Rubber Leaf Inc 10-Q for FY2023 Q3
Rubber Leaf Inc (RLEA)
About this 10-Q
Rubber Leaf Inc filed this 10-Q on November 13, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.81M
- down 7.3% from $1.95M a year earlier
- Net loss
- $360.92K
- compared with net income of $11.99K a year earlier
- Diluted EPS
- -$0.01
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
or
For the transition period from ______ to ______
Commission
File Number
(Exact name of registrant as specified in its charter)
| (State or Other Jurisdiction | (I.R.S. Employer | |
| of Incorporation or Organization) | Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Not applicable | Not applicable | Not applicable |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☐ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 13, 2023, the registrant had shares of common stock outstanding.
TABLE OF CONTENTS
| 2 |
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section entitled “Risk Factors”, beginning on page 6 of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities & Exchange Commission (“SEC”) on March 31, 2023. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Unless expressly indicated or the context requires otherwise, the terms “RLI,” “Company,” “we,” “us,” and “our” in this document refer to Rubber Leaf Inc, a Nevada corporation.
| 3 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RUBBER LEAF INC
INDEX TO FINANCIAL STATEMENTS
| 4 |
RUBBER LEAF INC
CONSOLIDATED BALANCE SHEETS
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivables | ||||||||
| Accounts receivables – related parties | ||||||||
| Accounts receivables | ||||||||
| Advances to vendors | ||||||||
| Advances to vendors and other receivable- related parties | ||||||||
| Advances to vendors | ||||||||
| Inventories | ||||||||
| Deposit to vendor - related party | ||||||||
| Other current assets | ||||||||
| Total current asset | ||||||||
| Noncurrent assets: | ||||||||
| Plant and equipment, net | ||||||||
| Intangible asset, net | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES | ||||||||
| Current liabilities: | ||||||||
| Borrowings | $ | $ | ||||||
| Borrowings– related party | ||||||||
| Borrowings | ||||||||
| Accounts payables | ||||||||
| Accounts payables – related parties | ||||||||
| Accounts payables | ||||||||
| Notes payable | ||||||||
| Other payable - related party | ||||||||
| Advances from customers | ||||||||
| Retainage payable | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitment and Contingencies | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock: shares authorized, shares issued and outstanding | ||||||||
| Common stock: shares authorized, shares and shares issued and outstanding as of September 30, 2023 and December 31, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
RUBBER LEAF INC
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Sales-related parties | ||||||||||||||||
| Total | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Gross (loss) profit | ( | ) | ||||||||||||||
| Operating Expenses | ||||||||||||||||
| Selling expenses | ||||||||||||||||
| General & administrative expenses | ||||||||||||||||
| Total operation expenses | ||||||||||||||||
| (Loss) income from operation | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense), net | ( | ) | ( | ) | ||||||||||||
| Total other expenses, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) income before income taxes | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Income tax expenses (benefit) | ( | ) | ||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Foreign currency translation, net of tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Earnings per share | ||||||||||||||||
| Basic and diluted loss per share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average common shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 6 |
RUBBER LEAF INC
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Shares | Amount | Shares | Amount | Capital | Deficit) | income (loss) | (Deficit) | |||||||||||||||||||||||||
| Preferred Stocks | Common Stocks | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ Equity | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | income (loss) | (Deficit) | |||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Foreign currency translation, net tax | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2022 (Unaudited) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Preferred Stocks | Common Stocks | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ Equity | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | income (loss) | (Deficit) | |||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Issue of Shares | ||||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Foreign currency translation, net tax | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance at September 30, 2023 (Unaudited) | ( | ) | ||||||||||||||||||||||||||||||
| Balance | ( | ) | ||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 7 |
RUBBER LEAF INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2023 | 2022 | |||||||
For the nine months ended September 30 | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| Cash flow from operating activities | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Account receivables | ( | ) | ||||||
| Account receivables – related parties | ( | ) | ||||||
| Advances to vendors - related party | ( | ) | ||||||
| Advance to vendors | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Inventories | ( | ) | ( | ) | ||||
| Right-use-of asset | ( | ) | ||||||
| Notes payables | ( | ) | ||||||
| Account payables | ||||||||
| Accounts payable - related parties | ( | ) | ||||||
| Advances from customers | ||||||||
| Retainage payable | ( | ) | ( | ) | ||||
| Other current liabilities | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Cash flow from investing activities | ||||||||
| Loan receivable | ( | ) | ||||||
| Purchase of equipment and factory construction | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flow from financing activities | ||||||||
| Share issuance for cash | ||||||||
| Proceeds from related parties | ||||||||
| New borrowings | ||||||||
| Repayments of borrowings-related party | ( | ) | ||||||
| Repayments of borrowings | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes | ( | ) | ( | ) | ||||
| (Decrease) increase in cash | ( | ) | ||||||
| Cash and restricted cash, beginning | ||||||||
| Cash and restricted cash, ending | $ | |||||||
| Supplemental disclosures of cash flow | ||||||||
| Interest paid | $ | |||||||
| Income taxes paid | $ | |||||||
| Noncash investing and financing activities: | ||||||||
| Construction in progress additions | $ | |||||||
The accompanying notes are an integral part of these consolidated unaudited consolidated financial statements.
| 8 |
RUBBER LEAF INC
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
Note 1 - Organization and Description of Business
Rubber
Leaf Sealing Products (Zhejiang) Co., Ltd. (the “RLSP”) was established on July 8, 2019, and is located in Fenghua
District, Ningbo, Zhejiang province, the People’s Republic of China (“PRC”). It is engaged in the import and
export trade, production and sales of synthetic rubber, rubber compound, car window seals, auto parts, etc. of integrated group
companies. It has an integrated machinery production plant on PRC. RLSP, a well-known auto parts enterprise, is a first-tier
supplier of well-known auto brands such as Dongfeng Motor and French Renault. RLSP has a registered capital of $
Rubber Leaf Inc (the “Company” or “RLI”) was incorporated under the law of the State of Nevada on May 18, 2021 by Ms. Xingxiu Hua, the sole shareholder of RLSP. On May 27, 2021, the Company entered a share exchange agreement with Ms. Hua, pursuant to which, the Company issued shares of common stock to exchange for all of RLSP’s shares. No change of control of RLSP resulted from the execution of the share exchange agreement.
Note 2 – Going concern
The
accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States
(“GAAP”), which contemplate continuation of the Company as a going concern. The Company currently has a net loss of $(
Note 3 - Summary of Significant Accounting Policies
Basis of Presentation
This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements. These accounting policies conform to accounting principles, generally accepted in the United States of America, and have been consistently applied in the preparation of the financial statements. With respect to the unaudited financial statements as of and for the nine months ended September 30, 2023, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ended December 31, 2023.
The consolidated financial statements include the accounts of Rubber Leaf Inc, the parent company and its wholly owned subsidiary in China - Rubber Leaf Sealing Products (Zhejiang) Co., Ltd. All intercompany transactions and balances were eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates. Signiant estimates are used in the collectability of accounts receivable, the useful lives and impairment of property and equipment, the valuation of deferred tax assets, inventories reserve and provisions for income taxes, among others.
| 9 |
Revenue Recognition
The Company adopted Accounting Standards Update (“ASU”) 2014-09, Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606) since July 2019. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company applies the five-step model to sales contracts.
