The accompanying notes are an integral part of these consolidated
financial statements.
The accompanying notes are an integral part of these consolidated
financial statements.
The accompanying notes are an integral
part of these consolidated financial statements.
The accompanying notes are an integral
part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
NOTE 1 – ORGANIZATION AND DESCRIPTION
OF BUSINESS
China Green Agriculture, Inc. (the “Company”,
“Parent Company” or “Green Nevada”), through its subsidiaries, is engaged in the research, development,
production, distribution and sale of humic acid-based compound fertilizer, compound fertilizer, blended fertilizer, organic compound
fertilizer, slow-release fertilizers, highly-concentrated water-soluble fertilizers and mixed organic-inorganic compound fertilizer
and the development, production and distribution of agricultural products.
Unless the context indicates otherwise,
as used in this Report, the following are the references herein of all the subsidiaries of the Company (i) Green Agriculture Holding
Corporation (“Green New Jersey”), a wholly-owned subsidiary of Green Nevada, incorporated in the State of New Jersey;
(ii) Shaanxi TechTeam Jinong Humic Acid Product Co., Ltd. (“Jinong”), a wholly-owned subsidiary of Green New Jersey
organized under the laws of the PRC; (iii) Xi’an Hu County Yuxing Agriculture Technology Development Co., Ltd. (“Yuxing”),
a Variable Interest Entity (“VIE”) in the in the PRC controlled by Jinong through a series of contractual agreements;
(iv) Beijing Gufeng Chemical Products Co., Ltd., a wholly-owned subsidiary of Jinong in the PRC (“Gufeng”), and (v)
Beijing Tianjuyuan Fertilizer Co., Ltd., Gufeng’s wholly-owned subsidiary in the PRC (“Tianjuyuan”).
On June 30, 2016 the Company, through
its wholly-owned subsidiary Jinong, entered into strategic acquisition agreements and a series of contractual agreements with
the shareholders of the following six companies that are organized under the laws of the PRC and would be deemed VIEs: Shaanxi
Lishijie Agrochemical Co., Ltd. (“Lishijie”), Songyuan Jinyangguang Sannong Service Co., Ltd. (“Jinyangguang”),
Shenqiu County Zhenbai Agriculture Co., Ltd. (“Zhenbai”), Weinan City Linwei District Wangtian Agricultural Materials
Co., Ltd. (“Wangtian”), Aksu Xindeguo Agricultural Materials Co., Ltd. (“Xindeguo”), and Xinjiang Xinyulei
Eco-agriculture Science and Technology co., Ltd. (“Xinyulei”). On January 1, 2017, the Company, through its wholly-owned
subsidiary Jinong, entered into strategic acquisition agreements and a series of contractual agreements with the shareholders
of the following two companies that are organized under the laws of the PRC and would be deemed VIEs, Sunwu County Xiangrong Agricultural
Materials Co., Ltd. (“Xiangrong”), and Anhui Fengnong Seed Co., Ltd. (“Fengnong”).
On November 30, 2017, the Company, through
its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements
with the shareholders of Zhenbai.
Yuxing, Lishijie, Jinyangguang, Wangtian,
Xindeguo, Xinyulei, Xiangrong and Fengnong may also collectively be referred to as the “the VIE Companies”; Lishijie,
Jinyangguang, Wangtian, Xindeguo, Xinyulei, Xiangrong and Fengnong may also collectively be referred to as “the sales VIEs”
or “the sales VIE companies”.
CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2020
The Company’s current corporate structure as of is set
forth in the diagram below:
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
NOTE
2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principle
of consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Green New
Jersey, Jinong, Gufeng, Tianjuyuan, and the VIE Companies. All significant inter-company accounts and transactions have been eliminated
in consolidation.
Effective
June 16, 2013, Yuxing was converted from being a wholly-owned foreign enterprise 100% owned by Jinong to a domestic enterprise
100% owned one natural person, who is not affiliated to the Company (“Yuxing’s Owner”). Effective the same day,
Yuxing’s Owner entered into a series of contractual agreements with Jinong pursuant to which Yuxing became the VIE of Jinong.
VIE
assessment
A
VIE is an entity (1) that has total equity at risk that is not sufficient to finance its activities without additional subordinated
financial support from other entities, (2) where the group of equity holders does not have the power to direct the activities
of the entity that most significantly impact the entity’s economic performance, or the obligation to absorb the entity’s
expected losses or the right to receive the entity’s expected residual returns, or both, or (3) where the voting rights
of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive
the expected residual returns of the entity, or both, and substantially all of the entity’s activities either involve or
are conducted on behalf of an investor that has disproportionately few voting rights. In order to determine if an entity is considered
a VIE, the Company first performs a qualitative analysis, which requires certain subjective decisions regarding its assessments,
including, but not limited to, the design of the entity, the variability that the entity was designed to create and pass along
to its interest holders, the rights of the parties, and the purpose of the arrangement. If the Company cannot conclude after a
qualitative analysis whether an entity is a VIE, it performs a quantitative analysis. The qualitative analysis considered the
design of the entity, the risks that cause variability, the purpose for which the entity was created, and the variability that
the entity was designed to pass along to its variable interest holders. When the primary beneficiary could not be identified through
a qualitative analysis, we used internal cash flow models to compute and allocate expected losses or expected residual returns
to each variable interest holder based upon the relative contractual rights and preferences of each interest holder in the VIE’s
capital structure.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
Use
of estimates
The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the amount 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 and outcomes
may differ from management’s estimates and assumptions due to risks and uncertainties, including uncertainty in the current
economic environment due to the recent outbreak of a novel strain of the COVID-19.
Leases
The Company determines if an arrangement is a lease or contains
a lease at inception. Operating lease right-of-use assets and lease liabilities are recognized at commencement based on the present
value of lease payments over the lease term. As the implicit rate is typically not readily determinable in the Company’s
lease agreements, the Company uses its incremental borrowing rate as of the lease commencement date to determine the present value
of the lease payments. The incremental borrowing rate is based on the Company’s specific rate of interest to borrow on a
collateralized basis, over a similar term and in a similar economic environment as the lease. Lease expense is recognized on a
straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recognized on the balance sheet;
the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Additionally, the Company accounts
for lease and non-lease components as a single lease component for its identified asset classes. As of June 30, 2020, the Company
does not have any material leases for the implementation of ASC 842.
Cash
and cash equivalents and concentration of cash
For statement of cash flows purposes, the
Company considers all cash on hand and in banks, certificates of deposit with state owned banks in the PRC and banks in the United
States, and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
The Company maintains large sums of cash in three major banks in China. The aggregate cash in such accounts and on hand as of June
30, 2020 and 2019 was $11,866,308 and $72,178,448, respectively. There is no insurance securing these deposits in China. In addition,
the Company also had $68,470 and $81,356 in cash in two banks in the United States as of June 30, 2020 and 2019, respectively.
Cash overdraft as of balance sheet date will be reflected as liabilities in the balance sheet. 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.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
Accounts
receivable
Management regularly reviews the composition
of accounts receivable and analyzes customer credit worthiness, current economic trends and changes in customer payment patterns
to evaluate the collectability of accounts receivable at each year-end. Accounts considered uncollectible are provisioned for written
off based upon management’s assessment. As of June 30, 2020, and 2019, the Company had accounts receivable of $105,693,326
and $145,190,160, net of allowance for doubtful accounts of $38,466,200 and $33,515,410, respectively. The impact of COVID-19 caused
the difficulty of accounts receivable collection in the fiscal year 2020 as numerous distributors encountered significant difficulties
and/or hardships in their businesses amid the pandemic. The company recorded bad debt expense in the amount of $ 118 million and
$10 million for the fiscal year ended June 30, 2020 and the fiscal year ended June 30, 2019, respectively. The Company adopts
no policy to accept product returns post to the sales delivery.
Inventories
Inventory
is valued at the lower of cost (determined on a weighted average basis) or market. Inventories consist of raw materials, work
in process, finished goods and packaging materials. The Company reviews its inventories regularly for possible obsolete goods
and establishes reserves when determined necessary. As of June 30, 2020 and 2019 the Company had no reserve for obsolete goods.
Property,
plant and equipment
Property,
plant and equipment are recorded at cost. Gains or losses on disposals are reflected as gain or loss in the year of disposal.
The cost of improvements that extend the life of plant, property, and equipment are capitalized. These capitalized costs may include
structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.
Depreciation
for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets:
|
|
Estimated
Useful Life
|
Building
|
|
10-25 years
|
Agricultural assets
|
|
8 years
|
Machinery and equipment
|
|
5-15 years
|
Vehicles
|
|
3-5 years
|
Construction
in Progress
Construction
in progress represents the costs incurred relating to the construction of buildings or new additions to the Company’s plant
facilities. Costs classified to construction in progress include all costs of obtaining the asset and bringing it to the location
and condition necessary for its intended use. No depreciation is provided for construction in progress until the assets are completed
and are placed into service. Interest incurred during construction is capitalized into construction in progress.
Long-Lived
Assets
The Company tests long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated
undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists,
an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. As of June 30, 2020 and
2019 the Company determined that there were no impairments of its long-lived assets.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
Intangible
Assets
The Company records intangible assets acquired
individually or as part of a group at fair value. Intangible assets with definitive lives are amortized over the useful life of
the intangible asset, which is the period over which the asset is expected to contribute directly or indirectly to the entity’s
future cash flows. The Company evaluates intangible assets for impairment at least annually and more often whenever events or changes
in circumstances indicate that the carrying value may not be recoverable. Whenever any such impairment exists, an impairment loss
will be recognized for the amount by which the carrying value exceeds the fair value. The Company has not recorded impairment of
intangible assets as of June 30, 2020 and 2019, respectively.
Goodwill
We test goodwill for impairment annually, or when events and
circumstances change that would indicate the carrying amount may not be recoverable. ASC 350, “Intangibles – Goodwill
and Other,” permits the assessment of qualitative factors to determine whether events and circumstances lead to the conclusion
that it is necessary to perform the two-step quantitative goodwill impairment test required under ASC 350. ASC 350 also allows
the option to skip the qualitative assessment and proceed directly to a quantitative assessment.
