Erayak Power Solution Group Inc 6-K, filed Nov 5, 2024
Erayak Power Solution Group Inc. (RAYA)
About this 6-K
Erayak Power Solution Group Inc filed this 6-K on November 5, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November
Commission File Number:
No. 528, 4th Avenue
Binhai Industrial Park
Wenzhou, Zhejiang Province
People’s Republic of China 325025
+86-577-86829999
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Erayak Power Solution Group Inc | ||
| Date: November 5, 2024 | By: | /s/ Lingyi Kong |
| Name: | Lingyi Kong | |
| Title: | Chief Executive Officer | |
1
Exhibit Index
| Exhibit No. | Description | |
| 99.1 | Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 2024 and 2023 | |
| 99.2 | Unaudited Interim Condensed Consolidated Financial Statements for the Six Months Ended June 30, June 30, 2024 and 2023 | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
2
Exhibit 99.1
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes included elsewhere in this report on Form 6-K and with the discussion and analysis of our financial condition and results of operations contained in our Annual Report on Form 20-F for the fiscal year ended December 31, 2023. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.
Results of Operations
For the Six Months Ended June 30, 2024 and 2023
The following table summarizes the results of our operations for the six months ended June 30, 2024 and 2023, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such periods.
(All amounts, other than percentages, are in U.S. dollars)
For the Six Months Ended June 30, | Variance | |||||||||||||||
| 2024 | 2023 | Amount | Percentage | |||||||||||||
| Sales | $ | 11,943,904 | $ | 9,449,817 | $ | 2,494,087 | 26.39 | % | ||||||||
| Cost of sales | (10,796,299 | ) | (6,619,695 | ) | (4,176,604 | ) | 63.09 | % | ||||||||
| Gross profit | 1,147,605 | 2,830,122 | (1,682,517 | ) | -59.45 | % | ||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | (1,153,066 | ) | (1,168,174 | ) | 15,107 | -1.29 | % | |||||||||
| Selling and marketing expenses | (454,841 | ) | (436,619 | ) | (18,222 | ) | 4.17 | % | ||||||||
| Research and development costs | (828,013 | ) | (481,702 | ) | (346,311 | ) | 71.89 | % | ||||||||
| Inventory reserve provision | - | (83,419 | ) | 83,419 | -100 | % | ||||||||||
| Total operating expenses | (2,435,920 | ) | (2,169,914 | ) | (266,007 | ) | 12.26 | % | ||||||||
| Operating (loss) income | $ | (1,288,315 | ) | $ | 660,208 | $ | (1,948,524 | ) | -295.14 | % | ||||||
| Other income (expenses): | ||||||||||||||||
| Rental income, net | 109,449 | 102,712 | 6,737 | 6.56 | % | |||||||||||
| Interest expenses, net | (64,588 | ) | (199,712 | ) | 135,124 | -67.66 | % | |||||||||
| Other income, net | 145,952 | 4,671 | 141,281 | 3024.88 | % | |||||||||||
| Total other income (expenses), net | 190,813 | (92,329 | ) | 283,142 | -306.67 | % | ||||||||||
| (Loss) income before income taxes | $ | (1,097,503 | ) | $ | 567,879 | $ | (1,665,382 | ) | -293.26 | % | ||||||
| Income tax refund (provision) | 38,963 | (92,707 | ) | 131,670 | -142.03 | % | ||||||||||
| Net (loss) income | $ | (1,058,540 | ) | $ | 475,172 | $ | (1,533,712 | ) | -322.77 | % | ||||||
Revenues
Revenues increased by approximately $2.49 million, or 26.39%, to approximately $11.94 million for the six months ended June 30, 2024 from approximately $9.45 million for the six months ended June 30, 2023. The increase in revenues was primarily driven by the increase in trade sales of our subsidiary, Ruike Electronics Co., Ltd.
Gross profit
Our gross profit decreased by approximately $1.68 million, or 59.45%, to approximately $1.15 million for the six months ended June 30, 2024 from approximately $2.83 million for the six months ended June 30, 2023. Gross profit margin was 9.61% for the six months ended June 30, 2024, as compared to 29.95% for the six months ended June 30, 2023. The decrease in gross margin was primarily due to the increased initial cost in raw materials for producing newly developed products.
Research and development (“R&D”) expenses
Research and development expenses increased by approximately $0.35 million, or 71.89% to approximately $0.83 million for the six months ended June 30, 2024 as compared to approximately $0.48 million for the six months ended June 30, 2023. The increase in R&D expenses was mainly due to the increased R&D activities on new products.
Interest expenses, net
Our interest expense (net) decreased by approximately $0.14 million, to approximately $0.06 million for the six months ended June 30, 2024, from approximately $0.20 million for the six months ended June 30, 2023. The decrease of interest expense was mainly due to decreased short-term and long-term borrowings during the fiscal period ended June 30, 2024 as compared to the fiscal period ended June 30, 2023.
