Item 1. Financial Statements
CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
December 31,
2021
|
|
|
June 30,
2021
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
23,607,170
|
|
|
$
|
18,593,944
|
|
Accounts receivable, net
|
|
|
74,786,136
|
|
|
|
102,783,004
|
|
Inventories, net
|
|
|
38,766,953
|
|
|
|
64,315,903
|
|
Prepaid expenses and other current assets
|
|
|
6,917,487
|
|
|
|
8,093,808
|
|
Amount due from related parties
|
|
|
86,208
|
|
|
|
42,757
|
|
Advances to suppliers, net
|
|
|
26,999,738
|
|
|
|
23,884,772
|
|
Total Current Assets
|
|
|
171,163,692
|
|
|
|
217,714,188
|
|
|
|
|
|
|
|
|
|
|
Plant, property and equipment, net
|
|
|
21,196,299
|
|
|
|
22,221,016
|
|
Other assets
|
|
|
472,533
|
|
|
|
497,365
|
|
Other non-current assets
|
|
|
8,989,477
|
|
|
|
9,888,518
|
|
Intangible assets, net
|
|
|
16,184,054
|
|
|
|
16,407,651
|
|
Total Assets
|
|
$
|
218,006,055
|
|
|
$
|
266,728,738
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
6,402,013
|
|
|
$
|
16,868,942
|
|
Customer deposits
|
|
|
6,434,068
|
|
|
|
6,257,215
|
|
Accrued expenses and other payables
|
|
|
19,627,408
|
|
|
|
13,598,821
|
|
Amount due to related parties
|
|
|
5,238,700
|
|
|
|
4,976,689
|
|
Taxes payable
|
|
|
31,079,921
|
|
|
|
32,542,494
|
|
Short term loans
|
|
|
4,247,100
|
|
|
|
4,179,600
|
|
Interest payable
|
|
|
806,949
|
|
|
|
794,124
|
|
Total Current Liabilities
|
|
|
73,836,159
|
|
|
|
79,217,885
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
73,836,159
|
|
|
|
79,217,885
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred Stock, $.001 par value, 20,000,000 shares authorized, 0 shares issued and outstanding as of December 31, 2021 and June 30, 2021, respectively
|
|
|
-
|
|
|
|
-
|
|
Common stock, $.001 par value, 115,197,165 shares authorized, 8,487,629 and 8,487,629 shares issued and outstanding as of December 31, 2021 and June 30, 2021, respectively
|
|
|
8,488
|
|
|
|
8,488
|
|
Additional paid-in capital
|
|
|
170,223,195
|
|
|
|
170,223,195
|
|
Statutory reserve
|
|
|
26,925,274
|
|
|
|
27,673,245
|
|
Retained earnings
|
|
|
(52,124,706
|
)
|
|
|
(5,812,533
|
)
|
Accumulated other comprehensive loss
|
|
|
(862,354
|
)
|
|
|
(4,581,541
|
)
|
Total Stockholders’ Equity
|
|
|
144,169,896
|
|
|
|
187,510,853
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
218,006,055
|
|
|
$
|
266,728,738
|
|
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
|
|
Three Months Ended
December 31,
|
|
|
Six Months Ended
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
14,966,519
|
|
|
$
|
14,901,875
|
|
|
|
30,128,261
|
|
|
$
|
29,431,187
|
|
Gufeng
|
|
|
21,573,414
|
|
|
|
22,436,394
|
|
|
|
36,361,666
|
|
|
|
38,264,597
|
|
Yuxing
|
|
|
2,819,203
|
|
|
|
2,682,195
|
|
|
|
5,708,097
|
|
|
|
5,105,683
|
|
VIEs - others
|
|
|
3,467,453
|
|
|
|
3,718,507
|
|
|
|
5,068,013
|
|
|
|
8,202,581
|
|
Net sales
|
|
|
42,826,589
|
|
|
|
43,738,971
|
|
|
|
77,266,037
|
|
|
|
81,004,048
|
|
Cost of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
|
10,990,616
|
|
|
|
10,921,417
|
|
|
|
22,082,927
|
|
|
|
21,606,881
|
|
Gufeng
|
|
|
19,144,888
|
|
|
|
19,846,423
|
|
|
|
32,002,150
|
|
|
|
33,824,240
|
|
Yuxing
|
|
|
2,374,221
|
|
|
|
2,140,856
|
|
|
|
4,763,688
|
|
|
|
4,182,928
|
|
VIEs - others
|
|
|
3,040,779
|
|
|
|
3,277,876
|
|
|
|
4,349,477
|
|
|
|
6,800,222
|
|
Cost of goods sold
|
|
|
35,550,504
|
|
|
|
36,186,572
|
|
|
|
63,198,242
|
|
|
|
66,414,271
|
|
Gross profit
|
|
|
7,276,085
|
|
|
|
7,552,399
|
|
|
|
14,067,795
|
|
|
|
14,589,777
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
3,185,204
|
|
|
|
2,944,641
|
|
|
|
6,681,075
|
|
|
|
7,361,235
|
|
General and administrative expenses
|
|
|
32,418,068
|
|
|
|
43,149,969
|
|
|
|
48,813,393
|
|
|
|
74,098,894
|
|
Total operating expenses
|
|
|
35,603,272
|
|
|
|
46,094,610
|
|
|
|
55,494,468
|
|
|
|
81,460,129
|
|
(Loss) from operations
|
|
|
(28,327,187
|
)
|
|
|
(38,542,211
|
)
|
|
|
(41,426,673
|
)
|
|
|
(66,870,352
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense)
|
|
|
462,076
|
|
|
|
(48,987
|
)
|
|
|
459,231
|
|
|
|
(57,467
|
)
|
Interest income
|
|
|
31,219
|
|
|
|
20,836
|
|
|
|
76,600
|
|
|
|
43,219
|
|
Interest expense
|
|
|
(66,419
|
)
|
|
|
(67,185
|
)
|
|
|
(138,518
|
)
|
|
|
(123,953
|
)
|
Total other (expense)
|
|
|
426,876
|
|
|
|
(95,336
|
)
|
|
|
397,313
|
|
|
|
(138,201
|
)
|
(Loss) from continuing operations before income taxes
|
|
|
(27,900,310
|
)
|
|
|
(38,637,547
|
)
|
|
|
(41,029,361
|
)
|
|
|
(67,008,554
|
)
|
Provision for income taxes
|
|
|
516,981
|
|
|
|
1,435,825
|
|
|
|
629,004
|
|
|
|
2,951,140
|
|
(Loss) from continuing operations
|
|
|
(28,417,291
|
)
|
|
|
(40,073,372
|
)
|
|
|
(41,658,365
|
)
|
|
|
(69,959,694
|
)
|
Net income (loss) from discontinued operations, net of taxes
|
|
|
(3,565,645
|
)
|
|
|
36,708
|
|
|
|
(5,401,779
|
)
|
|
|
(1,029,883
|
)
|
Net (loss)
|
|
|
(31,982,936
|
)
|
|
|
(40,036,664
|
)
|
|
|
(47,060,144
|
)
|
|
|
(70,989,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
3,262,613
|
|
|
|
11,927,692
|
|
|
|
3,719,187
|
|
|
|
25,395,536
|
|
comprehensive income (loss)
|
|
$
|
(28,720,323
|
)
|
|
$
|
(28,108,971
|
)
|
|
|
(43,340,957
|
)
|
|
$
|
(45,594,041
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
8,487,629
|
|
|
|
6,350,129
|
|
|
|
8,487,629
|
|
|
|
6,350,129
|
|
Basic net earnings per share – from continuing operations
|
|
$
|
(3.35
|
)
|
|
$
|
(6.31
|
)
|
|
|
(4.91
|
)
|
|
$
|
(11.02
|
)
|
Basic net earnings per share – from discontinued operations
|
|
|
(0.42
|
)
|
|
|
0.01
|
|
|
|
(0.64
|
)
|
|
|
(0.16
|
)
|
Basic net earnings per share
|
|
$
|
(3.77
|
)
|
|
$
|
(6.30
|
)
|
|
|
(5.54
|
)
|
|
$
|
(11.18
|
)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
8,487,629
|
|
|
|
6,350,129
|
|
|
|
8,487,629
|
|
|
|
6,350,129
|
|
Diluted net earnings per share– from continuing operations
|
|
|
(3.35
|
)
|
|
|
(6.31
|
)
|
|
|
(4.91
|
)
|
|
|
(11.02
|
)
|
Diluted net earnings per share – from discontinued operations
|
|
|
(0.42
|
)
|
|
|
0.01
|
|
|
|
(0.64
|
)
|
|
|
(0.16
|
)
|
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 2021 AND
2020
|
|
Number
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
Total
|
|
|
|
Of
|
|
|
Common
|
|
|
Paid In
|
|
|
Statutory
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Capital
|
|
|
Reserve
|
|
|
Earnings
|
|
|
Income (loss)
|
|
|
Equity
|
|
BALANCE, JUNE 30, 2021
|
|
|
8,487,629
|
|
|
$
|
8,488
|
|
|
$
|
170,223,195
|
|
|
$
|
27,673,245
|
|
|
$
|
(5,812,533
|
)
|
|
$
|
(4,581,541
|
)
|
|
$
|
187,510,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47,060,144
|
)
|
|
|
|
|
|
|
(47,060,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer to statutory reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(747,971
|
)
|
|
|
747,971
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,719,187
|
|
|
|
3,719,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2021
|
|
|
8,487,629
|
|
|
$
|
8,488
|
|
|
$
|
170,223,195
|
|
|
$
|
26,925,274
|
|
|
$
|
(52,124,706
|
)
|
|
$
|
(862,354
|
)
|
|
$
|
144,169,896
|
|
|
|
Number
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
Total
|
|
|
|
Of
|
|
|
Common
|
|
|
Paid In
|
|
|
Statutory
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Capital
|
|
|
Reserve
|
|
|
Earnings
|
|
|
Income (loss)
|
|
|
Equity
|
|
BALANCE, JUNE 30, 2020
|
|
|
6,350,129
|
|
|
$
|
6,350
|
|
|
$
|
155,455,332
|
|
|
|
29,743,991
|
|
|
|
111,864,338
|
|
|
|
(34,264,089
|
)
|
|
|
262,805,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,989,577
|
)
|
|
|
|
|
|
|
(70,989,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer to statutory reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(498,625
|
)
|
|
|
498,625
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,395,536
|
|
|
|
25,395,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2020
|
|
|
6,350,129
|
|
|
$
|
6,350
|
|
|
$
|
155,455,332
|
|
|
$
|
29,245,366
|
|
|
$
|
41,373,386
|
|
|
$
|
(8,868,553
|
)
|
|
$
|
217,211,881
|
|
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
|
|
Six Months Ended
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net (loss)
|
|
$
|
(47,060,144
|
)
|
|
$
|
(70,989,577
|
)
|
Adjustments to reconcile Net income (loss) to net cash provided by (used in) operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,631,019
|
|
|
|
1,867,471
|
|
Provision for losses on accounts receivable
|
|
|
25,279,928
|
|
|
|
38,475,657
|
|
Gain (Loss) on disposal of property, plant and equipment
|
|
|
34
|
|
|
|
1,562
|
|
Inventories impairment
|
|
|
10,999,380
|
|
|
|
30,791,832
|
|
Changes in operating assets
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(588,426
|
)
|
|
|
(27,015,611
|
)
|
Amount due from related parties
|
|
|
(42,248
|
)
|
|
|
(172,434
|
)
|
Other current assets
|
|
|
1,199,981
|
|
|
|
(251,484
|
)
|
Inventories
|
|
|
11,209,817
|
|
|
|
(15,219,180
|
)
|
Advances to suppliers
|
|
|
(2,947,592
|
)
|
|
|
34,718,741
|
|
Other assets
|
|
|
1,046,057
|
|
|
|
994,332
|
|
Changes in operating liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(6,343,299
|
)
|
|
|
(1,558,575
|
)
|
Customer deposits
|
|
|
543,423
|
|
|
|
909,131
|
|
Tax payables
|
|
|
244,000
|
|
|
|
580,112
|
|
Accrued expenses and other payables
|
|
|
(58,685
|
)
|
|
|
630,812
|
|
Interest payable
|
|
|
6,527,291
|
|
|
|
-
|
|
Net cash used in operating activities
|
|
|
(1,640,536
|
)
|
|
|
(6,237,210
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of plant, property, and equipment
|
|
|
(83,816
|
)
|
|
|
(92,801
|
)
|
Change in construction in process
|
|
|
32,471
|
|
|
|
|
|
Sales of discontinued operations
|
|
|
1,841,677
|
|
|
|
(119,489
|
)
|
Net cash provided by (used in) investing activities
|
|
|
1,790,332
|
|
|
|
(212,290
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from loans
|
|
|
-
|
|
|
|
306,000
|
|
Net cash provided by financing activities
|
|
|
-
|
|
|
|
306,000
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate change on cash and cash equivalents
|
|
|
1,582,358
|
|
|
|
4,035,108
|
|
Net increase in cash and cash equivalents
|
|
|
5,013,226
|
|
|
|
(2,108,392
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning balance
|
|
|
18,593,944
|
|
|
|
11,934,778
|
|
Cash and cash equivalents, ending balance
|
|
$
|
23,607,170
|
|
|
$
|
9,826,386
|
|
|
|
|
|
|
|
|
|
|
Supplement disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest expense paid
|
|
$
|
138,518
|
|
|
$
|
123,953
|
|
Income taxes paid
|
|
$
|
240,265
|
|
|
$
|
239,711
|
|
The consolidated statements of cash flows are
presented with the combined cash flows from discontinued operations with cash flows from continuing operations within each cash flow statement
category.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
CHINA GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
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.
