use as vehicle fuel, including alternative vehicle and alternative fuel companies, refuse collectors, industrial gas companies, truck
stop and fuel station owners, fuel providers, utilities and their affiliates and other organizations.
If the alternative vehicle fuel market grows then
the number and type of participants in this market and their level of capital and commitments to alternative vehicle fuel programs will
increase. We compete for vehicle fuel users based on demand for the type of fuel, which may be affected by a variety of factors, including,
among others, cost, supply, availability, quality, cleanliness, and safety of the fuel; cost, availability and reputation of vehicles
and engines; convenience and accessibility of fueling stations; regulatory mandates and other requirements; and recognition of the brand.
We believe we compare favorably with our competitors based on these factors; however, some of our competitors have substantially greater
financial, marketing, and other resources than we have. As a result, these competitors may be able to respond more quickly to changes
in customer preferences, legal requirements or other industry or regulatory trends; devote greater resources to the development, promotion
and sale of their products; adopt more aggressive pricing policies, dedicate more effort to infrastructure and systems development in
support of their business or product development activities; implement more robust or creative initiatives to advance consumer acceptance
of their products; or exert more influence on the regulatory landscape that impacts the vehicle fuels market.
7
Advertising Business and Mobile Game Business
Fast Approach is a North America demand side platform
that directly connects to Chinese market without middleman and is supported by world class data science researchers among some well-respected
universities in North America. A demand-side platform is a system that allows buyers of digital advertising inventory to manage multiple
ad exchange and data exchange through one interface. Fast Approach builds full audience scale model, extracts audience features, optimizes
advertising campaign strategies.
Allinyson is an entrepreneurial game company which
has the capacity to conduct independent research, development, and operations, aiming to create the most popular and world-class influential
game products. The company adheres to the team building concept of “Small but Precise” and carries out the development and operation
of game business with the core R&D and operation backbone. It has developed and operated several fun and relaxing games which ranked
top in the Philippines in terms of downloads and users. Block Puzzle is the crown jewel among all the games with its top ranking in the
overall APP ranking in the Philippines.
Competition
The Trade Desk is the largest, independent programmatic
advertising DSP for digital media buyers in the world. The Trade Desk launched its programmatic ad buying platform in China, in 2019 facilitating
access to Chinese media companies, such as Alibaba, Tencent and Baidu Exchange Services. The Trade Desk is the major competitor in north
American.
The market for mobile game is fragmental
and competitive. We only provide limited number of mobile games which are recognized in Philippine mobile game market.
Raw Materials
Our business depends on obtaining a reliable supply
of various products, including tea, refined methanol, methanol, formaldehyde, polymer emulsion and beef products. Because of the diversity
of available sources of these raw materials, we believe that our raw materials are currently in adequate supply.
We obtain our raw materials primarily from domestic
procurement for our tea production, formaldehyde and methanol products.
Shandong Yunchu carries out our beef products business.
It mainly purchased frozen beef from six countries: Uruguay, Brazil, Chile, Argentina, Australia and New Zealand and 25 factories are
involved. The top ten suppliers include: Marrig, Minerva S.A., G & K O’Connor Pty Ltd, Frigorifico matadero Pando ontilcor S.A., Las
Moras, Frigorifico de Osorno S.A., Ersinal S.A. ecoparks S.A., lorsinal S.A., and Minerva S.A. The Company has established a stable long
term cooperative relationship with these beef and mutton manufacturers. The stable supply provides competitive advantage for Company to
procure various various beef products with high quality and low price to meet the needs of domestic customers.
We select suppliers based on price and product
quality. We typically rely on numerous domestic suppliers, including some with whom we have a long-term relationship. Our suppliers generally
include wholesale agricultural product companies, food production companies, tea bag processing companies and chemical products wholesale
company.
8
Our Customers
Our products are sold both in Chinese domestic
market. Shandong Yunchu distributes beef products in China including several major beef products providers and distributors in China,
such as: Henan Hengdu Food Co., Ltd, Shanxi Pingyao Beef Group, Shandong Delis Food Co., Ltd and Heilongjiang Binxi Group. When it comes
to manufacturing and sales of synthetic fuel products, we do business through direct sales, constructing refuel facilities and conducting
technical cooperation with other companies.