The Company’s revenue is mainly generated from selling synthetic rubber, rubber compound, car window seals, auto parts under two models of supply. The Company has disaggregated revenue at the sales channels through direct supply model and indirect supply model.
Model A: Direct supply model. Upon passing the on-site inspections of automobile Original Equipment Manufacturers (the “OEMs”), RLSP is listed at the OEMs’ directories being one of their first-tier suppliers who will purchase raw materials, produce final products independently, and deliver finished products to the OEMs’ warehouses directly. RLSP satisfies its performance obligation when its finished products are delivered to the OEMs’ warehouses and a follow-up quality inspection is accepted by the OEMs. Meanwhile, the OEMs will also request product replacement for disqualified products. The ownership and control of our finished products are transferred to our customers as soon as the products pass the inspection and acceptance into the warehouses of the OEMs. Our revenue will be recognized once the control of our products has been transferred to our customers, and the payments will be paid by the OEMs directly.
Model B: Indirect supply model. RLSP received the purchase orders from our
related parties-Shanghai Xinsen Import & Export Co., Ltd (“Shanghai Xinsen”) and Xinsen Sealing Products (Hangzhou) Co.,
Ltd (“Hangzhou Xinsen”) (collectively named as “Xinsen Group” for two companies together). The Company’s
President, Ms. Xingxiu Hua, holds
| 1) | RLSP purchases raw materials and subcontracts the third-party manufacturers to produce WIP. Once WIP is finished and delivered to RLSP’s warehouse, RLSP performs some manual processes, such as welding and constructing in order to meet the specification of the purchase orders, the final products are concluded after strict quality inspection. | |
| 2) | RLSP purchases raw materials and subcontracts third party manufacturers to produce finished products. RLSP will perform the responsibilities to trace and observe each step of production from the third-party manufacturers. |
The finished products will be delivered to the first-tier suppliers’ warehouses, the downstream customers of Xinsen Group either from RLSP or third-party manufacturers’ locations. Xinsen Group will assign inspectors and perform quality inspections when the finished products are delivered. RLSP satisfies its performance obligation when the finished products are delivered to Xinsen Group’s customers and the quality inspection is qualified performed by Xinsen Group. Meanwhile, Xinsen Group will also request product replacement for disqualified products. Once the quality and quantity are confirmed and finished products are acceptable into the warehouses of Xinsen Group’s customers, receiving notes will be provided by Xinsen Group’s customers, then to RLSP as proof of delivery. The date of receiving notes signed is the time that RLSP transfers ownership and control of the finished products under model B to Xinsen Group then indirectly to the first-tier suppliers. RLSP recognizes revenue on the dates when receiving notes are signed by Xinsen Group’s customers.
Under both supply models, payment of products is generally made within a 30-day term upon receiving notes signed by our customers. Extended payment terms are provided on a limited basis not to exceed two months. After the customer receives the finished products, if the customer finds quality problems before installing them to the vehicles, the customer is able to inform RLSP and request replacement for the same type products. RLSP does not offer warranty assurance to our customers due to the characteristics of our products.
| 10 |
Cost of revenue
Cost of revenues is comprised of raw materials consumed, manufacturing costs, third party logistics and distribution costs including packaging, freight, transportation, shipping and handling costs, and inventory adjustment due to the defectives and inventory count.
Cash and Cash Equivalents
Cash and cash equivalents include bank deposits and liquid investments with original maturities of three months or less as of the purchase date of such investments.
Restricted cash
The Company had notes payable outstanding with Ningbo bank and was required to keep certain amounts on deposit that were subject to withdrawal restrictions. The notes payable is generally short term in nature due to its maturity period of six months or less, thus restricted cash was classified as a current asset.
Concentration risk
The
Company maintains cash with banks in the United States of America (“USA”) and PRC. Should any bank holding cash become insolvent,
or if the Company is otherwise unable to withdraw funds, the Company would lose the cash with that bank; however, the Company has not
experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. In China,
a depositor has up to RMB
Financial
instruments that potentially subject the Company to significant concentrations of credit risk are cash and cash equivalents and accounts
receivable. As of September 30, 2023 and December 31, 2022, $ and $
Major customers
For the nine months ended September 30, 2023 and 2022, as well as three months ended September 30, 2023 and 2022 the Company’s revenues from two major customers accounted more than 10% of the total revenue were as following:
Schedule of Concentration Risk Percent
| Nine months ended September 30, 2023 | Three months ended September 2023 | Nine months ended September 30, 2022 | Three months ended September 30, 2022 | |||||||||||||||||||||||||||||
| Amount | % of Total Revenue | Amount | % of Total Revenue | Amount | % of Total Revenue | Amount | % of Total Revenue | |||||||||||||||||||||||||
| Customer B | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
| Customer A | $ | % | % | $ | % | $ | % | |||||||||||||||||||||||||
| As of September 30, 2023 | As of September 30, 2022 | |||||||||||||||
| Accounts Receivable | % of Total Accounts Receivable | Accounts Receivable | % of Total Accounts Receivable | |||||||||||||
| Customer B | $ | % | $ | % | ||||||||||||
| Customer A | $ | -% | $ | -% | ||||||||||||
| ● | Customer A: eGT New Energy Automotive Co., Ltd. (“eGT”), an unrelated party. |
| ● | Customer B: Shanghai Xinsen Import & Export Co., Ltd (“Shanghai Xinsen”), a related party that sells RLSP’s products to Shanghai Hongyang Sealing Co., Ltd. (“Shanghai Hongyang”) and Wuhu Huichi Auto Parts Co., Ltd. (“Wuhu Huichi”), two unrelated parties of RLSP and the Company, and certified first-tier suppliers of Auto Manufacturers. |
| 11 |
Major vendors
For the nine months ended September 30, 2023 and 2022, as well as three months ended September 30, 2023 and 2022, the Company made purchases from the major vendors accounted more than 10% of the total purchases were as following:
Nine months ended September 30, 2023 | Three months ended September 30, 2023 | Nine months ended September 30, 2022 | Three months ended September 30, 2022 | |||||||||||||||||||||||||||||
| Amount | % of Total Purchase | Amount | % of Total Purchase | Amount | % of Total Purchase | Amount | % of Total Purchase | |||||||||||||||||||||||||
| Vendor A | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
| Vendor B | $ | -% | $ | -% | $ | % | $ | -% | ||||||||||||||||||||||||
| Vendor C | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
As of September 30, 2023 | As of September 30, 2022 | |||||||||||||||
| Accounts payable | % of Total Accounts Payable | Accounts payable | % of Total Accounts Payable | |||||||||||||
| Vendor A | $ | % | $ | % | ||||||||||||
| Vendor B | $ | % | $ | % | ||||||||||||
| Vendor C | $ | -% | $ | -% | ||||||||||||
| ● | Vendor A: Shanghai Haozong Rubber & Plastic Technology Co., Ltd. (“Shanghai Haozong”), a related party. |
| ● | Vendor B: Shanghai Huaxin Economic and Trade Co., Ltd. (“Shanghai Huaxin”), a related party, purchase amounts and accounts payable balances include retainage payables. |
| ● | Vendor C: Shanghai Yongliansen Import and Export Trading Company (“Yongliansen”), a related party. |
Accounts Receivable
Accounts receivables are reported at their net realizable value. Any value adjustments are booked directly against the relevant receivable. We have standard payment terms that generally require payment within approximately 30 to 60 days. Management performs ongoing credit evaluations of its customers. An allowance for potentially uncollectible accounts is provided based on history, economic conditions, and composition of the accounts receivable started from January 1, 2023, the first date the Company adopted ASC 2016-13. As of September 30, 2023 and December 31, 2022 no credit risk identified by the management and no allowance for doubtful accounts deemed necessary.