On June 2, 2021, the Company, through its wholly-owned
subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of
Xindeguo, Xinyulei and Xiangrong.
On December 1, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Lishijie.
On December 31, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Fengnong.
Yuxing, Jinyangguang and Wangtian may also
collectively be referred to as the “the VIE Companies”; Jinyangguang, and Wangtian may also collectively be referred to as
“the sales VIEs” or “the sales VIE companies”.
”.
The Company’s corporate structure as of December 31, 2021 is
set forth in the diagram below:
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.
For purposes of comparability, certain prior period
amounts have been reclassified to conform to the current year presentation in accordance with accounting principles generally accepted
in the United States of America (“GAAP”). The Company’s consolidated financial statements have been presented with its
former VIEs Xindeguo, Xinyulei, Xiangrong, Lishijie and Fengnong as a discontinued operation. See Note 21, “Discontinued Operations,”
for more information.
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.
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 December 31, 2021, 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 December 31, 2021 and
June 30, 2021 were $23,538,947 and $18,515,829, respectively. There is no insurance securing these deposits in China. In addition, the
Company also had $68,223 and $78,115 in cash in two banks in the United States as of December 31, 2021 and June 30, 2021, 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.
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 adequacy of these reserves at each year-end. Accounts considered uncollectible are provisioned for /written off based upon management’s
assessment. As of December 31, 2021, and June 30, 2021, the Company had accounts receivable of $74,786,136 and $102,783,004, net of allowance
for doubtful accounts of $35,171,602 and $23,738,987, respectively. The company recorded bad debt expense in the amount of $ 25 million
and $ 38 million for six months ended December 31, 2021 and 2020, respectively. The Company adopts no policy to accept product returns
after 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 December
31, 2021, and 2020, the Company had no reserve for obsolete goods. The company confirmed the loss of $11 million and $31 million of inventories
for six months ended December 31, 2021 and 2020, respectively.
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 December 31, 2021
and 2020, respectively.
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 December 31, 2021, and June 30, 2021, the Company had customer deposits of $6,434,068 and $6,257,215,
respectively.
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:
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
(Loss) from continuing operations for Basic Earnings Per Share
|
|
$
|
(28,417,291
|
)
|
|
$
|
(40,073,372
|
)
|
(Loss) from discontinued operations for Basic Earnings Per Share
|
|
|
(3,565,645
|
)
|
|
|
36,708
|
|
(Loss) for Basic Earnings Per Share
|
|
|
(31,982,936
|
)
|
|
|
(40,036,664
|
)
|
Basic Weighted Average Number of Shares
|
|
|
8,487,629
|
|
|
|
6,350,129
|
|
(Loss) from continuing operations Per Share – Basic
|
|
$
|
(3.35
|
)
|
|
$
|
(6.31
|
)
|
(Loss) Income from discontinued operations Per Share – Basic
|
|
$
|
(0.42
|
)
|
|
$
|
0.01
|
|
Net (Loss) Per Share – Basic
|
|
$
|
(3.77
|
)
|
|
$
|
(6.30
|
)
|
(Loss) from continuing operations for Diluted Earnings Per Share
|
|
$
|
(28,417,291
|
)
|
|
$
|
(40,073,372
|
)
|
(Loss) Income from discontinued operations for Diluted Earnings Per Share
|
|
$
|
(3,565,645
|
)
|
|
|
36,708
|
|
(Loss) for Diluted Earnings Per Share
|
|
$
|
(31,982,936
|
)
|
|
|
(40,036,664
|
)
|
Diluted Weighted Average Number of Shares
|
|
|
8,487,629
|
|
|
|
6,350,129
|
|
(Loss) from continuing operations Per Share – Diluted
|
|
$
|
(3.35
|
)
|
|
$
|
(6.31
|
)
|
(Loss) Income from discontinued operations Per Share – Diluted
|
|
$
|
(0.42
|
)
|
|
$
|
0.01
|
|
Net (Loss) Per Share – Diluted
|
|
$
|
(3.77
|
)
|
|
$
|
(6.30
|
)
|
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
(Loss) from continuing operations for Basic Earnings Per Share
|
|
$
|
(41,658,365
|
)
|
|
$
|
(69,959,694
|
)
|
(Loss) from discontinued operations for Basic Earnings Per Share
|
|
|
(5,401,779
|
)
|
|
|
(1,029,883
|
)
|
(Loss) for Basic Earnings Per Share
|
|
|
(47,060,144
|
)
|
|
|
(70,989,577
|
)
|
Basic Weighted Average Number of Shares
|
|
|
8,487,629
|
|
|
|
6,350,129
|
|
(Loss) from continuing operations Per Share – Basic
|
|
$
|
(4.91
|
)
|
|
$
|
(11.02
|
)
|
(Loss) Income from discontinued operations Per Share – Basic
|
|
$
|
(0.64
|
)
|
|
$
|
(0.16
|
)
|
Net (Loss) Per Share – Basic
|
|
$
|
(5.54
|
)
|
|
$
|
(11.18
|
)
|
(Loss) from continuing operations for Diluted Earnings Per Share
|
|
$
|
(41,658,365
|
)
|
|
$
|
(69,959,694
|
)
|
(Loss) Income from discontinued operations for Diluted Earnings Per Share
|
|
$
|
(5,401,779
|
)
|
|
|
(1,029,883
|
)
|
(Loss) for Diluted Earnings Per Share
|
|
$
|
(47,060,144
|
)
|
|
|
(70,989,577
|
)
|
Diluted Weighted Average Number of Shares
|
|
|
8,487,629
|
|
|
|
6,350,129
|
|
(Loss) from continuing operations Per Share – Diluted
|
|
$
|
(4.91
|
)
|
|
$
|
(11.02
|
)
|
(Loss) Income from discontinued operations Per Share – Diluted
|
|
$
|
(0.64
|
)
|
|
$
|
(0.16
|
)
|
Net (Loss) Per Share – Diluted
|
|
$
|
(5.54
|
)
|
|
$
|
(11.18
|
)
|
Recent accounting pronouncements
In December 2019, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”), 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 evaluated
the impact that with the adoption of ASU 2019-12, and it did not have any impact on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity
(Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting
for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation
in certain areas. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2023, although
early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its 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 during the
reporting period from July 1, 2021 through December 31, 2021. These factors raise doubt about the Company’s ability to continue
as a 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.
NOTE 4 – INVENTORIES
Inventories consisted of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
Raw materials
|
|
$
|
5,532,720
|
|
|
$
|
18,023,063
|
|
Supplies and packing materials
|
|
$
|
514,466
|
|
|
$
|
431,076
|
|
Work in progress
|
|
$
|
226,377
|
|
|
$
|
252,873
|
|
Finished goods
|
|
$
|
32,493,390
|
|
|
$
|
45,608,891
|
|
Total
|
|
$
|
38,766,953
|
|
|
$
|
64,315,903
|
|
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
Building and improvements
|
|
$
|
42,131,601
|
|
|
$
|
41,429,653
|
|
Auto
|
|
|
3,302,295
|
|
|
|
3,472,838
|
|
Machinery and equipment
|
|
|
19,711,345
|
|
|
|
19,369,913
|
|
Total property, plant and equipment
|
|
|
65,145,241
|
|
|
|
64,272,403
|
|
Less: accumulated depreciation
|
|
|
(43,948,942
|
)
|
|
|
(42,051,387
|
)
|
Total
|
|
$
|
21,196,299
|
|
|
$
|
22,221,016
|
|
NOTE 6 – INTANGIBLE ASSETS
Intangible assets consisted of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
Land use rights, net
|
|
$
|
9,354,408
|
|
|
$
|
9,330,109
|
|
Technology patent, net
|
|
|
-
|
|
|
|
-
|
|
Customer relationships, net
|
|
|
321,889
|
|
|
|
656,625
|
|
Non-compete agreement
|
|
|
-
|
|
|
|
16,589
|
|
Trademarks
|
|
|
6,507,757
|
|
|
|
6,404,328
|
|
Total
|
|
$
|
16,184,054
|
|
|
$
|
16,407,651
|
|
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 $11,511,984). 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 $164,528). 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 $1,145,946). The intangible asset is being amortized over the grant period of 50 years.
The Land Use Rights consisted of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
Land use rights
|
|
$
|
12,657,930
|
|
|
|
12,456,753
|
|
Less: accumulated amortization
|
|
|
(3,303,522
|
)
|
|
|
(3,126,644
|
)
|
Total land use rights, net
|
|
$
|
9,354,408
|
|
|
|
9,330,109
|
|
TECHNOLOGY PATENT
On August 16, 2001, Jinong was issued a technology
patent related to a proprietary formula used in the production of humic acid. The fair value of the related intangible asset was determined
to be the respective cost of RMB 5,875,068 (or $924,148) 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 of the acquired technology patent was estimated to be RMB9,200,000 (or $1,447,160)
and is amortized over the remaining useful life of six years using the straight-line method. As of December 31, 2021, this technology
patent is fully amortized.
The technology know-how consisted of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
Technology know-how
|
|
$
|
2,371,308
|
|
|
$
|
2,333,621
|
|
Less: accumulated amortization
|
|
|
(2,371,308
|
)
|
|
|
(2,333,621
|
)
|
Total technology know-how, net
|
|
$
|
-
|
|
|
$
|
-
|
|
CUSTOMER RELATIONSHIPS
On July 2, 2010, the Company acquired Gufeng and
its wholly-owned subsidiary Tianjuyuan. The fair value of the acquired customer relationships was estimated to be RMB65,000,000 (or $10,224,500)
and is amortized over the remaining useful life of ten years. On June 30, 2016 and January 1, 2017, the Company acquired the sales VIE
Companies. The fair value of the acquired customer relationships was estimated to be RMB8,808,783 (or $1,385,622) and is amortized over
the remaining useful life of seven to ten years.
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
Customer relationships
|
|
$
|
11,610,122
|
|
|
$
|
12,028,177
|
|
Less: accumulated amortization
|
|
|
(11,288,233
|
)
|
|
|
(11,371,552
|
)
|
Total customer relationships, net
|
|
$
|
321,889
|
|
|
$
|
656,625
|
|
NON-COMPETE AGREEMENT
On July 2, 2010, the Company acquired Gufeng and
its wholly-owned subsidiary Tianjuyuan. The fair value of the acquired non-compete agreement was estimated to be RMB1,320,000 (or $207,636)
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 sales VIE Companies. The fair value of the acquired non-compete agreements was estimated to be RMB3,099,908 (or $487,616)
and is amortized over the remaining useful life of five years using the straight-line method.
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
Non-compete agreement
|
|
$
|
695,251
|
|
|
$
|
959,345
|
|
Less: accumulated amortization
|
|
|
(695,251
|
)
|
|
|
(942,756
|
)
|
Total non-compete agreement, net
|
|
$
|
-
|
|
|
$
|
16,589
|
|
TRADEMARKS
On July 2, 2010, the Company acquired Gufeng and
its wholly-owned subsidiary Tianjuyuan. The preliminary fair value of the acquired trademarks was estimated to be RMB40,700,000 (or $6,402,110)
and is subject to an annual impairment test.
AMORTIZATION EXPENSE
Estimated amortization expenses of intangible
assets for the next five twelve months periods ended December 31, are as follows:
Twelve Months Ended on December 31,
|
|
Expense
($)
|
|
2022
|
|
|
518,338
|
|
2023
|
|
|
434,474
|
|
2024
|
|
|
306,744
|
|
2025
|
|
|
283,737
|
|
2026
|
|
|
128,595
|
|
NOTE 7 – OTHER NON-CURRENT ASSETS
Other non-current assets mainly include advance
payments related to leasing land for use by the Company. As of December 31, 2021, the balance of other non-current assets was $8,989,477,
which was the lease fee advances for agriculture lands that the Company engaged in Shiquan County from 2022 to 2027.