Our Sales and Marketing Efforts
We have not spent a significant amount of capital
on advertising in the past, and our advertising budget continues to be limited. In 2023, our marketing and branding efforts mainly focus
on internet advertising and long-term customers.
Organizational Structure
Planet Green was incorporated in Nevada on February
4, 1986 and effective on November 12, 2009, Planet Green reincorporated in Nevada from Delaware. Planet Green was formerly known as American
Lorain Corporation.
The following diagram illustrates our corporate
structure including our subsidiaries and our VIE.
Subsidiaries
On May 9, 2019, the Company and Shanghai Xunyang
Internet Technology Co., Ltd. (the “Shanghai Xunyang”), a subsidiary of the Company, entered into a Share Exchange Agreement
with Xianning Bozhuang, and each of the shareholders of Xianning Bozhuang, pursuant to which, among other things and subject to the terms
and conditions contained therein, Shanghai Xunyang agreed to effect an acquisition of Xianning Bozhuang by acquiring from the Sellers
all of the outstanding equity interests of Xianning Bozhuang. On May 14, 2019, the Company closed the acquisition transaction and Shanghai
Xunyang entered into a series of VIE agreements with Xianning Bozhuang and its shareholders. For company internal restructure purpose,
on December 20, 2019, Xianning Bozhuang terminated the VIE agreements with Shanghai Xunyang and entered into similar series of VIE agreements
with Jiayi Technologies on the same day. On August 2, 2021, as part of the internal restructure efforts to remove VIE arrangement, the
Company and its subsidiary terminated series of VIE agreements and acquired 100% equity ownership of Xianning Bozhuang.
9
On June 5, 2020, the Company entered into a share
exchange agreement with Fast Approach to acquire all outstanding shares of Fast Approach, a corporation incorporated under the laws of
Canada and in the business of operating a demand side platform. Upon completing the transaction, Fast Approach became a wholly owned subsidiary
of the Company. Fast Approach owns 100% equity of Shanghai Shuning.
On January 4, 2021, through Jiayi Technologies,
the Company entered into a series of VIE agreements with Jingshan Sanhe as well as its shareholders. The Company is considered the primary
beneficiary of Jingshan Sanhe and it consolidates its accounts as VIE. On September 10, 2021, as part of the internal restructure efforts
to remove VIE arrangement, Hubei Bulaisi acquired 85% equity ownership of Jingshan Sanhe and Jiayi Technologies terminated the VIE agreements
with Jingshan Sanhe on the same date.
On September 14, 2022, the Company and Hubei Bulaisi,
a subsidiary of the Company, entered into a Share Purchase Agreement with a shareholder of Jingshan Sanhe Luckysky acquiring the remaining
15% of the outstanding equity interests of Jingshan Sanhe Luckysky. Upon closing of the transaction, Hubei Bulaisi, acquired 100% equity
ownership of Jingshan Sanhe Luckysky.
On December 9, 2021, the Company and Jiayi Technologies,
a subsidiary of the Company, entered into a Share Exchange Agreement with Shandong Yunchu and each of shareholders of Shandong Yunchu.
Upon closing of the transaction, Jiayi Technologies acquired 100% equity ownership of Shandong Yunchu.
On April 8, 2022, the Company entered into a Share
Purchase Agreement with Allinyson Ltd. and each of shareholders of Allinyson. Upon closing of the transaction, the Company acquired 100%
equity ownership of Allinyson.
VIE Arrangements
We currently have Jilin Chuangyuan as VIE under
its corporate structure. The Company is considered the primary beneficiary of the VIE only for accounting purpose.
On March 9, 2021, through Jiayi Technologies, the
Company entered into a series of VIE agreements with Jilin Chuangyuan as well as its shareholders. The ordinary shares of Jilin Chuangyuan
are currently owned by Yongsheng Chen and Xiaodong Cai.
On July 15, 2021, through Jiayi Technologies, the
Company entered into a series of VIE agreements with Anhui Ansheng, as well as its shareholders. The ordinary shares of Anhui Ansheng
are currently owned by Xiaodong Cai.