Liquidity and Capital Resources
As of June 30, 2024 and December 31, 2023, we had cash and cash equivalents of $1,103,939 and $5,878,434, respectively. We believe that our current cash, cash to be generated from our operations and access to help from our related parties will be sufficient to meet our working capital needs for at least the next twelve months. Although we do not have any amounts committed to be provided by our related parties, due to their relatively small amounts, we do not believe our working capital needs will be negatively impacted without such funds provided by related parties.
Substantially all of our operations are conducted in China and a majority portion of our revenues, expense, cash and cash equivalents are denominated in Renminbi (RMB). RMB is subject to the exchange control regulation in China, and, as a result, we may have difficulty distributing any dividends outside of China due to PRC exchange control regulations that restrict its ability to convert RMB into U.S. Dollars.
Under applicable PRC regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reaches 50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation. Under PRC law, RMB is currently convertible into U.S. Dollars under a company’s “current account,” which includes dividends, trade and service-related foreign exchange transactions, without prior approval of the State Administration of Foreign Exchange (SAFE), but is not from a company’s “capital account,” which includes foreign direct investments and loans, without the prior approval of the SAFE.
With respect to retained earnings accrued after such date, our board of directors may declare dividends after taking into account our operations, earnings, financial condition, cash requirements and availability and other factors as it may deem relevant at such time. Any declaration and payment, as well as the amount, of dividends will be subject to our By-Laws, charter and applicable Chinese and U.S. state and federal laws and regulations, including the approval from the shareholders of each subsidiary which intends to declare such dividends, if applicable.
We have limited financial obligations dominated in US dollars, thus the foreign currency restrictions and regulations in the PRC on the dividends distribution will not have a material impact on the liquidity, financial condition and results of operations of the Company.
2
Cash Flow Summary
| For the Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash (used in) provided by operating activities | $ | (12,859,999 | ) | $ | 5,454,714 | |||
| Net cash used in investing activities | (601,845 | ) | (4,344,326 | ) | ||||
| Net cash provided by (used in) financing activities | 8,790,822 | (619,025 | ) | |||||
| Effect of exchange rate changes on cash | (103,473 | ) | (284,958 | ) | ||||
| Net (decrease) increase in cash | $ | (4,774,495 | ) | $ | 206,405 | |||
Operating Activities:
Net cash used in operating activities for the six months ended June 30, 2024 was approximately $12.86 million, which was primarily attributable to a net loss approximately $1.06 million, adjusted for non-cash items for approximately $0.50 million and adjustments for changes in working capital approximately $12.30 million. The adjustments for changes in working capital mainly included increase of accounts receivable of approximately $4.28 million, increase of inventory of approximately $2.73 million, increase of advance to suppliers of approximately $5.52 million, increase of accounts payable of approximately $2.42 million, decrease of accrued expenses and other current liabilities of approximately $2.21 million, and increase of advance from customers of approximately $0.56 million.
Net cash provided by operating activities for the six months ended June 30, 2023 was approximately $5.45 million, which was primarily attributable to a net profit approximately $0.48 million, adjusted for non-cash items for approximately $0.54 million and adjustments for changes in working capital approximately $0.44 million. The adjustments for changes in working capital mainly included decrease of accounts receivable of approximately $3.73 million, increase of inventory of approximately $1.05 million, decrease of advance to suppliers of approximately $2.76 million, decrease of accounts payable of approximately $0.58 million, and decrease of advance from customers of approximately $0.33 million.
Investing Activities:
Net cash used in investing activities was approximately $0.60 million for the six months ended June 30, 2024. It was primarily attributable to the addition of fixed assets for production needs during the fiscal period.
Net cash used in investing activities was approximately $4.34 million for the six months ended June 30, 2023. It was primarily attributable to the addition of fixed assets for production needs during the period, and a fixed deposit, which is presented as other non-current assets on the Interim Consolidated Balance Sheet.
Financing Activities:
Net cash provided by financing activities was approximately $8.79 million for the six months ended June 30, 2024. It was primarily attributable to the financing through share issuance of $8 million, and net proceeds from short-term bank loans of approximately $1 million, offset by the repayment of long-term bank loans of approximately $0.16 million.
Net cash used in financing activities was approximately $0.62 million for the six months ended June 30, 2023. It was primarily attributable to the repayment of short-term loans with an approximate amount of $1 million and repayment of related party loans with an approximate amount of $0.17 million, offset by the proceeds from long-term bank loans with approximate amount of $0.55 million.
Statement Regarding Unaudited Financial Information
The unaudited financial information set forth above is subject to adjustments that may be identified when audit work is performed on the Company’s year-end financial statements, which could result in significant differences from this unaudited financial information.
3
Exhibit 99.2
ERAYAK POWER SOLUTION GROUP INC.