In March 2017, Jinong entered into a lease agreement
for approximately 3,400 mu, and 2600-hectare agriculture lands in Shiquan County, Shaanxi Province. The lease was from April 2017 and
was renewable for every ten-year period up to 2066. The aggregate leasing fee was approximately RMB 13 million per annum, The Company
had made 10-year advances of leasing fee per lease terms. The Company has amortized $1 million and $1 million as expenses for the six
months ended December 31, 2021 and 2020, respectively.
Estimated amortization expenses of the lease advance
payments for the next four twelve-month periods ended December 31 and thereafter are as follows:
Twelve months ending December 31,
|
|
|
|
2023
|
|
$
|
2,111,753
|
|
2024
|
|
$
|
2,111,753
|
|
2025
|
|
$
|
2,111,753
|
|
2026 and thereafter
|
|
$
|
2,654,219
|
|
NOTE 8 – ACCRUED EXPENSES AND OTHER PAYABLES
Accrued expenses and other payables consisted of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
Payroll and welfare payable
|
|
$
|
187,897
|
|
|
$
|
184,910
|
|
Accrued expenses
|
|
|
8,205,123
|
|
|
|
7,957,290
|
|
Other payables
|
|
|
11,102,466
|
|
|
|
5,326,796
|
|
Other levy payable
|
|
|
131,922
|
|
|
|
129,825
|
|
Total
|
|
$
|
19,627,408
|
|
|
$
|
13,598,821
|
|
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 RMB 25,500,000 (approximately
$4,011,150). For the six months Ended December 31, 2021 and 2020, Yuxing has sold approximately 0 and $176,409 products to 900LH.com.
As of December 31, 2021, and June 30, 2021, the
amount due to related parties was $5,238,700 and $4,976,689, respectively. As of December 31, 2021, and June 30, 2021, $1,101,100
and $1,083,600, 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 December 31, 2021, and June 30, 2021, the
Company’s subsidiary, Jinong, owed 900LH.com $4,529 and $12,870, respectively.
On July 1, 2020, Jinong signed an office lease
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 lease, Jinong rented 612 square meters (approximately 6,588 square feet) of office space from Kingtone
Information. The lease provides for a two-year term effective as of July 1, 2020 with monthly rent of RMB24,480 (approximately $3,851).
NOTE 10 – LOAN PAYABLES
As of December 31, 2021, the short-term loan payables
consisted of three loans which mature on dates ranging from June 17, 2020 through August 5, 2021 with interest rates ranging from 5.22%
to 5.66%. All loans are collateralized by Tianjuyuan’s land use right and building ownership right.
No.
|
|
Payee
|
|
Loan period per agreement
|
|
Interest
Rate
|
|
|
December 31,
2021
|
|
1
|
|
Postal Saving Bank of China - Pinggu Branch
|
|
May 27, 2021-May 26, 2022
|
|
|
5.66
|
%
|
|
|
2,359,500
|
|
2
|
|
Beijing Bank - Pinggu Branch
|
|
May 27, 2021-May 26, 2022
|
|
|
5.66
|
%
|
|
|
314,600
|
|
3
|
|
Postal Saving Bank of China - Pinggu Branch
|
|
May 25, 2021-May 21, 2022
|
|
|
5.22
|
%
|
|
|
1,573,000
|
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
4,247,100
|
|
The interest expense from short-term loans was
$138,518 and $123,953 for the period ended December 31, 2021 and 2020, respectively.
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 ($7,803,000) 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, 2019
|
|
|
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 ($1,836,000) 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 December 31, 2019.
The Company determined that the fair value of
the convertible notes payable was 0 as of December 31, 2021 and June 30, 2021. 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. The accumulated amortization of this discount into accretion
expenses was $1,375,499 as of December 31, 2021 and 2020.
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 six-month period ended December 31, 2021 and 2020 of 0 and $273,796, 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 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 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%.
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 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
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
VAT provision
|
|
$
|
(393,304
|
)
|
|
$
|
(284,940
|
)
|
Income tax payable
|
|
|
(263,804
|
)
|
|
|
1,136,929
|
|
Other levies
|
|
|
2,726,494
|
|
|
|
2,679,970
|
|
Repatriation tax
|
|
|
29,010,535
|
|
|
|
29,010,535
|
|
Total
|
|
$
|
31,079,921
|
|
|
$
|
32,542,494
|
|
The provision for income taxes consists of the following
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Current tax - foreign
|
|
$
|
629,004
|
|
|
$
|
3,047,841
|
|
Deferred tax
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
629,004
|
|
|
$
|
3,047,841
|
|
Significant components of deferred tax assets were as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
Deferred tax assets
|
|
|
|
|
|
|
Deferred Tax Benefit
|
|
|
36,946,301
|
|
|
|
36,359,106
|
|
Valuation allowance
|
|
|
(36,946,301
|
)
|
|
|
(36,359,106
|
)
|
Total deferred tax assets
|
|
$
|
-
|
|
|
|
-
|
|
Tax Rate Reconciliation
Our effective tax rates were approximately -1.4%
and-4.6% for the six months ended December 31, 2021 and 2020, 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 (loss) differ from the amounts computed by applying the US statutory income tax rate of 21.0% to income before income
taxes for the six months ended December 31, 2021 and 2020 for the following reasons:
December 31, 2021
|
|
China
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
15% - 25%
|
|
|
|
|
|
21%
|
|
|
|
|
|
Total
|
|
|
|
|
Pretax income (loss)
|
|
$
|
(45,930,217
|
)
|
|
|
|
|
|
|
(500,923
|
)
|
|
|
|
|
|
$
|
(46,431,140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax expense (benefit)
|
|
|
(11,482,554
|
)
|
|
|
25.0
|
%
|
|
|
(105,194
|
)
|
|
|
21.0
|
%
|
|
|
(11,587,748
|
)
|
|
|
|
|
High-tech income benefits on Jinong
|
|
|
1,551,499
|
|
|
|
(3.4
|
)%
|
|
|
-
|
|
|
|
-
|
|
|
|
1,551,499
|
|
|
|
|
|
Losses from subsidiaries in which no benefit is recognized
|
|
|
9,972,865
|
|
|
|
(21.7
|
)%
|
|
|
-
|
|
|
|
-
|
|
|
|
9,972,865
|
|
|
|
|
|
Change in valuation allowance on deferred tax asset from US tax benefit
|
|
|
587,195
|
|
|
|
(1.3
|
)%
|
|
|
105,194
|
|
|
|
(21.0
|
)%
|
|
|
692,389
|
|
|
|
|
|
Actual tax expense
|
|
$
|
629,004
|
|
|
|
(1.4
|
)%
|
|
$
|
-
|
|
|
|
-
|
%
|
|
$
|
629,004
|
|
|
|
(1.4
|
)%
|
December 31, 2020
|
|
China
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
|
|
|
15% - 25%
|
|
|
|
|
|
21%
|
|
|
|
|
|
Total
|
|
|
|
|
Pretax income (loss)
|
|
$
|
(65,557,592
|
)
|
|
|
|
|
|
|
(970,067
|
)
|
|
|
|
|
|
$
|
(66,527,659
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax expense (benefit)
|
|
|
(16,389,398
|
)
|
|
|
25.0
|
%
|
|
|
(203,714
|
)
|
|
|
21.0
|
%
|
|
|
(16,593,112
|
)
|
|
|
|
|
High-tech income benefits on Jinong
|
|
|
1,528,049
|
|
|
|
(2.3
|
)%
|
|
|
-
|
|
|
|
-
|
|
|
|
1,528,049
|
|
|
|
|
|
Losses from subsidiaries in which no benefit is recognized
|
|
|
15,632,400
|
|
|
|
(23.8
|
)%
|
|
|
-
|
|
|
|
-
|
|
|
|
15,632,400
|
|
|
|
|
|
Change in valuation allowance on deferred tax asset from US tax benefit
|
|
|
2,276,790
|
|
|
|
(3.5
|
)%
|
|
|
203,714
|
|
|
|
(21.0
|
)%
|
|
|
2,480,504
|
|
|
|
|
|
Actual tax expense
|
|
$
|
3,047,841
|
|
|
|
(4.6
|
)%
|
|
$
|
-
|
|
|
|
-
|
%
|
|
$
|
3,047,841
|
|
|
|
(4.6
|
)%
|
NOTE 13 – STOCKHOLDERS’ EQUITY
Common Stock
On November 23, 2021, the Company entered into a Share Purchase Agreement
with certain non-US investors, giving them the right to purchase up to 13,142,857 shares of the Company’s common stock, par value
$0.001 per share, at the price of $15 per share in a transaction exempt from registration under the Securities Act of 1933, as amended,
in reliance on an exemption provided by Rule 903 of Regulation S and/or Section 4(a)(2) of the Securities Act. The aggregate purchase
price for the issuable shares is up to $197,142,855.
There were no shares of common stock issued
during the six months ended December 31, 2021 and 2020.
As of December 31, 2021, and June 30, 2021, there
were 8,487,629 and 8,487,629 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 December 31, 2021, 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 – 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
No vendor accounted for over 10% of the Company’s sales for the
six months Ended December 31, 2021.
There were two vendors from which the Company
purchased more than 10% of its raw materials, with the total of 22.2% of its raw materials for the six months ended December 31, 2020.
Total purchases from these vendors are $20,257,292 for the six-month period ended December 31, 2020.
No customer accounted for over 10% of the Company’s sales for
the six months Ended December 31, 2021 and 2020.
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 moved to dismiss the litigation
and for attorney’s fees from the plaintiff. On November 2, 2020, the case was transferred to the United States District Court for
The Southern District Of New York. On September 30, 2021, the Southern District of New York federal court presiding over the case dismissed
all claims against the company, its executives, and its independent directors. The dismissal was without prejudice and the plaintiff
can appeal or amend within 30 days. The plaintiff amended the complaint on Oct 30, 2021. The Company intends to move to dismiss it.
NOTE 15 – SEGMENT REPORTING
The Company is 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 (expense)
and net income (loss) 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 (loss) by segment.
