UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ____________ to ____________

Commission File Number: 333-239929

KENONGWO GROUP US, INC.

(Exact name of registrant as specified in its charter)

Nevada		37-1914208
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

Yangjia Group, Xiaobu Town Yuanzhou District, Yichun City Jiangxi Province, China		336000
(Address of principal executive offices)		(Zip Code)

+86-400-915-2178

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

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. Yes ☒ No ☐

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 and post such files). Yes ☒ No ☐

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. (Check One):

Large accelerated filer ☐

Accelerated filer ☐

Non-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 ☐ No ☒

As of August 16, 2023, there were 101,882,485 shares of common stock, $0.0001 par value per share, issued and outstanding.

KENONGWO GROUP US, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page

PART I FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (Unaudited)	1

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months EndedJune 30, 2023 and 2022 (Unaudited)	2

	Condensed Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the Six Months June 30, 2023 and 2022 (Unaudited)	4

	Notes to Condensed Consolidated Financial Statements (Unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25

Item 4.	Controls and Procedures	25

PART II OTHER INFORMATION		27

Item 6.	Exhibits	27

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

KENONGWO GROUP US, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

	June 30,			December 31,
	2023			2022

ASSETS
Current Assets:
Cash and cash equivalents	$	5,081		$	234,048
Accounts receivable, net		1,628,512			1,517,700
Other receivables, net		230,349			189,118
Inventories		621,675			571,658
Advances and prepayments to suppliers		137,956			34,475
Total Current Assets		2,623,573			2,546,999

Plant and equipment, net		1,642,989			1,818,210
Construction in progress, net		94,384			96,249
Intangible assets, net		38,612			44,345
Total Non-current Assets		1,775,985			1,958,804
Total Assets	$	4,399,558		$	4,505,803

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable	$	727,734		$	912,608
Accrued expenses and other payables		831,508			1,074,183
Taxes payable		4,818			7,584
Advances from customers		43,421			33,510
Amount due to shareholder		57,291			234,849
Due to related parties		-			54,562
Total Current Liabilities		1,664,772			2,317,296

Non-Current Liabilities
Long-term loans		415,179			430,750
Total Liabilities		2,079,951			2,748,046

Stockholders’ Equity:
Common Stock, $0.0001 par value, 110,000,000 shares authorized; 101,882,485 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		10,188			10,188
Paid in capital		3,126,612			3,126,612
Accumulated deficit		(844,902	)		(1,501,803	)
Accumulated other comprehensive income		27,709			122,760
Total Stockholders’ Equity		2,319,607			1,757,757
Total Liabilities and Stockholders’ Equity	$	4,399,558		$	4,505,803

The accompanying notes are an integral part of these condensed consolidated financial statements.

KENONGWO GROUP US, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Stated in US Dollars)

	Three months ended June 30, 2023			Three months ended June 30, 2022			Six months ended June 30, 2023			Six months ended June 30, 2022
Revenue	$	1,535,042		$	1,654,237		$	3,653,564		$	3,548,414
Cost of revenues		1,112,454			1,303,451			2,540,897			2,731,878
Gross profit		422,588			350,786			1,112,667			816,536
Operating expenses
Selling and marketing expenses		51,295			54,856			113,816			118,803
General and administrative expenses		154,994			152,377			327,108			437,576
Total operating expenses		206,289			207,233			440,924			556,379

Income from operations		216,299			143,553			671,743			260,157

Other (expenses) income:
Interest expenses		(6,660	)		(8,007	)		(13,518	)		(16,362	)
Other income		614			5,332			3,789			5,491
Other expenses		(3,073	)		(1,007	)		(5,113	)		(1,795	)
Total other (expenses) income		(9,119	)		(3,682	)		(14,842	)		(12,666	)

Income before taxes		207,180			139,871			656,901			247,491
Provision for income taxes		-			-			-			-

Net income	$	207,180			139,871			656,901			247,491

Other comprehensive income (loss):
Foreign currency translation adjustment		(105,379	)		109,243			(95,051	)		70,795
Comprehensive income	$	101,801		$	249,114		$	561,850		$	318,286

Earnings per share
- Basic and diluted	$	-		$	0.07		$	0.01		$	0.13
Basic and diluted weighted average shares outstanding		101,882,485			1,882,485			101,882,485			1,882,485

The accompanying notes are an integral part of these condensed consolidated financial statements.

