Sino Green Land Corp. SEC 10-K Report

Sino Green Land Corp., a company engaged in the manufacturing and sales of recovered and recycled products in Malaysia, has released its Form 10-K report for the fiscal year ended June 30, 2024. The report highlights significant financial growth, strategic initiatives aimed at expanding its environmental recycling operations, and the challenges and risks the company faces in its industry.

Financial Highlights

• Net Revenues: $2.088 million, an increase of $1.451 million or 228% compared to the previous year, mainly due to an increase in sales of plastic recycle products.
• Gross Loss: $75,393, a decrease of $340,386 compared to the previous year, primarily due to the improvement of production efficiency.
• Operating Expenses: $643,767, a slight decrease of $723 compared to the previous year.
• Net Loss: $798,804, a decrease of $278,556 or 26% compared to the previous year, primarily due to the cost of revenue increase.

Business Highlights

• Corporate History: Sino Green Land Corporation, originally incorporated as Henry County Plywood Corporation in 2008, has undergone several name changes and business shifts. The company was primarily engaged in the wholesale distribution of premium fruits in China from 2009 to 2011. After a period of inactivity and custodianship, the company resumed operations in 2020 under the leadership of Ms. Wo Kuk Ching.
• Business Overview: The company is engaged in the manufacturing and sales of recovered and recycled products in Malaysia since 2019. It operates two factories with a combined area of approximately 8,759.83 square meters.
• Mission: The company’s mission is to advocate for waste recycling and aim for a sustainable environmental future, with the objective of becoming a prominent environmental recycling entity in Asia over the next five years.
• Operational Model: The company sources raw materials such as PET Bottle Bundles from Cambodia, Southeast Asia, and New Zealand. These materials undergo a series of processes including sorting, cutting, crushing, washing, cleaning, drying, separating, and recycling to produce plastic end products like flakes and strapping belts, which are then sold to local and international trading companies.
• Product Offerings: The company produces PET Bottle Flakes, PET Strapping Belts, and HDPE Pellets. PET Bottle Flakes are used as an alternative raw material to traditional polyester, while PET Strapping Belts are recognized for their high tensile strength and durability. HDPE Pellets are sourced from caps and rings of PET bottles and are used in casting molding applications.
• Geographical Performance: The company’s PET bottle flakes are exported to markets in the Asia-Pacific, Europe, and the Americas, including countries like Germany, the U.S., Ukraine, Vietnam, Thailand, Malaysia, Indonesia, and Turkey. PET plastic-steel straps are sold in China, Australia, Vietnam, Malaysia, Indonesia, and Thailand. HDPE recycled pellets find customers in China and Malaysia.
• Production Capacity: The company has a production capability of 50,000 tons of PET waste plastic bottles annually. It also produces 3,000 tons of PET plastic-steel strapping belts and 3,500 to 4,000 tons of HDPE recycled pellets annually.
• Competitive Strengths: The company has a deep understanding of the plastic recycling sector and adheres to Malaysian government regulations and international recycling standards. It operates with over 40 pieces of advanced equipment and has a production line for PET plastic-steel strapping belts. The company’s recycled raw materials are closely comparable to virgin plastics and are cost-effective.
• Market Overview: The global plastic waste crisis has led to increased demand for recycled PET (R-PET). The R-PET market is estimated to be worth around US$11 billion in 2023 and is projected to grow to US$15 billion by 2028, driven by changing consumer behavior and governmental policies promoting recycling and the circular economy.
• Future Outlook: The company plans to expand its operational scope and increase its investments in the recycling domain. It aims to enhance its recycling process and reduce the amount of non-biodegradable plastics reaching landfills. The strategic positioning in Semenyih, Malaysia, provides logistical advantages for efficient connections with local and international customers.