Inventories
Inventories consist of raw materials and finished products, and are stated at the lower of cost or net realizable value. Cost is calculated by applying the weighted -average method and physically applied first-in-first-out method (FIFO) in inventory stock in and out. The Company regularly reviews inventory quantities on hand and writes down to its net realizable value any inventory that it believes to be impaired. Management considers forecast demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments. Once inventory is written down and a new cost basis is established, it is not written back up if demand increases.
Advances to vendors
From time to time, we paid advances to our vendors in order to secure our purchase orders or as retainers required pursuant to various purchase agreements related to production and the 2nd production lines currently under construction. The advances have no interest bearing, normally settled along with purchase transactions within 60 to 180 days depending on market condition, and around 365 days for construction projects and/or equipment purchase.
Property and equipment
Property and equipment are initially recorded at their historical cost. Repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method over the following estimated useful lives of the depreciable assets:
| ● | Land
use rights: | |
| ● | Leasehold improvement: | |
| ● | Factory
equipment: | |
| ● | Auto
vehicles: | |
| ● | Office
equipment and furniture: |
| 12 |
Construction in progress (“CIP”) includes pre-construction costs, construction costs, interest incurred on financing, amortization of land use right during the construction period, insurance and overhead costs related to construction. Interest of borrowings specific for the construction project and amortization of land use rights are capitalized under CIP when development activities commence, and end when the qualifying assets are ready for their intended use.
Intangible Assets
All
land in the PRC is owned by the PRC government and cannot be sold to any individual or company. The Company has recorded the amounts
paid to the PRC government when acquired long-term interests of land use rights under intangible assets. This type of arrangement is
common for the use of land in the PRC. The Company amortizes land use rights based on the term of the respective land use rights granted,
which generally ranges from
Notes payable
Short-term notes payable are lines of credit extended by banks. The banks in-turn issue the Company a bankers acceptance notes, which can be endorsed and assigned to vendors as payments for purchases. These short-term notes payable bear no interest and is guaranteed by the bank for its complete face value and usually matures within three to six-month period. The banks usually require the Company to deposit a certain amount of cash at the bank as a guaranteed deposit, which is classified on the balance sheet as restricted cash.
As
of September 30, 2023 and December 31, 2022, RLSP held $ and $
Advances from customers
From time to time, we receive advances from our customers, which are made normally under sales frame contracts, each sales transaction will be initiated by purchase orders received under the frame contracts. The advances have no interest bearing, normally settled along with purchase/sales transactions within 60 to180 days.
Retainage Payables
| 13 |
Income Taxes
We are governed by the Income Tax Law of the PRC and the United States. The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
The
2017 Tax Reform Act permanently reduces the U.S. corporate income tax rate to a
Value added tax
The
Company is subject to value added tax (“VAT”). The applicable VAT rate is
The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.
Pursuant to ASC 260-10-55, EPS computations should be based on the facts and circumstances of the transaction for reorganization. The Company calculated its EPS retrospectively akin to a normal share issuance as if the reorganization incurred from the inception.
The Company does not have any potentially dilutive instruments as of September 30, 2023 and December 31, 2022, and, thus, anti-dilution issues are not applicable.
Fair Value of Financial Instruments
The Company’s balance sheets include certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
| ● | Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
| 14 |
| ● | Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |
| ● | Level 3 - Inputs that are both significant to the fair value measurement and unobservable. |
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2023 and December 31, 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalent, restricted cash, accounts receivable, advances to vendors, inventories, other current assets, accounts payables, advances from customers and other current liabilities. For short term borrowings and notes payable, the Company concluded the carrying values are a reasonable estimate of fair values because of the short period of time between the origination and repayment and as their stated interest rates approximate current rates available.
Operating Leases
The Company adopted ASC 842 since its inception. The Company determines if an arrangement is or contains a lease at inception. Operating leases with lease terms of more than 12 months are included in operating lease assets, accrued and other current liabilities, and long-term operating lease liabilities on its consolidated balance sheet. Operating lease assets represent its right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments over the lease term. Operating lease assets and liabilities are recognized based on the present value of the remaining lease payments discounted using its incremental borrowing rate. Lease expense is recognized on a straight-line basis over the lease term.
Related Parties
Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence. The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions.
Foreign Currency
Amounts reported in the condensed consolidated financial statements are stated in United States dollars, unless stated otherwise. The Company’s subsidiary in the PRC use the Chinese renminbi (RMB) as their functional currency and the holding company - RLI uses the United States dollar as their functional currency. For subsidiaries that use the local currency as the functional currency, all assets and liabilities are translated to United States dollars using exchange rates in effect at the end of the respective periods and the results of operations have been translated into United States dollars at the weighted average rates during the periods the transactions were recognized. Resulting translation gains or losses are recognized as a component of other comprehensive income (loss).
In accordance with ASC 830, Foreign Currency Matters (ASC 830), the Company translates the assets and liabilities into United States dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from RMB into United States dollar are recorded in stockholders’ equity as part of accumulated other comprehensive income. Further, foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. Gains and losses on those foreign currency transactions are included in other income (expense), net for the period in which exchange rates change.
| 15 |
Comprehensive Income (Loss)
The Company accounts for comprehensive income (loss) in accordance with ASC 220, Income Statement-Reporting Comprehensive Income (ASC 220). Under ASC 220, the Company is required to report comprehensive income (loss), which includes net income (loss) as well as other comprehensive income (loss). The only significant component of accumulated other comprehensive income (loss) as of September 30, 2023 and December 31, 2022 is the currency translation adjustment.
Segment Information
Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the executive team, which is comprised of the chief executive officer and the chief financial officer. Based on the financial information presented to and reviewed by the chief operating decision maker in deciding how to allocate the resources and in assessing the performance, the Company has determined that it has two operating and reporting segments based on sales channels – direct supply and indirect supply as of September 30, 2023 and December 31, 2022 and for three and six months ended.
Adoption of New Accounting Standards
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses”. The standard, including subsequently issued amendments (ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10 and ASU 2019-11), requires a financial asset measured at amortized cost basis, such as accounts receivable and certain other financial assets, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company adopted ASU No. 2016-13 effective on January 1, 2023. Adoption of the new standard did not have impact on the Company’s consolidated financial statements or financial disclosure since all accounts receivable as of January 1, 2023 were due from Xinsen Group, which were deemed no credit loss issue.
Accounting Standards Issued but Not Yet Adopted
ASUs issued but not yet adopted were assessed and determined to be not applicable or are not expected to have a material impact on our consolidated financial statements or financial statement disclosures.