On December 16, 2022, Jiayi Technologies, a subsidiary
of the Company, terminated the VIE agreements with Anhui Ansheng, a former VIE of Planet Green.
10
Each of the VIE Agreements is described in detail
below:
Consultation and Service Agreement . Pursuant
to the Consultation and Service Agreement, WFOE has the exclusive right to provide consultation and services to the operating entities
in China in the area of business management, human resource, technology and intellectual property rights. WFOE exclusively owns any intellectual
property rights arising from the performance of this Consultation and Service Agreement. The amount of service fees and payment term can
be amended by the WFOE and operating companies’ consultation and the implementation. The term of the Consultation and Service Agreement
is 20 years. WFOE may terminate this agreement at any time by giving 30 day’s prior written notice.
Business Cooperation Agreement . Pursuant
to the Business Cooperation Agreement, WFOE has the exclusive right to provide complete technical support, business support and related
consulting services, including but not limited to technical services, business consultations, equipment or property leasing, marketing
consultancy, system integration, product research and development, and system maintenance. WFOE exclusively owns any intellectual property
rights arising from the performance of this Business Cooperation Agreement. The rate of service fees may be adjusted based on the services
rendered by WFOE in that month and the operational needs of the operating entities. The Business Cooperation Agreement shall maintain
effective unless it was terminated or was compelled to terminate under applicable PRC laws and regulations. WFOE may terminate this Business
Cooperation Agreement at any time by giving 30 day’s prior written notice.
Equity Pledge Agreements . Pursuant to the
Equity Pledge Agreements among WFOE, operating entities and each of operating entities’ shareholder, shareholders of the operating
entities pledge all of their equity interests in the operating entities to WFOE to guarantee their performance of relevant obligations
and indebtedness under the Technical Consultation and Service Agreement and other control agreements. In addition, shareholders of the
operating entities are in the process of registering the equity pledge with the competent local authority.
Equity Option Agreements . Pursuant to the
Equity Option Agreements, WFOE has the exclusive right to require each shareholder of the operating companies to fulfill and complete
all approval and registration procedures required under PRC laws for WFOE to purchase, or designate one or more persons to purchase, each
shareholder’s equity interests in the operating companies, once or at multiple times at any time in part or in whole at WFOE’s
sole and absolute discretion. The purchase price shall be the lowest price allowed by PRC laws. The Equity Option Agreements shall remain
effective until all the equity interest owned by each operating entities shareholder has been legally transferred to WFOE or its designee(s).
Voting Rights Proxy Agreements . Pursuant
to the Voting Rights Proxy Agreements, each shareholder irrevocably appointed WFOE or WFOE’s designee to exercise all his or her
rights as the shareholders of the operating entities under the Articles of Association of each operating entity, including but not limited
to the power to exercise all shareholder’s voting rights with respect to all matters to be discussed and voted in the shareholders’
meeting. The term of each Voting Rights Proxy Agreement is 20 years. WFOE has the right to extend each Voting Proxy Agreement by giving
written notification.
As discussed above, we operate a portion of business
in China through the VIE and its subsidiaries, and rely on contractual arrangements among our WFOEs, the VIE, and their respective shareholders
to exert influence on the business operations of the VIE. The VIE structure provides our business operations in China with contractual
exposure to foreign investment. However, our contractual arrangements with the VIE are not equivalent of an investment in the VIE. Investors
are purchasing equity securities of our ultimate Nevada holding company rather than purchasing equity securities of the VIE. Chinese regulatory
authorities could disallow this structure, which would likely result in a material change in our and/or the VIE’s operations and/or
a material change in the value of the securities we are registering for sale, including that it could cause the value of such securities
to significantly decline or become worthless. If the PRC government deems that the contractual arrangements with the consolidated VIE
domiciled in China do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations
or the interpretation of existing regulations change or are interpreted differently in the future, we, our subsidiaries and the VIE could
be subject to severe penalties or be forced to relinquish their interests in those operations. It is uncertain whether any new PRC laws
or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. In addition, to
the extent cash is located in the PRC or within a PRC domiciled entity and may need to be used to fund operations outside of the PRC,
the funds may not be available due to limitations placed on us, our subsidiaries and the VIE by the PRC government. To the extent cash
or assets in the business is in the PRC or Hong Kong or in a PRC or Hong Kong entity, and may need to be used to fund operations outside
of the PRC or Hong Kong, the funds and assets may not be available to fund operations or for other uses outside of the PRC or Hong Kong
due to interventions in or the imposition of restrictions and limitations by the government on us, our subsidiaries’ or the VIE’s
ability to transfer cash and assets.