KENONGWO GROUP US, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Stated in US Dollars)

	Number		Common		Paid-in		Accumulated			Accumulated Other Comprehensive
	of Shares		Stock		Capital		Deficit			Loss			Total
Balance, January 1, 2022		1,882,485	$	188	$	494,058	$	(2,436,957	)	$	(41,115	)	$	(1,983,826	)
Net income		-		-		-		107,620			-			107,620
Foreign currency translation adjustment		-		-		-		-			(38,448	)		(38,448	)

Balance, March 31, 2022		1,882,485	$	188	$	494,058	$	(2,329,337	)	$	(79,563	)	$	(1,914,654	)
Net income		-		-		-		139,871			-			139,871
Foreign currency translation adjustment		-		-		-		-			109,243			109,243
Balance, June 30, 2022		1,882,485	$	188	$	494,058	$	(2,189,466	)	$	29,680		$	(1,665,540	)

Balance, January 1, 2023		101,882,485	$	10,188	$	3,126,612	$	(1,501,803	)	$	122,760		$	1,757,757
Net income		-		-		-		449,721			-			449,721
Foreign currency translation adjustment		-		-		-		-			10,328			10,328

Balance, March 31, 2023		101,882,485	$	10,188	$	3,126,612	$	(1,052,082	)	$	133,088		$	2,217,806
Net income		-		-		-		207,180			-			207,180
Foreign currency translation adjustment		-		-		-		-			(105,379	)		(105,379	)

Balance, June 30, 2023		101,882,485	$	10,188	$	3,126,612	$	(844,902	)	$	27,709		$	2,319,607

The accompanying notes are an integral part of these condensed consolidated financial statements.

KENONGWO GROUP US, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars)

	For the Six months ended
	June 30,
	2023			2022

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	656,901		$	247,491
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		118,884			73,488
Loss on disposal of PPE		2,906			-
Changes in operating assets and liabilities:
Accounts receivable		(172,769	)		(992,424	)
Other receivables		(50,125	)		(58,052	)
Inventories		(73,709	)		(24,864	)
Prepayment and deposits		(109,211	)		116,664
Accounts payable and accrued payables		(374,306	)		142,753
Advances from customers		11,598			425
Net cash provided by/ (used in) operating activities		10,169			(494,519	)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in plant and equipment		(4,120	)		(42,545	)
Proceeds from disposal of equipment		823			-
Purchase of CIP		(1,683	)		-
Intangible assets		-			(1,746	)
Net cash used in investing activities		(4,980	)		(44,291	)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from related party		-			512,401
Repayment of related party		(54,841	)		-
Repayment of director		(180,468	)		-
Net cash (used in)/ provided by financing activities		(235,309	)		512,401

EFFECT OF EXCHANGE RATE ON CASH		1,153			26,625

NET DECREASE IN CASH		(228,967	)		216
CASH, BEGINNING OF PERIOD		234,048			9,533
CASH, END OF PERIOD	$	5,081		$	9,749

SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Cash paid for interest expense, net of capitalized interest	$	13,518		$	16,362
Cash paid for income tax	$	-		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION, NATURE OF OPERATIONS AND GOING CONCERN

Kenongwo Group US, Inc. (“Kenongwo US” or the “Company”) is a holding company incorporated in the State of Nevada on October 17, 2018.

On October 17, 2018, the Company issued 30,000 shares of the common stock at the par value per share for a total purchase price of $3 to Mr. Erh-ping Pi.

On October 20, 2018, the Company issued 14,000,000 shares of the common stock at the par value per share for a total purchase price of $1,400 to its director and chief executive officer Mr. Jianjun Zhong.

On May 15, 2017, Jiangxi Kenongwo Technology Co., Ltd. (“Jiangxi Kenongwo”) was formed in the PRC. It is engaged in researching, developing, manufacturing and selling bamboo charcoal biomass organic fertilizers, amino acid water-soluble fertilizers, selenium-rich foliage fertilizers and other types of fertilizers in the People’s Republic of China (the “PRC”).

On January 1, 2019, the Company acquired all the issued and outstanding capital stock of Jiangxi Kenongwo pursuant to certain share transfer agreements entered into with Xiaoming Zhang and Yuhua Zhang, the two former shareholders of Jiangxi Kenongwo. The share transfer was completed on January 9, 2019 as evidenced by a business license issued by Administrative Bureau in Yichun City Jiangxi Province reflecting the sole foreign ownership. As a result, Jiangxi Kenongwo became the Company’s wholly owned subsidiary. In accordance to a stock entrustment agreement (the “Stock Entrustment Agreement”), Xiaoming Zhang and Yuhua Zhang held Jiangxi Kenongwo on behalf of Mr. Jianjun Zhong. Under the Stock Entrustment Agreement, Mr. Jianjun Zhong was the controlling beneficial owner of Jiangxi Kenongwo prior to the acquisition on January 1, 2019. Accordingly, the Company and Jiangxi Kenongwo were under common control prior to the acquisition; therefore, the transaction has been accounted for as business combination under common control in accordance to ASC-805-50-30-5, in which the assets and liabilities of Jiangxi Kenongwo have been presented at their carrying values at the date at which the transfer occurred, which was January 1, 2019. However, the carrying values did not differ from their historical basis. No goodwill was recognized in this transaction.

On September 6, 2019, the Company agreed to issue an aggregate of 1,300,000 shares of common stock in a private placement to two investors for an aggregate purchase price of $130,000. On February 26, 2020, March 2, 2020, March 4, 2020 and March 10, 2020, Jiangxi Kenongwo received the placement proceeds of $28,889 (RMB 200,000), $57,778 (RMB 400,000), $14,444 (RMB 100,000), and $28,889 (RMB 200,000), respectively, totaling $130,000 (RMB 900,000) from its two investors.