|
|
Three Months
Ended
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
December 31,
2021
|
|
|
December 31,
2020
|
|
|
December 31,
2021
|
|
|
December 31,
2020
|
|
Revenues from unaffiliated customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
14,966,519
|
|
|
$
|
14,901,875
|
|
|
$
|
30,128,261
|
|
|
$
|
29,431,187
|
|
Gufeng
|
|
|
21,573,414
|
|
|
|
22,436,394
|
|
|
|
36,361,666
|
|
|
|
38,264,597
|
|
Yuxing
|
|
|
2,819,203
|
|
|
|
2,682,195
|
|
|
|
5,708,097
|
|
|
|
5,105,683
|
|
Sales VIEs
|
|
|
3,467,453
|
|
|
|
3,718,506
|
|
|
|
5,068,013
|
|
|
|
8,202,580
|
|
Consolidated
|
|
$
|
42,826,589
|
|
|
$
|
43,738,970
|
|
|
$
|
77,266,037
|
|
|
$
|
81,004,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
(2,424,698
|
)
|
|
$
|
(6,822,917
|
)
|
|
$
|
(6,287,310
|
)
|
|
$
|
(5,064,240
|
)
|
Gufeng
|
|
|
(20,807,616
|
)
|
|
|
(29,684,059
|
)
|
|
|
(29,898,613
|
)
|
|
|
(60,820,293
|
)
|
Yuxing
|
|
|
154,758
|
|
|
|
151,213
|
|
|
|
317,359
|
|
|
|
288,426
|
|
Sales VIEs
|
|
|
(5,203,138
|
)
|
|
|
(1,672,256
|
)
|
|
|
(5,057,180
|
)
|
|
|
(304,179
|
)
|
Reconciling item (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Reconciling item (2)
|
|
|
(46,494
|
)
|
|
|
(514,193
|
)
|
|
|
(500,929
|
)
|
|
|
(970,068
|
)
|
Consolidated
|
|
$
|
(28,327,188
|
)
|
|
$
|
(37,525,972
|
)
|
|
$
|
(41,426,673
|
)
|
|
$
|
(66,870,354
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
(2,387,078
|
)
|
|
$
|
(6,808,850
|
)
|
|
$
|
(6,205,995
|
)
|
|
$
|
(5,290,807
|
)
|
Gufeng
|
|
|
(20,950,605
|
)
|
|
|
(29,815,966
|
)
|
|
|
(30,114,176
|
)
|
|
|
(61,009,636
|
)
|
Yuxing
|
|
|
235,065
|
|
|
|
167,650
|
|
|
|
397,004
|
|
|
|
304,559
|
|
Sales VIEs
|
|
|
(5,203,014
|
)
|
|
|
(1,739,445
|
)
|
|
|
(5,098,642
|
)
|
|
|
(704,126
|
)
|
Reconciling item (1)
|
|
|
2
|
|
|
|
2
|
|
|
|
6
|
|
|
|
2
|
|
Reconciling item (2)
|
|
|
(563,225
|
)
|
|
|
(1,876,485
|
)
|
|
|
(1,088,125
|
)
|
|
|
(3,246,858
|
)
|
Reconciling item (3)
|
|
|
451,563
|
|
|
|
(277
|
)
|
|
|
451,563
|
|
|
|
(12,827
|
)
|
Consolidated
|
|
$
|
(28,417,290
|
)
|
|
$
|
(40,073,371
|
)
|
|
$
|
(41,658,365
|
)
|
|
$
|
(69,959,694
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
210,294
|
|
|
$
|
202,293
|
|
|
$
|
417,687
|
|
|
$
|
394,871
|
|
Gufeng
|
|
|
205,818
|
|
|
|
303,556
|
|
|
|
410,392
|
|
|
|
608,667
|
|
Yuxing
|
|
|
323,648
|
|
|
|
311,775
|
|
|
|
643,953
|
|
|
|
610,571
|
|
Sales VIEs
|
|
|
49,163
|
|
|
|
70,840
|
|
|
|
97,743
|
|
|
|
138,688
|
|
Consolidated
|
|
$
|
788,923
|
|
|
$
|
888,465
|
|
|
$
|
1,569,775
|
|
|
$
|
1,752,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gufeng
|
|
|
66,419
|
|
|
|
67,185
|
|
|
|
138,429
|
|
|
|
123,953
|
|
Yuxing
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Sales VIEs
|
|
|
-
|
|
|
|
-
|
|
|
|
89
|
|
|
|
-
|
|
Consolidated
|
|
$
|
66,419
|
|
|
$
|
67,185
|
|
|
$
|
138,518
|
|
|
$
|
123,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
5,308
|
|
|
$
|
53,381
|
|
|
$
|
21,272
|
|
|
$
|
57,048
|
|
Gufeng
|
|
|
7,869
|
|
|
|
18,308
|
|
|
|
29,420
|
|
|
|
35,753
|
|
Yuxing
|
|
|
847
|
|
|
|
-
|
|
|
|
33,123
|
|
|
|
-
|
|
Sales VIEs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consolidated
|
|
$
|
14,024
|
|
|
$
|
71,689
|
|
|
$
|
83,816
|
|
|
$
|
92,801
|
|
|
|
As of
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
Identifiable assets:
|
|
|
|
|
|
|
Jinong
|
|
$
|
86,697,581
|
|
|
$
|
85,585,344
|
|
Gufeng
|
|
|
101,171,350
|
|
|
|
130,346,782
|
|
Yuxing
|
|
|
41,858,592
|
|
|
|
38,516,348
|
|
Sales VIEs
|
|
|
18,457,820
|
|
|
|
43,862,592
|
|
Reconciling item (1)
|
|
|
(30,345,409
|
)
|
|
|
(31,748,448
|
)
|
Reconciling item (2)
|
|
|
166,121
|
|
|
|
166,121
|
|
Consolidated
|
|
$
|
218,006,055
|
|
|
$
|
266,728,738
|
|
(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)
|
The comparative numbers are excluding discontinued entities
|
NOTE 16 – COMMITMENTS AND CONTINGENCIES
On July 1, 2020, Jinong signed an office lease
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 lease, Jinong rented 612 square meters (approximately 6,588 square feet) of office space from Kingtone
Information. The lease provides for a two-year term effective as of July 1, 2020 with monthly rent of RMB24,480 (approximately $3,851).
In February 2004, Tianjuyuan signed a fifty-year
lease 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 RMB 2,958(approximately $465).
On August 1, 2021, Jinyangguang signed a one-year
lease for 1,236.88 square meters (approximately 13,315 square feet) commercial space with monthly rent of RMB12,500 (approximately $1,966)
effective August 1, 2021.
Accordingly, the Company recorded an aggregate
of $70,727 and $24,318 as rent expenses from these committed property leases for the six-month periods ended December 31, 2021 and 2020,
respectively. The contingent rent expenses herein for the next five twelve-month periods ended December 31, are as follows:
Years ending December 31,
|
|
|
|
2022
|
|
$
|
75,387
|
|
2023
|
|
|
75,387
|
|
2024
|
|
|
75,387
|
|
2025
|
|
|
75,387
|
|
2026
|
|
|
75,387
|
|
NOTE 17 – 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.
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.
On June 2, 2021, the Company, through its wholly-owned
subsidiary Jinong, exited the VIE agreements with the shareholders of Xinjiang and Xiangrong.
On December 1, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Lishijie.
On December 31, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Fengnong.
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 unaudited condensed consolidated
financial statements as of December 31, 2021 and June 30, 2021:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
517,040
|
|
|
$
|
253,566
|
|
Accounts receivable, net
|
|
|
13,135,956
|
|
|
|
35,360,138
|
|
Inventories
|
|
|
4,241,273
|
|
|
|
6,681,758
|
|
Other current assets
|
|
|
58,459
|
|
|
|
477,693
|
|
Advances to suppliers
|
|
|
147,188
|
|
|
|
277,563
|
|
Total Current Assets
|
|
|
18,099,916
|
|
|
|
43,050,718
|
|
|
|
|
|
|
|
|
|
|
Plant, Property and Equipment, Net
|
|
|
36,015
|
|
|
|
138,662
|
|
Other assets
|
|
|
|
|
|
|
|
|
Intangible Assets, Net
|
|
|
321,889
|
|
|
|
673,213
|
|
Total Assets
|
|
$
|
18,457,820
|
|
|
$
|
43,862,593
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
4,419,182
|
|
|
|
14,736,412
|
|
Customer deposits
|
|
|
-
|
|
|
|
167,059
|
|
Accrued expenses and other payables
|
|
|
6,018,966
|
|
|
|
9,162,742
|
|
Total Current Liabilities
|
|
$
|
10,438,148
|
|
|
$
|
24,066,213
|
|
Total Liabilities
|
|
$
|
10,438,148
|
|
|
$
|
24,066,213
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
8,019,672
|
|
|
|
19,796,380
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
18,457,820
|
|
|
$
|
43,862,593
|
|
|
|
Three Months Ended
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Revenue
|
|
$
|
3,467,454
|
|
|
$
|
11,003,073
|
|
Expenses
|
|
|
8,670,467
|
|
|
|
12,538,159
|
|
Net income (loss)
|
|
$
|
(5,203,013
|
)
|
|
$
|
(1,535,086
|
)
|
|
|
Six Months Ended
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Revenue
|
|
$
|
5,068,014
|
|
|
$
|
24,803,790
|
|
Expenses
|
|
|
10,166,655
|
|
|
|
26,233,239
|
|
Net income
|
|
$
|
(5,098,641
|
)
|
|
$
|
(1,429,449
|
)
|
NOTE 18 – 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.
On June 2, 2021, the Company, through its wholly-owned
subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of
Xindeguo, Xinyulei and Xiangrong.
On December 1, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Lishijie.
On December 31, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Fengnong.
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.
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
|
|
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
|
)
|
On June 10, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Xindeguo and Xinyulei. In return, the shareholders of Xindeguo and Xinyulei agreed to pay cash with amount of RMB1,850,000 (approximately
$286,935) to the Company.
For the discontinuation of Xindeguo and Xinyulei
made on June 10, 2021, the Company gave up the control of the following assets in Xindeguo and Xinyulei:
Working Capital
|
|
$
|
(1,135,366
|
)
|
Intangible Assets
|
|
|
28,050
|
|
Long-term equity investment
|
|
|
139,320
|
|
Goodwill
|
|
|
1,257,784
|
|
Total Asset
|
|
|
288,898
|
|
In return, the purchase consideration returned
to the Company from Xindeguo and Xinyulei’s shareholders is summarized below:
Cash
|
|
$
|
286,380
|
|
Total Payback
|
|
$
|
286,380
|
|
Net Gain (Loss)
|
|
|
(2,518
|
)
|
On June 10, 2021, the Company, through its wholly-owned
subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of
Xiangrong. In return, the shareholders of Xiangrong agreed to pay cash with amount of RMB24,430,000 (approximately $3,789,093) to the
Company.
For the discontinuation of Xiangrong made on June
10, 2021, the Company gave up the control of the following assets in Xiangrong:
Working Capital
|
|
$
|
2,930,551
|
|
Intangible assets
|
|
|
23,890
|
|
Goodwill
|
|
|
316,200
|
|
Total Asset
|
|
$
|
3,270,641
|
|
In return, the purchase consideration returned to the Company from
Xiangrong’s shareholders is summarized below:
Cash
|
|
$
|
3,781,764
|
|
Total Payback
|
|
$
|
3,781,764
|
|
Net Gain (Loss)
|
|
|
511,123
|
|
On December 1, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Lishijie. In return, the shareholders of Lishijie agreed to pay cash with amount of RMB3,500,000 (approximately $550,550) to the Company
before December 31, 2021.
For the discontinuation of Lishijie made on November
1, 2021, the Company gave up the control of the following assets in Lishijie:
Working Capital
|
|
$
|
358,715
|
|
Intangible assets
|
|
|
128,677
|
|
|
|
|
|
|
Total Asset
|
|
$
|
487,392
|
|
In return, the purchase consideration returned
to the Company from Lishijie’s shareholders is summarized below:
Cash
|
|
$
|
550,550
|
|
Total Payback
|
|
$
|
487,392
|
|
Net Gain (Loss)
|
|
|
63,158
|
|
On December 31, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Fengnong. In return, the shareholders of Fengnong agreed to pay cash with amount of RMB8,750,000 (approximately $1,376,375) to the
Company.
For the discontinuation of Fengnong made on December
31, 2021, the Company gave up the control of the following assets in Fengnong:
Working Capital
|
|
$
|
805,005
|
|
Fixed Assets
|
|
|
91,033
|
|
Intangible Assets
|
|
|
86,456
|
|
|
|
|
|
|
Total Asset
|
|
|
982,494
|
|
In return, the purchase consideration returned to the Company from
Fengnong’s shareholders is summarized below:
Cash
|
|
$
|
1,376,375
|
|
Total Payback
|
|
$
|
982,494
|
|
Net Gain (Loss)
|
|
|
393,881
|
|
NOTE 19 – 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;
|
|
●
|
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 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, 2021 and first half of fiscal year of 2022 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 business, limiting business hours, and setting restrictions on travel and/or visits with clients and partners
for a prolonged period. 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 20 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, the Company has
analyzed its operations after December 31, 2021 to the date these unaudited condensed 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 unaudited condensed consolidated financial statements.
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis of our
financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements
and the notes to those financial statements appearing elsewhere in this report. This discussion and analysis contain forward-looking statements
that involve significant risks and uncertainties. As a result of many factors, such as the slow-down of the macro-economic environment
in China and its impact on economic growth in general, the competition in the fertilizer industry and the impact of such competition on
pricing, revenues and margins, the weather conditions in the areas where our customers are based, the cost of attracting and retaining
highly skilled personnel, the prospects for future acquisitions, and the factors set forth elsewhere in this report, our actual results
may differ materially from those anticipated in these forward-looking statements. With these risks and uncertainties, there can be no
assurance that the forward-looking statements contained in this report will in fact occur. You should not place undue reliance on the
forward-looking statements contained in this report.
The forward-looking statements speak only as
of the date on which they are made, and, except to the extent required by U.S. federal securities laws, we undertake no obligation to
update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events. Further, the information about our intentions contained in this report is a statement of our
intention as of the date of this report and is based upon, among other things, the existing regulatory environment, industry conditions,
market conditions and prices, and our assumptions as of such date. We may change our intentions, at any time and without notice,
based upon any changes in such factors, in our assumptions or otherwise.
Unless the context indicates otherwise, as
used in the notes to the financial statements of the Company, 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 in the PRC (“VIE”) controlled by Jinong through contractual agreements;
(iv) Songyuan Jinyangguang Sannong Service Co., Ltd. (“Jinyangguang”), a VIE in the PRC controlled by Jinong through contractual
agreements; (v) Weinan City Linwei District Wangtian Agricultural Materials Co., Ltd. (“Wangtian”), a VIE controlled by Jinong
through contractual agreements; (vi) Beijing Gufeng Chemical Products Co., Ltd., a wholly-owned subsidiary of Jinong in the PRC (“Gufeng”);
and (vii) Beijing Tianjuyuan Fertilizer Co., Ltd., Gufeng’s wholly-owned subsidiary in the PRC (“Tianjuyuan”). Yuxing,
Jinyangguang and Wangtian may also collectively be referred to as the “the VIE Companies”; Jinyangguang and Wangtian, may
also collectively be referred to as “the sales VIEs” or “the sales VIE companies”.