Note 4 – Inventories
Inventories consisted of raw rubber materials, finished goods of rubber products and others, and are stated at the lower of cost or net realizable value. As of September 30, 2023 and December 31, 2022, inventories consisted of the following:
Schedule of Inventories
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
| 16 |
Note 5 - Plant and equipment, net
Schedule of Plant and Equipment
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| Equipment and machinery | $ | $ | ||||||
| Furniture and office equipment | ||||||||
| Auto vehicles | ||||||||
| Leasehold improvement | ||||||||
| Minus: Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Plant and equipment, net | ||||||||
| Construction in progress | ||||||||
| Property plant and equipment, net | $ | $ | ||||||
Upon
the right use of land obtained, RLSP started to build the manufacture plant on the land. The Company capitalized the cost in related
to the construction, including the interests related to the borrowings, the utilities occurred in the construction, the amortization
of land use of right. On September 17, 2020, RLSP entered into a construction contract with Ningbo Rongsen to build up the
manufacture plant including a new production line for which the annual production capacity will be up to four million set of
automotive seals. The budget of the project is around $
For the equipment used for manufacturing, the depreciation expense is included as part of manufacturing overhead, while the equipment used for general administrative are included in selling, general and administrative expense on the statements of operations.
For
the nine months ended September 30, 2023 and 2022, the depreciation and amortization expenses were $
Note 6 - Intangible asset, net
On
October 21, 2020, RLSP purchased land use rights, for
Intangible asset, net consists of the following:
Schedule of Intangible Asset
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | ||||||||
| Land use rights | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Intangible asset, net | ||||||||
For
the nine months ended September 30, 2023 and 2022, $
| 17 |
Note 7 - Borrowings
On
November 30, 2020, RLSP entered a one-year bank loan of $
On April 30, 2021, RLSP borrowed $ (RMB million) short-term loan from an unrelated entity guaranteed by an individual person. The loan has a monthly interest rate of % with the due date on June 15, 2021. . On November 10, 2021, RLSP extended the maturity date of the loan till April 30, 2022 with the other loan terms remain the same and the two parties have verbally agreed to extend the due date to December 31, 2023. As of September 30, 2023 and December 31, 2022, the loan balances were $ (RMB million) and $ (RMB million), respectively.
On
September 1, 2021, RLSP borrowed $ (RMB million) short-term loan from an unrelated individual. The loan has an annual interest
rate of % with due date on August 31, 2022. RLSP has had several round financing transactions with the individual since then. As of
September 30, 2023 and December 31, 2022, the individual loan balances were $ (RMB million) and $ (RMB million)
respectively. Out of $ loan balance, RMB loan was extended its maturity date to
On September 1, 2021, RLSP borrowed $(RMB million) short-term loan from an officer of RLSP. The loan has an annual interest rate of % with due date on August 31, 2022. RLSP repaid $ and $ back during 2022 and 2021, respectively. For the nine months ended September 30, 2023, RLSP borrowed an additional $ (RMB million) from the officer. As of September 30, 2023 and December 31, 2022, the loan balances were $ (RMB million) and $ (RMB million), respectively. The loan was extended to December 31, 2023 on March 11, 2023 and the officer has waived loan interest since September 2022.
On
November 30, 2021, RLSP borrowed $
On
March 2022, RLSP borrowed $
On
November 18, 2022, RLSP entered a one-year bank loan of $
On September 14, 2023, RLSP borrowed $ (RMB million) a short-term loan from unrelated individual. The loan bears no interest and has its maturity date of . RLSP repaid back $ (RMB million) during September 2023. The loan balance was $ (RMB million) as of September 30, 2023.
Interest
expense primarily consists of the interest incurred on the bank loans, commercial & individual loans and minor bank service charges.
For nine months ended September 30, 2023 and 2022, the Company recorded the interest expense of $
| 18 |
Note 8 – Related Party Transactions
Purchase
In
order to reduce the purchase cost and enhance the purchase power, the Company purchases the main raw materials from Yongliansen Import
and Export Trading Company (“Yongliansen”) and Shanghai Haozong Rubber & Plastic Technology Co., Ltd. (“Shanghai
Haozong”), and also purchases equipment and rubber products under indirect supply model from Shanghai Huaxin Economic and Trade
Co., Ltd. (“Shanghai Huaxin”) during the nine months ended September 30, 2023 and 2022. The Company’s founder holds
minor equity interests of the three suppliers directly or indirectly and one of the Company directors, Mr. Jun Tong, holds
For nine months ended September 30 2023 and 2022, the Company purchased raw materials from Yongliansen (“Vendor C”) in the total amount of $ and $, respectively. For the three months ended September 30, 2023 and 2022, the total purchase amounts from Yongliansen were $ and $, respectively. As of September 30, 2023 and December 31, 2022, the Company advanced Yongliansen $ and $, respectively, mainly for raw material purchases. On November 30, 2020, RLSP advanced RMB million or $ as a deposit (the “Deposit”) to Yongliansen in order to lock-down our premium customer position among all customers of Yongliansen and maintain a long-term business relationship. The Deposit bears no interest and is due on demand. Due to less procurement of raw materials made from Yongliansen in 2022, RLSP requested Yongliansen to refund the Deposit, and Yongliansen agreed to fully refund RLSP by December 31, 2022. On December 15, 2022, RLSP and Yongliansen entered into a Payment Agreement, among which Yongliansen requested to extend the repayment date of the Deposit to September 30, 2023, and RLSP has agreed to grant such extension request.
For nine months ended September 30, 2023 and 2022, the Company purchased $ and $ rubber products from Shanghai Haozong (“Vendor A”), respectively, and purchased $ and $ rubber products from Shanghai Haozong for the three months ended September 30, 2023 and 2022, respectively. As of September 30, 2023 and December 31, 2022, $ and $ accounts payable due to Shanghai Haozong, respectively.
For nine months ended September 30, 2023 and 2022, RLSP purchased $ and $ rubber products and equipment from Shanghai Huaxin (“Vendor B”), respectively, and purchased $ and $ for the three months ended September 30, 2023 and 2022, respectively. As of September 30, 2023 and December 31, 2022, $ and $ payable were due to Shanghai Huaxin, respectively, including $ and $ retainage payable, respectively.