On October 16, 2019, the Company agreed to issue an aggregated of 606,925 shares of the common stock to a total of 41 investors for an aggregate purchase price of $60,693 in a private placement. On January 16, 2020, Jiangxi Kenongwo, on behalf of the Company, received the proceeds of $60,693 (RMB 418,166) from the 41 investors.

On October 5, 2021, the Company amended its articles of incorporation to reverse split its common stock at a rate of 1 for 10 (the “Reverse Split”). On November 1, 2021, FINRA announced the Reverse Split, which took effect at the opening of business on November 2, 2021.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with the US GAAP. The basis of accounting differs from that used in the statutory accounts of the Company, which are prepared in accordance with the accounting principles of the PRC (the “PRC GAAP”). The differences between the US GAAP and the PRC GAAP have been adjusted in these financial statements. The Company’s functional currency is the Chinese Renminbi (“RMB”); however, the accompanying financial statements have been translated and presented in United States Dollars (“USD”).

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the financial statements 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 periods. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ materially from those estimates.

Control by Principal Stockholders

The Company’s directors and executive officers and their affiliates or related parties own, beneficially and in the aggregate, the majority of the voting power of the outstanding shares of our common stock. Accordingly, if our directors and executive officers and their affiliates or related parties vote their shares uniformly, they would have the ability to control the approval of most corporate actions, including increasing our authorized capital stock and the dissolution or merger of our company or the sale of our assets.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. The Company maintains cash with various financial institutions.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful credit losses accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s historical payment history, its current credit worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection.

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventories

Inventories, consisting of raw materials, work in process, and finished goods related to the Company’s products are stated at the lower of cost or market utilizing the weighted average method.

Advances and Prepayments

The Company makes advance payment to suppliers and vendors for the procurement of raw materials. Upon physical receipt and inspection of the raw materials from suppliers the applicable amount is reclassified from advances and prepayments to suppliers to inventory.

Plant and Equipment

Included in property and equipment is construction-in-progress which consisted of factory improvements and machinery pending installation and includes the costs of construction, machinery and equipment, and any interest charges arising from borrowings used to finance these assets during the period of construction or installation of the assets. No provision for depreciation is made on construction-in-progress until such time as the relevant assets are completed and ready for their intended use.

Estimated useful lives of the Company’s assets are as follows:

		Useful Life
Building		20 years
Operating equipment		3-10 years
Vehicle		3-5 years
Electronic equipment		3-5 years
Office equipment		3-5 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts, and any gain or loss are included in the Company’s results of operations. The costs of maintenance and repairs are recognized to expenses as incurred; significant renewals and betterments are capitalized.

Construction in progress represents direct and indirect acquisition and construction costs for plants, and costs of acquisition and installation of related equipment. Amounts classified as construction in progress and prepayments for equipment are transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. Depreciation is not provided for assets classified in this account.

The Company both owns and leases manufacturing facilities. The Company leases a manufacturing facility to produce fertilizer products. In order to expand the Company’s production capacity, the Company invested in an additional manufacturing plant that it owns.

The plant that is owned by the Company is accounted for using the significant accounting policies set forth above.

The Company has adopted ASC 842 and ASC 840. Management determines that leased manufacturing facility is not required to be capitalized as a right of use asset under both ASC 842 and ASC 840 because the lease for that facility is entered into on a year to year basis. Additionally, management is not certain that it will renew its lease for that facility each year.

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible Assets

Included in the intangible assets is non-patented technology. Useful life for non-patented technology refers to the period during which economic benefits can be generated. Intangible assets are being amortized using the straight-line method over their lease terms or estimated useful life.

Estimated useful lives of the Company’s intangible assets are as follows:

		Useful Life
Non-patented technology		10 years

The Company carries intangible assets at cost less accumulated amortization. In accordance with the US GAAP, the Company examines the possibility of decreases in the value of intangible assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

Impairment of Long-lived Assets

In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company recorded no impairment charge for the six months ended June 30, 2023 and 2022.

Advances from Customers

Advances from customers consist of prepayments from customers for merchandise that had not yet been shipped. The Company will recognize the deposits as revenue as customers take delivery of the goods and title to the assets is transferred to customers in accordance with the Company’s revenue recognition policy.

Foreign currency translation

The accompanying financial statements are presented in United States dollars. The functional currencies of the Company are in Renminbi (RMB). The Company’s assets and liabilities are translated into United States dollars from RMB at year-end exchange rates, and its revenues and expenses are translated at the average exchange rate during the year. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

	6/30/2023		12/31/2022		6/30/2022
Period/year end RMB: US$ exchange rate		7.2258		6.9646		6.7114
Period/annual average RMB: US$ exchange rate		6.9291		6.7261		6.4835

The RMB is not freely convertible into foreign currencies and all foreign exchange transactions must be conducted through authorized financial institutions.