Unless the context otherwise requires, all
references to (i) “PRC” and “China” are to the People’s Republic of China; (ii) “U.S. dollar,”
“$” and “US$” are to United States dollars; and (iii) “RMB”, “Yuan” and Renminbi are to
the currency of the PRC or China.
Overview
We are engaged in the research, development, production
and sale of various types of fertilizers and agricultural products in the PRC through our wholly-owned Chinese subsidiaries, Jinong and
Gufeng (including Gufeng’s subsidiary Tianjuyuan), and our VIE, Yuxing. Our primary business is fertilizer products, specifically
humic-acid based compound fertilizer produced by Jinong and compound fertilizer, blended fertilizer, organic compound fertilizer, slow-release
fertilizer, highly-concentrated water-soluble fertilizer and mixed organic-inorganic compound fertilizer produced by Gufeng. In addition,
through Yuxing, we develop and produce various agricultural products, such as top-grade fruits, vegetables, flowers and colored seedlings.
For financial reporting purposes, our operations are organized into three business segments: fertilizer products (Jinong), fertilizer
products (Gufeng) and agricultural products (Yuxing).
The fertilizer business conducted by Jinong and
Gufeng generated approximately 85.3% and 85.4% of our total revenues for the six months Ended December 31, 2021 and 2020, respectively.
The sales VIEs generated 8.1% and 8.5% of our revenues for the six months Ended December 31, 2021 and 2020, respectively. Yuxing serves
as a research and development base for our fertilizer products.
Fertilizer Products
As of December 31, 2021, we had developed and
produced a total of 659 different fertilizer products in use, of which 72 were developed and produced by Jinong, 336 by Gufeng, and 251
by the VIE Companies.
Below is a table that shows the metric tons of
fertilizer sold by Jinong and Gufeng and the revenue per ton for the periods indicated:
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Change 2020 to 2021
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
|
|
(metric tons)
|
|
|
|
|
|
|
|
Jinong
|
|
|
15,271
|
|
|
|
21,228
|
|
|
|
(5,957
|
)
|
|
|
-28.1
|
%
|
Gufeng
|
|
|
59,007
|
|
|
|
66,865
|
|
|
|
(7,858
|
)
|
|
|
-11.8
|
%
|
|
|
|
74,278
|
|
|
|
88,093
|
|
|
|
(13,815
|
)
|
|
|
-15.7
|
%
|
|
|
Three Months Ended
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(revenue per tons)
|
|
Jinong
|
|
$
|
997
|
|
|
$
|
690
|
|
Gufeng
|
|
|
378
|
|
|
|
330
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Change 2020 to 2021
|
|
|
|
2021
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
|
|
(metric tons)
|
|
|
|
|
|
|
|
Jinong
|
|
|
30,498
|
|
|
|
37,099
|
|
|
|
(6,601
|
)
|
|
|
-17.8
|
%
|
Gufeng
|
|
|
97,778
|
|
|
|
111,689
|
|
|
|
(13,911
|
)
|
|
|
-12.5
|
%
|
|
|
|
128,276
|
|
|
|
148,788
|
|
|
|
(20,512
|
)
|
|
|
-13.8
|
%
|
|
|
Six Months Ended
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(revenue per tons)
|
|
Jinong
|
|
$
|
989
|
|
|
$
|
830
|
|
Gufeng
|
|
|
367
|
|
|
|
352
|
|
For the three months ended December 31, 2021,
we sold approximately 74,278 tons of fertilizer products, as compared to 88,093 metric tons for the three months ended December 31, 2020.
For the three months ended December 31, 2021, Jinong sold approximately 15,271 metric tons of fertilizer products, as compared to 21,228
metric tons for the three months ended December 31, 2020. For the three months ended December 31, 2021, Gufeng sold approximately 59,007
metric tons of fertilizer products, as compared to 66,865 metric tons for the three months ended December 31, 2020.
For the six months ended December 31, 2021, we
sold approximately 128,276 metric tons of fertilizer products, as compared to 148,788 metric tons for the six months ended December 31,
2020. For the six months ended December 31, 2021, Jinong sold approximately 30,498 metric tons of fertilizer products, a decrease of 6,601
metric tons, or 17.8%, as compared to 37,099 metric tons for the six months ended December 31, 2020. For the six months ended December
31, 2021, Gufeng sold approximately 97,778 metric tons of fertilizer products, a decrease of 13,911 metric tons, or 12.5% as compared
to 111,689 metric tons for the six months ended December 31, 2020.
Our sales of fertilizer products to customers
in five provinces within China accounted for approximately 69.3% of our fertilizer revenue for the three months ended December 31, 2021.
Specifically, the provinces and their respective percentage contributing to our fertilizer revenues were Hebei (44.1%), Heilongjiang (13.9%),
Inner Mongolia (12.5%), Shaanxi (7.9%) and Yunnan (4.9%).
As of December 31, 2021, we had a total of 1,918
distributors covering 22 provinces, 4 autonomous regions and 4 central government-controlled municipalities in China. Jinong had 1,076
distributors in China. Jinong’s sales are not dependent on any single distributor or any group of distributors. Jinong’s top
five distributors accounted for 8.0% of its fertilizer revenues for the three months ended December 31, 2021. Gufeng had 334 distributors,
including some large state-owned enterprises. Gufeng’s top five distributors accounted for 79.9% of its revenues for the three months
ended December 31, 2021.
Agricultural Products
Through Yuxing, we develop, produce and sell high-quality
flowers, green vegetables and fruits to local marketplaces and various horticulture and planting companies. We also use certain of Yuxing’s
greenhouse facilities to conduct research and development activities for our fertilizer products. The three PRC provinces and municipalities
that accounted for 93.5% of our agricultural products revenue for the three months ended December 31, 2021 were Shaanxi (83.5%), Shanghai
(6.3%), and Beijing (3.7%).
Recent Developments
New Products
During the three months ended December 31, 2021,
Jinong launched 3 new fertilizer products and added 115 new distributors. During the three months ended December 31, 2021, Gufeng did
not launch any new fertilizer products and did not add any new distributors.
Strategic Acquisitions
On June 30, 2016 and January 1, 2017, through
Jinong, we entered (i) Strategic Acquisition Agreements (the “SAA”), and (ii) Agreements for Convertible Notes (the “ACN”),
with the shareholders of the companies as identified below (the “Targets”).
June 30, 2016:
|
|
|
|
Cash
|
|
|
Principal of
|
|
|
|
|
|
Payment for
|
|
|
Notes for
|
|
|
|
|
|
Acquisition
|
|
|
Acquisition
|
|
Company Name
|
|
Business Scope
|
|
(RMB[1])
|
|
|
(RMB)
|
|
Shaanxi Lishijie Agrochemical Co., Ltd.
|
|
Sales of pesticides, agricultural chemicals, chemical fertilizers, agricultural materials; Manufacture and sales of mulches.
|
|
|
10,000,000
|
|
|
|
3,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Songyuan Jinyangguang Sannong Service Co., Ltd.
|
|
Promotion and consulting services regarding agricultural technologies; Retail sales of chemical fertilizers (including compound fertilizers and organic fertilizers); Wholesale and retail sales of pesticides, agricultural machinery and accessories; Collection of agricultural information; Development of saline-alkali soil; Promotion and development of high-efficiency agriculture and related information technology solutions for agriculture, agricultural and biological engineering high technologies; E-commerce; Cultivation of freshwater fish, poultry, fruits, flowers, vegetables, and seeds; Recycling and complex utilization of straw and stalk; Technology transfer and training; Recycling of agricultural materials ; Ecological industry planning.
|
|
|
8,000,000
|
|
|
|
12,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Shenqiu County Zhenbai Agriculture Co., Ltd.
|
|
Cultivation of crops; Storage, sales, preliminary processing and logistics distribution of agricultural by-products; Promotion and application of agricultural technologies; Purchase and sales of agricultural materials; Electronic commerce.
|
|
|
3,000,000
|
|
|
|
12,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Weinan City Linwei District Wangtian Agricultural Materials Co., Ltd.
|
|
Promotion and application of new agricultural technologies; Professional prevention of plant diseases and insect pests; Sales of plant protection products, plastic mulches, material, chemical fertilizers, pesticides, agricultural medicines, micronutrient fertilizers, hormones, agricultural machinery and medicines, and gardening tools.
|
|
|
6,000,000
|
|
|
|
12,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Aksu Xindeguo Agricultural Materials Co., Ltd.
|
|
Wholesale and retail sales of pesticides; Sales of chemical fertilizers, packaged seeds, agricultural mulches, micronutrient fertilizers, compound fertilizers, plant growth regulators, agricultural machineries, and water economizers; Consulting services for agricultural technologies; Purchase and sales of agricultural by- products.
|
|
|
10,000,000
|
|
|
|
12,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinjiang Xinyulei Eco-agriculture Science and Technology Co., Ltd
|
|
Sales of chemical fertilizers, packaged seeds, agricultural mulches, micronutrient fertilizers, organic fertilizers, plant growth regulators, agricultural machineries, and water economizers; Purchase and sales of agricultural by-products; Cultivation of fruits and vegetables; Consulting services and training for agricultural technologies; Storage services; Sales of articles of daily use, food and oil; On-line sales of the above-mentioned products.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
37,000,000
|
|
|
|
51,000,000
|
|
(1)
|
The exchange rate between RMB and U.S. dollars on June 30, 2016 is RMB1=US$0.1508, according to the exchange rate published by Bank of China.
|
|
|
(2)
|
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.
|
January 1, 2017:
|
|
|
|
Cash
|
|
|
Principal of
|
|
|
|
|
|
Payment for
|
|
|
Notes for
|
|
|
|
|
|
Acquisition
|
|
|
Acquisition
|
|
Company Name
|
|
Business Scope
|
|
(RMB[1])
|
|
|
(RMB)
|
|
Sunwu County Xiangrong Agricultural Materials Co., Ltd.
|
|
Sales of pesticides, agricultural chemicals, chemical fertilizers, agricultural materials; Manufacture and sales of mulches.
|
|
|
4,000,000
|
|
|
|
6,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Anhui Fengnong Seed Co., Ltd.
|
|
Wholesale and retail sales of pesticides; Sales of chemical fertilizers, packaged seeds, agricultural mulches, micronutrient fertilizers, compound fertilizers and plant growth regulators
|
|
|
4,000,000
|
|
|
|
6,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
8,000,000
|
|
|
|
12,000,000
|
|
(1)
|
The exchange rate between RMB and U.S. dollars on January 1, 2017 is RMB1=US$0.144, according to the exchange rate published by Bank of China.
|
Pursuant to the SAA and the ACN, the shareholders
of the Targets, while retaining possession of the equity interests and continuing to be the legal owners of such interests, agreed to
pledge and entrust all their equity interests, including the proceeds thereof but excluding any claims or encumbrances, and the operations
and management of its business to Jinong, in exchange of an aggregate amount of RMB45,000,000 (approximately $7,078,500) to be paid by
Jinong within three days following the execution of the SAA, ACN and the VIE Agreements, and convertible notes with an aggregate face
value of RMB 63,000,000 (approximately $9,909,900) with an annual fixed compound interest rate of 3% and term of three years.
Jinong acquired the Targets using the VIE arrangement
based on our need to further develop our business and comply with the regulatory requirements under the PRC laws.
As our business focuses on the production of fertilizer,
all our business activities intertwine with those in the agriculture industry in China. Specifically, we deal with compliance, regulation,
safety, inspection, and licenses in fertilizer production, farmland use and transfer, growing and distribution of agriculture goods, agriculture
basic supplies, seeds, pesticides, and trades of grains. It is an industry in which heavy regulations get implemented and strictly enforced.
In addition, E-commerce, which is also under strict government regulation in the PRC, has lately become a sales and distribution channel
for agricultural products. Currently, we are developing an online platform to connect the physical distribution network we either own
or lease.
Compared with the regulatory environment in other
jurisdictions, the regulatory environment in the PRC is unique. For example, the “M&A Rules” purports to require that
an offshore special purpose vehicle controlled directly or indirectly by PRC companies or individuals and formed for purposes of overseas
listing through acquisition of PRC domestic interests held by such PRC companies or individuals obtain the approval of the China Securities
Regulatory Commission (the “CSRC”) prior to the listing and trading of such special purpose vehicle’s securities on
an overseas stock exchange. On September 21, 2006, the CSRC published procedures regarding its approval of overseas listings by special
purpose vehicles.