On
December 25, 2021, RLSP signed a Payment Extension Agreement with Shanghai Huaxin regarding outstanding account payable balance, which
was amended on August 14, 2022. Under the amended Payment Extension Agreement, RLSP and Shanghai Huaxin both agreed that the $
Sales under Indirect Supply Model
In
order to stabilize customer relationships and maintain long-term orders, we authorized two related parties - Shanghai Xinsen (“Customer
B”) and Hangzhou Xinsen (“Customer C”) as our distributors. The Company’s President, Ms. Xingxiu Hua, held
For
nine months ended September 30, 2023 and 2022, RLSP had indirect sales through Xinsen Group that were sold to two certified first-tier
suppliers of the Auto Manufacturers $
Others
As
of September 30, 2023 and December 31, 2022, the Company’s founder and officer funded the Company and RLSP in the total amount
of $
| 19 |
Note 9 – Shareholder’s Equity
From
May to July 2023, the Company issued shares of common stocks at $ per share pursuant to private placements to ten individuals
for cash. The total $
Note 10 – Commitment and Contingencies
On
February 7, 2021, the landlord of the factory leased by RLSP filed a lawsuit against RLSP for default on lease payment pursuant to the
lease agreement entered on November 11, 2019. The case was settled under the court mediation and a civil settlement was issued on April
20, 2021, pursuant to which, RLSP should pay the total unpaid balance of $
On
July 5, 2022, Guangzhou FuRuiDe Metal Processing Machinery Manufacturing Co., Ltd. (“GFMP”) and RLSP entered into a settlement
agreement regarding the dispute about the molds produced by GFMP. GFMP manufactured five pairs of molds for RLSP for the total purchase
amount of RMB
On
September 17, 2020, RLSP entered into a construction contract with Ningbo Rongsen to build up a manufacturing factor and a new production
line for which the annual production will be up to four million set of automotive seals. The budget of the project is around $
Note 11 - Income Taxes
The
Company, RLI is a Nevada company and subject to the United States federal income tax at a tax rate of
For
the nine months ended September 30, 2023 and 2022, the provision for income taxes was $
The table below summarizes the difference between the U.S. statutory federal tax rate and the Company’s effective tax rate for nine months ended September 30, 2023 and 2022:
Schedule of Federal Effective Tax Rate
| 2023 | 2022 | |||||||
Nine months ended September | ||||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| U.S. federal income tax rate | % | % | ||||||
| Tax rate difference | % | % | ||||||
| Tax except | % | % | ||||||
| Nontaxable items | ( | )% | % | |||||
| GILTI tax | % | % | ||||||
| Others | % | % | ||||||
| Valuation allowance | ( | )% | ( | )% | ||||
| Effective tax rate | ( | )% | % | |||||
For U.S. income tax purposes, the Company has no cumulative undistributed earnings of foreign subsidiary as of September 30, 2023 after acquired RLSP on May 27, 2021. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if we concluded that such earnings will be remitted to the U.S. in the future.
In addition, the 2017 Tax Act also creates a new requirement that certain income (i.e., Global Intangible Low-Taxed Income (“GILTI”)) earned by controlled foreign corporations (“CFCs”) must be included currently in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess of the shareholder’s net CFC tested income over the net deemed tangible income return, which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income. The Company has elected to recognize the tax on GILTI as a period expense in the period the tax is incurred. For the nine months ended September 30, 2023 and 2022
ASC 740 requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The management evaluated the Company’s tax positions and considered that no provision for uncertainty in income taxes was necessary as of September 30, 2023.
| 20 |
Note 12 - Segment Reporting
We realize revenue primarily through the sale of synthetic rubber, rubber compound, car window seals, auto parts with two sales channels. The Company managed and reviewed its business as two operating and reporting segments: direct supply and indirect supply models.
The business line distribution of the Company’s information as of and for nine months as well as three months ended September 30, 2023 and 2022 as following:
Schedule of Business Line Distribution
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| For the nine months ended September 30, | For the three months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenue: | ||||||||||||||||
| Direct supply model | $ | $ | $ | |||||||||||||
| Indirect supply model | ||||||||||||||||
| Total | ||||||||||||||||
| Revenue | ||||||||||||||||
| Gross profit: | ||||||||||||||||
| Direct supply model | % | % | ( | )% | % | |||||||||||
| Indirect supply model | ( | )% | ( | )% | ( | )% | ( | )% | ||||||||
| Total | % | % | ( | )% | % | |||||||||||
| Gross profit | % | % | ( | )% | % | |||||||||||
| Income(loss) from operations: | ||||||||||||||||
| Direct supply model | ( | ) | ( | ) | ||||||||||||
| Indirect supply model | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Corporate | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | ( | ) | ( | ) | ( | ) | ||||||||||
| Income(loss) from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income(loss) | ||||||||||||||||
| Direct supply model | ( | ) | ( | ) | ||||||||||||
| Indirect supply model | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Corporate | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Net income(loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| September 30, 2023 | December 31, 2022 | |||||||
| Reportable assets | ||||||||
| Direct supply model | $ | $ | ||||||
| Indirect supply model | ||||||||
| Corporate | ||||||||
| Reportable assets | ||||||||
All long-term assets are managed under a direct supply model by the chief operating decision maker.
Note 13 - Subsequent Events
The Company has evaluated all subsequent events through the date these condensed financial statements were issued and determine that there were no subsequent events or transactions that require recognition or disclosures in the condensed financial statements.
| 21 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.
This Quarterly Report on Form 10-Q contains forward-looking statements, particularly those identified with the words, “anticipates,” “believes,” “expects,” “plans,” “intends,” “objectives,” and similar expressions. These statements reflect management’s best judgment based on factors known at the time of such statements. The reader may find discussions containing such forward-looking statements in the material set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as elsewhere in this Quarterly Report on Form 10-Q. Actual events or results may differ materially from those discussed herein. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guarantee, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.
Overview
Rubber Leaf Inc (“the Company”) was incorporated under the laws of the State of Nevada on May 18, 2021. It acquired Rubber Leaf Sealing Products (Zhejiang) Co., Ltd. (“RLSP”) on May 27, 2021, through a Share Exchange Agreement between the Company and Xingxiu Hua, the President of the Company and who owned all of the issued and outstanding shares of RLSP. After the acquisition, RLSP became a 100% directly controlled subsidiary of the Company. Currently, all of the Company’s business is conducted through RLSP, our Wholly Foreign-Owned Enterprise (the “WOFE”) in China. RLSP was established in Fenghua, Ningo, China and commenced operations in July 2019. RLSP was the wholly-owned subsidiary of Rubber Leaf LLC, a Delaware company organized on June 1, 2018, and Ms. Xingxiu Hua was the sole member of Rubber Leaf LLC. RLSP’s main business areas include import and export trade, production and sales of synthetic rubber, rubber compound, car window seals, auto parts and etc. We are a well-known auto parts enterprise, and we are also the first-tier supplier of well-known auto brands such as eGT New Energy Automotive Co., Ltd. (“eGT”), Dongfeng Motor Corporation (“Dongfeng”), French Renault and Volkswagen.
The Company’s principal business address is Qixing Road, Weng’ao Industrial Zone, Chunhu Subdistrict, Fenghua District Ningbo, Zhejiang, China.
