NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Organic
Agricultural Company Limited (“Organic Agricultural”, the “Company”, “we” or “us”)
was incorporated in the State of Nevada on April 17, 2018.
The
Company, through its subsidiaries with headquarters in Harbin, China, sells paddy and selenium-enriched paddy products, rice and
other agricultural products. At March 31, 2020, the Company’s subsidiaries were:
|
●
|
Organic
Agricultural (Samoa) Co., Ltd. (“Organic Agricultural Samoa”), a limited company incorporated in Samoa on
December 15, 2017, is wholly owned by Organic Agricultural. Organic Agricultural Samoa owns all of the outstanding shares
of capital stock of Organic Agricultural Company Limited (Hong Kong).
|
|
●
|
Organic
Agricultural Company Limited (Hong Kong) (“Organic Agricultural HK”), which was established on December 6,
2017 under the laws of Hong Kong, is wholly owned by Organic Agricultural Samoa. Organic Agricultural HK owns all of the registered
equity of Heilongjiang Tianci Liangtian Agricultural Technology Development Company Limited.
|
|
●
|
Heilongjiang
Tianci Liangtian Agricultural Technology Development Company Limited. (“Tianci Liangtian”), a company incorporated
in Heilongjiang, China on November 2, 2017, is wholly owned by Organic Agricultural HK. Tianci Liangtian owned:
|
|
●
|
all
of the registered equity of Heilongjiang Yuxinqi Agricultural Technology Development Company Limited (“Yuxinqi”),
which was incorporated in Heilongjiang, China on February 5, 2018. Yuxinqi sells agricultural products to customers.
|
|
●
|
51%
of the registered equity of Baoqing County Lvxin Paddy Rice Plant Specialized Cooperative (“Lvxin”), a
company incorporated in China on February 9, 2012. Lvxin is an integrated agricultural company providing self-planting paddy
to its customers.
|
In
April 2020, Tianci Liangtian sold its equity interest in Lvxin (See Note 12).
Reorganization
On
May 16, 2018, the Company completed a corporate reorganization to combine several controlled entities (now referred to as the
“subsidiaries”) into Organic Agricultural. The specific transactions related to this reorganization are as follows:
On
March 31, 2017, Hao Shuping and the shareholders of Lvxin signed an Equity Transfer Agreement, whereby shareholders of Lvxin transferred
51% of the controlling interest in Lvxin to Hao Shuping. Hao Shuping agreed to pay the Lvxin shareholders RMB 2,029,586 (US$305,472)
in cash and cause the company that would become Organic Agricultural to issue to them 152,736 shares (valued at US$152,736). Hao
Shuping and the shareholders of Lvxin also signed an irrevocable supplemental agreement that gave Hao Shuping voting and managerial
control over Lvxin. By June 22, 2018, Tianci Liangtian paid all of the consideration to Lvxin’s former shareholders.
On
January 1, 2018, pursuant to the Equity Transfer Agreement between Hao Shuping and Tianci Liangtian, Hao Shuping transferred his
51% controlling interest in Lvxin to Tianci Liangtian. As control of both entities resided with Hao Shuping, we have accounted
for the combination of Lvxin with Tianci Liangtian as a transaction between entities under common control.
On
January 8, 2018, the shareholders of Tianci Liangtian transferred ownership of Tianci Liangtian to Organic Agricultural HK, which
is wholly owned by Organic Agricultural Samoa.
On
May 16, 2018, the Company issued 10,000,000 shares of its common stock, par value $0.001 to the shareholders of Organic Agricultural
Samoa, in exchange for 100% of the outstanding shares of Organic Agricultural Samoa (the “Share Exchange”).