For both e-commerce and agriculture industries,
PRC regulators limit the investment from foreign entities and set particularly rules for foreign-owned entities to conduct business. We
expect these limitations on foreign-owned entities will continue to exist in e-commerce and agriculture industries. The VIE arrangement,
however, provides feasibility for obtaining administrative approval process and avoiding industry restrictions that can be imposed on
an entity that is a wholly-owned subsidiary of a foreign entity. The VIE agreements reduce uncertainty and the current limitation risk.
It is our understanding that the VIE agreements, as well as the control we obtained through VIE arrangement, are valid and enforceable.
Such legal structure does not violate the known, published, and current PRC laws. While there are substantial uncertainties regarding
the interpretation and application of PRC Laws and future PRC laws and regulations, and there can be no assurance that the PRC authorities
will take a view that is not contrary to or otherwise different from our belief and understanding stated above, we believe the substantial
difficulty that we experienced previously to conduct business in agriculture as a foreign ownership can be greatly reduced by the VIE
arrangement. Further, as an integral part of the VIE arrangement, the underlying equity pledge agreements provide legal protection for
the control we obtained. Pursuant to the equity pledge agreements, we have completed the equity pledge processes with the Targets to ensure
the complete control of the interests in the Targets. The shareholders of the Targets are not entitled to transfer any shares to a third
party under the exclusive option agreements. If necessary, they may transfer shares to our company without consideration.
While the VIE arrangement provides us with the
feasibility to conduct our business in the E-Commerce and agriculture industries, validity and enforceability of VIE arrangement is subject
to (i) any applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar laws affecting creditors’
rights generally, (ii) possible judicial or administrative actions or any PRC Laws affecting creditors’ rights, (iii) certain equitable,
legal or statutory principles affecting the validity and enforceability of contractual rights generally under concepts of public interest,
interests of the State, national security, reasonableness, good faith and fair dealing, and applicable statutes of limitation; (iv) any
circumstance in connection with formulation, execution or implementation of any legal documents that would be deemed materially mistaken,
clearly unconscionable, fraudulent, coercive at the conclusions thereof; and (v) judicial discretion with respect to the availability
of indemnifications, remedies or defenses, the calculation of damages, the entitlement to attorney’s fees and other costs, and the
waiver of immunity from jurisdiction of any court or from legal process. Validity and enforceability of VIE arrangement is also subject
to risk derived from the discretion of any competent PRC legislative, administrative or judicial bodies in exercising their authority
in the PRC. As a result, there can no assurance that any of such PRC Laws will not be changed, amended or replaced in the immediate future
or in the longer term with or without retrospective effect.
Results of Operations
Three Months ended December 31, 2021 Compared to the Three Months
ended December 31, 2020.
|
|
2021
|
|
|
2020
|
|
|
Change
$
|
|
|
Change
%
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
14,966,519
|
|
|
$
|
14,901,875
|
|
|
|
64,644
|
|
|
|
0.4
|
%
|
Gufeng
|
|
|
21,573,414
|
|
|
|
22,436,394
|
|
|
|
(862,980
|
)
|
|
|
-3.8
|
%
|
Yuxing
|
|
|
2,819,203
|
|
|
|
2,682,195
|
|
|
|
137,008
|
|
|
|
5.1
|
%
|
Sales VIEs
|
|
|
3,467,453
|
|
|
|
3,718,507
|
|
|
|
(251,054
|
)
|
|
|
-6.8
|
%
|
Net sales
|
|
|
42,826,589
|
|
|
|
43,738,971
|
|
|
|
(912,382
|
)
|
|
|
-2.1
|
%
|
Cost of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
|
10,990,616
|
|
|
|
10,921,417
|
|
|
|
69,199
|
|
|
|
0.6
|
%
|
Gufeng
|
|
|
19,144,888
|
|
|
|
19,846,423
|
|
|
|
(701,535
|
)
|
|
|
-3.5
|
%
|
Yuxing
|
|
|
2,374,221
|
|
|
|
2,140,856
|
|
|
|
233,365
|
|
|
|
10.9
|
%
|
Sales VIEs
|
|
|
3,040,779
|
|
|
|
3,277,876
|
|
|
|
(237,097
|
)
|
|
|
-7.2
|
%
|
Cost of goods sold
|
|
|
35,550,504
|
|
|
|
36,186,572
|
|
|
|
(636,068
|
)
|
|
|
-1.8
|
%
|
Gross profit
|
|
|
7,276,085
|
|
|
|
7,552,399
|
|
|
|
(276,314
|
)
|
|
|
-3.7
|
%
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
3,185,204
|
|
|
|
2,944,641
|
|
|
|
240,563
|
|
|
|
8.2
|
%
|
General and administrative expenses
|
|
|
32,418,068
|
|
|
|
43,149,969
|
|
|
|
(10,731,901
|
)
|
|
|
-24.9
|
%
|
Total operating expenses
|
|
|
35,603,272
|
|
|
|
46,094,610
|
|
|
|
(10,491,338
|
)
|
|
|
-22.8
|
%
|
Income (loss) from operations
|
|
|
(28,327,187
|
)
|
|
|
(38,542,211
|
)
|
|
|
10,215,024
|
|
|
|
-26.5
|
%
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
462,076
|
|
|
|
(48,987
|
)
|
|
|
511,063
|
|
|
|
-1043.3
|
%
|
Interest income
|
|
|
31,219
|
|
|
|
20,836
|
|
|
|
10,384
|
|
|
|
49.8
|
%
|
Interest expense
|
|
|
(66,419
|
)
|
|
|
(67,185
|
)
|
|
|
766
|
|
|
|
-1.1
|
%
|
Total other income (expense)
|
|
|
426,876
|
|
|
|
(95,336
|
)
|
|
|
522,213
|
|
|
|
-547.8
|
%
|
(Loss) before income taxes
|
|
|
(27,900,310
|
)
|
|
|
(38,637,547
|
)
|
|
|
10,737,237
|
|
|
|
-27.8
|
%
|
Provision for income taxes
|
|
|
516,981
|
|
|
|
1,435,825
|
|
|
|
(918,844
|
)
|
|
|
-64.0
|
%
|
Net (loss) from continuing operations
|
|
$
|
(28,417,291
|
)
|
|
$
|
(40,073,372
|
)
|
|
|
11,656,081
|
|
|
|
-29.1
|
%
|
Net (loss) from discontinued operations
|
|
|
(3,565,645
|
)
|
|
|
36,708
|
|
|
|
(3,602,353
|
)
|
|
|
-9813.5
|
%
|
Net (Loss)
|
|
|
(31,982,936
|
)
|
|
|
(40,036,664
|
)
|
|
|
8,053,728
|
|
|
|
-20.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
3,262,613
|
|
|
|
11,927,692
|
|
|
|
(8,665,079
|
)
|
|
|
-72.6
|
%
|
Comprehensive (loss)
|
|
$
|
(28,720,323
|
)
|
|
$
|
(28,108,972
|
)
|
|
|
(611,351
|
)
|
|
|
2.2
|
%
|
Net Sales
Total net sales for the three months ended December
31, 2021 were $42,826,589 a decrease of $912,382 or 2.1%, from $43,738,971 for the three months ended December 31, 2020. This decrease
was principally a result of the negative impact on sales volumes due to the COVID-19 pandemic, especially for Gufeng’ net sales.
For the three months ended December 31, 2021,
Jinong’s net sales increased $64,644, or 0.4%, to $14,966,519 from $14,901,875 for the three months ended December 31, 2020. This
increase was mainly due to Jinong’s higher sales price in the last three months. Jinong’s revenue per ton is $997 for the
three months ended December 31, 2021, increased $307 or 44.6%, as compared to $690 for the three months ended December 31, 2020.
For the three months ended December 31, 2021,
Gufeng’s net sales were $21,573,414, a decrease of $862,980 or 3.8%, from $22,436,394 for the three months ended December 31, 2020.
This decrease was mainly due to Gufeng’s lower sales volume in the last three months. Gufeng sold approximately 59,007 metric tons
of fertilizer products for the three months ended December 31, 2021, decreased 7,858 tons or 11.8%, as compared to 66,865 metric tons
for the three months ended December 31, 2020.
For the three months ended December 31, 2021,
Yuxing’s net sales were $2,819,203, an increase of $137,008 or 5.1%, from $2,682,195 for the three months ended December 31, 2020.
The increase was mainly due to the increase in market demand during the three months ended December 31, 2021.
For the three months ended December 31, 2021,
VIEs’ net sales were $3,467,453, a decrease of $251,054 or 6.8%, from $3,718,507 for the three months ended December 31, 2020. The
decrease was mainly due to the decrease in market demand during the three months ended December 31, 2021.
Cost of Goods Sold
Total cost of goods sold for the three months
ended December 31, 2021 was $35,550,504, a decrease of $636,068, or 1.8%, from $36,186,572 for the three months ended December 31, 2020.
The decrease was mainly due to 10.9% decrease in Yuxing’ cost of goods sold.
Cost of goods sold by Jinong for the three months
ended December 31, 2021 was $10,990,616, an increase of $69,199, or 0.6%, from $10,921,417 for the three months ended December 31, 2020.
The increase in cost of goods was primarily due to higher net sales in the fiscal year 2021.
Cost of goods sold by Gufeng for the three months
ended December 31, 2021 was $19,144,888, a decrease of $701,535, or 3.5%, from $19,846,423 for the three months ended December 31, 2020.
This decrease was primarily due to the 3.8% decrease in net sale in the fiscal year 2021.
For three months ended December 31, 2021, cost
of goods sold by Yuxing was $2,374,221, an increase of $233,365, or 10.9%, from $2,140,856 for the three months ended December 31, 2020.
This increase was mainly due to Yuxing’s higher net sales in the fiscal year 2021.
For three months ended December 31, 2021, cost
of goods sold by VIEs was $3,040,779, a decrease of $237,097, or 7.2%, from $3,277,876 for the three months ended December 31, 2020. This
decrease was mainly due to VIEs’ lower net sales in the fiscal year 2021.
Gross Profit
Total gross profit for the three months ended
December 31, 2021 decreased by $276,314, or 3.7%, to $7,276,085, as compared to $7,552,399 for the three months ended December 31, 2020.
Gross profit margin was 17.0% and 17.3% for the three months Ended December 31, 2021 and 2020, respectively.
Gross profit generated by Jinong slightly decreased
by $4,555, or 0.1%, to $3,975,903 for the three months ended December 31, 2021 from $3,980,458 for the three months ended December 31,
2020. Gross profit margin from Jinong’s sales was approximately 26.6% and 26.7% for the three months Ended December 31, 2021 and
2020, respectively. The decrease in gross profit margin was mainly due to the higher product cost for Jinong in the fiscal year 2021.
For the three months ended December 31, 2021,
gross profit generated by Gufeng was $2,428,526, a decrease of $161,445, or 6.2%, from $2,589,971 for the three months ended December
31, 2020. Gross profit margin from Gufeng’s sales was approximately 11.3% and 11.5% for the three months ended December 31, 2021
and 2020, respectively.
For the three months ended December 31, 2021,
gross profit generated by Yuxing was $444,982, a decrease of $96,357, or 17.8% from $541,339 for the three months ended December 31, 2020.
The gross profit margin was approximately 15.8% and 20.2% for the three months ended December 31, 2021 and 2020, respectively. The decrease
in gross profit percentage was mainly due to the increase in product costs.
Gross profit generated by VIEs decreased by $13,957,
or 3.2%, to $426,674 for the three months ended December 31, 2021 from $440,631 for the three months ended December 31, 2020. Gross profit
margin from VIE’s sales was approximately 12.3% and 11.8% for the three months ended December 31, 2021 and 2020, respectively, which
was slightly increased.
Selling Expenses
Our selling expenses consisted primarily of salaries
of sales personnel, advertising and promotion expenses, freight-out costs and related compensation. Selling expenses were $3,185,204,
or 7.4%, of net sales for the three months ended December 31, 2021, as compared to $2,944,641, or 6.7%, of net sales for the three months
ended December 31, 2020, an increase of $240,563, or 8.2%. The increase in selling expense was caused by the increase in marketing activities.
The selling expenses of Jinong for the three months
ended December 31, 2021 were $2,873,376 or 19.2% of Jinong’s net sales, as compared to selling expenses of $2,777,239 or 18.6% of
Jinong’s net sales for the three months ended December 31, 2020.The selling expenses of Yuxing were $15,596 or 0.6% of Yuxing’s
net sales for the three months ended December 31, 2021, as compared to $9,871 or 0.4% of Yuxing’s net sales for the three months
ended December 31, 2020. The selling expenses of Gufeng were $77,980 or 0.4% of Gufeng’s net sales for the three months ended December
31, 2021, as compared to $73,249 or 0.3% of Gufeng’s net sales for the three months ended December 31, 2020.