Components of Our Results of Operations
Sales Revenue
The Company generate revenue through selling the synthetic rubber, rubber compound, car window seals, auto parts. Sales revenue under two models of supply:
Model A: Direct supply model. Upon passing the on-site inspections of automobile Original Equipment Manufacturers (the “OEMs”), RLSP is listed at the OEMs’ directories being one of their first-tier suppliers who will purchase raw materials, produce final products independently, and deliver finished products to the OEMs’ warehouses directly. RLSP satisfies its performance obligation when its finished products are delivered to the OEMs’ warehouses and a follow-up quality inspection is accepted by the OEMs. Meanwhile, the OEMs will also request product replacement for disqualified products. The ownership and control of our finished products are transferred to our customers as soon as the products passed the inspection and acceptance into the warehouses of the OEMs. Our revenue will be recognized once the control of our products has been transferred to our customers, and the payments will be paid by the OEMs directly.
| 22 |
Model B: Indirect supply model. RLSP received the purchase orders from our related parties-Shanghai Xinsen Import & Export Co., Ltd (“Shanghai Xinsen”) and Xinsen Sealing Products (Hangzhou) Co., Ltd (“Hangzhou Xinsen”) (collectively named as “Xinsen Group” for two companies together). The Company’s President, Ms. Xingxiu Hua, holds 90% ownership of Shanghai Xinsen and Shanghai Xinsen holds 70% ownership of Hangzhou Xinsen, or Ms. Hua owns 63% ownership of Hangzhou Xinsen, respectively. Effective on October 1, 2022, Ms. Hua reduced her ownership of Shanghai Xinsen from 90% to 15%, and so accordingly reduced her indirect ownership of Hangzhou Xinsen from 63% to 10.5%. Under the indirect supply model, RLSP also received one single purchaser order from a new unrelated party of the Company, Shanghai Huafu Chemical Technological Co., Ltd (“Huafu”), in September 2023. Branded Automobile Manufacturers (the “Auto Manufacturers”) send a lump sum purchase orders of the whole vehicle rubber and plastic auto parts of one model to their first-tier suppliers, who then subcontract rubber and plastic seals to Xinsen Group. Xinsen Group is a certified second-tier supplier of Auto Manufacturers who then subcontracts some products that they do not have capability to manufacture to RLSP. Once purchase orders are received, RLSP will purchase rubber materials from our venders and outsourced the purchase orders to third party manufacturer for work-in-process products (“WIP”) or finished products in its entirely based on management’s decision under the operating circumstances. RLSP has two forms of outsourced processing under Model B:
| 1) | RLSP purchases raw materials and subcontracts the third-party manufacturers to produce WIP. Once WIP is finished and delivered to RLSP’s warehouse, RLSP performs some manual processes, such as welding and constructing in order to meet the specification of the purchase orders, the final products are concluded after strict quality inspection. | |
| 2) | RLSP purchases raw materials and subcontracts third party manufacturers to produce finished products. RLSP will perform the responsibilities to trace and observe each step of production from the third-party manufacturers. |
The finished products will be delivered to the first-tier suppliers’ warehouses, the downstream customers of Xinsen Group either from RLSP or third-party manufacturers’ locations. Xinsen Group will assign inspectors and perform quality inspection when the finished products are delivered. RLSP satisfies its performance obligation when the finished products are delivered to Xinsen Group’s customers and the quality inspection is qualified performed by Xinsen Group. Meanwhile, Xinsen Group will also request product replacement for disqualified products. Once the quality and quantity are confirmed and finished products are acceptable into the warehouses of Xinsen Group’s customers, receiving notes will be provided by Xinsen Group’s customers, then to RLSP as proof of delivery. The date of receiving notes signed is the time that RLSP transfers ownership and control of the finished products under model B to Xinsen Group then indirectly to the first-tier suppliers. RLSP recognizes revenue on the dates when receiving notes are signed by Xinsen Group’s customers.
Under both supply models, payment of products is generally made within a 30-day term upon receiving notes signed by our customers. Extended payment terms are provided on a limited basis not to exceed two months. After customer receives the finished products, if the customer finds quality problems before installing them to the vehicles, the customer is able to inform RLSP and request replacement for the same type products. Since November 2021, RLSP has terminated warranty assurance to our customers due to the characteristics of our products.
Related Party Revenues
We also generate revenue through Indirect supply model. The Company processes the purchase orders from our related parties, subcontracts them to third party suppliers, who will produce and deliver the finished products to the final customers. Specifically, the Company either purchase raw materials and subcontracts them for manufacturing or procure the products directly in the market to supply our customers depends on the specific requirements of the orders.
Cost of Revenues
Cost of revenues is comprised of raw materials consumed, manufacturing costs, third party logistics and distribution costs including packaging, freight, transportation, shipping and handling costs, and inventory adjustment due to the defectives and inventory count.
Selling Expense
Selling expense principally consist of costs associated with our sales force. Our main selling cost is the commission fee from indirect supply model sales.
General and Administrative Expense
General and administrative expenses include the expenses for commercial support personnel, personnel in executive and other administrative functions, other commercial costs necessary to support the commercial operation of our products, professional fees for legal, consulting and accounting services. General and administrative expenses also include depreciation and impairments of office furniture and equipment.
| 23 |
Interest Expense
Interest expense primarily consists of interest expense incurred under our Revolving Loan Agreement with banks, individual third parties, and minor bank service charges.
Income taxes
We are governed by the Income Tax Law of the PRC, and the United States. We account for income tax using the liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. We record a valuation allowance to offset deferred tax assets if based on the weight of available evidence; it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
Result of Operations
Comparison of the Three Months Ended on September 30, 2023 and 2022
The following table summarizes our results of operations for the three months ended on September 30, 2023 and 2022:
| For three months ended on September 30, | ||||||||||||
| 2023 | 2022 | Changes | ||||||||||
| Sales | $ | 143,424 | 1,443,070 | $ | (1,299,646 | ) | ||||||
| Sales-related parties | 1,666,917 | 510,034 | 1,156,883 | |||||||||
| Total | 1,810,341 | 1,953,104 | (142,763 | ) | ||||||||
| Cost of sales | 1,983,537 | 1,650,580 | 332,957 | |||||||||
| Gross profit (loss) | (173,196 | ) | 302,524 | (475,720 | ) | |||||||
| Operating Expenses | ||||||||||||
| Selling expenses | 6,835 | 34,264 | (27,429 | ) | ||||||||
| General & administrative expenses | 124,130 | 192,265 | (68,135 | ) | ||||||||
| Total operation expenses | 130,965 | 226,529 | (95,564 | ) | ||||||||
| Gain (loss) from operation | (304,161 | ) | 75,995 | (380,156 | ) | |||||||
| Other income (expense): | ||||||||||||
| Interest expense | (56,762 | ) | (50,765 | ) | (5,997 | ) | ||||||
| Other (expense) income, net | 7 | (13,406 | ) | 13,413 | ||||||||
| Total other expenses, net | (56,755 | ) | (64,171 | ) | 7,416 | |||||||
| Net Income(loss) before income taxes | (360,916 | ) | 11,824 | (372,740 | ) | |||||||
| Income tax expenses (benefit) | - | (166 | ) | 166 | ||||||||
| Net income (loss) | $ | (360,916 | ) | 11,990 | $ | (372,906 | ) | |||||
Sales Revenue
Sales revenue were $1,810,341 and $1,953,104 for the three months ended on September 30, 2023 and 2022, respectively, a decrease of $142,763 or 7 % year over year. The decrease was mainly due to the decreased demand from our direct supply model in the third quarter of 2023, as well as the exchange rate decreasing for Chinese RMB against U.S. dollar during the third quarter of 2023, which resulted in the total revenues translated from Chinese RMB to U.S. dollar decreased.