INTERIM CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2024 AND DECEMBER 31, 2023
(IN U.S. DOLLARS, EXCEPT SHARE DATA)
| June 30, 2024 (Unaudited) | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Advances to suppliers | ||||||||
| Other receivables | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Right-of-use assets | ||||||||
| Deferred tax assets | ||||||||
| Other non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Short-term borrowings | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Advances from customers | ||||||||
| Due to related parties | ||||||||
| Long-term loans – current portion | ||||||||
| Tax payable | ||||||||
| Total current liabilities: | ||||||||
| Non-current liabilities: | ||||||||
| Long-term loans | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Shareholders’ Equity: | ||||||||
| Class A shares, | ||||||||
| Class B shares, | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserve | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Shareholders’ equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
F-1
ERAYAK POWER SOLUTION GROUP INC.
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(IN U.S. DOLLARS, EXCEPT SHARE DATA)
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Sales | $ | $ | ||||||
| Cost of sales | ( | ) | ( | ) | ||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative | ( | ) | ( | ) | ||||
| Selling and marketing | ( | ) | ( | ) | ||||
| Research and development | ( | ) | ( | ) | ||||
| Inventory reserve provision | - | ( | ) | |||||
| Total operating expenses | ( | ) | ( | ) | ||||
| Operating (loss) income | ( | ) | ||||||
| Other income (expenses): | ||||||||
| Interest expenses, net | ( | ) | ( | ) | ||||
| Rental income, net | ||||||||
| Other income, net | ||||||||
| Total other income (expenses), net | ( | ) | ||||||
| (Loss) income before income taxes | ( | ) | ||||||
| Income tax refund (provision) | ( | ) | ||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Other comprehensive income: | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| Earnings per share attributable to common shareholders: | ||||||||
| Shares | ||||||||
| (Loss) earnings per share | $ | ( | ) | $ | ||||
| Weighted average number of shares outstanding | ||||||||
| Basic and Diluted | ||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
F-2
ERAYAK POWER SOLUTION GROUP INC.
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(IN U.S. DOLLARS, EXCEPT SHARE DATA)
For the six months ended June 30, 2024:
| Class A shares | Ordinary shares, $0.0001 par Amount | Class B shares | Amount | Additional Paid-in Capital | Statutory Reserve | Retained Earnings | Accumulated Other Comprehensive Income (loss) | Total shareholders’ equity | ||||||||||||||||||||||||||||
| Balance at December 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Share issuance | ||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2023:
| Class A shares | Ordinary shares, $0.0001 par Amount | Class B shares | Amount | Additional Paid-in Capital | Statutory Reserve | Retained Earnings | Accumulated Other Comprehensive Income (loss) | Total shareholders’ equity | ||||||||||||||||||||||||||||
| Balance at December 31, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||
| Foreign currency translation loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
F-3
ERAYAK POWER SOLUTION GROUP INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(UNAUDITED, IN U.S. DOLLARS)
| 2024 | 2023 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Imputed interest expenses | ||||||||
| Right of use lease asset | ||||||||
| Inventory reserve provision | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||
| Advances to suppliers | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Other receivables | ( | ) | ( | ) | ||||
| Loan receivable | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and other current liabilities | ( | ) | ( | ) | ||||
| Advances from customers | ( | ) | ||||||
| Tax payable | ( | ) | ( | ) | ||||
| Net cash (used in) provided by operating activities | ( | ) | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchases of property, plant, and equipment | ( | ) | ( | ) | ||||
| Fixed deposit | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from short-term borrowings | ||||||||
| Repayments on short-term borrowings | ( | ) | ( | ) | ||||
| Proceeds from related parties | ||||||||
| Payments to related parties | ( | ) | ( | ) | ||||
| Proceeds from share issuance | ||||||||
| Proceeds from long-term bank loans | ||||||||
| Repayments on long-term bank loans | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash | ( | ) | ( | ) | ||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at the beginning of period | ||||||||
| Cash and cash equivalents at the end of period | ||||||||
| Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheet | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Cash and cash equivalents at the end of year | $ | |||||||
| Supplemental disclosures of cash flows information: | ||||||||
| Cash paid for income taxes | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
F-4
ERAYAK POWER SOLUTION GROUP INC.
SELECTED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
Erayak Power Solution Group Inc. (“Erayak Group”)
Erayak Group was incorporated on June 14,
2019 under the laws of Cayman Islands. Under its memorandum of association, Erayak Group was authorized to issue
Erayak Group is a holding company and is currently
not actively engaging in any business.