Revenue Recognition

The Company adopted ASC 606 “Revenue Recognition”, and recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

The Company derives its revenues from the sale of fertilizer products. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfils its obligations under each of its agreements:

	●	identify the contract with a customer;

	●	identify the performance obligations in the contract;

	●	determine the transaction price;

	●	allocate the transaction price to performance obligations in the contract; and

	●	recognize revenue as the performance obligation is satisfied.

Cost of Revenues

Cost of revenues consists primarily of raw materials, utility and supply costs consumed in the manufacturing process, manufacturing labor, depreciation expense and direct overhead expenses necessary to manufacture finished goods as well as warehousing and distribution costs such as inbound freight charges, shipping and handling costs, purchasing and receiving costs.

Income Taxes

The Company accounts for income taxes under the provisions of Section 740-10-30 of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification, which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in its financial statements or tax returns.

The Company is subject to the Enterprise Income Tax (“EIT”) law of the People’s Republic of China. The Company’s primary operations are located in the PRC. The Company is high tech enterprises are subject to corporate income tax at a reduced rate of 15%.

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Related Parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions.

Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) comprised of net income (loss) and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. The Company’s comprehensive income (loss) consist of net income (loss) and unrealized gains from foreign currency translation adjustments.

Fair Value of Financial Instruments

The Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts and other payables, accrued liabilities and short-term debt, have carrying amounts that approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

●

Level 1 - inputs to the valuation methodology used quoted prices for identical assets or liabilities in active markets.

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

	●	Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

	●	Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.

Government Contribution Plan

Pursuant to the applicable PRC laws and regulations, the Company is required to participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company has no further commitments beyond its monthly contribution.

Statutory Reserve

Pursuant to the applicable PRC laws and regulations, the Company must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under the PRC GAAP at each year-end). For foreign invested enterprises and joint ventures in the PRC, annual appropriations should be made to the “reserve fund”. For foreign invested enterprises, the annual appropriation for the “reserve fund” cannot be less than 10% of after-tax profits until the aggregated appropriations reach 50% of the registered capital (as determined under PRC GAAP at each year-end). If the Company has accumulated loss from prior periods, the Company is able to use the current period net income after tax to offset against the accumulate loss.

Recent accounting pronouncements

In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The amendments in this update require disclosures about transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model to increase transparency about (1) the types of transactions, (2) the accounting for the transactions, and (3) the effect of the transactions on an entity’s financial statements. The amendments are effective for all entities within their scope, which excludes not-for-profit entities and employee benefit plans, for financial statements issued for annual periods beginning after December 15, 2021. Early application of the amendment is permitted. The Company will adopt ASU No. 2021-10 effective January 1, 2022.The Company’s adoption of this guidance does not have a material impact on its financial statements.

The Company believes that there were no other accounting standards recently issued that had or are expected to have a material impact on our financial position or results of operations.

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – ACCOUNTS RECEIVABLE, NET

Accounts receivable consist of the following:

	June 30, 2023			December 31, 2022
Accounts receivable	$	1,920,428		$	1,854,314
Less: Allowance for doubtful accounts		(291,916	)		(336,614	)
Total accounts receivable, net	$	1,628,512		$	1,517,700

Movement of allowance for doubtful accounts is as follows:

	June 30, 2023			December 31, 2022
Beginning balance	$	(336,614	)	$	(126,998	)
Write-off/(Addition)		33,924			(228,171	)
Currency re-alignment		10,774			18,555
Ending balance	$	(291,916	)	$	(336,614	)

NOTE 4 – OTHER RECIVABLES

Other receivable consist of the following:

	June 30, 2023		December 31, 2022
Loan receivable	$	203,187	$	155,556
Deposit		11,667		12,104
Others		15,495		21,458
Ending balance	$	230,349	$	189,118

Amount due from third parties are unsecured, non-interest bearing and repayable on demand.

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – INVENTORIES

Inventories consisted of the following:

	June 30, 2023		December 31, 2022

Raw materials	$	356,048	$	328,007
Goods in process		19,489		13,084
Finished goods		246,138		230,567
Total, net	$	621,675	$	571,658

NOTE 6 – PREPAYMENTS

The prepayment balance of $137,956 and $34,475 as of June 30, 2023 and December 31, 2022 mainly represents the advanced payment to the suppliers for business purpose, respectively.

NOTE 7 – PLANT AND EQUIPMENT

Plant and equipment at June 30, 2023 and December 31, 2022 consisted of:

	June 30, 2023			December 31, 2022
Building	$	1,290,828		$	1,387,914
Operating equipment		625,005			648,446
Vehicle		19,845			20,590
Office equipment		94,336			100,275
		2,030,014			2,157,225
Less: Accumulated depreciation		(387,025	)		(339,015	)
		1,642,989			1,818,210
Construction in progress		94,384			96,249
	$	1,737,373		$	1,914,459

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – PLANT AND EQUIPMENT (CONTINUED)

As of June 30, 2023 and June 30, 2022, depreciation expense amounted to $114,576 and $69,091, respectively. Depreciation is not taken during the period of construction or equipment installation. Upon completion of the installation of manufacturing equipment or any construction in progress, construction in progress balances will be classified to their respective property and equipment category.