Our sales from related party were $1,666,917 for the three months ended on September 30, 2023 as compared to 510,034 for the same period last year, an increasing of $1,156,883. The increasing of our sales from related party was because the end-users of our related party participated in car discount promotion and sales events in mainland China from April to September 2023, which led to an increase in their orders. The sales event is anticipated to continue until the year end of 2023, so the purchase orders from our related party may still increase until December 2023.
RLSP’s major direct supply model customer, eGT temporarily suspended its factory production since June 2023, which resulted in a decline in orders to RLSP. eGT has started to resume production from late October 2023, and we expect to increase our direct sales revenue from eGT in the fourth quarter of 2023. Meanwhile, RLSP began to relocate its factory location to our newly constructed factory in early August, which also led to RLSP’s production decreased. We expect RLSP’s relocation to be completed before late November this year.
Cost of Sales
Cost of sales were $1,983,537 and $1,650,580 for the three months ended September 30, 2023 and 2022, respectively, an increase of $332,957, or 20% year over year. The increasing of cost of sales was mainly due to the increased sales from our related parties for the three months ended on September 30, 2023, compared with the same quarter last year.
Gross profit
Gross (loss) profit was $(173,196) and $302,524 for the three months ended on September 30, 2023 and 2022, respectively. Our revenue and gross profit margin were presented as below:
For the three months ended September 30, | ||||||||||||
| 2023 | 2022 | changes | ||||||||||
| Revenue: | ||||||||||||
| Direct supply model | $ | 30,663 | $ | 1,443,070 | $ | (1,412,407 | ) | |||||
| Indirect supply model | 1,779,678 | 510,034 | 1,269,644 | |||||||||
| Total | 1,810,341 | 1,953,104 | (142,763 | ) | ||||||||
| Gross profit margin: | ||||||||||||
| Direct supply model | (417 | )% | 22 | % | (439 | )% | ||||||
| Indirect supply model | (3 | )% | (3 | )% | 0 | % | ||||||
| Total | (10 | )% | 18 | % | (25 | )% | ||||||
| 24 |
The decreasing of our overall gross profit margin, compared with three months ended September 30, 2023 and 2022, was mainly due to the decreased sales revenues from direct supply model which generates a higher gross profit margin compared with our indirect supple model. RLSP’s major direct supply model customer, eGT temporarily suspended its factory production since June 2023, which resulted in a decline in orders to RLSP. eGT has started to resume production from late October 2023, and we expect that there will be increase on our direct sales model from eGT in the fourth quarter of this year.
Selling expenses
Selling expenses were $6,835 and $ 34,264 for three months ended September 30, 2023 and 2022 respectively, a decrease of $27,429 or 80% year over year, which was mainly due to the decreasing in travel and sales expenses. Moreover, under the indirect supply model, the sales commission decreased from 1% to 0.25% since October 2022, which also resulted in reduced sales cost. Meanwhile, RLSP began to relocate its factory location to our newly constructed factory in early August, which also led to RLSP’s production decreased. We expect RLSP’s relocation can be completed before late November this year.
General and administrative cost
General and administrative expense were $124,130 and $ 192,265 for the three months ended September 30, 2023 and 2022, respectively, decreased by $68,135, or 42 % year over year. The decrease was mainly due to the Company reduced the cost for operation resulted from the decreasing sales from direct supply model. Meanwhile, RLSP began to relocate its factory location to our newly constructed factory in early August, which also led to RLSP’s production decreased. We expect RLSP’s relocation can be completed before late November this year.
Income from Operations
For the three months ended September 30, 2023, loss from operations was $(304,161), as compared to income from operations of $75,995 for the three months ended September 30, 2022, a decrease of $380,156 or 500% year over year. The decrease in income from operations was primarily due to the decreasing in sales from our direct sales model client, eGT.
Net Income
As a result of the factors described above, our net loss was $(360,916) for the three months ended September 30, 2023, decreased by $372,740 from the net income of $11,990 for the three months ended September 30,2022.
Comparison of the Nine Months Ended on September 30, 2023 and 2022
The following table summarizes our results of operations for the nine months ended on September 30, 2023 and 2022:
| For nine months ended on September 30, | ||||||||||||
| 2023 | 2022 | Changes | ||||||||||
| Sales | $ | 1,363,906 | $ | 3,641,039 | $ | (2,277,133 | ) | |||||
| Sales-related parties | 4,901,355 | 4,229,247 | 672,108 | |||||||||
| Total | 6,265,261 | 7,870,286 | (1,605,025 | ) | ||||||||
| Cost of sales | 6,137,529 | 7,251,658 | (1,114,129 | ) | ||||||||
| Gross profit | 127,732 | 618,628 | (490,896 | ) | ||||||||
| Operating Expenses | ||||||||||||
| Selling expenses | 66,670 | 126,798 | (60,128 | ) | ||||||||
| General & administrative expenses | 487,512 | 607,451 | (119,939 | ) | ||||||||
| Total operation expenses | 554,182 | 734,249 | (180,067 | ) | ||||||||
| Loss from operation | (426,450 | ) | (115,621 | ) | (310,829 | ) | ||||||
| Other income (expense): | ||||||||||||
| Interest expense | (161,216 | ) | (153,333 | ) | (7,833 | ) | ||||||
| Other (expense) income, net | 11,832 | (11,084 | ) | 22,916 | ||||||||
| Total other expenses, net | (149,384 | ) | (164,417 | ) | 15,033 | |||||||
| Net loss before income taxes | (573,834 | ) | (280,038 | ) | (295,796 | ) | ||||||
| Income tax expenses | 15,695 | 7,672 | 8,023 | |||||||||
| Net loss | $ | (591,529 | ) | $ | (287,710 | ) | $ | (303,819 | ) | |||
| 25 |
Sales Revenue
Sales revenue were $6,265,261 and $ 7,870,286 for the nine months ended on September 30, 2023 and 2022, respectively, a decrease of $1.6 million or 20 % year over year. The decrease was mainly attribute to the demand deceasing from our direct supply model, as well as the exchange rate decreasing for Chinese RMB against U.S. dollar during the third quarter of 2023, which resulted in the total revenues translated from Chinese RMB to U.S. dollar decreased.
RLSP’s major direct supply model customer, eGT temporarily suspended its factory production since June 2023, which resulted in a decline in orders from RLSP. eGT has started to resume production from late October 2023, and we expect to increase our direct sales revenue from eGT in the fourth quarter of 2023. Meanwhile, RLSP began to relocate its factory location to our newly constructed factory in early August, which also led to RLSP’s production decreased. We expect RLSP’s relocation can be completed before late November this year.
Cost of Sales
Cost of sales were $6,137,529 and $ 7,251,658 for the nine months ended on September 30, 2023 and 2022, respectively, a decrease of $1.11 million, or 15% year over year. The decrease was accompanying with the decreasing sales in the overall corresponding period.