| Entity Name | Registered Location | Date of Incorporation | Ownership as of the issuance date of the report | |||
| Erayak Power Solution Group Inc. (“Erayak Group”) | ||||||
| Erayak Power Solution Limited (“Erayak BVI’) | ||||||
| Erayak Power Solution Hong Kong Limited (“Erayak HK”) | ||||||
| Ruike Electronics (Wenzhou) Co., Ltd. (“Ruike”) | ||||||
| Wenzhou Wenjie Technology Limited (“Wenjie”) | ||||||
| Zhejiang Leiya Electronics Limited (“Leiya”) | ||||||
| Wenzhou New Focus Limited (“New Focus”) |
Erayak Power Solution Limited (“Erayak BVI”)
Erayak BVI was incorporated on June 17, 2019 under
the laws of British Virgin Islands. Under its memorandum of association, Erayak BVI is authorized to issue
Erayak Power Solution Hong Kong Limited (“Erayak HK”)
Erayak HK was incorporated on June 26, 2019 under
the laws of Hong Kong and is a wholly owned subsidiary of Erayak Power Solution Limited. The paid in capital was $
F-5
Ruike Electronics (Wenzhou) Co., Ltd. (“Ruike”)
Ruike was
incorporated on December 5, 2023 in People’s Republic of China (“China” or “PRC”), and is a wholly owned
subsidiary of Erayak Power Solution Hong Kong Limited. Ruike is a wholly foreign owned enterprise organized under the laws of the PRC.
The paid in capital was $
Wenzhou Wenjie Technology Limited (“Wenjie”)
Wenjie was incorporated on December 11, 2019 in
People’s Republic of China (“China” or “PRC”), and is a wholly owned subsidiary of Erayak Power Solution
Hong Kong Limited. Wenjie is a wholly foreign owned enterprise organized under the laws of the PRC. The paid in capital was $
Zhejiang Leiya Electronics Limited (“Leiya”)
Leiya was incorporated on March 5, 2009 under
the laws of the People’s Republic of China. The paid in capital was RMB
The registered principal activities of Leiya are mainly development, production and sales of inverters, chargers and gasoline generators.
Wenzhou New Focus Limited (“New Focus”)
New Focus was incorporated on November 21, 2012
in China, and is a wholly owned subsidiary of Leiya. The paid in capital was RMB
The principal activity of New Focus is mainly the sale of Leiya’s products, which involves exports to multiple countries.
Reorganization
In or about April and August 2020, the Company
completed corporate reorganization to roll several controlled entities (now referred to as the subsidiaries) into one legal corporation
(the Company). Shengling Xiang transferred
During the years presented in these consolidated financial statements, the control of the entities has never changed (always under the ultimate control of Lingyi Kong). Accordingly, the combination has been treated as a corporate restructuring (reorganization) of entities under common control and thus the current capital structure has been retroactively presented in prior periods as if such structure existed at that time and in accordance with ASC 805-50-45-5, the entities under common control are presented on a combined basis for all periods to which such entities were under common control. The consolidation of the Company and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles in the United Stated of America (“US GAAP”) and have been consistently applied. The accompanying consolidated financial statements include the financial statements of the Company and its majority-owned and controlled subsidiaries. All significant inter-company transactions and balances have been eliminated upon consolidation.
F-6
Use of Estimates
The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Such estimates include, but are not limited to, allowances for doubtful accounts, inventory valuation, useful lives of property, plant and equipment, intangible assets, and income taxes related to realization of deferred tax assets and uncertain tax position. Actual results could differ from those estimates.
Foreign Currency Translation
The financial records of the Company’s subsidiaries in People’s Republic of China (“PRC”) are maintained in their local currencies which are Chinese Yuan (“CNY” or “RMB”). Monetary assets and liabilities denominated in currencies other than their local currencies are translated into local currencies at the rates of exchange in effect at the consolidated balance sheet dates. Transactions denominated in currencies other than their local currencies during the year are converted into local currencies at the applicable rates of exchange prevailing when the transactions occur. Transaction gains and losses are recorded in other income/(expense), net in the consolidated statements of income and comprehensive income.
The Company maintained its financial record using the United States dollar (“US dollar”) as the functional currency, while the subsidiaries of the Company in Hong Kong and mainland China maintained their financial records using RMB as the functional currencies. The reporting currency of the Company is US dollar. When translating local financial reports of the Company’s subsidiaries into US dollar, assets and liabilities are translated at the exchange rates at the consolidated balance sheet date, equity accounts are translated at historical exchange rates and revenue, expenses, gains and losses are translated at the average rate for the period. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the consolidated statements of income and comprehensive income.
| June 30, | June 30, | December 31, | ||||||||||
| 2024 | 2023 | 2023 | ||||||||||
| Period Ended RMB: USD exchange rate | ||||||||||||
| Period Average RMB: USD exchange rate | ||||||||||||
Cash and Cash Equivalents
Cash and cash equivalents primarily consist of cash and deposits with financial institutions which are unrestricted as to withdrawal and use. Cash equivalents consist of highly liquid investments that are readily convertible to cash generally with original maturities of three months or less when purchased.
Restricted Cash
The Company had bank acceptance notes outstanding with the bank and is required to keep certain amounts on deposit that are subject to withdrawal restrictions. Those notes are generally short term in nature due to their short maturity period of six to nine months; thus, restricted cash is classified as a current asset.
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts presented in the statement of cash flows. The Company adopted the new standard effective January 1, 2018, using the retrospective transition method.