Under the first step, the fair value of the reporting unit is
compared with its carrying value including goodwill. If the fair value of the reporting unit exceeds its carrying value, step two
does not need to be performed. If the fair value of the reporting unit is less than its carrying value, an indication of goodwill
impairment exists for the reporting unit and the enterprise must perform step two of the impairment test. Under step two, an impairment
loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of
that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner
comparable to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting
unit goodwill. As of June 30, 2020, and 2019, the Company performed the required impairment review which resulted in impairment
adjustment with amount of $607,677 in 2020 and no impairment adjustment in 2019. The impairment is reported in General and administrative
expenses.
The
COVID-19 pandemic events will continue to evolve and the effects on our businesses may differ from what we currently estimate.
If the effects prove to be worse than is reflected in our current estimates, additional goodwill or indefinite-lived intangible
asset impairment charges could be required.
Summary
of changes in goodwill by reporting segments is as follows:
|
|
Balance at
|
|
|
|
|
|
Foreign
|
|
|
Balance at
|
|
|
|
June 30,
|
|
|
Additions
|
|
|
Currency
|
|
|
June 30,
|
|
Segment
|
|
2019
|
|
|
/Deletion
|
|
|
Adjustment
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gufeng
|
|
$
|
4,665,642
|
|
|
|
-
|
|
|
$
|
(131,381
|
)
|
|
|
4,534,261
|
|
Acquisition of VIE Companies
|
|
|
3,208,779
|
|
|
|
(607,677)
|
|
|
|
(90,357
|
)
|
|
|
2,510,745
|
|
|
|
$
|
7,874,421
|
|
|
$
|
(607,677)
|
|
|
$
|
(221,738
|
)
|
|
$
|
7,045,006
|
|
Fair
Value Measurement and Disclosures
Our
accounting for Fair Value Measurement 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. This topic also establishes a fair value hierarchy
which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy
distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable
inputs). The hierarchy consists of three levels:
Level
one — Quoted market prices in active markets for identical assets or liabilities;
Level
two — Inputs other than level one inputs that are either directly or indirectly observable; and
Level
three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect
those assumptions that a market participant would use.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
Determining
which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy
disclosures each quarter.
The
following table presents the Company’s assets and liabilities required to be reflected within the fair value hierarchy as
of June 30, 2020.
|
|
Fair Value
|
|
|
|
|
|
|
As of
June 30,
|
|
|
Fair Value Measurements at
June 30, 2020
|
|
Description
|
|
2020
|
|
|
Using Fair Value Hierarchy
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Derivative liability
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The following table presents the Company’s
assets and liabilities required to be reflected within the fair value hierarchy as of June 30, 2019.
|
|
Fair Value
|
|
|
Fair Value Measurements at
|
|
|
|
As of
June 30,
|
|
|
June 30,
2019
|
|
Description
|
|
2019
|
|
|
Using Fair Value Hierarchy
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Derivative liability
|
|
$
|
18,162
|
|
|
$
|
-
|
|
|
$
|
18,162
|
|
|
$
|
-
|
|
The
carrying values of cash and cash equivalents, trade and other receivables, trade and other payables approximate their fair values
due to the short maturities of these instruments.
Derivative
financial instruments
The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify
as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is
initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in
the statements of operations. The Company uses a binomial option pricing model to value the derivative instruments. The classification
of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at
the end of each reporting period.
As of June 30, 2020, there is no derivative
financial instruments. The only derivative financial instrument is the variable conversion feature embedded in the convertible
notes payable (See Note 10). As of June 30, 2020, all convertible notes are matured and paid. Therefore, the fair value of derivative
liability is 0 as of June 30, 2020.
As of June 30, 2019, the only derivative
financial instrument is the variable conversion feature embedded in the convertible notes payable (See Note 10). The fair value
of the embedded conversion of $18,162 is recorded as a derivative liability on June 30, 2019. The fair value was determined using
a binomial option pricing model with the following assumptions:
Risk-free rate
|
|
|
3.1
|
%
|
Volatility
|
|
|
214.9
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
Country risk premium
|
|
|
90
|
%
|
Liquidity risk premium
|
|
|
3.0
|
%
|
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
Revenue
recognition
The
Company adopted Accounting Standards Codification (“ASC”) 606. ASC 606, Revenue from Contracts with Customers, establishes
principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the
entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue
to depict the transfer of services to customers in an amount that reflects the consideration that it expects to be entitled to
receive in exchange for those services recognized as performance obligations are satisfied.
The
Company has assessed the impact of the guidance by performing the following five steps analysis:
Step
1: Identify the contract
Step
2: Identify the performance obligations
Step
3: Determine the transaction price
Step
4: Allocate the transaction price
Step
5: Recognize revenue
Based
on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current
revenue streams in scope of Topic 606 and therefore there were no material changes to the Company’s consolidated financial
statements upon adoption of ASC 606.
Sales revenue is recognized on the date of
shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other
significant obligations of the Company exist, and collectability is reasonably assured.
The
Company’s revenue consists of invoiced value of goods, net of a value-added tax (VAT). No product return or sales discount
allowance are made as products delivered and accepted by customers are not returnable and sales discounts are not granted after
products are delivered.
Customer
deposits
Payments
received before all the relevant criteria for revenue recognition are satisfied are recorded as customer deposits. When all revenue
recognition criteria are met, the customer deposits are recognized as revenue. As of June 30, 2020, and 2019, the Company had
customer deposits of $7,342,590 and $6,514,619, respectively.
Stock-Based
Compensation
The costs of all employee stock option, as
well as other equity-based compensation arrangements, are reflected in the consolidated financial statements based on the estimated
fair value of the awards on the grant date. That cost is recognized over the period during which an employee is required to provide
service in exchange for the award—the requisite service period (usually the vesting period). Stock compensation for stock
granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments
issued, whichever is more reliably measured.
Income
taxes
We
account for uncertain tax positions in accordance with Accounting Standards Codification, or ASC, 740, “Income Taxes.”
The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous.
As such, we are required to make many subjective assumptions and judgments regarding our income tax exposures. Interpretations
of, and guidance surrounding, income tax laws and regulations change over time. Changes in our subjective assumptions and judgments
can materially affect amounts recognized in the consolidated balance sheets and statements of income. See Note 11, “Taxes
Payable,” of the Notes to Consolidated Financial Statements for additional detail on our uncertain tax positions and further
information regarding ASC 740.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
Foreign
currency translation
The
reporting currency of the Company is the US dollar. The functional currency of the Company and Green New Jersey is the US dollar.
The functional currency of the Chinese subsidiaries is the Chinese Yuan or Renminbi (“RMB”). For the subsidiaries
whose functional currencies are other than the US dollar, all asset and liability accounts were translated at the exchange rate
on the balance sheet date; stockholders’ equity is translated at the historical rates and items in the income statement
and cash flow statements are translated at the average rate in each applicable period. Translation adjustments resulting from
this process are included in accumulated other comprehensive income in the statement of shareholders’ equity. The resulting
translation gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the
functional currency is included in the results of operations as incurred.
Segment
reporting
The
Company utilizes the “management approach” model for segment reporting. The management approach model is based on
the way a company’s management organizes segments within the company for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography, legal structure, management structure, or any other way management
disaggregates a company.
As
of June 30, 2020, the Company, through its subsidiaries is engaged into four main business segments based on location and product:
Jinong (fertilizer production), Gufeng (fertilizer production) and Yuxing (agricultural products production) and the seven sales
VIEs that the Company acquired on June 30, 2016 and January 1, 2017. As of June 30, 2020, the Company maintained four main business
segments.
Fair
values of financial instruments
Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Assets and liabilities measured at fair value are categorized based on whether the inputs
are observable in the market and the degree that the inputs are observable. The categorization of financial assets and liabilities
within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The
Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, other receivables,
advances to suppliers, accounts payable, other payables, tax payable, and related party advances and borrowings.
As
of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying
values as presented on the balance sheets. This is attributed to the short maturities of the instruments and that interest rates
on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at
respective balance sheet dates.
Statement
of cash flows
The
Company’s cash flows from operations are calculated based on the local currencies. As a result, amounts related to assets
and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on
the balance sheets.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
Earnings
per share
Basic
earnings per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted
earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential
common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding
stock options and stock awards.
The
components of basic and diluted earnings per share consist of the following:
|
|
Years Ended June 30,
|
|
|
2020
|
|
2019
|
Net Income for Basic Earnings Per Share
|
|
$
|
(136,752,136
|
)
|
|
$
|
11,590,395
|
|
Basic Weighted Average Number of Shares
|
|
|
5,619,788
|
|
|
|
3,388,529
|
|
Net Income Per Share – Basic
|
|
$
|
(24.33
|
)
|
|
$
|
3.42
|
|
Net Income for Diluted Earnings Per Share
|
|
$
|
(136,752,136
|
)
|
|
$
|
11,590,395
|
|
Diluted Weighted Average Number of Shares
|
|
|
5,619,788
|
|
|
|
3,388,529
|
|
Net Income Per Share – Diluted
|
|
$
|
(24.33
|
)
|
|
$
|
3.42
|
|
Reclassification
Certain
reclassifications have been made to the prior year consolidated financial statements to conform to the 2019 consolidated financial
statement presentation. Such reclassifications did not affect total revenues, operating income or net income or cash flows as
previously reported.
Recent
accounting pronouncements
In August 2018, the FASB issued ASU 2018-13, “Changes
to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value
measurements from Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement.” ASU 2018-13
is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The
effect of the adoption of ASU 2018-13 will be a change to the disclosure requirements for certain fair value measurements.
In August 2018, the FASB issued ASU 2018-15,
“Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.”
ASU 2018-15 requires customers in a cloud computing arrangement that is a service contract to follow the internal-use software
guidance in ASC 350-40, “Intangibles—Goodwill and Other—Internal-Use Software,” to determine which implementation
costs may be capitalized. ASU 2018-15 is effective for interim and annual reporting periods beginning after December 15, 2019,
with early adoption permitted. The amendments in ASU 2018-15 can be applied either retrospectively or prospectively to all implementation
costs incurred after the date of adoption. The Company does not expect the adoption of ASU 2018-15 to have a material impact on
its consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12,
“Simplifying the Accounting for Income Taxes.” ASU 2019-12 eliminates certain exceptions within ASC 740, “Income
Taxes,” and clarifies certain aspects of ASC 740 to promote consistency among reporting entities. ASU 2019-12 is effective
for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted. Most amendments within
the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or
modified retrospective basis. The Company is evaluating the impact that adoption of ASU 2019-12 will have on its consolidated financial
statements.
