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, Hong Kong and Canada (the “Subsidiaries”). Planet Green is engaged
in a number of diverse business activities, including consumer products, chemical products and online advertising.
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. 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, and (2) 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. 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 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 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’ 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. 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.
2
Because our operations are
primarily located in the PRC and Hong Kong through our subsidiaries, 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
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, nor has our Nevada holding company or any of
our subsidiaries received any inquiry, notice, warning or sanctions regarding our listing on NYSE America 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 and
Shandong Yunchu is required to obtain Permit for Food Products. As of the date of this annual report, our subsidiaries, WFOEs 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.
3
As advised by our PRC counsel,
Hubei Kaicheng Law Offices, as of the date of this annual report, our subsidiaries, WFOEs, (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 our 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 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 our subsidiaries are 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 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. 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.
4
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 including
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.
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.
5
Chemical Business
Jingshan Sanhe has four
production lines on an 11,000-square-meter facility and owns capacities to complete manufacturing, labeling, and packaging. Jingshan
Sanhe researches, manufactures and distributes ethanol fuel products in China.
Competition
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. Jingshan Sanhe has 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.
Advertising 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.
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 since 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.
6
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 and methanol products.
Shandong Yunchu carries out our beef products business. It mainly purchased
frozen beef from six countries including 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.
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 2024, our marketing and branding
efforts mainly focus on internet advertising and long-term customers.
Organizational Structure
Planet Green was incorporated
in Delaware 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.
7
Reverse Split
The board of directors approved
a reverse stock split of the Company’s authorized and issued and outstanding shares of common stock, par value $0.001 per share
(“Common Stock”), at a ratio of 1-for-10 (the “Reverse Stock Split”). The Reverse Stock Split became legally effective
as of 4:01 p.m. Eastern Standard Time on May 31, 2024 (the “Legal Effective Date”), and the Common Stock was open for trading
on NYSE American on a reverse split-adjusted basis on June 3, 2024, under the existing trading symbol “PLAG”.
On the Legal Effective Date,
every ten (10) shares of the Common Stock issued and outstanding or held as treasury stock has been automatically converted into one (1)
new share of Common Stock. The total number of shares of Common Stock authorized for issuance has been reduced by a corresponding proportion
from 1,000,000,000 shares to 100,000,000 shares of Common Stock. The par value per share of the Common Stock remained unchanged at $0.001
per share. The Common Stock was assigned a new CUSIP number 72703U 201 following the reverse stock split.
Each shareholder’s percentage ownership interest in the Company
and proportional voting power remains virtually unchanged as a result of the Reverse Stock Split, except for minor changes and adjustments
that will result from rounding fractional shares into whole shares. The rights and privileges of the holders of shares of Common Stock
were substantially unaffected by the Reverse Stock Split. No fractional shares will be issued in connection with the Reverse Stock Split.
Fractional shares resulting from the Reverse Stock Split will be rounded up to the nearest whole share.
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.
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. On April 1, 2024, the Company transferred 100% of Allinyson’s shares and other
equity interest to an individual for aggregated purchase price of $1.00, and Allinyson was completely disposed.
8
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 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; and (2) 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.
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 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.
9
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.
10
Our Manufacturing Facilities
General
We currently manufacture our products and provide
services in 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
* Became
a VIE in May 2019 and a subsidiary in August 2021.
** Became
a subsidiary in September 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 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 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
We operate our production lines year-round.
11
Raw Materials
Our Supply Sources
Our business depends on obtaining
a reliable supply of various products, including tea, diesel l, 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 and diesel. 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 including 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.
For our business of 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 2024, 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.
12
Our Employees
As of December 31, 2024, we had a total of 62 employees.
Approximately 62 of our full-time employees are directly employed by our subsidiaries.
The following table sets forth the allocation of
employees, both direct and leased, by job function.
Number of
Department
Employees
Production
8
Purchasing
3
Research and Development
2
Quality Control
2
Sales
14
Finance
10
Management
11
Administration
12
Total
62
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.
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, 2024 was not a material portion of our total expenses for the year.
13
Government Regulation
As a company that continuously
strives to create new value, we have been doing business in the following areas: tea product cultivation, packaging, and manufacturing
and sales of synthetic fuel products, vehicles gasoline and diesel products; importing and distribution of beef products and multimedia
design and 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.