The construction in progress of $94,384 and $96,249 as of June 30, 2023 and December 31, 2022 represents the investment in building a processing plant and warehouse.

NOTE 8 – INTANGIBLE ASSETS

Intangible assets consisted of the following:

	June 30,			December 31,
	2023			2022

Non-patented technology	$	69,196		$	71,792
System and software		6,128			6,357
Less: Accumulated amortization		(36,712	)		(33,804	)
	$	38,612		$	44,345

The Company invested in the development of a product tracking system design, detect and defend against counterfeit products. The Company’s original cost was $69,196 and $71,792 as of June 30, 2023 and December 31, 2022, respectively.

As of June 30, 2023 and June 30, 2022, amortization expenses of intangible assets were $4,308 and $4,071, respectively.

NOTE 9 – LONG-TERM LOANS

On February 5, 2021, the Company entered into a new unsecured loan agreement with Yichun Village Commercial Bank in the amount of $464,389, with a due date of February 4, 2024. The loan carried an annualized interest rate of 7%. As of June 30, 2023 and December 31, 2022, the outstanding amount of the loan payable was $415,179 and $430,750. As of June 30, 2023 and 2022, the Company recognized interest expenses of $13,518 and $16,362.

NOTE 10 – ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables consisted of the following:

	June 30,		December 31,
	2023		2022

Rental payable	$	185,902	$	426,558
Other payable		30,457		76,943
Amount due to third parties		386,796		182,773
Salary and related payables		87,650		146,967
Accrued expenses		140,703		240,942
Total	$	831,508	$	1,074,183

Amount due to third parties are obtained for working capital purposes.

Amount due to third parties are unsecured, non-interest bearing and repayable on demand.

Other payables relate to amount due to vendors for purchase of machineries and equipment not settled as of June 30, 2023 and December 31, 2022.

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – RELATED PARTY TRANSACTIONS

As of June 30, 2023 and December 31, 2022, the outstanding balances of nil and $54,562 were due to Mr. Keqi Li, the supervisor of the Company. These balances were advances made to the Company for general working capital purposes. The amounts are due on demand, non-interest bearing, and unsecured.

As of June 30, 2023 and December 31, 2022, the outstanding balance due to shareholders was $57,291 and $234,849, respectively.

NOTE 12 – CONCENTRATIONS

Customers Concentrations

The following table sets forth information as to each customer that accounted for 10% or more of the Company’s revenues as of June 30, 2023 and 2022.

	June 30, 2023				June 30, 2022
Customers	Amount $		%		Amount $		%
Jiangxi Zhensen Agricultural Technology Co., Ltd		877,456		24.02		1,080,418		30.45
Jiangxi Yebao Technology Co., Ltd		818,141		22.39		828,254		23.34
Hainan Yijing Agricultural Development Co., Ltd		627,424		17.17		-		-
Tonggu Sibo Agricultural Development Co., Ltd		531,092		14.54		-		-
Ganzhou Jinruisheng Ecological Agriculture Development Co., Ltd		488,878		13.38		-		-
Jiangxi Menglai Agricultural Development Co., Ltd		-		-		796,433		22.44

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – CONCENTRATIONS (CONTINUED)

Suppliers Concentrations

The following table sets forth information as to each supplier that accounted for 10% or more of the Company’s purchase as of June 30, 2023 and 2022.

	June 30, 2023				June 30, 2022
Suppliers	Amount $		%		Amount $		%
Bozhou Lifeng Manure Technology Co., Ltd		746,103		32.65		1,126,360		47.24
Yifeng Ronghua Carbon Industry Co., Ltd		438,739		19.20		-		-
Jiangxi Shanghe Ecological Agriculture Co., Ltd		344,585		15.08		-		-
Nanchang Mingrui Chemical Co., Ltd		309,225		13.53		-		-
Nanchang Fuying Plastic Industry Co., Ltd		267,054		11.69		-		-
Yuanzhou District Sanyi Chemical Products Sales Department		-		-		437,130		18.33

Credit Risks

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. Substantially all of the Company’s cash is maintained with state-owned banks within the PRC, and none of these deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts. A significant portion of the Company’s sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk with respect to trade accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk. As of June 30, 2023 and December 31, 2022, the Company’s cash balances by geographic area were as follows:

	June 30, 2023				December 31, 2022
United States	$	4,611	90.75	%	$	4,611	1.97	%
China		470	9.25	%		229,437	98.03	%
Total cash and cash equivalents	$	5,081	100	%	$	234,048	100	%

KENONGWO GROUP US, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – INCOME TAXES

The Company’s primary operations are located in the PRC. The Company is high tech enterprises are subject to corporate income tax at a reduced rate of 15%.