11
Cash Flows through Our Organization:
Planet Green is a holding company with no material
operations of its own. We currently conduct our operations through our subsidiaries including our WFOEs, the VIE and their respective
subsidiaries. Cash is transferred through our organization in the manner as follows: (1) we may transfer funds to our WFOEs through our
Hong Kong subsidiaries, Promising Prospect HK Limited, and Bless Chemical Co., Ltd. (HK) by additional capital contributions or shareholder
loans, as the case may be; (2) the VIE may pay service fees to our PRC subsidiaries for services rendered by our PRC subsidiaries; (3)
our PRC subsidiaries may pay service fees to the VIE for services rendered by the VIE; and (4) our PRC subsidiaries may make dividends
or other distributions to Planet Green. We do not have cash management policies dictating how funds are transferred throughout our organization.
We may encounter difficulties in our ability to transfer cash between PRC subsidiaries and non-PRC subsidiaries largely due to various
PRC laws and regulations imposed on foreign exchange. If we intend to distribute dividends through Planet Green, our WFOEs will transfer
the dividends to our Hong Kong subsidiaries in accordance with the laws and regulations of the PRC, and then our Hong Kong subsidiaries
will transfer the dividends to the Planet Green, and the dividends will be distributed from the Planet Green to all shareholders respectively
in proportion to the shares they hold, regardless of whether the shareholders are U.S. investors or investors in other countries or regions.
There can be no assurance the PRC government will not intervene or impose restrictions on the Company’s ability to transfer cash
out of China. In 2023 our PRC subsidiaries did not receive any cash benefits from the VIEs for services rendered to the VIEs and their
subsidiaries. As of December 31, 2023, our VIE owned $2,823,782 to our WOEFs as loan. As of December 31, 2023, we were not subject to
any actual foreign exchange restrictions.
We have no present plans to distribute earnings
or settle amounts owed under the VIE agreements which it plans to retain the retained earnings to continue to grow the business. No dividends
or distribution has been declared to paid to Planet Green from subsidiaries or its VIEs and no dividends or distribution was made to any
U.S. investors.
Effects of PRC foreign exchange regulations
on our ability to transfer assets within our organization
Current foreign exchange and other regulations
in the PRC may restrict our PRC subsidiaries and VIE in their ability to transfer their net assets to Planet Green and its subsidiaries
and to investors. The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases,
the remittance of currency out of China. Under our current corporate structure, Planet Green as the holding company may rely on dividend
payments from its subsidiaries to fund any cash and financing requirements Planet Green may have. Under existing PRC foreign exchange
regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign
exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange (the “SAFE”)
by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE,
cash generated from the operations of our PRC subsidiaries in China may be used to pay dividends to Planet Green. However, approval from
or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted
out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain
SAFE approval to use cash generated from the operations of our PRC subsidiaries and VIE to pay off their respective debt in a currency
other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than
Renminbi.
In light of the flood of capital outflows of China
in 2016 due to the weakening Renminbi, the PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny
of major outbound capital movement including overseas direct investment. More restrictions and substantial vetting process are put in
place by SAFE to regulate cross-border transactions falling under the capital account. If any of Planet Green’s shareholders regulated
by such policies fail to satisfy the applicable overseas direct investment filing or approval requirement timely or at all, it may be
subject to penalties from the relevant PRC authorities. The PRC government may at its discretion further restrict access in the future
to foreign currencies for current account transactions. If the foreign exchange control system prevents Planet Green from obtaining sufficient
foreign currencies to satisfy Planet Green’s foreign currency demands, Planet Green may not be able to pay dividends in foreign
currencies to its shareholders.