General and Administrative Expenses
General and administrative expenses consisted
primarily of related salaries, rental expenses, business development, depreciation and travel expenses incurred by our general and administrative
departments and legal and professional expenses including expenses incurred and accrued for certain litigation. General and administrative
expenses were $32,418,068, or 75.7% of net sales for the three months ended December 31, 2021, as compared to $43,149,969, or 98.7% of
net sales for the three months ended December 31, 2020, a decrease of $10,731,901, or 24.9%. The decrease in general and administrative
expenses was mainly due to lower bad debts expense.
Total Other Income (Expenses)
Total other income (expenses) consisted of income
from subsidies received from the PRC government, interest income, interest expenses and bank charges. Total other income for the three
months ended December 31, 2021 was $426,876, as compared to $95,336 total other expenses for the three months ended December 31, 2020,
an increase in income of $522,213 or 547.8%. The increase in total other income resulted from higher subsidy income and investment gain
for three months ended December 31, 2021.
Income Taxes
Jinong is subject to a preferred tax rate of 15%
because of its business being classified as a High-Tech project under the PRC Enterprise Income Tax Law (“EIT”) that became
effective on January 1, 2008. Jinong incurred income tax expenses of 0 for the three months ended December 31, 2021 and 2020 due to net
loss.
Gufeng is subject to a tax rate of 25%, incurred
0 income tax expenses for the three months ended December 31, 2021 and 2020 due to net loss.
Yuxing has no income tax for the three months
ended December 31, 2021 and 2020 because of being exempted from paying income tax due to its products fall into the tax exemption list
set out in the EIT.
Net income (loss)
Net (loss) for the three months ended December
31, 2021 was $(31,982,936), a decrease in loss of $8,053,728, or 20.1%, compared to net (loss) of $(40,036,664) for the three months ended
December 31, 2020. Net loss as a percentage of total net sales was approximately -74.7% and -91.5% for the three months ended December
31, 2021 and 2020, respectively.
Net (loss) from continuing operations for the
three months ended December 31, 2021 was $(28,417,291), a decrease of loss with amount of $11,656,081, or 29.1%, compared to net (loss)
of $(40,073,372) for the three months ended December 31, 2020. The decrease in net loss was mainly due to lower general and administrative
expenses.
Net income (loss) from discontinued operations
for the three months ended December 31, 2021 was $(3,565,645), a decrease of with amount of $3,602,353, or 9,813.5%, compared to net income
with amount of $36,708 for the three months ended December 31, 2020. The decrease in net income was mainly due to lower sales.
Six months ended December 31, 2021 Compared to
the Six months ended December 31, 2020.
|
|
2021
|
|
|
2020
|
|
|
Change $
|
|
|
Change %
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
30,128,261
|
|
|
$
|
29,431,187
|
|
|
|
697,074
|
|
|
|
2.4
|
%
|
Gufeng
|
|
|
36,361,666
|
|
|
|
38,264,597
|
|
|
|
(1,902,931
|
)
|
|
|
-5.0
|
%
|
Yuxing
|
|
|
5,708,097
|
|
|
|
5,105,683
|
|
|
|
602,414
|
|
|
|
11.8
|
%
|
Sales VIEs
|
|
|
5,068,013
|
|
|
|
8,202,581
|
|
|
|
(3,134,568
|
)
|
|
|
-38.2
|
%
|
Net sales
|
|
|
77,266,037
|
|
|
|
81,004,048
|
|
|
|
(3,738,011
|
)
|
|
|
-4.6
|
%
|
Cost of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
|
22,082,927
|
|
|
|
21,606,881
|
|
|
|
476,046
|
|
|
|
2.2
|
%
|
Gufeng
|
|
|
32,002,150
|
|
|
|
33,824,240
|
|
|
|
(1,822,090
|
)
|
|
|
-5.4
|
%
|
Yuxing
|
|
|
4,763,688
|
|
|
|
4,182,928
|
|
|
|
580,760
|
|
|
|
13.9
|
%
|
Sales VIEs
|
|
|
4,349,477
|
|
|
|
6,800,222
|
|
|
|
(2,450,745
|
)
|
|
|
-36.0
|
%
|
Cost of goods sold
|
|
|
63,198,242
|
|
|
|
66,414,271
|
|
|
|
(3,216,029
|
)
|
|
|
-4.8
|
%
|
Gross profit
|
|
|
14,067,795
|
|
|
|
14,589,777
|
|
|
|
(521,982
|
)
|
|
|
-3.6
|
%
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
6,681,075
|
|
|
|
7,361,235
|
|
|
|
(680,160
|
)
|
|
|
-9.2
|
%
|
General and administrative expenses
|
|
|
48,813,393
|
|
|
|
74,098,894
|
|
|
|
(25,285,501
|
)
|
|
|
-34.1
|
%
|
Total operating expenses
|
|
|
55,494,468
|
|
|
|
81,460,129
|
|
|
|
(25,965,661
|
)
|
|
|
-31.9
|
%
|
Income (loss) from operations
|
|
|
(41,426,673
|
)
|
|
|
(66,870,352
|
)
|
|
|
25,443,679
|
|
|
|
-38.0
|
%
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
459,231
|
|
|
|
(57,467
|
)
|
|
|
516,698
|
|
|
|
-899.1
|
%
|
Interest income
|
|
|
76,600
|
|
|
|
43,219
|
|
|
|
33,381
|
|
|
|
77.2
|
%
|
Interest expense
|
|
|
(138,518
|
)
|
|
|
(123,953
|
)
|
|
|
(14,565
|
)
|
|
|
11.8
|
%
|
Total other income (expense)
|
|
|
397,313
|
|
|
|
(138,201
|
)
|
|
|
535,514
|
|
|
|
-387.5
|
%
|
(Loss) before income taxes
|
|
|
(41,029,361
|
)
|
|
|
(67,008,554
|
)
|
|
|
25,979,193
|
|
|
|
-38.8
|
%
|
Provision for income taxes
|
|
|
629,004
|
|
|
|
2,951,140
|
|
|
|
(2,322,136
|
)
|
|
|
-78.7
|
%
|
Net (loss) from continuing operations
|
|
$
|
(41,658,365
|
)
|
|
$
|
(69,959,694
|
)
|
|
|
28,301,329
|
|
|
|
-40.5
|
%
|
Net (loss) from discontinued operations
|
|
|
(5,401,779
|
)
|
|
|
(1,029,883
|
)
|
|
|
(4,371,896
|
)
|
|
|
424.5
|
%
|
Net (Loss)
|
|
|
(47,060,144
|
)
|
|
|
(70,989,577
|
)
|
|
|
23,929,433
|
|
|
|
-33.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
3,719,187
|
|
|
|
25,395,536
|
|
|
|
(21,676,349
|
)
|
|
|
-85.4
|
%
|
Comprehensive (loss)
|
|
$
|
(43,340,957
|
)
|
|
$
|
(45,594,041
|
)
|
|
|
2,253,084
|
|
|
|
-4.9
|
%
|
Net Sales
Total net sales for the six months ended December
31, 2021 were $77,266,037 a decrease of $3,738,011 or 4.6%, from $81,004,048 for the six months ended December 31, 2020. This decrease
was primarily due to a decrease in VIEs’ net sales.
For the six months ended December 31, 2021, Jinong’s
net sales decreased $697,074, or 2.4%, to $30,128,261 from $29,431,187 for the six months ended December 31, 2020. This increase was mainly
due to Jinong’s higher sales price in the last six months. Jinong’s revenue per ton is $989 for the six months ended December
31, 2021, increased $159 or 19.2%, as compared to $830 for the three months ended December 31, 2020.
For the six months ended December 31, 2021, Gufeng’s
net sales were $36,361,666, a decrease of $1,902,931, or 5.0%, from $38,264,597 for the six months ended December 31, 2020. This decrease
was mainly attributable to the decrease in Gufeng’s sales volume in the last six months.
For the six months ended December 31, 2021, Yuxing’s
net sales were $5,708,097, an increase of $602,414 or 11.8%, from $5,105,683 for the six months ended December 31, 2020.
For the six months ended December 31, 2021, VIEs’
net sales were $5,068,013, a decrease of $3,134,568, or 38.2%, from $8,202,581 for the six months ended December 31, 2020. This decrease
was mainly attributable to the decrease in market demands in the last six months.
Cost of Goods Sold
Total cost of goods sold for the six months ended
December 31, 2021 was $63,198,242, a decrease of $3,216,029, or 4.8%, from $66,414,271 for the six months ended December 31, 2020. The
decrease was mainly due to the decrease in Gufeng’s and VIEs’ cost of goods sold which decreased 5.4% and 36.0% respectively.
Cost of goods sold by Jinong for the six months
ended December 31, 2021 was $22,082,927, an increase of $476,046, or 2.2%, from $21,606,881 for the six months ended December 31, 2020.
The increase in cost of goods was primarily due to the increase in net sales during the last six months.
Cost of goods sold by Gufeng for the six months
ended December 31, 2021 was $32,002,150, a decrease of $1,822,090, or 5.4%, from $33,824,240 for the six months ended December 31, 2020.
This decrease was primarily due to the 5.0% decrease in net sale during the last six months.
For six months ended December 31, 2021, cost of
goods sold by Yuxing was $4,763,688, an increase of $580,760, or 13.9%, from $4,182,928 for the six months ended December 31, 2020. This
increase was mainly due to the 11.8% increase in Yuxing’s net sales during the last six months.
For six months ended December 31, 2021, cost of
goods sold by VIEs was $4,349,477, a decrease of $2,450,745, or 36.0%, from $6,800,222 for the six months ended December 31, 2020. This
decrease was mainly due to the 38.2% decrease in VIEs’ net sales during the last six months.
Gross Profit
Total gross profit for the six months ended December
31, 2021 decreased by $521,982, or 3.6%, to $14,067,795, as compared to $14,589,777 for the six months ended December 31, 2020. Gross
profit margin was 18.2% and 18.0% for the six months ended December 31, 2021 and 2020, respectively.
Gross profit generated by Jinong increased by
$221,028 or 2.8%, to $8,045,334 for the six months ended December 31, 2021 from $7,824,306 for the six months ended December 31, 2020.
Gross profit margin from Jinong’s sales was approximately 26.7% and 26.6% for the six months ended December 31, 2021 and 2020, respectively.
For the six months ended December 31, 2021, gross
profit generated by Gufeng was $4,359,516, a decrease of $80,841, or 1.8%, from $4,440,357 for the six months ended December 31, 2020.
Gross profit margin from Gufeng’s sales was approximately 12.0% and 11.6% for the six months ended December 31, 2021 and 2020, respectively.
The slightly increase in gross profit margin was mainly due to the increase in unit sales price.
For the six months ended December 31, 2021, gross
profit generated by Yuxing was $944,409, an increase of $21,654, or 2.3% from $922,755 for the six months ended December 31, 2020. The
gross profit margin was approximately 16.5% and 18.1% for the six months ended December 31, 2021 and 2020, respectively. The decrease
in gross profit percentage was mainly due to the increase in product costs.
Gross profit generated by VIEs decreased by $683,823,
or 48.8%, to $718,536 for the six months ended December 31, 2021 from $1,402,359 for the six months ended December 31, 2020. Gross profit
margin from VIE’s sales was approximately 14.2% and 17.1% for the six months ended December 31, 2021 and 2020, respectively. The
decrease in gross profit percentage was mainly due to the increase in product costs.
Selling Expenses
Our selling expenses consisted primarily of salaries
of sales personnel, advertising and promotion expenses, freight-out costs and related compensation. Selling expenses were $6,681,075,
or 8.6%, of net sales for the six months ended December 31, 2021, as compared to $7,361,235, or 9.1% of net sales for the six months ended
December 31, 2020, a decrease of $680,160 or 9.2%.
The selling expenses of Jinong for the six months
ended December 31, 2021 were $6,203,367 or 20.6% of Jinong’s net sales, as compared to selling expenses of $7,033,876 or 23.9% of
Jinong’s net sales for the six months ended December 31, 2020. The selling expenses of Yuxing were $29,376 or 0.5% of Yuxing’s
net sales for the six months ended December 31, 2021, as compared to $21,688 or 0.4% of Yuxing’s net sales for the six months ended
December 31, 2020. The selling expenses of Gufeng were $163,561 or 0.4% of Gufeng’s net sales for the six months ended December
31, 2021, as compared to $140,730 or 0.4% of Gufeng’s net sales for the six months ended December 31, 2020.
General and Administrative Expenses
General and administrative expenses consisted
primarily of related salaries, rental expenses, business development, depreciation and travel expenses incurred by our general and administrative
departments and legal and professional expenses including expenses incurred and accrued for certain litigation. General and administrative
expenses were $48,813,393, or 63.2% of net sales for the six months ended December 31, 2021, as compared to $74,098,894, or 91.5% of net
sales for the six months ended December 31, 2020, a decrease of $25,285,501, or 34.1%.