The following tables provide the reconciliation of the differences between the statutory and effective tax expenses for the six months ended June 30, 2023 and 2022:

	June 30, 2023			June 30, 2022
Income (Loss) before tax	$	656,901		$	247,491

PRC Statutory Tax at 15% Rate		98,535			37,124
Utilization of deferred tax benefits previously not recognized		(98,535	)		(37,124	)
Income tax	$	-		$	-

Accounting for Uncertainty in Income Taxes

The tax authority of the PRC government conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises complete their relevant tax filings. Therefore, the Company’s PRC entities’ tax filings results are subject to change. It is therefore uncertain as to whether the PRC tax authority may take different views about the Company’s PRC entities’ tax filings, which may lead to additional tax liabilities.

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 concluded that no provision for uncertainty in income taxes was necessary for the six months ended June 30, 2023 and 2022.

NOTE 14 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date of the issuance of the consolidated financial statements and no subsequent event is identified.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Business Overview

We primarily engage in researching, developing, manufacturing and selling bamboo charcoal biomass organic fertilizers, amino acid water-soluble fertilizers, selenium-rich foliage fertilizers and other types of fertilizers in the PRC through our subsidiary, Jiangxi Kenongwo Technology Co., Ltd. (“Jiangxi Kenongwo”), a company incorporated under the laws of the PRC.

We generated our revenue from the sales of our organic fertilizers. We currently have one integrated factory covering a land area of 143,590 square feet in Yichun City, Jiangxi Province, PRC to produce our organic fertilizers, which has been in operations since 2017. We plan to expand our production capacity and build an automatic and standardized production line.

We believe that our brand reputation and ability to tailor our products to meet the requirements of various regions of the PRC affords us a competitive advantage. We purchase the majority of our raw materials from suppliers located in the PRC and use suppliers that are located in close proximity to our manufacturing facilities, which helps us to control our cost of revenue.

Amidst the COVID-19 outbreak in 2020, our business operations were adversely impacted. In particular, the lockdown policy in China has caused delays in the logistics industry and consequently, the supply of our raw materials was impacted. In addition, the restrictions of face-to-face interactions have slowed down the process of our marketing, client meeting and new products launching activities. The spread of COVID-19 has been effectively controlled in China. People’s daily life and businesses’ operations started going to normalcy. As a result, we believe these negative impacts are temporary. However, there is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the economy of China and the rest of the world and, as such, the extent of the business disruption and the related financial impact cannot be reasonably estimated at this time.

China is the principal market for our products, which are primarily sold to our customers through distributors in over twenty provinces in China, including Jiangxi, Hunan, Hubei, Fujian, Jiangsu, Shanghai, Zhejiang, Sichuan, Chongqing, Guangdong, Hainan, Xinjiang, Guizhou, Anhui, Shandong, Shanxi, Shaanxi, Liaoning, Jilin, Heilongjiang, Yunnan and Guangxi provinces.

Critical Accounting Policies

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with US GAAP. Our financial statements reflect the selection and application of accounting policies that require management to make significant estimates and judgments. We believe the following critical accounting policies used in the preparation of our financial statements require significant judgments and estimates. For additional information relating to these and other accounting policies, see Note 2 to our financial statements included elsewhere in this report.

Basis of Presentation

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern as the Company’s net income is positive on June 30, 2023 and the Company is able to obtain financial support from shareholder to meet its short term liquidity shortage.

The Company plans to continue its expansion and investments, which will require continued improvements in revenue, net income, and cash flows.

Revenue Recognition

	●	identify the contract with a customer;

	●	identify the performance obligations in the contract;

	●	determine the transaction price;

	●	allocate the transaction price to performance obligations in the contract; and

	●	recognize revenue as the performance obligation is satisfied.

Results of Operations

Comparison of the Three months ended June 30, 2023 and 2022

	For the Three months ended June 30,						Variance
	2023			2022			Amount			%
	$			$			$
Revenues		1,535,042			1,654,237			(119,195	)		(7.21	)
Cost of revenues		1,112,454			1,303,451			(190,997	)		(14.65	)
Gross profit		422,588			350,786			71,802			20.47
Operating expenses:
Selling expenses		51,295			54,856			(3,561	)		(6.49	)
General and administrative expenses		154,994			152,377			2,617			1.72
Total operating expenses		206,289			207,233			(944	)		(0.46	)
Income from operations		216,299			143,553			72,746			50.68
Other income (expense):
Interest expense		(6,660	)		(8,007	)		1,347			(16.82	)
Other (expenses) income		(2,459	)		4,325			(6,784	)		(156.85	)
Total other expenses		(9,119	)		(3,682	)		(5,437	)		147.69
Income before income taxes		207,180			139,871			67,309			48.12
Income taxes		-			-			-			-
Net income		207,180			139,871			67,309			48.12

Revenue

For the three months ended June 30, 2023, our total revenue was $1,535,042, representing a decrease of 7.21% compared to $1,654,237 for the same period in 2022. This decrease was mainly due to the change in exchange rate, actually the amount of RMB was increased, an increase in demand of our products after the Company developed and obtained more customers.