Strategic Initiatives

• Resumption of Operations: Sino Green Land Corporation resumed its business operations on July 2, 2020, after a period of inactivity, focusing on environmental protection technology, recycling, and renewal of plastic waste bottles and packaging materials through its Malaysia subsidiary, Tian Li Eco Holdings Sdn. Bhd.
• Expansion Plans: The company acquired a factory building (Factory No. 5) in January 2024 to support its operational expansion.
• Capital Management: As of June 30, 2024, the company had total current assets of $834,790 and total current liabilities of $3,514,227, resulting in a working capital deficit of $2,679,437. The company financed its capital requirements through personal short-term loans and a credit facility with OCBC Bank in Malaysia. The company obtained a loan of MYR 5,000,000 (approximately US$1,069,000) in October 2022 and an additional loan of MYR 4,600,000 (approximately US$975,162) in June 2023 to fund the purchase of factory buildings. The company also issued a convertible note payable of $750,000 in January 2023, which is convertible into 937,500 shares of common stock.
• Future Outlook: The company plans to continue its strategic focus on environmental recycling and aims to become a leading entity in Asia within the next five years. Management estimates that current funds on hand will be sufficient to continue operations through the next nine months. The company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support the reversal of the valuation allowance. The company also plans to continue financing its capital requirements through personal short-term loans and bank borrowings while exploring opportunities to increase sales volume and generate sufficient revenues to meet its obligations.

Challenges and Risks

• Going Concern Doubts: Sino Green Land incurred a net loss of $798,804 and used cash in operating activities of $752,278 for the year ended June 30, 2024. These factors raise substantial doubt about the company’s ability to continue as a going concern within one year after the date the financial statements are issued. The independent registered public accounting firm also raised substantial doubt about the company’s ability to continue as a going concern.
• Material Weaknesses in Internal Controls: The company identified material weaknesses in its internal controls over financial reporting, including the lack of a functioning independent audit committee, inadequate segregation of duties, and insufficient personnel with appropriate U.S. GAAP knowledge. These weaknesses could result in material misstatements in financial statements and failure to meet reporting obligations.
• Operational Disruptions: Major disruptions at waste treatment plants, such as machinery breakdowns, power shortages, or natural disasters, could adversely affect the company’s ability to process plastic recycle products and generate revenue.
• Dependence on Key Personnel: The company’s success depends on the continuous efforts of key management and operational personnel. The loss of any key personnel could materially and adversely affect the business.
• Reliance on Foreign Workers: The company relies on foreign workers for its operations. Changes in Malaysian government policies or increased competition for foreign workers could increase operational costs and adversely affect the business.
• Lack of Long-Term Customer Agreements: The company generally does not enter into long-term agreements with customers. Failure to retain existing customers or attract new ones could materially and adversely affect the business.
• Cross-Border Sales Risks: Cross-border sales transactions carry risks such as changes in import taxes, customs regulations, and potential delays, which could affect revenues and earnings.
• Need for Additional Funding: The company will need to raise additional funding, which may not be available on acceptable terms. Failure to obtain necessary capital could force the company to delay, limit, or terminate product development efforts or other operations.
• Supply Chain Dependence: The company’s success depends on the availability, cost, and quality of raw materials. Any disruption in the supply chain could materially and adversely affect the business.
• Potential Business Combinations: Future acquisitions or strategic alliances may not be successful and could result in large write-offs, debt, or contingent liabilities, harming the company’s operating results.
• Regulatory Compliance: The company must comply with various laws and regulations, including those related to workplace safety, environmental protection, and foreign worker employment. Non-compliance could result in penalties and adversely affect the business.
• Environmental Liability: The company’s operations are subject to environmental laws and regulations. Non-compliance could lead to substantial fines, clean-up costs, and suspension of operations.
• Capital Investment Risks: Planned capital investments in new machinery and systems may result in increased depreciation expenses, operating costs, and cash flow used in investing activities, which could adversely affect the business.
• COVID-19 Disruptions: Further disruptions from new COVID-19 infections could materially harm the company’s business prospects by interrupting the supply chain and affecting the financial condition of customers.
• Economic and Political Risks in Malaysia: Changes in Malaysian economic, political, and social conditions, as well as government policies, could adversely affect the company’s business and industry.
• Currency Conversion and Exchange Rate Risks: Fluctuations in the value of MYR against other currencies could adversely affect the company’s financial performance and ability to pay dividends.
• Foreign Exchange Legislation: Changes in Malaysian foreign exchange control regulations could limit the company’s ability to repatriate funds and affect its financial operations.

SEC Filing: Sino Green Land Corp. [ SGLA ] - 10-K - Sep. 30, 2024