NOTE 3 – GOING CERCERN
The Company’s financial
statements are prepared assuming that the Company will continue as a going concern. The Company has incurred operating losses
and had negative operating cash flows in the fiscal year 2020 and may continue to incur operating losses and generate
negative cash flows as the Company implements its future business plan. If the situation exists, there could be substantial
doubt about the Company's ability to continue as going concern.
To meet its working capital needs through
the next twelve months and to fund the growth of the Company, the Company may consider plans to raise additional funds through
the issuance of equity or borrow loan from local bank. The ability of the Company to continue as a going concern is dependent upon
its ability to successfully execute its new business strategy and eventually attain profitable operations.
The accompanying financial statements
do not include any adjustments to reflect the recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue as going concern.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
NOTE
4 – INVENTORIES
Inventories
consisted of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Raw materials
|
|
$
|
43,177,071
|
|
|
$
|
102,268,620
|
|
Supplies and packing materials
|
|
$
|
465,746
|
|
|
$
|
496,138
|
|
Work in progress
|
|
$
|
374,756
|
|
|
$
|
390,708
|
|
Finished goods
|
|
$
|
54,903,508
|
|
|
$
|
58,858,423
|
|
Total
|
|
$
|
98,921,081
|
|
|
$
|
162,013,889
|
|
During
the year ended June 30, 2020, the Company sold compound fertilizers (finished goods) to certain parties at market price, and purchased
equivalent amount of simple fertilizers (raw material) from the same parties also at market price. The simple fertilizers purchased,
along with other materials were used in the Company’s production facility to manufacture compound fertilizers. While nonmonetary,
the sales and purchase transactions were consummated independently under separate agreements at different times, and measured
at the prevailing market value. The total amount of nonmonetary sales and purchases amounted to $43,537,582 during the year ended
June 30, 2020. No gain or loss incurred as the result of the nonmonetary transactions.
For the fiscal year ended June 30, 2020,
total inventories decreased $63,092,808, or 38.9%, to $98,921,081 from $162,013,889 for the fiscal year ended June 30, 2019. This
decrease was mainly due to the decrease in raw materials which is from $102,268,620 to $43,177,071. In the second and third quarters
of fiscal year 2020, the bad weather lasted a long time in Pinggu, which is a mountainous area where Gufeng locates. The frequent
rainfall and snowfall caused the damaged of Gufeng’s warehouse. As a result, the inventories were seriously damaged. After
comprehensive consideration and evaluation, the company confirmed the loss of $39,643,198 of raw materials in the fiscal year 2020. This
impairment loss is reported in the General and Administrative expenses.
NOTE
5 – PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment consisted of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Building and improvements
|
|
$
|
37,799,650
|
|
|
$
|
38,877,508
|
|
Auto
|
|
|
3,207,619
|
|
|
|
3,391,040
|
|
Machinery and equipment
|
|
|
17,601,852
|
|
|
|
18,125,539
|
|
Agriculture assets
|
|
|
-
|
|
|
|
741,044
|
|
Total property, plant and equipment
|
|
|
58,609,121
|
|
|
|
61,135,130
|
|
Less: accumulated depreciation
|
|
|
(35,680,787
|
)
|
|
|
(34,465,192
|
)
|
Total
|
|
$
|
22,928,334
|
|
|
$
|
26,669,938
|
|
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
NOTE
6 – INTANGIBLE ASSETS
Intangible
assets consisted of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Land use rights, net
|
|
$
|
8,850,905
|
|
|
$
|
9,341,327
|
|
Technology patent, net
|
|
|
2,069
|
|
|
|
3,004
|
|
Customer relationships, net
|
|
|
908,933
|
|
|
|
2,174,564
|
|
Non-compete agreement
|
|
|
230,669
|
|
|
|
436,634
|
|
Trademarks
|
|
|
5,759,049
|
|
|
|
5,925,920
|
|
Total
|
|
$
|
15,751,625
|
|
|
$
|
17,881,449
|
|
LAND
USE RIGHT
On
September 25, 2009, Yuxing was granted a land use right for approximately 88 acres (353,000 square meters or 3.8 million square
feet) by the People’s Government and Land & Resources Bureau of Hu County, Xi’an, Shaanxi Province. The fair value
of the related intangible asset was determined to be the respective cost of RMB73,184,895 (or $10,355,663). The intangible asset
is being amortized over the grant period of 50 years using the straight-line method.
On
August 13, 2003, Tianjuyuan was granted a certificate of Land Use Right for a parcel of land of approximately 11 acres (42,726
square meters or 459,898 square feet) at Ping Gu District, Beijing. The purchase cost was recorded at RMB1, 045,950 (or $148,002).
The intangible asset is being amortized over the grant period of 50 years.
On
August 16, 2001, Jinong received a land use right as a contribution from a shareholder, which was granted by the People’s
Government and Land& Resources Bureau of Yangling District, Shaanxi Province. The fair value of the related intangible asset
at the time of the contribution was determined to be RMB7,285,099 (or $1,030,842). The intangible asset is being amortized
over the grant period of 50 years.
The
Land Use Rights consisted of the following:
|
|
June 30,
2019
|
|
|
Foreign Currency Adjustment
|
|
|
Amortization
|
|
|
June 30,
2020
|
Land use rights
|
|
$
|
11,868,721
|
|
|
|
(334,215
|
)
|
|
|
|
|
|
11,534,506
|
Less: accumulated amortization
|
|
|
(2,527,394
|
)
|
|
|
|
|
|
|
(156,207
|
)
|
|
(2,683,601)
|
Total land use rights, net
|
|
$
|
9,341,327
|
|
|
|
(334,215
|
)
|
|
|
(156,207
|
)
|
|
8,850,905
|
TECHNOLOGY
PATENT
On
August 16, 2001, Jinong was issued a technology patent related to a proprietary formula used in the production of humid acid.
The fair value of the related intangible asset was determined to be the respective cost of RMB 5,875,068 (or $831,322) and is
being amortized over the patent period of 10 years using the straight-line method. This technology patent has been fully amortized.
On
July 2, 2010, the Company acquired Gufeng and its wholly-owned subsidiary Tianjuyuan. The fair value on the acquired technology
patent was estimated to be RMB9,200,000 (or $1,301,800) and is amortized over the remaining useful life of six years using the
straight-line method. As of June 30, 2020, this technology patent is fully amortized.
On
June 30, 2016, the Company acquired Xingyulei and Xindeguo. The fair value on the acquired technology patent was estimated to
be RMB26,648 (or $3,771) and RMB3,000(or $425) respectively.
The
technology know-how consisted of the following:
|
|
June 30,
|
|
|
Foreign Currency
|
|
|
|
|
|
June 30,
|
|
|
|
2019
|
|
|
Adjustment
|
|
|
Amortization
|
|
|
2020
|
|
Technology know-how
|
|
$
|
2,199,247
|
|
|
|
(61,930
|
)
|
|
|
|
|
|
$
|
2,137,317
|
|
Less: accumulated amortization
|
|
|
(2,196,243
|
)
|
|
|
61,098
|
|
|
|
(103
|
)
|
|
|
(2,135,248
|
)
|
Total technology know-how, net
|
|
$
|
3,004
|
|
|
|
(832
|
)
|
|
|
(103
|
)
|
|
$
|
2,069
|
|
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
CUSTOMER
RELATIONSHIP
On
July 2, 2010, the Company acquired Gufeng and its wholly-owned subsidiary Tianjuyuan. The fair value on the acquired customer
relationships was estimated to be RMB65,000,000 (or $9,197,500) and is amortized over the remaining useful life of ten years.
On June 30, 2016, and January 1, 2017 the Company acquired the VIE Companies. The fair value of the acquired customer relationships
was estimated to be RMB14,729,602 (or $2,084,239) and is amortized over the remaining useful life of seven to ten years.
|
|
June 30,
|
|
|
Foreign Currency
|
|
|
|
|
|
June 30,
|
|
|
|
2019
|
|
|
Adjustment
|
|
|
Amortization
|
|
|
2020
|
|
Customer relationships
|
|
$
|
11,608,629
|
|
|
|
(326,890
|
)
|
|
|
|
|
|
$
|
11,281,739
|
|
Less: accumulated amortization
|
|
|
(9,434,065
|
)
|
|
|
|
|
|
|
(938,741
|
)
|
|
|
(10,372,806
|
)
|
Total customer relationships, net
|
|
$
|
2,174,564
|
|
|
|
(326,890
|
)
|
|
|
(938,741
|
)
|
|
$
|
908,933
|
|
NON-COMPETE
AGREEMENT
On
July 2, 2010, the Company acquired Gufeng and its wholly-owned subsidiary Tianjuyuan. The fair value on the acquired non-compete
agreement was estimated to be RMB1,320,000 (or $186,780) and is amortized over the remaining useful life of five years using the
straight-line method. On June 30, 2016, and January 1, 2017 the Company acquired the VIE Companies. The fair value of the
acquired non-compete agreements was estimated to be RMB6,843,439 (or $968,347) and is amortized over the remaining useful life
of five years using the straight-line method.
|
|
June 30,
|
|
|
Foreign Currency
|
|
|
|
|
|
June 30,
|
|
|
|
2019
|
|
|
Adjustment
|
|
|
Amortization
|
|
|
2020
|
|
Non-compete agreement
|
|
$
|
1,188,597
|
|
|
|
(33,470
|
)
|
|
|
|
|
|
$
|
1,155,127
|
|
Less: accumulated amortization
|
|
|
(751,963
|
)
|
|
|
|
|
|
|
(172,495
|
)
|
|
|
(924,458
|
))
|
Total non-compete agreement, net
|
|
$
|
436,634
|
|
|
|
(33,470
|
)
|
|
|
(172,495
|
)
|
|
$
|
230,669
|
|
TRADEMARKS
On
July 2, 2010, the Company acquired Gufeng and its wholly-owned subsidiary Tianjuyuan. The preliminary fair value on the acquired
trademarks was estimated to be RMB40,700,000 (or $5,759,050) and is subject to an annual impairment test. On June 30, 2016, and
January 1, 2017 the Company acquired the VIE Companies. The fair value of the acquired trademarks was estimated to be RMB29,648
(or $4,195) and is subject to an annual impairment test.