12
Recent Regulatory Development
As we conduct substantially all of our operations
in China, we are subject to legal and operational risks associated with having substantially all of our operations in China, including
changes in the legal, political and economic policies of the Chinese government, the relations between China and the United States, or
Chinese or United States regulations may materially and adversely affect our business, financial condition and results of operations.
PRC laws and regulations governing our current business operations are sometimes vague and uncertain, and therefore, these risks may result
in a material change in our operations and the value of our common stock or could significantly limit or completely hinder our ability
to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless.
Recently, the PRC government initiated a series of regulatory actions and made a number of public statements on the regulation of business
operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision
over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts
in anti-monopoly enforcement. We have relied on the opinion of our PRC counsel, Hubei Kaicheng Law Office, that as of the date of this
Annual Report, we are not directly subject to these regulatory actions or statements, as we have not implemented any monopolistic behavior
and our business does not involve large-scale collection of user data, implicate cybersecurity, or involve any other type of restricted
industry. As further advised by our PRC counsel, Hubei Kaicheng Law Office, as of the date of this Annual Report, no relevant laws or
regulations in the PRC explicitly require us to seek approval from the China Securities Regulatory Commission (the “CSRC”)
or any other PRC governmental authorities for our overseas listing or securities offering plans, nor has our company or any of our subsidiaries
received any inquiry, notice, warning or sanctions regarding our offering of securities from the CSRC or any other PRC governmental authorities.
However, since these statements and regulatory actions by the PRC government are newly published and official guidance and related implementation
rules have not been issued, it is highly uncertain what potential impact such modified or new laws and regulations will have on our daily
business operations, or ability to accept foreign investments and list on a U.S. or other foreign exchange. The Standing Committee of
the National People’s Congress (the “SCNPC”) or other PRC regulatory authorities may in the future promulgate laws,
regulations or implementing rules that require our company or any of our subsidiaries to obtain regulatory approval from Chinese authorities
before offering securities in the U.S. In other words, although the Company is currently not required to obtain permission from any of
the PRC central or local government and has not received any denial to list on the U.S. exchange, our operations could be adversely affected,
directly or indirectly; our ability to offer, or continue to offer, securities to investors would be potentially hindered and the value
of our securities might significantly decline or be worthless, by existing or future laws and regulations relating to its business or
industry or by intervene or interruption by PRC governmental authorities, if we or our subsidiaries (i) do not receive or maintain such
permissions or approvals, (ii) inadvertently conclude that such permissions or approvals are not required, (iii) applicable laws, regulations,
or interpretations change and we are required to obtain such permissions or approvals in the future, or (iv) any intervention or interruption
by PRC governmental with little advance notice.
Enforcement of Civil Liabilities
Currently all our directors and majority of senior
executive officers either are physically reside in China for a significant portion of each year, and/or are PRC nationals. As a result,
it may be difficult for you to effect service of process upon us or those persons inside mainland China. In addition, there is uncertainty
as to whether the PRC courts would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil
liability provisions of U.S. securities laws or those of any U.S. state.
The recognition and enforcement of foreign judgments
are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the
requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made
or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement with the
U.S. that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures
Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates
the basic principles of PRC laws or national sovereignty, security, or public interest. As a result, it is uncertain whether and on what
basis a PRC court would enforce a judgment rendered by a court in the U.S.
It may also be difficult for you or overseas regulators
to conduct investigations or collect evidence within China. For example, in China, there are significant legal and other obstacles to
obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities.
Although the authorities in China may establish a regulatory cooperation mechanism with its counterparts of another country or region
to monitor and oversee cross-border securities activities, such regulatory cooperation with the securities regulatory authorities in the
U.S. may not be efficient in the absence of a practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities
Law, or “Article 177,” which became effective in March 2020, no overseas securities regulator is allowed to directly conduct
investigations or evidence collection activities within the territory of the PRC. Article 177 further provides that Chinese entities and
individuals are not allowed to provide documents or materials related to securities business activities to foreign agencies without prior
consent from the securities regulatory authority of the PRC State Council and the competent departments of the PRC State Council. While
detailed interpretation of or implementing rules under Article 177 have yet to be promulgated, the inability for an overseas securities
regulator to directly conduct an investigation or evidence collection activities within China may further increase difficulties faced
by you in protecting your interests.