As
a result of the Share Exchange, Hao Shuping acquired 48.8% of the Company’s outstanding shares. Prior to the Share Exchange,
Hao Shuping controlled Lvxin and Tianci Liangtian. Therefore, the Share Exchange was accounted for as a business combination of
entities under common control in accordance with ASC 805-50-30-5. Accordingly, the assets and liabilities of the Company and its
subsidiaries are presented at their carrying values at the date of the transaction; the Company’s historical stockholders’
equity was retroactively restated to the first period presented, as the acquisition of Organic Agricultural Samoa, Organic Agricultural
HK, Tianci Liangtian and Lvxin was treated as a combination of entities under common control.
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going
concern
Management
has determined there is substantial doubt about our ability to continue as a going concern as a result of our lack of significant
revenues and recurring losses. If we are unable to generate significant revenue or secure additional financing, we may be required
to cease or curtail our operations. Our financial statements do not include adjustments that might result from the outcome of
this uncertainty.
The Company’s operations have been
financed primarily by advances and loans from related parties and proceeds from sales of shares. Hao Shuping, Shen Zhenai, Xun
Jianjun were the primary sources of financing for the early operations of the entity and will continue to provide support in the
future if there is any need for capital. As of March 31,2020, the Company had a balance of $44,772, $37,647, $7,766 and $31,249,
due to Hao Shuping, Shen Zhenai, Xun Jianjun and Lou Zhengui, respectively. The Company received $734,617 during the year ended
March 31, 2020, and an additional $46,500 from April 1, 2020 to the date of filling this report, from the sale of shares. These
funds provided sufficient working capital for the Company.
Management
intends to expand product offerings to include value-added products, both products based on rice and products based on other food
stuffs, such as organic red beans and millet.
The
marketing personnel of the Company will endeavor to expand awareness of our brand, open new marketing channels, and educate the
nation about the health benefits of selenium-enriched rice.
In
this manner, Management hopes to generate sufficient operating cash inflow to support its future operations and development of
the Company in addition to capital raised from sales of shares and shareholders’ support based on needs.
Basis
of presentation
The
accompanying consolidated financial statements have been prepared on the accrual basis of accounting. All significant intercompany
accounts and transactions have been eliminated in consolidation when applicable.
The
Company’s consolidated financial statements are expressed in U.S. Dollars and are presented in accordance with Accounting
Principles Generally Accepted in the United States of America (“U.S. GAAP”).
Principles
of consolidation
The
consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company accounts
and transactions have been eliminated in consolidation. The consolidated financial statements include the assets, liabilities,
and net income or loss of these subsidiaries.
The
Company’s subsidiaries as of March 31, 2020 are listed as follows:
Name
|
|
Place of
Incorporation
|
|
Attributable
equity interest
%
|
|
|
Authorized
capital
|
|
Organic Agricultural (Samoa) Co., Ltd.
|
|
Samoa
|
|
|
100
|
|
|
|
USD 1,000,000
|
|
Organic Agricultural Company Limited (Hong Kong)
|
|
Hong Kong
|
|
|
100
|
|
|
|
HKD 10,000
|
|
Heilongjiang Tianci Liangtian Agricultural Technology Development Company Limited
|
|
China
|
|
|
100
|
|
|
|
0
|
|
Heilongjiang Yuxinqi Agricultural Technology Development Company Limited
|
|
China
|
|
|
100
|
|
|
|
0
|
|
Baoqing County Lvxin Paddy Rice Plant Specialized Cooperative
|
|
China
|
|
|
51
|
|
|
|
0
|
|
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use
of estimates
The
preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue 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 from those estimates.
One significant item subject to such estimates and assumptions is the inventory valuation allowance. These estimates are often
based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable.
Actual results could differ from these estimates.
Cash
and cash equivalents
Cash
consists of cash on hand and bank deposits, which are unrestricted as to withdrawal and use. All highly liquid investments with
original stated maturities of three months or less are classified as cash and cash equivalents. The Company’s cash and cash
equivalents consist of cash on hand and cash in bank, as of March 31, 2020 and 2019.