AMORTIZATION
EXPENSE
Estimated
amortization expenses of intangible assets for the next five twelve months periods ended June 30, are as follows:
Years Ending June 30,
|
|
Expense ($)
|
|
2021
|
|
|
812,591
|
|
2022
|
|
|
586,726
|
|
2023
|
|
|
548,263
|
|
2024
|
|
|
395,530
|
|
2025
|
|
|
329,007
|
|
NOTE
7 – OTHER NON-CURRENT ASSETS
Other non-current assets mainly include
advance payments related to rent the land use for the Company. As of June 30, 2020, the balance of other non-current assets was
$12,843,512, which was the rental fee advances for agriculture lands that the Company engaged in Shiquan County from 2020 to 2027.
In March 2017, Jinong entered into the rental agreement for
approximately 3,400 mu, and 2600-hectare agriculture lands in Shiquan County, Shaanxi Province. The rental agreement was from April
2017 and was renewable for every ten-year period up to 2066. The aggregate rental fee was approximately RMB 13 million per annum,
The Company had made 10-year advances of rental fee per rental terms. The Company has amortized $1.9 million as expenses for the
year ended June 30, 2020 and $2.0 million as expenses for the year ended June 30, 2019.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
Estimated
amortization expenses of the rental advance payments herein for the next four twelve-month periods ended June 30 and thereafter
are as follows:
Years ending June 30,
|
|
|
|
2021
|
|
$
|
1,899,638
|
|
2022
|
|
$
|
1,899,638
|
|
2023
|
|
$
|
1,899,638
|
|
2024
|
|
$
|
1,899,638
|
|
2025 and thereafter
|
|
$
|
5,244,962
|
|
NOTE
8 – ACCRUED EXPENSES AND OTHER PAYABLES
Accrued
expenses and other payables consisted of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Payroll payable
|
|
$
|
23,435
|
|
|
$
|
24,891
|
|
Welfare payable
|
|
|
145,270
|
|
|
|
149,479
|
|
Accrued expenses
|
|
|
7,640,130
|
|
|
|
6,847,041
|
|
Other payables
|
|
|
6,211,818
|
|
|
|
4,886,202
|
|
Other levy payable
|
|
|
118,671
|
|
|
|
122,109
|
|
Total
|
|
$
|
14,139,324
|
|
|
$
|
12,029,722
|
|
NOTE
9 – AMOUNT DUE TO RELATED PARTIES
At
the end of December 2015, Yuxing entered into a sales agreement with the Company’s affiliate, 900LH.com Food Co., Ltd. (“900LH.com”,
previously announced as Xi’an Gem Grain Co., Ltd) pursuant to which Yuxing is to supply various vegetables to 900LH.com
for its incoming seasonal sales at the holidays and year ends (the “Sales Agreement”). The contingent contracted value
of the Sales Agreement is RMB25,500,000 (approximately $3,608,250). During the year ended June 30, 2020 and 2019 Yuxing has sold
approximately $1,200,090 and $604,073 products to 900LH.com.
The
amount due from 900LH.com to Yuxing was 0 and 0 as of June 30, 2020 and 2019, respectively.
As
of June 30, 2020, and June 30, 2019, the amount due to related parties was $4,212,407 and $3,641,945, respectively. As of
June 30, 2020, and June 30, 2019, $990,500 and $1,019,200, respectively were amounts that Gufeng borrowed from a related party,
Xi’an Techteam Science & Technology Industry (Group) Co. Ltd., a company controlled by Mr. Zhuoyu Li, Chairman and CEO
of the Company, representing unsecured, non-interest bearing loans that are due on demand. These loans are not subject to
written agreements.
As
of June 30, 2020, the Company’s subsidiary, Jinong, owed 900LH.com. $11,819
On
July 1, 2018, Jinong signed an office rental agreement with Kingtone Information Technology Co., Ltd. (“Kingtone Information”),
of which Mr. Zhuoyu Li, Chairman and CEO of the Company, served as Chairman. Pursuant to the rental agreement, Jinong rented 612 square meters
(approximately 6,588 square feet) of office space from Kingtone Information. The rental agreement provides for a two-year term effective
as of July 1, 2018 with monthly rent of RMB24,480 (approximately $3,464).
NOTE
10 – LOAN PAYABLES
As
of June 30, 2020, the short-term loan payables consisted of two loans which mature on dates ranging from June 16, 2021 through
June 22, 2021 with interest rates ranging from 5.22% to 5.66%. No. 1 and 2 below are collateralized by Tianjuyuan’s land
use right and building ownership right. Loan No. 2 is also guaranteed by the cash deposit.
No.
|
|
Payee
|
|
Loan period per agreement
|
|
Interest Rate
|
|
|
June 30,
2019
|
|
1
|
|
Postal Saving Bank of China - Pinggu Branch
|
|
June 17, 2020-June 16, 2021
|
|
|
5.66
|
%
|
|
|
2,122,500
|
|
2
|
|
Beijing Bank -Pinggu Branch
|
|
June 22, 2020-June 22, 2021
|
|
|
5.22
|
%
|
|
|
1,415,000
|
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
3,537,500
|
|
The interest expense from short-term loans was $278,328 and
$318,122 for the year ended June 30, 2020 and 2019, respectively.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
NOTE
11 – CONVERTIBLE NOTES PAYABLE
Relating
to the acquisition of the VIE Companies, the Company subsidiary, Jinong, issued to the VIE Companies shareholders convertible
notes payable twice, in the aggregate notional amount of RMB 51,000,000 ($7,216,500) with a term of three years and an annual
interest rate of 3%.
No.
|
|
Related Acquisitions of Sales VIEs
|
|
Issuance Date
|
|
Maturity Date
|
|
Notional Interest Rate
|
|
|
Conversion Price
|
|
|
Notional Amount
(in RMB)
|
|
1
|
|
Wangtian, Lishijie, Xindeguo, Xinyulei, Jinyangguang
|
|
June 30, 2016
|
|
June 30, 2020
|
|
|
3
|
%
|
|
$
|
5.00
|
|
|
|
39,000,000
|
|
2
|
|
Fengnong, Xiangrong
|
|
January 1, 2017
|
|
December 31, 2019
|
|
|
3
|
%
|
|
$
|
5.00
|
|
|
|
12,000,000
|
|
The
convertible notes take priority over the preferred stock and common stock of Jinong, and any other class or series of capital
stocks Jinong issues in the future in terms of interests and payments in the event of any liquidation, dissolution or winding
up of Jinong. On or after the third anniversary of the issuance date of the note, noteholders may request Jinong to process the
note conversion to convert the note into shares of the Company’s common stock. The notes cannot be converted prior to the
mature date. The per share conversion price of the notes is the higher of the following: (i) $5.00 per share or (ii) 75% of the
closing price of the Company’s common stock on the date the noteholder delivers the conversion notice. Due to the discontinuation
of VIE agreements with Zhenbai’s shareholders, certain convertible notes issued on June 30, 2016 with a face amount of RMB
12,000,000 ($1,698,000) were tendered back to the Company. All outstanding balance of unpaid principal and accrued interest in
the tendered convertible notes were forfeited.
On
November 15, 2019, the Company issued 995,000 shares of common stock at the price of $5.00 per share for the total amount of $4,975,000
to the holders of the Company’s convertible notes payable in connection with the payment of the convertible notes’
principal and interests. The convertible notes were issued on June 30, 2016 and matured on June 30, 2019.
On
February 14, 2020, the Company issued 377,650 shares of common stock at the price of $5.00 per share for the total amount of $1,888,250
to the holders of the Company’s convertible notes payable in connection with the payment of the convertible notes’
principal and interests. The convertible notes were issued on January 1, 2017 and matured on January 1, 2020.
The Company determined that the fair value of the convertible
notes payable was RMB 0 ($0) and RMB 51,629,859 ($7,517,307) as of June 30, 2020 and June 30, 2019, respectively. Aside from the
forfeiture of the convertible notes previously issued to Zhenbai’s shareholders, the difference between the fair value of
the notes and the face amount of the notes is being amortized to accretion implied interest expense over the three-year life of
the notes. As of June 30, 2020, the accumulated amortization of this discount into accretion expenses was $1,375,499. As
of June 30, 2019, the accumulated amortization of this discount into accretion expense was $1,333,792.
NOTE
12 – TAXES PAYABLE
Enterprise
Income Tax
Effective January 1, 2008, the Enterprise Income Tax (“EIT”)
law of the PRC replaced the tax laws for Domestic Enterprises (“DEs”) and Foreign Invested Enterprises (“FIEs”).
The EIT rate of 25% replaced the 33% rate that was applicable to both DEs and FIEs. The two-year tax exemption and three-year 50%
tax reduction tax holiday for production-oriented FIEs was eliminated. Since January 1, 2008, Jinong became subject to income tax
in China at a rate of 15% as a high-tech company, because of the expiration of its tax exemption on December 31, 2007. Accordingly,
it made provision for income taxes for the years ended June 30, 2020 and 2019 of $2,344,928 and $6,497,340, respectively, which
is mainly due to the operating income from VIEs. VIEs is subject to 25% EIT rate and thus it made provision for income taxes of
$892,719 and $3,482,862 for the years ended June 30, 2020 and 2019, respectively.
Value-Added
Tax
All the Company’s fertilizer products
that are produced and sold in the PRC were subject to a Chinese Value-Added Tax (VAT) of 13% of the gross sales price. On April
29, 2008, the PRC State of Administration of Taxation (SAT) released Notice #56, “Exemption of VAT for Organic Fertilizer
Products”, which allows certain fertilizer products to be exempt from VAT beginning June 1, 2008. The Company submitted
the application for exemption in May 2009, which was granted effective September 1, 2009, continuing through December 31, 2015.
On August 10, 2015 and August 28, 2015, the SAT released Notice #90. “Reinstatement of VAT for Fertilizer Products”,
and Notice #97, “Supplementary Reinstatement of VAT for Fertilizer Products”, which restore the VAT of 13% of
the gross sales price on certain fertilizer products includes non-organic fertilizer products starting from September 1, 2015,
but granted taxpayers a reduced rate of 3% from September 1, 2015 through June 30, 2016.