F-7
As of June 30, 2024, and December 31, 2023, restricted
cash was $
Accounts Receivable, net
Accounts receivables are recognized and carried at the original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Based on management of customers’ credit and ongoing relationship, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on aging analysis basis. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is principally determined using the weighted-average method. The Company records adjustments to inventory for excess quantities, obsolescence or impairment when appropriate to reflect inventory at net realizable value. These adjustments are based upon a combination of factors including current sales volume, market conditions, lower cost or market analysis and the expected realizable value of the inventory.
Advances to Suppliers
Advances to suppliers refer to advances for purchase of materials or services, which are applied against accounts payable when the materials or services are received.
The Company reviews a supplier’s credit history and background information before advancing a payment. If the financial condition of its suppliers were to deteriorate, resulting in an impairment of their ability to deliver goods or provide services, the Company would write off such an amount in the period when it is considered impaired. As of June 30, 2024 and December 31, 2023, the Company had no write-offs for advances to suppliers.
Advances from Customers
Advances from customers refer to advances received from customers, which are applied against accounts receivable when products are sold.
Property, Plant and Equipment, net
Property, plant, and equipment are recorded at
cost less accumulated depreciation.
| Useful lives | ||
| Buildings | ||
| Machinery and equipment | ||
| Transportation vehicles | ||
| Office furniture and equipment | ||
| Electronic equipment |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of income and other comprehensive income in other income or expenses.
F-8
Intangible Assets
| Useful lives | ||
| Patents | ||
| Trademark |
Leases/Right of use assets
Effective January 1, 2018, the Company adopted the new lease accounting standard using a modified retrospective transition method which allowed the Company not to recast comparative periods presented in its consolidated financial statements. In addition, the Company elected the package of practical expedients, which allowed the Company to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as operating or finance leases, and to not reassess initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The Company combines the lease and non-lease components in determining the ROU assets and related lease obligation. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities as disclosed in financial statements. ROU assets and related lease obligations are recognized at commencement date based on the present value of remaining lease payments over the lease term.
Impairment of Long-lived Assets
The Company’s management reviews the carrying values of long-lived assets whenever events and circumstances, such as a significant decline in the asset’s market value, obsolescence or physical damage affecting the asset, significant adverse changes in the assets use, deterioration in the expected level of the assets performance, cash flows for maintaining the asset are higher than forecast, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. If the estimated cash flows from the use of the asset and its eventual disposition are below the asset’s carrying value, then the asset is deemed to be impaired and written down to its fair value.
There was no impairment charge recognized for long-lived assets for the periods ended June 30, 2024 and December 31, 2023.
Fair Value Measurement
Fair Value Measurements and Disclosures requires disclosure of the fair value of financial instruments held by the Company. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| ● | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| ● | Level 3 inputs to the valuation methodology use one or more unobservable inputs which are significant to the fair value measurement. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
F-9
For the Company’s financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, other receivables, accounts payable, other current liabilities, and bank loans, the carrying amounts approximate their fair values due to their short maturities as of June 30, 2024 and December 31, 2023.
Value-added Tax (“VAT”)
Sales revenue represents the invoiced value of
goods, net of VAT. All of the Company’s products that are sold in the PRC are subject to a VAT on the gross sales price.
Revenue Recognition
The Company generates its revenues mainly from sales of electrical products, such as electrical converters and inverters, to third-party customers, who are mainly distributors and retailers. The Company follows Financial Accounting Standards Board (FASB) ASC 606 and accounting standards updates (“ASU”) 2014-09 for revenue recognition. On January 1, 2018, the Company has early adopted ASU 2014-09, which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company considers customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts with a customer. As part of its consideration of the contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. In the principal versus agent consideration, since no another party is involved in transactions, the Company is a principal.
In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company analyzed historical refund claims for defective products, and since no warranty, discount or return policy are documented in the sales agreements, the Company concluded that they have been immaterial.
Revenues are reported net of all value added taxes. As the Company’s standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on their relative standalone selling price.
Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied at a point in time), which typically occurs at delivery. For international sales, the Company sells its products primarily under the free onboard (“FOB”) shipping point term. For sales under the FOB shipping point term, the Company recognizes revenues when products are delivered from Company to the designated shipping point. Prices are determined based on negotiations with the Company’s customers and are not subject to adjustment.
Rental income
Rental income is from subleasing part of the leased assets under operating leases, and it is recognized in the statements of comprehensive income on a straight-line basis over the term of the lease.
F-10
Government Grant
Government grants are compensation for expenses already incurred or for the purpose of giving immediate financial support to the Company. The government evaluates the Company’s eligibility for the grants on a consistent basis, and then makes the payment. Therefore, there are no restrictions on the grants.
Government grants are recognized when received
and all the conditions for their receipt have been met. The grants received were $
Research and Development Costs
Research and development activities are directed toward the development of new products as well as improvements in existing processes. These costs, which primarily include salaries, contract services and supplies, are expensed as incurred.