The Company’s disaggregate revenue streams are summarized as follows:

	For the Three months ended June 30,
	2023		2022
Revenues – Solid organic fertilizers	$	1,535,042	$	1,654,237
Total revenues	$	1,535,042	$	1,654,237

Cost of revenues

Cost of revenues for the fertilizers was $1,112,454 and $1,303,451 for the three months ended June 30, 2023 and 2022, respectively, a decrease $0.19 million. The small decrease in cost of sales was due to the liberalization of the logistics industry the Company’s raw material costs have also been reduced.

The Company’s disaggregate cost of revenues streams are summarized as follows:

	For the Three months ended June 30,
	2023		2022
Cost of revenues – Bamboo charcoal biomass organic fertilizers	$	1,112,454	$	1,303,451
Total cost of revenues	$	1,112,454	$	1,303,451

Gross Profit

Our gross profit was $422,588 and $350,786 with gross margin of 27.53% and 21.21%, for the three months ended June 30, 2023 and 2022, respectively. The increase in gross profit was due to cost of sales was reduced.

Selling Expenses

Our selling expenses were $51,295 for the three months ended June 30, 2023, representing a decrease of $3,561 or 6.49% compared to $54,856 for the three months ended June 30, 2022. Selling expenses are not much different compared to the same period of last fiscal year.

General and Administrative Expenses

General and administrative expenses increased by $2,617, or 1.72% from $152,377 for the three months ended June 30, 2022 to $154,994 for the same period in 2023.

Research and Development (“R&D”) Expenses

Research and development expenses include salaries and other compensation-related expenses paid to the Company’s research and product development personnel while they are working on R&D projects, as well as raw materials used for the R&D projects. R&D expenses incurred by the Company are included in the general and administrative expenses and totaled $37,437 and $40,955 for the three months ended June 30, 2023 and 2022, respectively.

Net Income

Our net income was $207,180 and $139,871 for the three months ended June 30, 2023 and 2022, respectively, representing an increase of $67,309. It was due to the increase in revenues, as discussed above.

Comparison of the Six months ended June 30, 2023 and 2022

	For the Six months ended June 30,						Variance
	2023			2022			Amount			%
	$			$			$
Revenues		3,653,564			3,548,414			105,150			2.96
Cost of revenues		2,540,897			2,731,878			(190,981	)		(6.99	)
Gross profit		1,112,667			816,536			296,131			36.27
Operating expenses:
Selling expenses		113,816			118,803			(4,987	)		(4.20	)
General and administrative expenses		327,108			437,576			(110,468	)		(25.25	)
Total operating expenses		440,924			556,379			(115,455	)		(20.75	)
Income from operations		671,743			260,157			411,586			158.21
Other income (expense):
Interest expense		(13,518	)		(16,362	)		2,844			(17.38	)
Other (expenses) income		(1,324	)		3,696			(5,020	)		(135.82	)
Total other expense		(14,842	)		(12,666	)		(2,176	)		17.18
Income before income taxes		656,901			247,491			409,410			165.42
Income taxes		-			-			-			-
Net income		656,901			247,491			409,410			165.42

Revenue

For the six months ended June 30, 2023, our total revenue was $3,653,564, representing an increase of 2.96% compared to $3,548,414 for the same period in 2022. This increase was mainly due to an increase in demand of our products after the Company developed and obtained more customers.

The Company’s disaggregate revenue streams are summarized as follows:

	For the Six months ended June 30,
	2023		2022
Revenues – Solid organic fertilizers	$	3,653,564	$	3,548,414
Total revenues	$	3,653,564	$	3,548,414

Cost of revenues

Cost of revenues for the fertilizers was $2,540,897 and $2,731,878 for the six months ended June 30, 2023 and 2022, respectively, a decrease $0.19 million. The small decrease in cost of sales was due to the liberalization of the logistics industry the Company’s raw material costs have also been reduced.

The Company’s disaggregate cost of revenues streams are summarized as follows:

	For the Six months ended June 30,
	2023		2022
Cost of revenues – Bamboo charcoal biomass organic fertilizers	$	2,540,897	$	2,731,878
Total cost of revenues	$	2,540,897	$	2,731,878

Gross Profit

Our gross profit was $1,112,667 and $816,536 with gross margin of 30.45% and 23.01%, for the six months ended June 30, 2023 and 2022, respectively. The increase in gross profit was due to cost of sales was reduced.

Selling Expenses

Our selling expenses were $113,816 for the six months ended June 30, 2023, representing a decrease of $4,987 or 4.20% compared to $118,803 for the six months ended June 30, 2022. Selling expenses are not much different compared to the same period of last fiscal year.

General and Administrative Expenses

General and administrative expenses decreased by $110,468, or 25.25% from $437,576 for the six months ended June 30, 2022 to $327,108 for the same period in 2023. This decrease was mainly due to gift, meal, and conference expenses was reduced.

Research and Development (“R&D”) Expenses

Research and development expenses include salaries and other compensation-related expenses paid to the Company’s research and product development personnel while they are working on R&D projects, as well as raw materials used for the R&D projects. R&D expenses incurred by the Company are included in the general and administrative expenses and totaled $74,069 and $82,610 for the six months ended June 30, 2023 and 2022, respectively.