Revenue
recognition
Effective
April 1, 2018, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the
commercial sales of products and contracts by applying the following steps: (1) identify the contract with a customer; (2) identify
the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance
obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
The
Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that economic benefits will flow
to the entity, and specific criteria have been met for each of the Company’s activities as described below.
The
Company sells paddy and selenium-enriched paddy products, rice and other agricultural products. All revenue is recognized when
it is both earned and realized. The Company’s policy is to recognize the sale when the products, ownership and risk of loss
have transferred to the purchasers, and collection of the sales proceeds, if not prepaid, is reasonably assured, all of which
generally occur when the customer receives the products. Accordingly, revenue is recognized at the point in time when delivery
is made.
Given
the nature of this revenue source of the Company’s business and the applicable rules guiding revenue recognition, the revenue
recognition practices for the sale do not contain estimates that materially affect results of operations nor does the Company
have any policy for return of products.
Fair
value measurements
The
Company applies the provisions of FASB ASC 820, Fair Value Measurements for fair value measurements of financial assets
and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value
in the financial statements. ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair
value measurements.
Fair
value is defined as the price that would be received when selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In determining the fair value for the assets and liabilities required or
permitted to be recorded, the Company considers the principal or most advantageous market in which it would transact, and it considers
assumptions that market participants would use when pricing the asset or liability.
ASC
820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level
1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The
three levels of the fair value hierarchy are as follows:
Level
1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or
liabilities;
Level
2: Quoted prices, other than those in Level 1, in markets that are not active or for similar assets and liabilities, or inputs
that are observable, either directly or indirectly, for substantially the full term of the asset or liability;
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair
value measurements (continued)
Level
3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable
(supported by little or no market activity).
There
were no transfers between level 1, level 2 or level 3 measurements during the year ended March 31, 2020 and 2019.
Financial
assets and liabilities of the Company primarily consists of cash, account receivables, prepaid expenses, inventories, other receivables,
accounts payable and accrued liabilities, customer deposits, due to related parties, lease liability(current) and other payables.
As at March 31, 2020 and 2019, the carrying values of these financial instruments approximated their fair values due to the short-term
nature of these instruments.
Functional
currency and foreign currency translation
An
entity’s functional currency is the currency of the primary economic environment in which it operates. Normally that is
the currency of the environment in which the entity primarily generates and expends cash. Management’s judgment is essential
to determine the functional currency by assessing various indicators, such as cash flows, sales price and market, expenses, financing
and inter-company transactions and arrangements. The functional currency of the Company is the Chinese Renminbi (“RMB’),
except the functional currency of Organic Agricultural HK is the Hong Kong Dollar (“HKD”), and the functional currency
of Organic Agricultural Samoa and Organic Agricultural is the United States dollar (“US Dollars” “USD”
or “$”). The reporting currency of these consolidated financial statements is in US Dollars.
The
financial statements of the Company, which are prepared using the RMB and the HKD, are translated into the Company’s reporting
currency, the US Dollar. Assets and liabilities are translated using the exchange rate at each reporting period end date. Revenue
and expenses are translated using average rates prevailing during each reporting period, and shareholders’ equity is translated
at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other
comprehensive income or loss.
Transactions
denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates
prevailing at the dates of the transactions. Foreign currency exchange gains and losses resulting from these transactions are
included in operations.
The
exchange rates used for foreign currency translation are as follows:
|
|
|
|
For
the year ended March 31,
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
(USD
to RMB/USD to HKD)
|
|
|
(USD
to RMB/USD to HKD)
|
|
Assets and liabilities
|
|
period end exchange rate
|
|
|
7.0896/7.7529
|
|
|
|
6.7111/7.8493
|
|
Revenue and expenses
|
|
period average
|
|
|
6.9662/7.8164
|
|
|
|
6.7108/7.8416
|
|
Income
taxes
The
Company follows FASB ASC Topic 740, Income Taxes, which requires the recognition of deferred income taxes for the differences
between the basis of assets and liabilities for financial statements and income tax purposes. Under this method, deferred income
taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and
their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods
in which the differences are expected to affect taxable income. Deferred tax assets are also recognized for operating losses and
for tax credit carryforwards. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income
taxes (continued)
ASC
740-10-30 requires income tax positions to meet a more-likely-than-not recognition threshold to be recognized in the financial
statements. Under ASC 740-10-30, tax positions that previously failed to meet the more-likely-than-not threshold should be recognized
in the first subsequent financial reporting period in which that threshold is met. Under ASC 740-10-40, previously recognized
tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first subsequent financial
reporting period in which that threshold is no longer met.