13
Our Manufacturing Facilities
General
We currently manufacture our products and provide
services in Meihekou City of Jilin Province, Jingshan City and Xianning City of Hubei Province, Qingdao City of Shandong Province, and
Toronto in Canada.
The following table indicates the year that operations
commenced at each of the facilities and the size of the facilities.
Facility
Year
Operations
Commenced
Facility Size
(square
meters)
Xianning Bozhuang*
2013
33,333
Jingshan Sanhe**
2018
11,018
Jilin Chuangyuan***
2013
59,690
* Became
a VIE in May 2019 and a subsidiary in August 2021.
** Became
a subsidiary in September 2021.
*** Became
a VIE in March 2021.
Production Lines
We currently manufacture our products using production lines.
The production process for our cyan brick tea
products involves, primary processing of fresh leaves, piling and fermenting, storing and aging, picking, pressing, and baking. The production
process for our black tea products involves selecting and sorting the fresh leaves, withering, rolling, fermenting, baking and drying,
grading according to color, prompting fragrance, packing and warehousing. The production process for our green tea products involves
selecting and sorting the fresh leaves, airing, fixating, cooling, rolling, stir drying, selecting and grading, prompting fragrance,
packing and warehousing.
The production process for our formaldehyde products
is illustrated as follows. The raw material methanol, after being injected into the high position tank, enters the methanol evaporator
through the filter, mixes with the air from the roots blower to form the binary mixture, and then adds steam to form the ternary mixture,
which is heated by the superheater to 120 ℃ and enters the oxidizer, carries out oxidation and dehydrogenation reaction through
the silver catalyst to form the formaldehyde gas, and then absorbs the formaldehyde solution through the first absorption tower and the
second absorption tower. The excess waste gas is burned out by the exhaust gas boiler.
The production process for our methyl starting
with the raw materials methanol and formaldehyde are pumped into the reaction distillation tower according to the proportion. At the bottom
of the tower, formaldehyde and methanol are indirectly heated by steam. The reaction liquid vapor from the tower upwards through the catalyst
reaction to produce methyl acetal, and then through the distillation tower separation, cooling, the final product methyl acetal.
The production process for our urea-formaldehyde
glue is demonstrated as follows. Formaldehyde is pumped from the formaldehyde workshop into the tank of formaldehyde storage, and then
pumped into the metering tank through the feed pump of formaldehyde. After the PH value is adjusted by adding alkali, it is sent into
the reaction kettle. At the same time, urea is also added into the kettle according to the corresponding proportion, heating the reaction
kettle. After heating up the kettle, melamine is added, so that the material can undergo addition reaction in the kettle. After the PH
value is adjusted by dropping formic acid in the kettle, the material is sent into the condensation kettle through the transfer pump.
Urea and additives are added into the condensation kettle according to a certain proportion for condensation reaction, and the finished
product is formed after cooling treatment.
14
The production process for our clean fuel
oil is illustrated as follows. The self-control design of the facilities for storage of raw materials and addition of additives shall,
in accordance with the requirements of the process, conduct centralized indication and adjustment of the temperature, flow rate and liquid
level of the raw oil tanks, raw oil metering tanks, product oil allocation tanks and finished oil tanks during the fuel blending process;
realize remote monitoring of the whole fuel production process, and conduct on-the-spot indication of pressure and partial flow rate.
The production process for our construction rubber
powder (re-dispersible latex powder) is demonstrated as follows. Using polymer emulsion (VAE emulsion) as raw material, all kinds of additives
are added, and then transported to the reaction kettle through diaphragm pump to warm up and mix evenly, and then transported to the mixing
kettle with additives through diaphragm pump to mix evenly, then transported to the high-speed reactor through diaphragm pump to emulsify,
emulsified and then transported to the spare material tank through the diaphragm pump, and then transported to the spray drying tower
through the spare material tank through the diaphragm pump to form polymer powder after spray drying, and the polymer powder and various
additives are mixed and screened through the mixer to be packed into the warehouse.