On
April 28, 2017, the PRC State of Administration of Taxation (SAT) released Notice 2017 #37, “Notice on Policy of Reduced
Value Added Tax Rate,” under which, effective July 1, 2017, all of the Company’s fertilizer products that are
produced and sold in the PRC are subject to a Chinese Value-Added Tax (VAT) of 11% of the gross sales price. The tax rate was
reduced 2% from 13%.
On
April 4, 2018, the PRC State of Administration of Taxation (SAT) released Notice 2018 #32, “Notice on Adjustment of VAT
Tax Rate,” under which, effective May 1, 2018, all of the Company’s fertilizer products that are produced and
sold in the PRC are subject to a Chinese Value-Added Tax (VAT) of 10% of the gross sales price. The tax rate was reduced 1% from
11%.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
On
March 20, 2019, the PRC State of Administration of Taxation (SAT) released Notice 2019 #39, “Announcement on Policies
Concerning Deepening the Reform of Value Added Tax,” under which, Effective April 1, 2019, all of the Company’s
fertilizer products that are produced and sold in the PRC are subject to a Chinese Value-Added Tax (VAT) of 9% of the gross sales
price. The tax rate was reduced 1% from 10%.
Income
Taxes and Related Payables
Taxes
payable consisted of the following:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
VAT provision
|
|
$
|
(257,068
|
)
|
|
$
|
(424,535
|
)
|
Income tax payable
|
|
|
1,704,543
|
|
|
|
1,550,830
|
|
Other levies
|
|
|
1,187,442
|
|
|
|
1,220,859
|
|
Repatriation tax
|
|
|
29,010,535
|
|
|
|
29,010,535
|
|
Total
|
|
$
|
31,645,452
|
|
|
$
|
31,357,690
|
|
The
provision for income taxes consists of the following:
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Current tax – foreign
|
|
$
|
2,344,928
|
|
|
$
|
6,497,340
|
|
Total
|
|
$
|
2,344,928
|
|
|
$
|
6,497,340
|
|
Significant
components of deferred tax assets were as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Deferred tax assets
|
|
|
|
|
|
|
Deferred Tax Benefit
|
|
|
33,743,546
|
|
|
|
15,377,180
|
|
Valuation allowance
|
|
|
(33,743,546
|
)
|
|
|
(15,377,180
|
)
|
Total deferred tax assets
|
|
$
|
-
|
|
|
|
-
|
|
The change in valuation allowance for the year ended June 30,
2020 was an increase of $18,366,366 which was resulted from an increase in the net operating losses generated in USA.
The
Company periodically evaluates the likelihood of the realization of deferred tax assets, and adjusts the carrying amount of the
deferred tax assets by the valuation allowance to the extent the future realization of the deferred tax assets is not judged to
be more likely than not. The Company considers many factors when assessing the likelihood of future realization of its deferred
tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income
or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors.
As of June 30, 2020, based on the weight of available evidence,
including cumulative losses in recent years and expectations of future taxable income, the Company determined that it was more
likely than not that its deferred tax assets would not be realized and the total deferred tax assets is 0.
U.S.
Tax Cuts and Jobs Act and Provisional Estimates
On December 22, 2017, the TCJA was enacted into law, which significantly
changes existing U.S. tax law and includes numerous provisions that affect our business, such as imposing a one-time transition
tax on deemed repatriation of deferred foreign income, reducing the U.S. federal statutory tax rate, and adopting a territorial
tax system. The TCJA required us to incur a one-time transition tax on deferred foreign income not previously subject to U.S. income
tax at a rate of 15.5% for foreign cash and certain other net current assets, and 8% on the remaining income. The TCJA also reduced
the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018. For fiscal year 2018, our blended U.S. federal statutory
tax rate is 27.5%. This is the result of using the tax rate of 34% for the first and second quarter of fiscal year 2018 and the
reduced tax rate of 21% for the third and fourth quarter of fiscal year 2018. For fiscal year 2019 and 2020, our U.S. federal statutory
tax rate is 21%.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
Tax
Rate Reconciliation
Our effective tax rates were approximately
-1.7% and 35.9% for years ended June 30, 2020 and 2019, respectively. Substantially all the Company’s income before income
taxes and related tax expense are from PRC sources. Actual income tax benefit reported in the consolidated statements of operations
and comprehensive income differ from the amounts computed by applying the US statutory income tax rate of 21.0% and 21.0% to income
before income taxes for the years ended June 30, 2020 and 2019 for the following reasons:
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
15% - 25%
|
|
|
21%
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income (loss)
|
|
$
|
(132,851,959
|
)
|
|
|
|
|
|
|
(1,555,249
|
)
|
|
|
|
|
|
$
|
(134,407,208
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax expense (benefit)
|
|
|
(33,212,990
|
)
|
|
|
25.0
|
%
|
|
|
(326,602
|
)
|
|
|
21.0
|
%
|
|
|
(33,539,592
|
)
|
|
|
|
|
High-tech income benefits on Jinong
|
|
|
1,814,372
|
|
|
|
-1.4
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
1,814,372
|
|
|
|
|
|
Losses from subsidiaries in which no benefit is recognized
|
|
|
33,743,546
|
|
|
|
-25.4
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
33,743,546
|
|
|
|
|
|
Change in valuation allowance on deferred tax asset from US tax benefit
|
|
|
-
|
|
|
|
|
|
|
|
326,602
|
|
|
|
(21.0
|
)%
|
|
|
326,602
|
|
|
|
|
|
Actual tax expense
|
|
$
|
2,344,928
|
|
|
|
-1.8
|
%
|
|
$
|
-
|
|
|
|
|
%
|
|
$
|
2,344,928
|
|
|
|
-1.7
|
%
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
15% - 25%
|
|
|
21%
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax income (loss)
|
|
$
|
19,894,737
|
|
|
|
|
|
|
|
(1,807,002
|
)
|
|
|
|
|
|
$
|
18,087,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax expense (benefit)
|
|
|
4,973,684
|
|
|
|
25.0
|
%
|
|
|
(379,470
|
)
|
|
|
21.0
|
%
|
|
|
4,594,214
|
|
|
|
|
|
High-tech income benefits on Jinong
|
|
|
(697,062
|
)
|
|
|
(3.5
|
)%
|
|
|
-
|
|
|
|
-
|
|
|
|
(697,062
|
)
|
|
|
|
|
Losses from subsidiaries in which no benefit is recognized
|
|
|
2,220,717
|
|
|
|
11.2
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
2,220,717
|
|
|
|
|
|
Change in valuation allowance on deferred tax asset from US tax benefit
|
|
|
-
|
|
|
|
|
|
|
|
379,470
|
|
|
|
(21.0
|
)%
|
|
|
379,470
|
|
|
|
|
|
Actual tax expense
|
|
$
|
6,497,340
|
|
|
|
32.7
|
%
|
|
$
|
-
|
|
|
|
|
%
|
|
$
|
6,497,340
|
|
|
|
35.9
|
%
|
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
NOTE
13 – STOCKHOLDERS’ EQUITY
Common
Stock
On
April 25, 2019, the Company entered into a Stock Purchase Agreement (the “SPA”) with certain non-US persons, as defined
in Regulation S promulgated under the Securities Act of 1933, in connection with a private placement offering of 6,000,000 shares
of common stock, par value $0.001 per share, of the Company. The purchase price per share of the offering is $1.00. On April 26,
2019, the Company issued 6,000,000 Shares of the Company’s Common Stock, par value $0.001 per share, pursuant to the SPA.
The Shares issued in the offering are exempt from the registration requirements of the Securities Act, pursuant to Section 4(a)(2)
of the Securities Act and/or Regulation S promulgated thereunder.
On
May 10, 2019, the Company sold 2,270,000 shares of common stock at the price of $1.00 per share for total proceeds of $2,270,000
to certain third-party individuals. The issuances were completed pursuant to the exemption from registration provided by Regulation
S promulgated under the Securities Act of 1933, as amended.
On
June 25, 2019, the Company approved the amendment to its Articles of Incorporation to affect a 1 for 12 reverse stock splits.
The number of outstanding shares of the registrant’s common stock on June 30, 2019, was 3,986,912.
During
the year ended June 30, 2019, the Company issued an aggregate of 650,000 shares of common stock to pay off consulting services
under the 2009 Plan. The value of the stock was $370,500 and is based on the fair value of the Company’s common stock on
the grant date.
On
July 2, 2019, the Company issued 59,567 shares of common stock to pay off consulting services under the 2009 Plan. The value of
the stock was $330,000 and was based on the fair value of the Company’s common stock on the grant date.
On
August 13, 2019, the Company sold 212,000 shares of common stock at the price of $10.00 per share for total proceeds of $2,120,000
to certain third-party individuals. The issuances were completed pursuant to the exemption from registration provided by Regulation
S promulgated under the Securities Act of 1933, as amended.
On
August 15, 2019, Shaanxi Baoyu Science and Technology Investment Company, a limited liability investment company incorporated
in the People’s Republic of China (“Shaanxi Baoyu”), entered into a certain Stock Purchase Agreement (the “SPA”)
pursuant to Regulation S promulgated under the Securities Act of 1933 with the Company in connection with a private placement
offering of 471,000 shares of Common Stock, par value $0.001 per share, of the Company. The purchase price per share of the offering
was $12.00 for total proceeds of $5,652,000. On August 16, 2019, the Company issued 471,000 Shares of the Company’s Common
Stock, par value $0.001 per share, to Shaanxi Baoyu, pursuant to the SPA.
On
August 19, 2019, the Company sold 248,000 shares of common stock at the price of $10.00 per share for total proceeds of $2,480,000
to certain unrelated individuals. The issuances were completed pursuant to the exemption from registration provided by Regulation
S promulgated under the Securities Act of 1933, as amended.
On
November 15, 2019, the Company issued 995,000 shares of common stock at the price of $5.00 per share for the total amount of $4,975,000
to the holders of the Company’s convertible notes payable in connection with the payment of the convertible notes’
principal and interests. The convertible notes were issued on June 30, 2016 and matured on June 30, 2019.