Total Other Income (Expenses)
Total other income (expenses) consisted of income
from subsidies received from the PRC government, interest income, interest expenses and bank charges. Total other income for the six months
ended December 31, 2021 was $397,313, as compared to $138,201 total other expenses for the six months ended December 31, 2020, an increase
in income of $535,514 or 387.5%. The increase in total other income resulted from higher subsidy income and investment gain for six months
ended December 31, 2021.
Income Taxes
Jinong is subject to a preferred tax rate of 15%
as a result of its business being classified as a High-Tech project under the PRC Enterprise Income Tax Law (“EIT”) that became
effective on January 1, 2008. Jinong incurred income tax expenses of 0 for the six months ended December 31, 2021, as compared to $$273,796
for the six months ended December 31, 2020, a decrease of $$273,796, or 100.0%.
Gufeng is subject to a tax rate of 25%, incurred
0 income tax expenses for the six months ended December 31, 2021 and 2020.
Yuxing has no income tax for the six months ended
December 31, 2021 and 2020 as a result of being exempted from paying income tax due to its products fall into the tax exemption list set
out in the EIT.
Net Income (loss)
Net (loss) for the six months ended December 31,
2021 was $(47,060,144), a decrease of loss with amount of $23,929,433, or 33.7%, compared to $(70,989,577) for the six months ended December
31, 2020. The decrease was mainly due to lower general and administrative expenses. Net loss as a percentage of total net sales was approximately
-60.9% and -87.6% for the six months ended December 31, 2021 and 2020, respectively.
Net (loss) from continuing operations for the
six months ended December 31, 2021 was $(41,658,365), a decrease of loss with amount of $28,301,329, or 40.5%, compared to $(69,959,694)
for the six months ended December 31, 2020. The decrease was mainly due to lower General and administrative expenses.
Net (loss) from discontinued operations for the
six months ended December 31, 2021 was $(5,401,779), a increase of loss with amount of $4,371,896, or 424.5%, compared to net (loss) with
amount of $(1,029,883) for the six months ended December 31, 2020. The increase of net loss was mainly due to lower sales.
Discussion of Segment Profitability Measures
As of December 31, 2021, we were engaged in the
following businesses: the production and sale of fertilizers through Jinong and Gufeng, the production and sale of high-quality agricultural
products by Yuxing, and the sales of agriculture materials by the sales VIEs. For financial reporting purpose, our operations were organized
into four main business segments based on locations and products: Jinong (fertilizer production), Gufeng (fertilizer production) and Yuxing
(agricultural products production) and the sales VIEs. Each of the segments has its own annual budget about development, production and
sales.
Each of the four operating segments referenced
above has separate and distinct general ledgers. The chief operating decision maker (“CODM”) makes decisions with respect
to resources allocation and performance assessment upon receiving financial information, including revenue, gross margin, operating income
and net income (loss) produced from the various general ledger systems; however, net income (loss) by segment is the principal benchmark
to measure profit or loss adopted by the CODM.
For Jinong, the net (loss) increased by $915,188,
or 17.3%, to $(6,205,995) for six months ended December 31, 2021, from $(5,290,807) for the six months ended December 31, 2020. The increase
in net loss was principally due to higher general and administrative expense.
For Gufeng, the net (loss) decreased by $30,895,460
or 50.6%, to $(30,114,176) for six months ended December 31, 2021 from $(61,009,636) for six months ended December 31, 2020. The decrease
of net loss was principally due to the decrease in general and administrative expense.
For Yuxing, the net income increased $92,445 or
30.4%, to $397,004 for six months ended December 31, 2021 from $304,559 for six months ended December 31, 2020. The increase was mainly
due to higher sales.
For the sales VIEs, the net (loss) was $(5,098,641)
for period ended December 31, 2021, increased by $4,394,515, or 624.1%, from $(704,126) for six months ended December 31, 2020. The increase
was mainly due to the increase in general and administrative expenses for the sales VIEs.
Liquidity and Capital Resources
Our principal sources of liquidity include cash
from operations, borrowings from local commercial banks and net proceeds of offerings of our securities.
As of December 31, 2021, cash and cash equivalents
were $23,607,170, an increase of $5,013,226, or 27.0%, from $18,593,944 as of June 30, 2021.
We intend to use some of the remaining net proceeds
from our securities offerings, as well as other working capital if required, to acquire new businesses, upgrade production lines and complete
Yuxing’s new greenhouse facilities for agriculture products located on 88 acres of land in Hu County, 18 kilometers southeast of
Xi’an city. Yuxing purchased a set of agricultural products testing equipment for the year of 2016. We believe that we have sufficient
cash on hand and positive projected cash flow from operations to support our business growth for the next twelve months to the extent
we do not have further significant acquisitions or expansions. However, if events or circumstances occur and we do not meet our operating
plan as expected, we may be required to seek additional capital and/or to reduce certain discretionary spending, which could have a material
adverse effect on our ability to achieve our business objectives. Notwithstanding the foregoing, we may seek additional financing as necessary
for expansion purposes and when we believe market conditions are most advantageous, which may include additional debt and/or equity financings.
There can be no assurance that any additional financing will be available on acceptable terms, if at all. Any equity financing may result
in dilution to existing stockholders and any debt financing may include restrictive covenants.
The following table sets forth a summary of our cash flows for the
periods indicated:
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Net cash provided by (used in) operating activities
|
|
$
|
1,640,536
|
|
|
$
|
(6,237,210
|
)
|
Net cash provided by (used in) investing activities
|
|
|
1,790,332
|
|
|
|
(212,290
|
)
|
Net cash provided by (used in) financing activities
|
|
|
-
|
|
|
|
306,000
|
|
Effect of exchange rate change on cash and cash equivalents
|
|
|
1,582,358
|
|
|
|
4,035,108
|
|
Net increase in cash and cash equivalents
|
|
|
5,013,226
|
|
|
|
(2,108,392
|
)
|
Cash and cash equivalents, beginning balance
|
|
|
18,593,944
|
|
|
|
11,934,778
|
|
Cash and cash equivalents, ending balance
|
|
$
|
23,607,170
|
|
|
$
|
9,826,386
|
|
Operating Activities
Net cash provided by operating activities was
$1,640,536 for the six months ended December 31, 2021, an increase of $7,877,746, or 126.3%, from cash used in operating activities of
$6,237,210 for the six months ended December 31, 2020. The increase was mainly due to the decrease in net loss and the decrease in account
receivable during the six months ended December 31, 2021 as compared to the same period in 2020.
Investing Activities
Net cash provided by investing activities for
the six months ended December 31, 2021 was $1,790,332, compared to cash used in investing activities of $212,290 for the six months ended
December 31, 2020. The increase was mainly due to the sales of discontinued operations and the Company received the fund during the six
months ended December 31, 2021.
Financing Activities
Net cash provided by financing activities for
the six months ended December 31, 2021 was 0, compared to $306,000 net cash provided by financing activities for the six months ended
December 31, 2020 from short-loan.
As of December 31, 2021 and June 30, 2021, our loans payable was as
follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2021
|
|
|
2021
|
|
Short term loans payable:
|
|
$
|
4,247,100
|
|
|
$
|
4,179,600
|
|
Total
|
|
$
|
4,247,100
|
|
|
$
|
4,179,600
|
|
Accounts Receivable
We had accounts receivable of $74,786,136 as of
December 31, 2021, as compared to $102,783,004 as of June 30, 2021, a decrease of $27,996,868, or 27.2%. The decrease was primarily attributable
to Gufeng’s accounts receivable and the discontinued of Lishijie and Fengnong. As of December 31, 2021, Gufeng’s accounts
receivable was $35,645,623, a decrease of $2,409,388, or 6.3%, compared to $38,055,011 as of June 30, 2021.
Allowance for doubtful accounts in accounts receivable
for the six months ended December 31, 2021 was $35,171,602, an increase of $11,432,615 or 48.2%, from $23,738,987 as of June 30, 2021.
And the allowance for doubtful accounts as a percentage of accounts receivable was 32.0% as of December 31, 2021 and 18.8% as of June
30, 2021.
Deferred assets
We had no deferred assets as of December 31, 2021
and June 30, 2021. During the three months, we assisted the distributors in certain marketing efforts and developing standard stores to
expand our competitive advantage and market shares. Based on the distributor agreements, the amount owed by the distributors in certain
marketing efforts and store development will be expensed over three years if the distributors are actively selling our products. If a
distributor defaults, breaches, or terminates the agreement with us earlier than the contractual terms, the unamortized portion of the
amount owed by the distributor is payable to us immediately. The deferred assets had been fully amortized as of December 31, 2021.
Inventories
We had inventories of $38,766,953 as of December
31, 2021, as compared to $64,315,903 as of June 30, 2021, a decrease of $25,548,950, or 39.7%. The decrease was primarily attributable
to Gufeng’s inventory. As of December 31, 2021, Gufeng’s inventory was $11,364,711, compared to $36,617,573 as of June 30,
2021, a decrease of $25,252,862, or 69.0%.
Advances to Suppliers
We had advances to suppliers of $26,999,738 as
of December 31, 2021 as compared to $23,884,772 as of June 30, 2021, representing an increase of $3,114,966, or 13.0%. Our inventory level
may fluctuate from time to time, depending how quickly the raw material is consumed and replenished during the production process, and
how soon the finished goods are sold. The replenishment of raw material relies on management’s estimate of numerous factors,
including but not limited to, the raw materials future price, and spot price along with its volatility, as well as the seasonal demand
and future price of finished fertilizer products. Such estimate may not be accurate, and the purchase decision of raw materials based
on the estimate can cause excessive inventories in times of slow sales and insufficient inventories in peak times.
Accounts Payable
We had accounts payable of $6,402,013 as of December
31, 2021 as compared to $16,868,942 as of June 30, 2021, representing a decrease of $10,466,929, or 62.0%. The decrease was primarily
due to the decrease of accounts payable for VIEs due to the discontinued of Lishijie and Fengnong.
Unearned Revenue (Customer Deposits)
We had customer deposits of $6,434,068 as of December
31, 2021 as compared to $6,257,215 as of June 30, 2021, representing an increase of $176,853, or 2.8%. This increase was due to seasonal
fluctuation and we expect to deliver products to our customers during the next three months at which time we will recognize the revenue.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of
its financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have
been prepared in accordance with United States generally accepted accounting principles. Our financial statements reflect the selection
and application of accounting policies which require management to make significant estimates and judgments. See Note 2 to our unaudited
condensed consolidated financial statements, “Basis of Presentation and Summary of Significant Accounting Policies.” We believe
that the following paragraphs reflect the most critical accounting policies that currently affect our financial condition and results
of operations:
Use of estimates
The preparation of unaudited condensed 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 unaudited condensed 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
could differ materially from those estimates.
Revenue recognition
Sales revenue is recognized at the date of shipment
to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, we have no other significant
obligations and collectability is reasonably assured. Payments received before all the relevant criteria for revenue recognition are satisfied
are recorded as unearned revenue.
Our revenue consists of invoiced value of goods,
net of a value-added tax (VAT). No product return or sales discount allowance is made as products delivered and accepted by customers
are normally not returnable and sales discounts are normally not granted after products are delivered.
Cash and cash equivalents
For statement of cash flows purposes, we consider
all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when
purchased, to be cash and cash equivalents.
Accounts receivable
Our policy is to maintain reserves for potential
credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer
concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy
of these reserves. Any accounts receivable of Jinong and Gufeng that are outstanding for more than 180 days will be accounted as allowance
for bad debts, and any accounts receivable of Yuxing that are outstanding for more than 90 days will be accounted as allowance for bad
debts.
Deferred assets
Deferred assets represent amounts the Company
advanced to the distributors in their marketing and stores development to expand our competitive advantage and market shares. Based
on the distributor agreements, the amount owed by the distributors in certain marketing efforts and store development will be expensed
over three years if the distributors are actively selling our products. If a distributor defaults, breaches, or terminates the agreement
with us earlier than the realization of the contractual terms, the unamortized portion of the amount owed by the distributor is to be
refunded to us immediately. The deferred assets had been fully amortized as of December 31, 2021.
Segment reporting
FASB ASC 280 requires use of 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 December 31, 2021, we were organized into
five main business units: Jinong (fertilizer production), Gufeng (fertilizer production), Yuxing (agricultural products production),
Jinyangguang (agriculture sales) and Wangtian (agriculture sales). For financial reporting purpose, our operations were organized into
four main business segments based on locations and products: Jinong (fertilizer production), Gufeng (fertilizer production) and Yuxing
(agricultural products production) and the sales VIEs. Each of the segments has its own annual budget regarding development, production
and sales.