The following table shows the number and types
of production lines, the types of products produced and the production capacity as of the date of this report:
Facility
Production Lines
Product
Portfolio
Capacity
Xianning Bozhuang
There are six production lines: the production line of cyan brick tea with traditional handicraft; the production line of cyan brick tea; the production line of teabag; the production line of green tea and the production line of black tea
Cyan brick tea, black tea and green tea
Production line with 5,020 tons of production capacity
Jingshan Sanhe
There are two production lines: the production line of ethanol fuel and the production line of fuel additive
Alcohol based clean fuel, liquid wax, arene and biomass fuel
Two production lines with a total production capacity of 300,000 tons/year for ethanol fuel, and 3000 tons/year for fuel additive
Jilin Chuangyuan
The company has two formaldehyde production lines, eight rubber production units, one methylal production line and one clean fuel oil production line
Formaldehyde, urea formaldehyde adhesive, methylal and clean fuel oil
Annual production capacity of 120,000 tons of formaldehyde, 100,000 tons of urea formaldehyde glue, 3,0000 tons of methylal and 20,000 tons of clean fuel oil
We operate our production lines year-round.
Raw Materials
Our Supply Sources
Our business depends on obtaining a reliable supply
of various products, including tea, refined methanol, methanol, formaldehyde, polymer emulsion and beef products. Because of the diversity
of available sources of these raw materials, we believe that our raw materials are currently in adequate supply.
15
We obtain our raw materials primarily from domestic
procurement for our tea production, formaldehyde and methanol products. When it comes to our beef products, we rely on overseas suppliers
to import the raw materials.
Shandong Yunchu carries out our beef products business.
It mainly purchased frozen beef from six countries: Uruguay, Brazil, Chile, Argentina, Australia and New Zealand and 25 factories are
involved. The top ten suppliers include: Marrig, Minerva S.A., G & K O’Connor Pty Ltd, Frigorifico matadero Pando ontilcor S.A.,
Las Moras, Frigorifico de Osorno S.A., Ersinal S.A. ecoparks S.A., lorsinal S.A., and Minerva S.A. The Company has established a stable
long term cooperative relationship with these beef and mutton manufacturers. The stable supply provides competitive advantage for Company
to procure various beef products with high quality and low price to meet the needs of domestic customers.
We select suppliers based on price and product
quality. We typically rely on numerous domestic suppliers, including some with whom we have a long-term relationship. Our suppliers generally
include wholesale agricultural product companies, food production companies, tea bag processing companies and chemical products wholesale
company.
Our Customers
Our products are sold in Chinese domestic market.
As to our formaldehyde products, vehicles gasoline
and diesel products, we are a leading regional chemical products provider in north-eastern China area, and we are the sole provider of
formaldehyde in Jilin Province, China.
When it comes to manufacturing and sales of synthetic
fuel products, we do business through direct sales, constructing refuel facilities and conducting technical cooperation with other companies.
Shandong Yunchu distributes beef products in China
including several major beef products providers and distributors in China, such as Henan Hengdu Food Co., Ltd., Shanxi Pingyao Beef Group,
Shandong Delis Food Co., Ltd. and Heilongjiang Binxi Group.
Our Sales and Marketing Efforts
We have not spent a significant amount of capital
on advertising in the past, and our advertising budget continues to be limited. In 2023, our marketing and branding efforts mainly focus
on internet advertising and long-term customers.
Intellectual Property
Patents
The company vigorously implements scientific and
technological innovation. Jingshan Sanhe obtains 12 practical patent certificates from the State Intellectual Property Office of the PRC,
which includes a diesel exhaust cleaner and its preparation method, a kind of automobile exhaust cleaner and preparation method, a kind
of filtering device for exhaust port of cleaning liquid production plant, a kind of automobile cleaner dispensing device, a kind of liquid
dispensing equipment, a kind of mixing and stirring tank, a kind of cleaning brush for cleaning agent storage tank, a kind of reactor
for producing auto cleaner, a kind of cleaning brush for cleaning agent mixing kettle, a kind of mixing tank, a cleaning tool for cleaning
the reactor for detergent production and a kind of mixing and defoaming tank. The company will give full play to the advantages of independent
intellectual property rights, continue to innovate, maintain the leading technology and enhance the core competitiveness of the company.