Shipping and Handling Costs
Shipping and handling costs are expensed when
incurred and are included in selling and marketing expenses. Shipping and handling costs were $
Advertising Costs
Advertising costs are expensed as incurred in
accordance with ASC 720-35, “Selling and Marketing Expenses-Advertising Costs”. Advertising costs were $
Income Taxes
The Company accounts for income taxes using the asset and liability method whereby it calculates deferred tax assets or liabilities for temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, net operating loss carry forwards and credits by applying enacted tax rates applicable to the years in which those temporary differences are expected to be reversed or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. The components of the deferred tax assets and liabilities are individually classified as non-current amounts.
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
To the extent applicable, the Company records
interest and penalties as other expense. All the tax returns of the Company’s PRC subsidiaries remain subject to examination by
PRC tax authorities for
The Company and its subsidiaries are not subject to U.S. tax laws and local state tax laws. The Company’s income and that of its related entities must be computed in accordance with Chinese and foreign tax laws, as applicable, and all of which may be changed in a manner that could adversely affect the amount of distributions to shareholders. There can be no assurance that the Income Tax Laws of PRC will not be changed in a manner that adversely affects shareholders. Any such change could increase the amount of tax payable by the Company, reducing the amount available to pay dividends to the holders of the Company’s ordinary shares.
F-11
Earnings Per Share
Earnings (loss) per share is calculated in accordance with ASC 260 Earnings per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share are computed in accordance with the treasury stock method and based on the weighted average number of ordinary shares and dilutive ordinary share equivalents. Dilutive ordinary share equivalents are excluded from the computation of diluted earnings per share if their effects would be anti-dilutive. There were no dilutive ordinary share equivalents outstanding during the six months ended June 30, 2024 and 2023.
The Company did not use the two-class method to compute net income per ordinary share, because it did not have other issued securities other than ordinary shares. Class A and Class B shares are both ordinary shares, and per Article 6 in Memorandum and Articles of Association (amended and restated), they have the same rights, preferences, privileges, and restrictions, except for voting and conversion rights.
Comprehensive income/(loss)
Comprehensive income/(loss) is defined as the changes in shareholders’ equity during a period arising from transactions and other events and circumstances excluding transactions resulting from investments by shareholders and distributions to shareholders. Comprehensive income or loss is reported in the consolidated statements of comprehensive income/(loss). Accumulated other comprehensive income/(loss), as presented on the accompanying consolidated balance sheets, consists of accumulated foreign currency translation adjustments.
Certain Risks and Concentration
Exchange Rate Risks
The Company operates in PRC, which may give rise to significant foreign currency risks mainly from fluctuations and the degree of volatility of foreign exchange rates between the USD and the RMB.
Currency Convertibility Risks
Substantially all the Company’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with other information such as suppliers’ invoices, shipping documents and signed contracts.
Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentration of credit risks consist primarily of cash and cash equivalents, restricted cash, notes receivable. The Company places its cash and cash equivalents, restricted cash, and note receivable in good credit quality financial institutions in Hong Kong and PRC. Concentration of credit risks with respect to accounts receivables is linked to the concentration of revenue. To manage credit risk, the Company performs ongoing credit evaluations of customers’ financial condition.
Interest Rate Risks
The Company is subject to interest rate risk. The Company has bank interest bearing loans charged at variable interest rates. And although some bank interest bearing loans are charged at fixed interest rates within the reporting period, the Company is still subject to the risk of adverse changes in the interest rates charged by the banks when these loans are refinanced.
Risks and Uncertainties
The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note1, this may not be indicative of future results.
F-12
Liquidity Risks
Our primary sources of liquidity consist of existing cash balances, cash flows from our operating activities and availability under our revolving credit facility. Our ability to generate sufficient cash flows from our operating activities is primarily dependent on our sales of converters and power generating products to our customers at margins sufficient to cover fixed and variable expenses.
As of June 30, 2024, and December 31, 2023, we
had cash and cash equivalents of $
NOTE 3 – ACCOUNTS RECEIVABLE
| June 30, 2024 | December 31, 2023 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivable, net | $ | $ | ||||||
The average accounts receivable turnover period was approximately 117 days and 145 days for the fiscal periods ended June 30, 2024 and December 31, 2023, respectively.
| June 30, 2024 | December 31, 2023 | |||||||
| Beginning balance | $ | ( | ) | $ | ( | ) | ||
| Provision adjustment for accounts receivable | ( | ) | ||||||
| Exchange difference | ||||||||
| Ending balance | $ | ( | ) | $ | ( | ) | ||
F-13
NOTE 4 – INVENTORIES
| June 30, 2024 | December 31, 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Inventory valuation allowance | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
The inventory valuation allowance recognized for
the fiscal periods ended June 30, 2024 and December 31, 2023 was and $
NOTE 5 – ADVANCES TO SUPPLIERS AND OTHER
| June 30, 2024 | December 31, 2023 | |||||||
| Advance to suppliers | $ | $ | ||||||
| Advance payment for potential factory lease and land purchase | ||||||||
| Total | ||||||||
As of June 30, 2024 and December 31, 2023, there
was an advance payment in the amount of $
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT
| June 30, 2024 | December 31, 2023 | |||||||
| Machinery and equipment | $ | $ | ||||||
| Transportation vehicles | ||||||||
| Electronic devices | ||||||||
| Office furniture and equipment | ||||||||
| Construction in progress | ||||||||
| Building | ||||||||
| Total property plant and equipment, at cost | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
As of June 30, 2024 and December 31, 2023, the Company had no impaired or pledged property and equipment.