Gross profit
Gross profit were $127,732 and $618,628 for nine months ended on September 30, 2023 and 2022, respectively. Our revenue and gross profit margin were presented as below:
| For the nine months ended on September 30 | ||||||||||||
| 2023 | 2022 | changes | ||||||||||
| Revenue: | ||||||||||||
| Direct supply model | $ | 1,250,979 | 3,641,039 | (2,390,060 | ) | |||||||
| Indirect supply model | 5,014,282 | 4,229,247 | 785,035 | |||||||||
| Total | 6,265,261 | 7,870,286 | (1,605,025 | ) | ||||||||
| Gross profit margin: | ||||||||||||
| Direct supply model | 13 | % | 19 | % | (5 | )% | ||||||
| Indirect supply model | (1 | )% | (2 | )% | 1 | % | ||||||
| Total | 2 | % | 8 | % | (6 | )% | ||||||
The decreasing of our overall gross profit margin, compared with nine months ended on September 30, 2023 and 2022, was mainly due to the decreased sales revenues from direct supply model which generates a higher gross profit margin compared with our indirect supple model. RLSP’s major direct supply model customer, eGT temporarily suspended its factory production since June 2023, which resulted in a decline in orders from RLSP. eGT has started to resume production from late October 2023, and we expect that there will be increase on our direct sales model from eGT in the fourth quarter of this year.
Selling expenses
Selling expenses were $66,670 and $ 126,798 for nine months ended on September 30, 2023 and 2022 respectively, with a decrease of 60,128 or 47% year over year. The decrease was mainly due to the decreasing in travel and sales expenses. Moreover, under the indirect supply model, the sales commission decreased from 1% to 0.25% since October 2022, which also resulted in reduced sales cost. Meanwhile, RLSP began to relocate its factory location to our newly constructed factory in early August, which also led to RLSP’s production decreased. We expect RLSP’s relocation can be completed before late November this year.
General and administrative cost
General and administrative expense were $487,512 and $ 607,451 for the s nine months ended on September 30, 2023 and 2022, respectively, decreased by $119,939, or 25% year over year. The decrease was mainly due to the Company reduced the cost for operation resulted from the decreasing in total sales revenue, compared with the same period of 2023 and 2022. Meanwhile, RLSP began to relocate its factory location to our newly constructed factory in early August, which also led to RLSP’s production decreased. We expect RLSP’s relocation can be completed before late November this year.
Income from Operations
For the nine months ended on September 30, 2023, loss from operations was $(426,450), as compared to loss from operations of $(115,621) for the nine months ended on September 30, 2022, a decrease of $310,829 or 269% year over year. The decrease in income from operations was primarily due to the decreasing in sales from our direct sales model client, eGT.
Net Income
As a result of the factors described above, our net loss was $(591,529) for the nine months ended on September 30, 2023, decreased by $303,819 from the net loss of $(287,710) for the nine months ended September 30, 2022.
| 26 |
Equity and Capital Resources
As of nine months ended September 30, 2023, we had an accumulated deficit of $(2,411,286). As of September 30, 2023, we had cash of $44,009 and negative working capital of $(9,928,099), compared to cash of $51,417 and a negative working capital of $(8,079,248) on December 31, 2022. The decrease in the working capital was primarily due to the decreased account receivable-related party which was affected by the indirect sales. These factors and our ability to raise additional capital to accomplish our objectives, raises substantial doubt about our ability to continue as a going concern.
Going Concern Assessment
The Company demonstrates adverse conditions that raise substantial doubt about the Company’s ability to continue as a going concern. These adverse conditions are negative financial trends, specifically cash outflow from operating activities, operating losses, accumulated deficit and other adverse key financial ratios.
Management’s plan to alleviate the substantial doubt about the Company’s ability to continue as a going concern include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations to meet its operating needs on a timely basis, obtain additional working capital funds from the majority shareholder and the President of the Company to eliminate inefficiencies in order to meet its anticipated cash requirements. However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company’s ongoing capital expenditures and other requirements.
The unaudited condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Policies
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The critical accounting policies are discussed in further detail in the notes to the unaudited financial statements appearing elsewhere in this 10-Q report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “small reporting company” we are not required to provide this information under this item pursuant to Regulation S-K.
| 27 |
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed with an objective of ensuring that information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. Disclosure controls are also designed with an objective of ensuring that such information is accumulated and communicated to our management, including our chief executive officer, in order to allow timely consideration regarding required disclosures.
The evaluation of our disclosure controls by our principal executive officer included a review of the controls’ objectives and design, the operation of the controls, and the effect of the controls on the information presented in this Annual Report. Our management, including our Chief Executive Officer, does not expect that disclosure controls can or will prevent or detect all errors and all fraud, if any. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Also, projections of any evaluation of the disclosure controls and procedures to future periods are subject to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that there were material weakness in our internal controls over Financial reporting as of September 30, 2023 and they were therefore not as effective as they could be to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The material weakness in our controls and procedure were lack of US GAAP knowledge and segregation duties. Management does not believe that any of these material weaknesses materially affected the results and accuracy of its financial statements. However, in view of this discovery of such weaknesses, management has begun a review to improve them.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
| 28 |
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 1A. Risk Factors.
As a “smaller reporting company”, we are not required to provide this information under this item pursuant to Regulation S-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
From May to July 2023, the Company issued 133,000 shares of common stocks at $3.00 per share pursuant to private placements to ten individuals for cash. The total $399,000 subscription were fully received as of September 30, 2023. On July 5, 2023, the Company sold 7,000 shares of its common stock pursuant to private placement to one investor at $3.00 per share for total amount of $21,000. The Company relied upon Regulation S of the Securities Act of 1933, as amended, for the sale of these securities. No commissions were paid regarding the share issuance and the share certificates were issued with a Rule 144 restrictive legend.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None
Item 6. Exhibits
Exhibit Number |
Description of Exhibit | |
| 31.1* | Certification of Chief Executive Officer pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a) | |
| 31.2* | Certification of Chief Financial Officer pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a) | |
| 32.1* | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | |
| 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 (embedded within the Inline XBRL document) |
* Filed herewith.
| 29 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| RUBBER LEAF INC | |
| Date: November 13, 2023 | /s/ Xingxiu Hua |
| Xingxiu Hua, Chief Executive Officer | |
| Date: November 13, 2023 | /s/ Hua Wang |
| Hua Wang, Chief Financial Officer |
| 30 |
EXHIBIT INDEX
Exhibit Number |
Description of Exhibit | |
| 31.1* | Certification of Chief Executive Officer pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a) | |
| 31.2* | Certification of Chief Financial Officer pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a) | |
| 32.1* | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 | |
| 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 (embedded within the Inline XBRL document) |
* Filed herewith.
| 31 |
EXHIBIT 31.1
CERTIFICATION
I, Xingxiu Hua, certify that:
| 1. | I have reviewed this report on Form 10-Q of Rubber Leaf Inc; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Xingxiu Hua | |
| Xingxiu Hua | |
| Chief Executive Officer | |
| November 13, 2023 |
EXHIBIT 31.2
CERTIFICATION
I, Hua Wang, certify that:
| 1. | I have reviewed this report on Form 10-Q of Rubber Leaf Inc; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Hua Wang | |
| Hua Wang | |
| Chief Financial Officer | |
| November 13, 2023 |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the report of Rubber Leaf Inc (the “Company”) on Form 10-Q for the period ending September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ Xingxiu Hua | |
| Xingxiu Hua | |
| Chief Executive Officer | |
| November 13, 2023 | |
| /s/ Hua Wang | |
| Hua Wang | |
| Chief Financial Officer | |
| November 13, 2023 |