We take reasonable steps to protect our proprietary
information and trade secrets, such as limiting disclosure of proprietary plans, methods and other similar information on a need-to-know
basis and requiring employees with access to our proprietary technology to enter into confidentiality arrangements. We believe that our
proprietary technology and trade secrets are adequately protected.
16
Our Employees
As of December 31, 2023, we had a total of 143
employees. Approximately 143 of our full-time employees are directly employed by our subsidiaries and VIE.
The following table sets forth the allocation of
employees, both direct and leased, by job function.
Number of
Department
Employees
Production
49
Purchasing
3
Research and Development
5
Quality Control
6
Sales
26
Finance
13
Management
23
Administration
18
Total
143
We have not experienced any significant problems
or disruption to our operations due to labor disputes, nor have we experienced any difficulties in recruitment and retention of experienced
staff.
We compensate our production line employees by
unit produced (piece work) and compensate other employees with a base salary and bonus based on performance. We also provide training
for our staffs from time to time to enhance their technical and product knowledge, including knowledge of industry quality standards.
Our employees participate in state pension scheme
and various types of social insurance organized by municipal and provincial governments. Outsourcing agents are responsible for contributions
on behalf of the leased employees.
Our Research and Development Activities
We have research and development staffs at each
of our facilities. In total, 5 employees are dedicated to research and development.
Jingshan Sanhe owns a professional laboratory which
includes 17 sets of professional experimental equipment operated by 2 high-end scientific research experts to ensure the high quality
of raw materials and products.
Jilin Chuanyuan was jointly awarded by Jilin Provincial
Department of education and Jilin Provincial Department of industry and information technology as Jilin University enterprise joint technology
innovation laboratory by 3 high-end scientific research experts. The company currently carries out a project of transformation of scientific
and technological achievements with Beihua University. Specifically, it is a kind of urea formaldehyde resin adhesive with ultra-low formaldehyde
emission and its preparation process, ZL 201510055885x. At the same time, as a participant, the project is applying for the national science
and technology progress award. Beihua University has set up a teaching and research practice base in our company. On top of that, the
company also successfully developed the urea formaldehyde resin for E1 grade waterproof particleboard, E0 grade and F grade particleboard,
as well as the UF resin for E0 grade and F grade particleboard with UFC.
We rely heavily on customer feedback to assist
us in the modification and development of our products. We also utilize customer feedback to assist us in the development of new products.
The amount we spent on research and development
activities during the years ended December 31, 2023 and 2022 was not a material portion of our total expenses for those years.
17
Government Regulation
As a company that continuously strives to create
new value, we have been doing business in five areas: tea product cultivation, packaging, and sales; manufacturing and sales of synthetic
fuel products, formaldehyde products, vehicles gasoline and diesel products; manufacturing of insulation type explosion-proof skid-mounted
refueling equipment and SF double-layer buried type storage tank products business; importing and distribution of beef products and multimedia
design, advertising business.
Our tea product cultivation, packaging, and sales
business is subject to regulations of China’s Agricultural Ministry and Ministry of Health. This regulatory scheme governs the manufacture
(including composition and ingredients), labeling, packaging and safety of food. It also regulates manufacturing practices, including
quality assurance programs, for foods through its current manufacturing practice regulations, and specifies the standards of identity
for certain foods. We have obtained approvals from Chinese authorities for products that requires the approval under regulations, including
quality safety approval from government.
Our manufacturing and sales of chemical products
business is subject to multiple regulations under PRC law. We have complete certificates, including the work safety license, production
license and emission license. We have passed the environmental assessment acceptance and currently works on the promotion to the second
level of work safety standardization from the third level. Our operation meets the requirements of relevant national laws, regulations,
standards and specifications, as well as other the requirements of national management departments at all levels.
Our importing and distribution of beef products
business is carried out by Shandong Yunchu and we have obtained relevant certifications including the record registration form of foreign
trade operators and food business license.