On
February 14, 2020, the Company issued 377,650 shares of common stock at the price of $5.00 per share to the holders of the Company’s
convertible notes payable in connection with the payment of the convertible notes’ principal and interests. The convertible
notes were issued on January 1, 2017 with amount of RMB12,000,000 ($1,726,619) and matured on January 1, 2020 with total amount
of RMB13,112,723 ($1,888,250) included interests.
As
of June 30, 2020, and June 30, 2019, there were 6,350,129 and 3,986,912 shares of common stock issued and outstanding, respectively.
Preferred
Stock
Under
the Company’s Articles of Incorporation, the Board has the authority, without further action by stockholders, to designate
up to 20,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges, qualifications
and restrictions granted to or imposed upon the preferred stock, including dividend rights, conversion rights, voting rights,
rights and terms of redemption, liquidation preference and sinking fund terms, any or all of which may be greater than the rights
of the common stock. If the Company sells preferred stock under its registration statement on Form S-3, it will fix the rights,
preferences, privileges, qualifications and restrictions of the preferred stock of each series in the certificate of designation
relating to that series and will file the certificate of designation that describes the terms of the series of preferred stock
the Company offers before the issuance of the related series of preferred stock.
As
of June 30, 2020, the Company has 20,000,000 shares of preferred stock authorized, with a par value of $.001 per share, of which
no shares are issued or outstanding.
NOTE
14 – STOCK OPTIONS
There
were no issuances of stock options during the years ended June 30, 2020 and 2019.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
NOTE
15 – CONCENTRATIONS AND LITIGATION
Market
Concentration
All
the Company’s revenue-generating operations are conducted in the PRC. Accordingly, the Company’s business, financial
condition and results of operations may be influenced by the political, economic and legal environments 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 and Western Europe. These include risks associated with, among other things, the political, economic
and legal environment and foreign currency exchange. The Company’s results may be adversely affected by, among other things,
changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance
abroad, and rates and methods of taxation.
Vendor
and Customer Concentration
There
was no vendor that the Company purchased over 10% of its raw materials for fertilizer manufacturing during the year ended June
30, 2020.
There
were two vendors from which the Company purchased 10.8% and 10.6%, respectively, of its raw materials for fertilizer manufacturing
during the year ended June 30, 2019. Total purchases from these two vendors amounted to $51,459,699 as June 30, 2019
Two
customers accounted for an aggregate amount of $42,091,565, or 10.5% and 10.4%, respectively, of the Company’s manufactured
fertilizer sales for the year ended June 30, 2020.
Two
customers accounted for an aggregate amount of $35,303,527, or 7.4% and 7.3%, respectively, of the Company’s manufactured
fertilizer sales for the year ended June 30, 2019.
Litigation
On
June 5, 2020, an individual filed suit pro se (as in, representing oneself without an attorney) in the Southern District of Florida
federal court alleging violations of the Securities Exchange Act. The Company believes the action is without merit and vigorously
opposed it. The company has moved to dismiss the litigation and for attorney’s fees from the plaintiff. The motions are
pending.
NOTE
16 – SEGMENT REPORTING
As
of June 30, 2020, the Company was organized into four main business segments based on location and product: Jinong (fertilizer
production), Gufeng (fertilizer production), Yuxing (agricultural products production) and the sales VIEs. Each of the four operating
segments referenced above has separate and distinct general ledgers. The chief operating decision maker (“CODM”) receives
financial information, including revenue, gross margin, operating income and net income produced from the various general ledger
systems to make decisions about allocating resources and assessing performance; however, the principal measure of segment profitability
or loss used by the CODM is net income by segment.
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Revenues from unaffiliated customers:
|
|
|
|
|
|
|
Jinong
|
|
$
|
57,001,659
|
|
|
$
|
76,494,490
|
|
Gufeng
|
|
|
119,623,964
|
|
|
|
136,285,236
|
|
Yuxing
|
|
|
9,227,113
|
|
|
|
10,101,051
|
|
Sales VIEs
|
|
|
63,390,760
|
|
|
|
71,440,026
|
|
Consolidated
|
|
$
|
249,243,496
|
|
|
$
|
294,320,803
|
|
|
|
|
|
|
|
|
|
|
Operating income (expense):
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
(18,249,504
|
)
|
|
$
|
7,288,789
|
|
Gufeng
|
|
|
(117,826,339
|
)
|
|
|
14,076,655
|
|
Yuxing
|
|
|
413,226
|
|
|
|
(3,435,206
|
)
|
Sales VIEs
|
|
|
3,045,528
|
|
|
|
2,681,521
|
|
Reconciling item (1)
|
|
|
-
|
|
|
|
-
|
|
Reconciling item (2)
|
|
|
(1,555,269
|
)
|
|
|
(1,807,011
|
)
|
Consolidated
|
|
$
|
(134,172,358
|
)
|
|
$
|
18,804,748
|
|
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
Net income (loss):
|
|
|
|
|
Jinong
|
|
$
|
(15,422,166
|
)
|
|
$
|
5,925,025
|
|
Gufeng
|
|
|
(88,682,298
|
)
|
|
|
10,191,675
|
|
Yuxing
|
|
|
425,957
|
|
|
|
(3,435,659
|
)
|
Sales VIEs
|
|
|
2,153,503
|
|
|
|
729,023
|
|
Reconciling item (1)
|
|
|
19
|
|
|
|
9
|
|
Reconciling item (2)
|
|
|
(1,555,269
|
)
|
|
|
(1,807,009
|
)
|
Reconciling item (3)
|
|
$
|
(33,671,883
|
)
|
|
$
|
(12,668
|
)
|
Consolidated
|
|
$
|
(136,752,136
|
)
|
|
$
|
11,590,395
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
760,535
|
|
|
$
|
788,787
|
|
Gufeng
|
|
|
2,070,861
|
|
|
|
2,144,061
|
|
Yuxing
|
|
|
1,179,144
|
|
|
|
1,242,761
|
|
Sales VIEs
|
|
|
687,942
|
|
|
|
745,169
|
|
Consolidated
|
|
$
|
4,698,482
|
|
|
$
|
4,920,779
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
Jinong
|
|
|
25,593
|
|
|
|
277,003
|
|
Gufeng
|
|
|
278,373
|
|
|
|
318,122
|
|
Yuxing
|
|
|
-
|
|
|
|
-
|
|
Sales VIEs
|
|
|
105
|
|
|
|
-
|
|
Consolidated
|
|
$
|
304,071
|
|
|
$
|
595,125
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditure:
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
50,625
|
|
|
$
|
6,862
|
|
Gufeng
|
|
|
4,448
|
|
|
|
47,096
|
|
Yuxing
|
|
|
27,794
|
|
|
|
9,653
|
|
Sales VIEs
|
|
|
14,617
|
|
|
|
-
|
|
Consolidated
|
|
$
|
97,483
|
|
|
$
|
63,610
|
|
|
|
As of
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Identifiable assets:
|
|
|
|
|
|
|
Jinong
|
|
$
|
83,055,679
|
|
|
$
|
149,166,251
|
|
Gufeng
|
|
|
213,038,203
|
|
|
|
253,149,321
|
|
Yuxing
|
|
|
34,310,053
|
|
|
|
35,900,242
|
|
Sales VIEs
|
|
|
44,715,491
|
|
|
|
42,269,307
|
|
Reconciling item (1)
|
|
|
(33,157,364
|
)
|
|
|
518,158
|
|
Reconciling item (2)
|
|
|
166,121
|
|
|
|
(2,879
|
)
|
Consolidated
|
|
$
|
342,128,183
|
|
|
$
|
481,000,399
|
|
|
(1)
|
Reconciling
amounts refer to the unallocated assets or expenses of Green New Jersey.
|
|
(2)
|
Reconciling
amounts refer to the unallocated assets or expenses of the Parent Company.
|
|
(3)
|
Reconciling
amounts refer to the loss on discontinuing sales VIE of Shenqiu Zhenbai.
|
Total revenues from exported products currently
accounted for less than 1% of the Company’s total fertilizer revenues for the years ended June 30, 2020 and 2019, respectively.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
NOTE
17 – COMMITMENTS AND CONTINGENCIES
On
July 1, 2018, Jinong signed an office rental agreement with Kingtone Information Technology Co., Ltd. (“Kingtone Information”),
of which Mr. Zhuoyu Li, Chairman and CEO of the Company, served as Chairman. Pursuant to the rental agreement, Jinong rented 612 square meters
(approximately 6,588 square feet) of office space from Kingtone Information. The rental agreement provides for a two-year term effective
as of July 1, 2018 with monthly rent of RMB24,480 (approximately $3,464).
In
February 2004, Tianjuyuan signed a fifty-year rental agreement with the village committee of Dong Gao Village and Zhen Nan Zhang Dai Village
in the Beijing Ping Gu District, at a monthly rent of RMB2,958 ($419).
Accordingly, the Company recorded an aggregate
of $46,815 and $$48,257 as rent expenses for the years ended June 30, 2020 and 2019, respectively. The contingent rent expenses
herein for the next five years ended June 30, are as follows:
Years ending June 30,
|
|
|
|
2021
|
|
|
46,815
|
|
2022
|
|
|
46,815
|
|
2023
|
|
|
46,815
|
|
2024
|
|
|
46,815
|
|
2025
|
|
|
46,815
|
|
NOTE
18 – VARIABLE INTEREST ENTITIES
In accordance with accounting standards
regarding consolidation of variable interest entities, VIEs are generally entities that lack sufficient equity to finance their
activities without additional financial support from other parties or whose equity holders lack adequate decision-making ability.
All VIEs with which a company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the
VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.
Green
Nevada through one of its subsidiaries, Jinong, entered into a series of agreements (the “VIE Agreements”) with Yuxing
for it to qualify as a VIE, effective June 16, 2013.
The
Company has concluded, based on the contractual arrangements, that Yuxing is a VIE and that the Company’s wholly-owned subsidiary,
Jinong, absorbs a majority of the risk of loss from the activities of Yuxing, thereby enabling the Company, through Jinong, to
receive a majority of Yuxing expected residual returns.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
On June 30, 2016 and January 1, 2017, the
Company, through its wholly-owned subsidiary Jinong, entered into strategic acquisition agreements and into a series of contractual
agreements to qualify as VIEs with the shareholders of the sales VIE Companies.