Net Income

Our net income was $656,901 and $247,491 for the six months ended June 30, 2023 and 2022, respectively, representing an increase of $409,410. It was due to the increase in revenues, as discussed above.

Liquidity and Capital Resources

Our working capital gain was $958,801 and $229,703 at the six months ended June 30, 2023 and December 31, 2022, respectively.

We have respectively financed our operations over the six months ended June 30, 2023 and 2022 primarily through proceeds from advances from related parties and the long-term loans.

The components of cash flows are discussed below:

	For the Six months ended June 30,
	2023			2022
Net cash provided by / (used in) operating activities	$	10,169		$	(494,519	)
Net cash used in investing activities		(4,980)			(44,291	)
Net cash (used in)/provided by financing activities		(235,309)			512,401
Exchange rate effect on cash		1,153			26,625
Net cash (outflow) inflow	$	(228,967	)	$	216

Cash used in Operating Activities

For the six months ended June 30, 2023, net cash provided by operating activities was $10,169, which consisted primarily of net income of $656,901, which was adjusted by depreciation and amortization and loss on disposal of PPE of $118,884 and $2,906. The Company had a decrease of $374,306 in account payables and accrued payables, a decrease of $172,769 in accounts receivable, a decrease of $109,211 in prepayments to the suppliers. The Company incurred a decrease in inventories of $73,709 and a decrease in other receivable of $50,125.

For the six months ended June 30, 2022, net cash used in operating activities was $494,519, which consisted primarily of net income of $247,491, which was adjusted by depreciation and amortization of $73,488. The Company had a decrease of $142,753 in account payables and accrued payables, an increase of $992,424 in accounts receivable, a decrease of $116,664 in prepayments to the suppliers, which were offset by an increase of $24,864 in inventories and an increase in other receivable of $58,052.

Cash used in Investing Activities

Net cash used in investing activities was $4,980 for the six months ended June 30, 2023.

Net cash used in investing activities was $44,291 for the six months ended June 30, 2022. The activities consisted of our investments of $42,525 in purchasing plant and equipment and an adjustment of $1,746 of intangible assets due to currency exchange effect.

Cash Provided by Financing Activities

Net cash used in financing activities was $235,309 for the six months ended June 30, 2023. During this period, Repayment to director and related parties of $235,309.

Net cash provided by financing activities was $512,401 for the six months ended June 30, 2022. During this period, cash provided by financing activities mainly included proceeds from related parties of $512,401.

Off-balance Sheet Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to its shares and classified as shareholder’s equity or that are not reflected in its consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Liquidity Risk

We are also exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and liquidity to meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, we will turn to other financial institutions and third parties to obtain short-term funding to meet the liquidity shortage.

Inflation Risk

We are also exposed to inflation risk and inflationary factors, such as increases in raw material and overhead costs, which could impair our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of revenue if the selling prices of our products do not increase with such increased costs.

Foreign Currency Risk

All of our operating activities and a significant portion of our assets and liabilities are denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the Peoples’ Bank of China (“PBOC”) or other authorized financial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts. The value of RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2023, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, our disclosure controls and procedures were not effective due to the continuing material weakness in our internal control over financial reporting.

The material weakness and significant deficiency identified by our management as of June 30, 2023 relates to the ability of the Company to record transactions and provide disclosures in accordance with GAAP. We did not have sufficient and skilled accounting personnel with an appropriate level of experience in the application of GAAP commensurate with our financial reporting requirements. For example, our staff members do not hold licenses such as Certified Public Accountant or Certified Management Accountant in the United States, have not attended United States institutions for training as accountants, and have not attended extended educational programs that would provide sufficient relevant education relating to GAAP. Our staff will require substantial training to meet the demands of a U.S. public company and our staff’s understanding of the requirements of GAAP-based reporting is inadequate.

We plan to provide GAAP training sessions to our accounting team. The training sessions will be organized to help our corporate accounting team gain experience in GAAP reporting and to enhance their awareness of new and emerging pronouncements with potential impact over our financial reporting. We plan to continue to recruit experienced and professional accounting and financial personnel and participate in educational seminars, tutorials, and conferences and employ more qualified accounting staff in future.

Changes in Internal Controls over Financial Reporting.

During the six months ended June 30, 2023, there were no changes in our internal control over financial reporting identified in connection with the evaluation performed during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations over Internal Controls.

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:

	(i)	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

	(ii)	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

	(iii)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls will prevent or detect all errors and all fraud. 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. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS

The following exhibits are included as part of this report by reference:

31.1		Certification of Principal Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
31.2		Certification of Principal Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
32.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	KENONGWO GROUP US, INC.

Date: August 16, 2023	By:	/s/ Jianjun Zhong
		Name:	Jianjun Zhong
		Title:	President and Chief Executive Officer
			(principal executive officer)

Date: August 16, 2023	By:	/s/ Jianjun Zhong
		Name:	Jianjun Zhong
		Title:	Chief Financial Officer
			(principal financial officer and principal accounting officer)

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Kenongwo Group US, Inc. 10-Q