Additions to property and equipment for the fiscal
periods ended June 30, 2024 and December 31, 2023 were $
Depreciation expenses were $
The depreciation expenses included in cost of
sales during the periods ended June 30, 2024 and 2023 were $
F-14
NOTE 7 – INTANGIBLE ASSETS
| June 30, 2024 | December 31, 2023 | |||||||
| Intangible assets | ||||||||
| Cost | $ | $ | ||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Additions, at cost | ||||||||
| Amortization current period | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
The intangible assets represent the ERAYAK trademark and the Company’s purchase of patents related to new technologies to produce inverters.
There were no disposals for the fiscal periods ended June 30, 2024 and December 31, 2023.
During the periods of June 30, 2024 and December 31, 2023, the Company had no impaired or pledged intangibles.
| Year | Amortization | Net carrying value | ||||||
| 2025 | $ | $ | ||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
NOTE 8 – LEASE
The Company has one related party lease for the land where it operates with no option to renew, and the Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. After paid part of the 20-year lease payment, the Company secured the right to use of property, and the lessor, Wenzhou Ailefu Technology Co., Ltd (“Ailefu”), provided the leased assets as guarantee for the Company to apply bank loan, and the lease payment for the future 20 years have been prepaid. The Company sub-leases part of the property and uses rental income to cover part or all of the interest expense on the bank loan. The related bank loan is disclosed in Note 11 – Long-term Loans. Rental income from the sublease is disclosed in Note 17 – Rental Income, Net. Relation between the Company and Ailefu is disclosed in Note 19 – Related Party Transactions.
The ending balances of right of use assets were $
NOTE 9 – OTHER NON-CURRENT ASSETS
As of June 30, 2024, and December 31, 2023, other
non-current assets included a three-year fixed deposit in the amount of RMB
NOTE 10 – SHORT-TERM BORROWINGS
| Bank Name | Amount – RMB | Amount – USD | Issuance Date | Expiration Date | Interest | |||||||||||
| Ningbo Bank | $ | % | ||||||||||||||
| Ningbo Bank | % | |||||||||||||||
| Minsheng Bank | % | |||||||||||||||
| Total | RMB | $ | ||||||||||||||
F-15
| Bank Name | Amount – RMB | Amount – USD | Issuance Date | Expiration Date | Interest | |||||||||||
| Minsheng Bank | % | |||||||||||||||
The Company’s short-term bank borrowings are guaranteed by the Company’s major shareholders, their immediate family members, and related companies.
NOTE 11 – LONG-TERM LOANS
| Description | Amount – RMB | Amount – USD | Issuance Date | Expiration Date | Interest | |||||||||||
| WeBank Shenzhen | $ | % | ||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| Longwan Rural Commercial Bank | % | |||||||||||||||
| Longwan Rural Commercial Bank | % | |||||||||||||||
| Minsheng Bank | % | |||||||||||||||
| Subtotal | ||||||||||||||||
| Current portion of long-term loans | ( | ) | ( | |||||||||||||
| Total | RMB | $ | ||||||||||||||
| Description | Amount – RMB | Amount – USD | Issuance Date | Expiration Date | Interest | |||||||||||
| WeBank Shenzhen | $ | % | ||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | % | |||||||||||||||
| WeBank Shenzhen | ||||||||||||||||
| WeBank Shenzhen | ||||||||||||||||
| Longwan Rural Commercial Bank | % | |||||||||||||||
| Longwan Rural Commercial Bank | % | |||||||||||||||
| Minsheng Bank | % | |||||||||||||||
| Subtotal | ||||||||||||||||
| Current portion of long-term loans | ( | ) | ( | ) | ||||||||||||
| Total | RMB | $ | ||||||||||||||
F-16
As of June 30, 2024 and December 31, 2023, the long-term loans from Minsheng Bank were secured by the leased property from Ailefu, which is disclosed in Note 8 - Lease.
NOTE 12 – SALES
| 2024 | 2023 | |||||||
| Inverters | $ | $ | ||||||
| Chargers | ||||||||
| Gasoline generators | ||||||||
| Power bank | ||||||||
| Other products | ||||||||
| Total | $ | $ | ||||||
There is no warranty, discount or return policy documented in the sales agreements.