Jinong,
the sales VIE Companies, and the shareholders of the sales VIE Companies also entered into a series of contractual agreements
for the sales VIE Companies to qualify as VIEs (the “VIE Agreements”).
On
November 30, 2017, the Company, through its wholly-owned subsidiary Jinong, exited the VIE agreements with the shareholders of
Zhenbai.
As a result of these contractual arrangements,
with Yuxing and the sales VIE Companies the Company is entitled to substantially all the economic benefits of Yuxing and the VIE
Companies. The following financial statement amounts and balances of the VIEs were included in the accompanying consolidated financial
statements as of June 30, 2020 and June 30, 2019:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
712,301
|
|
|
$
|
818,312
|
|
Accounts receivable, net
|
|
|
33,727,918
|
|
|
|
29,933,837
|
|
Inventories
|
|
|
22,995,075
|
|
|
|
19,944,011
|
|
Other current assets
|
|
|
593,942
|
|
|
|
475,001
|
|
Related party receivable
|
|
|
66
|
|
|
|
(1,031
|
)
|
Advances to suppliers
|
|
|
520,901
|
|
|
|
3,606,384
|
|
Total Current Assets
|
|
|
58,550,203
|
|
|
|
54,776,514
|
|
|
|
|
|
|
|
|
|
|
Plant, Property and Equipment, Net
|
|
|
8,513,395
|
|
|
|
9,753,039
|
|
Other assets
|
|
|
59,575
|
|
|
|
218,549
|
|
Intangible Assets, Net
|
|
|
9,391,626
|
|
|
|
10,212,668
|
|
Goodwill
|
|
|
2,510,745
|
|
|
|
3,208,779
|
|
Total Assets
|
|
$
|
79,025,544
|
|
|
$
|
78,169,549
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
16,416,828
|
|
|
$
|
17,250,276
|
|
Customer deposits
|
|
|
86,430
|
|
|
|
256,489
|
|
Accrued expenses and other payables
|
|
|
6,996,544
|
|
|
|
6,243,753
|
|
Amount due to related parties
|
|
|
41,549,931
|
|
|
|
42,680,723
|
|
Total Current Liabilities
|
|
|
65,049,733
|
|
|
|
66,431,241
|
|
Total Liabilities
|
|
$
|
65,049,733
|
|
|
|
66,431,241
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
13,975,811
|
|
|
|
11,738,308
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
79,025,544
|
|
|
$
|
78,169,549
|
|
|
|
Years Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
$
|
72,617,872
|
|
|
$
|
81,541,077
|
|
Expenses
|
|
|
70,038,413
|
|
|
|
84,247,714
|
|
Net income
|
|
$
|
2,579,459
|
|
|
$
|
(2,706,637
|
)
|
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
NOTE
19 – BUSINESS COMBINATIONS
On
June 30, 2016, the Company, through its wholly-owned subsidiary Jinong, entered into strategic acquisition agreements and also
into a series of contractual agreements to qualify as VIEs with the shareholders of Shaanxi Lishijie Agrochemical Co., Ltd., Songyuan
Jinyangguang Sannong Service Co., Ltd., Shenqiu County Zhenbai Agriculture Co., Ltd., Weinan City Linwei District Wangtian Agricultural
Materials Co., Ltd., Aksu Xindeguo Agricultural Materials Co., Ltd., and Xinjiang Xinyulei Eco-agriculture Science and Technology
Co., Ltd.
Subsequently,
on January 1, 2017, Jinong entered into similar strategic acquisition agreements and a series of contractual agreements to qualify
as VIEs with the shareholders of Sunwu County Xiangrong Agricultural Materials Co., Ltd., and Anhui Fengnong Seed Co., Ltd.
On
November 30, 2017, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements
and the series of contractual agreements with the shareholders of Zhenbai.
The
VIE Agreements are as follows:
Entrusted
Management Agreements
Pursuant
to the terms of certain Entrusted Management Agreements dated June 30, 2016 and January 1, 2017, between Jinong and the shareholders
of the sales VIE Companies (the “Entrusted Management Agreements”), the sales VIE Companies and their shareholders
agreed to entrust the operations and management of its business to Jinong. According to the Entrusted Management Agreement, Jinong
possesses the full and exclusive right to manage the sales VIE Companies’ operations, assets and personnel, has the right
to control all the sales VIE Companies’ cash flows through an entrusted bank account, is entitled to the sales VIE Companies’
net profits as a management fee, is obligated to pay all the sales VIE Companies’ payables and loan payments, and bears
all losses of the sales VIE Companies. The Entrusted Management Agreements will remain in effect until (i) the parties mutually
agree to terminate the agreement; (ii) the dissolution of the sales VIE Companies; or (iii) Jinong acquires all the assets or
equity of the sales VIE Companies (as more fully described below under “Exclusive Option Agreements”).
Exclusive
Technology Supply Agreements
Pursuant
to the terms of certain Exclusive Technology Supply Agreements dated June 30, 2016 and January 1, 2017, between Jinong and the
sales VIE companies (the “Exclusive Technology Supply Agreements”), Jinong is the exclusive technology provider to
the sales VIE companies. The sales VIE companies agreed to pay Jinong all fees payable for technology supply prior to making any
payments under the Entrusted Management Agreement. The Exclusive Technology Supply Agreements shall remain in effect until (i)
the parties mutually agree to terminate the agreement; (ii) the dissolution of the sales VIE companies; or (iii) Jinong acquires
the sales VIE companies (as more fully described below under “Exclusive Option Agreements”).
Shareholder’s
Voting Proxy Agreements
Pursuant
to the terms of certain Shareholder’s Voting Proxy Agreements dated June 30, 2016 and January 1, 2017, among Jinong and
the shareholders of the sales VIE companies (the “Shareholder’s Voting Proxy Agreements”), the shareholders
of the sales VIE companies irrevocably appointed Jinong as their proxy to exercise on such shareholders’ behalf all of their
voting rights as shareholders pursuant to PRC law and the Articles of Association of the sales VIE companies, including the appointment
and election of directors of the sales VIE companies. Jinong agreed that it shall maintain a board of directors, the composition
and appointment of which shall be approved by the Board of the Company. The Shareholder’s Voting Proxy Agreements will remain
in effect until Jinong acquires all the assets or equity of the sales VIE companies.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
Exclusive
Option Agreements
Pursuant
to the terms of certain Exclusive Option Agreements dated June 30, 2016 and January 1, 2017, among Jinong, the sales VIE companies,
and the shareholders of the sales VIE companies (the “Exclusive Option Agreements”), the shareholders of the sales
VIE companies granted Jinong an irrevocable and exclusive purchase option (the “Option”) to acquire the sales VIE
companies’ equity interests and/or remaining assets, but only to the extent that the acquisition does not violate limitations
imposed by PRC law on such transactions. The Option is exercisable at any time at Jinong’s discretion so long as such exercise
and subsequent acquisition of the sales VIE companies does not violate PRC law. The consideration for the exercise of the Option
is to be determined by the parties and memorialized in the future by definitive agreements setting forth the kind and value of
such consideration. Jinong may transfer all rights and obligations under the Exclusive Option Agreements to any third parties
without the approval of the shareholders of the sales VIE companies so long as a written notice is provided. The Exclusive Option
Agreements may be terminated by mutual agreements or by 30 days written notice by Jinong.
Equity
Pledge Agreements
Pursuant
to the terms of certain Equity Pledge Agreements dated June 30, 2016 and January 1, 2017, among Jinong and the shareholders of
the sales VIE companies (the “Pledge Agreements”), the shareholders of the sales VIE companies pledged all of their
equity interests in the sales VIE companies to Jinong, including the proceeds thereof, to guarantee all of Jinong’s rights
and benefits under the Entrusted Management Agreements, the Exclusive Technology Supply Agreements, the Shareholder’ Voting
Proxy Agreements and the Exclusive Option Agreements. Prior to termination of the Pledge Agreements, the pledged equity interests
cannot be transferred without Jinong’s prior written consent. The Pledge Agreements may be terminated only upon the written
agreement of the parties.
Non-Compete
Agreements
Pursuant
to the terms of certain Non-Compete Agreements dated June 30, 2016 and January 1, 2017, among Jinong and the shareholders of the
sales VIE companies (the “Non-Compete Agreements”), the shareholders of the sales VIE companies agreed that during
the period beginning on the initial date of their services with Jinong, and ending five (5) years after termination of their services
with Jinong, without Jinong’s prior written consent, they will not provide services or accept positions including but not
limited to partners, directors, shareholders, managers, proxies or consultants, provided by any profit making organizations with
businesses that may compete with Jinong. They will not solicit or interfere with any of the Jinong’s customers, or solicit,
induce, recruit or encourage any person engaged or employed by Jinong to terminate his or her service or engagement. If the shareholders
of the sales VIE companies breach the non-compete obligations contained therein, Jinong is entitled to all loss and damages; if
the damages are difficult to determine, remedies bore the shareholders of the sales VIE companies shall be no less than 50% of
the salaries and other expenses Jinong provided in the past.
The Company entered these VIE Agreements
as a way for the Company to have more control over the distribution of its products. The transactions are accounted for as business
combinations in accordance with ASC 805. A summary of the purchase price allocations at fair value is below:
For
acquisitions made on June 30, 2016:
Cash
|
|
$
|
708,737
|
|
Accounts receivable
|
|
|
6,422,850
|
|
Advances to suppliers
|
|
|
1,803,180
|
|
Prepaid expenses and other current assets
|
|
|
807,645
|
|
Inventories
|
|
|
7,787,043
|
|
Machinery and equipment
|
|
|
140,868
|
|
Intangible assets
|
|
|
270,900
|
|
Other assets
|
|
|
3,404,741
|
|
Goodwill
|
|
|
3,158,179
|
|
Accounts payable
|
|
|
(3,962,670
|
)
|
Customer deposits
|
|
|
(3,486,150
|
)
|
Accrued expenses and other payables
|
|
|
(4,653,324
|
)
|
Taxes payable
|
|
|
(16,912
|
)
|
Purchase price
|
|
$
|
12,385,087
|
|
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
A
summary of the purchase consideration paid is below:
Cash
|
|
$
|
5,568,500
|
|
Convertible notes
|
|
|
6,671,769
|
|
Derivative liability
|
|
|
144,818
|
|
|
|
$
|
12,385,087
|
|
The
cash component of the purchase price for these acquisitions made on June 30, 2016 was paid in July and August 2016.