NOTE 13 – GENERAL AND ADMINISTRATIVE EXPENSES
| 2024 | 2023 | |||||||
| Employee compensation and benefits | $ | $ | ||||||
| Travel and communication expenses | ||||||||
| Rent and utilities | ||||||||
| Consulting fees | ||||||||
| Insurance | ||||||||
| Depreciation and amortization expenses | ||||||||
| Sales tax | ||||||||
| Entertainment | ||||||||
| Office and miscellaneous | ||||||||
| Total | $ | $ | ||||||
NOTE 14 – SELLING AND MARKETING EXPENSES
| 2024 | 2023 | |||||||
| Employee compensation and benefits | $ | $ | ||||||
| Travel and promotion | ||||||||
| Shipping and handling | ||||||||
| Insurance | ||||||||
| Consulting fee | ||||||||
| Inspection and certification fees | ||||||||
| Entertainment | ||||||||
| Office and miscellaneous | ||||||||
| Total | $ | $ | ||||||
F-17
NOTE 15 – RESEARCH AND DEVELOPMENT EXPENSES
| 2024 | 2023 | |||||||
| Salaries | $ | $ | ||||||
| Contract services and supplies | ||||||||
| Utility | ||||||||
| Design cost | ||||||||
| Depreciation | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
NOTE 16 – INTEREST EXPENSES, NET
| 2024 | 2023 | |||||||
| Interest expense | $ | ( | ) | $ | ( | ) | ||
| Interest income | ||||||||
| Total interest expense, net | $ | ( | ) | $ | ( | ) | ||
NOTE 17 – RENTAL INCOME, NET
| 2024 | 2023 | |||||||
| Rental income | $ | $ | ||||||
| Rental expense | ( | ) | ( | ) | ||||
| Total rental income, net | $ | $ | ||||||
NOTE 18 – OTHER INCOME, NET
| 2024 | 2023 | |||||||
| Government grant | $ | $ | ||||||
| Exchange gains (losses) | ( | ) | ||||||
| Bank charges | ( | ) | ( | ) | ||||
| Miscellaneous income | ||||||||
| Miscellaneous expenses | ( | ) | ( | ) | ||||
| Total other income (expenses), net | $ | $ | ||||||
F-18
NOTE 19 – RELATED PARTY TRANSACTIONS
1)
| Name | Relationship with the Company | |
| Wenzhou Ailefu Technology Co. Ltd. (“Ailefu”) | ||
| Hangzhou Xiangze Trading Co. Ltd. (“Xiangze”) | ||
| Wenzhou Weidi Technology Co. Ltd. (“Weidi”) | ||
| Shanghai Fushishenye Mechanical and Electrical Equipment Co. Ltd. (“Fushishenye”) | ||
| Ruian Xiaobai New Energy Automobile Rental Co. Ltd. (“Xiaobai”) | ||
| Chuanlong Lin | ||
| Shengling Xiang | ||
| Lingyi Kong | ||
| Chunhua Xiang |
2) Related party balances
| Accounts | Name of related parties | June 30, 2024 | December 31, 2023 | |||||||
| Due to related party | Lingyi Kong | ( | ) | ( | ) | |||||
| Wenzhou Ailefu Technology Co. Ltd. | ( | ) | ||||||||
| Total due to related parties | $ | ( | ) | $ | ( | ) | ||||
NOTE 20 – SHAREHOLDERS’ EQUITY
Ordinary shares
The Company is authorized to issue
Holders of Class A Ordinary Shares and Class B
Ordinary Shares shall at all times vote together as one class on all resolutions submitted to a vote by the Members.
F-19
Initial Public Offering
On December 14, 2022, the Company consummated
its initial public offering (“IPO”) of
Private Placement
On May 20, 2024, the Company entered into securities
purchase agreements (the “Securities Purchase Agreements”) with certain purchasers (“Purchasers”) in connection
with the issuance and sale (the “Private Placement”) of (i) an aggregate of
Statutory Reserve
The Company’s PRC subsidiaries are required
to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based
on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations
to the statutory surplus reserve are required to be at least
Under PRC laws and regulations, paid in capital, additional paid in capital, and statutory surplus reserves are restricted to set-off against losses, expansion of production and operation and increasing registered capital of the respective company and are not distributable other than upon liquidation. The reserves are not allowed to be transferred to the Company in terms of cash dividends, loans or advances, nor allowed for distribution except under liquidation.
NOTE 21 – COMMITMENTS AND CONTINGENCIES
As of June 30, 2024 and December 31, 2023, the
Company had
From time to time, the Company is involved in
various legal proceedings, claims and other disputes arising from commercial operations, employees, and other matters which, in general,
are subject to uncertainties and in which the outcomes are not predictable. The Company determines whether an estimated loss from a contingency
should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. Although the Company can give no assurances
about the resolution of pending claims, litigation or other disputes and the effect such outcomes may have on the Company, the Company
believes that any ultimate liability resulting from the outcome of such proceedings to the extent not otherwise provided or covered by
insurance, will not have a material adverse effect on our consolidated financial position or results of operations or liquidity. As of
June 30, 2024 and December 31, 2023, the Company had
F-20