For
acquisitions made on January 1, 2017:
Working Capital
|
|
$
|
941,192
|
|
Machinery and equipment
|
|
|
222,875
|
|
Intangible assets
|
|
|
1440
|
|
Goodwill
|
|
|
684,400
|
|
Customer Relationship
|
|
|
522,028
|
|
Non-compete Agreement
|
|
|
392,852
|
|
Purchase price
|
|
$
|
2,764,787
|
|
A
summary of the purchase consideration paid is below:
Cash
|
|
$
|
1,201,888
|
|
Convertible notes
|
|
|
1,559,350
|
|
Derivative liability
|
|
|
3,549
|
|
|
|
$
|
2,764,787
|
|
The
cash component of the purchase price for these acquisitions made on January 1, 2017 was paid during March 2017.
On
November 30, 2017, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements
and the series of contractual agreements with the shareholders of Zhenbai. In return, the shareholders of Zhenbai agreed to tender
the whole payment consideration in the SAA back to the Company with early termination penalties. The convertible notes paid to
Zhenbai’s shareholders and the accrued interest has been forfeited.
For
the discontinuation of Zhenbai made on November 30, 2017, the Company gave up the control of the following assets in Zhenbai:
Working Capital
|
|
$
|
1,179,352
|
|
Intangible assets
|
|
|
896,559
|
|
Customer Relationship
|
|
|
684,727
|
|
Non-compete Agreement
|
|
|
211,833
|
|
Goodwill
|
|
|
538,488
|
|
Total Asset
|
|
$
|
2,614,401
|
|
In
return, the purchase consideration returned to the Company from Zhenbai’s shareholders is summarized below:
Cash
|
|
$
|
461,330
|
|
Interest Payable
|
|
|
83,039
|
|
Convertible notes
|
|
|
1,724,683
|
|
Derivative liability
|
|
|
13,353
|
|
Total Payback
|
|
$
|
2,282,406
|
|
Net Loss
|
|
|
(331,995
|
)
|
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
NOTE
20 – RESTRICTED NET ASSETS
The
Company’s operations are primarily conducted through its PRC subsidiaries, which can only pay dividends out of their retained
earnings determined in accordance with the accounting standards and regulations in the PRC and after it has met the PRC requirements
for appropriation to statutory reserves. In addition, the Company’s businesses and assets are primarily denominated in RMB,
which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s
Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s
Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires
submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. These
currency exchange control procedures imposed by the PRC government authorities may restrict the ability of the Company’s
PRC subsidiaries to transfer their net assets to the Parent Company through loans, advances or cash dividends.
The
Company’s PRC subsidiaries net assets as of June 30, 2020 and 2019 exceeded 25% of the Company’s consolidated net
assets. Accordingly, condensed Parent Company financial statements have been prepared in accordance with Rule 5-04 and Rule 12-04
of SEC Regulation S-X, and are as follows.
Parent
Company Financial Statements
PARENT
COMPANY FINANCIAL INFORMATION OF CHINA GREEN AGRICULTURE, INC.
Condensed Balance Sheets
|
|
As of June 30,
|
|
|
|
2020
|
|
|
2019
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
65,520
|
|
|
$
|
78,406
|
|
Other current assets
|
|
|
169,071
|
|
|
|
71
|
|
Total Current Assets
|
|
|
234,590
|
|
|
|
78,476
|
|
|
|
|
|
|
|
|
|
|
Long-term equity investment
|
|
|
273,573,440
|
|
|
|
406,084,910
|
|
Total long-term assets
|
|
|
273,573,440
|
|
|
|
406,084,910
|
|
Total Assets
|
|
$
|
273,808,030
|
|
|
$
|
406,163,387
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
214,520
|
|
|
$
|
214,520
|
|
Amount due to related parties
|
|
|
3,192,986
|
|
|
|
2,592,986
|
|
Other payables and accrued expenses
|
|
|
7,594,602
|
|
|
|
6,800,194
|
|
Total Current Liabilities
|
|
|
11,002,108
|
|
|
|
9,607,701
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value, 115,197,165 shares authorized, 3,986,912 and 3,241,413 shares issued and outstanding as of June 30, 2020 and June 30, 2019, respectively
|
|
|
6,350
|
|
|
|
3,987
|
|
Additional paid in capital
|
|
|
155,455,332
|
|
|
|
138,012,445
|
|
Accumulated other comprehensive income
|
|
|
(34,264,089
|
)
|
|
|
(19,821,211
|
)
|
Retained earnings
|
|
|
141,608,329
|
|
|
|
278,360,465
|
|
Total Stockholders’ Equity
|
|
|
262,805,922
|
|
|
|
396,555,686
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
273,808,030
|
|
|
$
|
406,163,387
|
|
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
Condensed Statements of Operations
|
|
Year ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
General and administrative expenses
|
|
|
1,555,269
|
|
|
|
1,807,010
|
|
Interest income
|
|
|
19
|
|
|
|
9
|
|
Provision for tax
|
|
|
-
|
|
|
|
-
|
|
Equity investment in subsidiaries
|
|
|
(135,196,887
|
)
|
|
|
13,397,397
|
|
Net income
|
|
$
|
(136,752,136
|
)
|
|
$
|
11,590,395
|
|
Condensed Statements of Cash Flows
|
|
Year Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Net cash provided by (used in) operating activities
|
|
$
|
(10,864,886
|
)
|
|
$
|
(8,617,776
|
)
|
Net cash provided by (used in) investing activities
|
|
|
-
|
|
|
|
-
|
|
Net cash provided by (used in) financing activities
|
|
|
10,852,000
|
|
|
|
8,679,230
|
|
Cash and cash equivalents, beginning balance
|
|
|
78,405
|
|
|
|
(29,103,559
|
)
|
Cash and cash equivalents, ending balance
|
|
$
|
65,520
|
|
|
$
|
(29,042,104
|
)
|
Notes
to Condensed Parent Company Financial Information
As
of June 30, 2020, and 2019, there were no material contingencies, significant provisions for long-term obligations, or guarantees
of the Company, except as separately disclosed in the Consolidated Financial Statements, if any. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
NOTE 21 – OTHER EVENTS
In December 2019, a novel strain of coronavirus
was reported to have surfaced in Wuhan, China, which was continuing to spread throughout China and other parts of the world, including
the United States. On January 30, 2020, the World Health Organization declared the outbreak of the COVID-19 a “Public Health
Emergency of International Concern,” and on March 11, 2020, the World Health Organization characterized the outbreak as a
“pandemic”. The epidemic has resulted in quarantines, travel restrictions, and the temporary closure of office buildings
and facilities in China and in the U.S.
Xi’an
City, where our headquarters are located, is one of the most affected areas in China. The Company has been following the orders
of local government and health authorities to minimize exposure risk for its employees, including the closures of its offices
and having employees work remotely from January of 2020 until March of 2020. An occurrence of an uncontrollable event such as
the COVID-19 pandemic may negatively affect our operations and financial results.
Substantially all our revenues are generated
in China. Consequently, our results of operations were adversely and materially affected by COVID-19. Any potential impact to our
results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity
of COVID-19 and the actions taken by government authorities and other entities to contain COVID-19 or treat its impact, almost
all of which are beyond our control. Potential impacts include, but are not limited to, the following:
|
●
|
temporary
closure of offices, travel restrictions or suspension of transportation of our products
to our customers and our suppliers have been negatively affected, and could continue
to be negatively affected, on their ability to supply our demands;
|
|
●
|
our
customers that are negatively impacted by the outbreak of COVID-19 may reduce their budgets to purchase our products and services,
which may materially adversely impact our revenue;
|
|
●
|
we
may have to provide significant sales incentives to our customers in response to the outbreak, which may in turn materially
adversely affect our financial condition and operating results;
|
|
●
|
the
business operations of our customers and suppliers have been and could continue to be negatively impacted by the outbreak,
result in loss of customers or disruption of our services, which may in turn materially adversely affect our financial condition
and operating results;
|
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2020
|
●
|
any
disruption of our supply chain, logistics providers or customers could adversely impact our business and results of operations,
including causing our suppliers to cease manufacturing products for a period of time or materially delay delivery to customers,
which may also lead to loss of customers, as well as reputational, competitive and business harm to us;
|
|
●
|
many
of our customers, distributors, suppliers and other partners are individuals and small and medium-sized enterprises (SMEs),
which may not have strong cash flows or be well capitalized, and may be vulnerable to an epidemic outbreak and slowing macroeconomic
conditions. If the SMEs that we work with cannot weather COVID-19 and the resulting economic impact, or cannot resume business
as usual after a prolonged outbreak, our revenues and business operations may be materially and adversely impacted;
|
|
●
|
the
global stock markets have experienced, and may continue to experience, significant decline from the COVID-19 outbreak, which
could materially adversely affect our stock price;
|
Because of the uncertainty surrounding
the COVID-19 outbreak, the financial impact related to the outbreak of and response to the COVID-19 cannot be reasonably estimated
at this time, but our results for the full fiscal year of 2020 had been adversely affected.
In general, our business could be adversely
affected by the effects of epidemics, including, but not limited to, the COVID-19, avian influenza, severe acute respiratory syndrome
(SARS), the influenza A virus, the Ebola virus, or other outbreaks. In response to an epidemic or other outbreaks, government and
other organizations may adopt regulations and policies that could lead to severe disruption to our daily operations, including
temporary closure of our offices and other facilities. These severe conditions may cause us and/or our partners to make internal
adjustments, including but not limited to, temporarily closing down business, limiting business hours, and setting restrictions
on travel and/or visits with clients and partners for a prolonged period of time. Various impacts arising from severe conditions
may cause business disruption, resulting in material, adverse effects to our financial condition and results of operations.
We
are taking significant measures to mitigate the financial and operational impacts of COVID-19 as well as additional actions to
improve our liquidity through cost reduction and conservation measures.
NOTE 22 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company
has analyzed its operations subsequent to June 30, 2020 to the date these consolidated financial statements were available to be
issued and has determined that there were no significant subsequent events or transactions that would require recognition or disclosure
in the consolidated financial statements.
F-34