The
application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and
regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of
regulations and court rulings. Therefore, the actual liability may be materially different from our estimates, which could result
in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities or the deferred tax
asset valuation allowance.
Lvxin
products sales and services have been exempt from enterprise income tax. According to the “PRC Income Tax Law” Article
27 (1), income from agricultural, forestry, animal husbandry and the fisheries industries shall be exempt from business tax.
According
to the “PRC Income Tax Law”, Tianci Liantian and Yuxinqi are subject to a 25% standard enterprise income tax in the
PRC.
Earnings
(loss) per share
The
Company computes earnings (loss) per share (“EPS”) in accordance with FASB ASC 260, Earnings Per Share.
ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income
(loss) divided by the weighted average common shares outstanding during the period.
Diluted
EPS is similar to basic EPS but presents the dilutive effect on a per share basis of contracts to issue ordinary common shares
(e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented,
or issuance date, if later. The computation of diluted EPS includes the estimated impact of the exercise of contracts to purchase
common stock using the treasury stock method and the potential common shares associated with convertible debt using the if-converted
method. Potential common shares that have an anti-dilutive effect (i.e., those that increase earnings per share or decrease loss
per share) are excluded from the calculation of diluted EPS.
Share-based
compensation
The
Company follows the provisions of FASB ASC 718 requiring employee equity awards to be accounted for under the fair value method.
Accordingly, share-based compensation is measured at grant date, based on the fair value of the award and recognized over its
vesting period. No equity instruments were granted during the year ended March 31, 2020 and no compensation expense is required
to be recognized under provisions of ASC 718 with respect to employees. During the year ended March 31, 2019, specifically on
June 13, 2018, the Company granted a total of 290,000 shares with a fair value on the grant date of $1.30 per share to 8 employees,
and $377,000 compensation expense was recognized under the provisions of ASC 718. These shares were fully vested when issued.
Segment
information and geographic data
The
Company is operating in one segment in accordance with the accounting guidance in FASB ASC Topic 280, Segment Reporting.
The Company’s revenues are from the sales of agricultural products from customers in the People’s Republic of China
(“PRC”). All assets of the Company are located in the PRC.
Concentration
of credit risk
The
Company maintains cash in three banks in China. In China, the insurance coverage of each bank is RMB500,000 (approximately USD$75,000).
As of March 31, 2020, the Company had RMB768,318 (approximately USD$103,000) in excess of the insurance amounts.
During
the year ended March 31, 2020, major customers Li Jiaxu, Zhao Shihai and Huiye Group generated 38%, 32% and 11% of revenue, respectively.
During the year ended March 31, 2019, major customers Li Jiaxu, Sun Rongmao, Zhao Shihai and Shouhang Commerce and Trade Ltd.
generated 21%, 18%, 33% and 20% of revenue, respectively.
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent
accounting pronouncements
Revenue
In
March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations
(Reporting Revenue Gross versus Net). The amendment in this update affects entities with transactions included within the scope
of Topic 606, The scope of that Topic includes entities that enter into contracts with customers to transfer goods or services
(that are an output of the entity’s ordinary activities) in exchange for consideration. The amendments are intended to improve
the operability and understandability of the implementation guidance on principal versus agent considerations. In April 2016,
the FASB issued ASU No. 2016-10, the amendments in ASU 2016-10 provide more detailed guidance, including additional implementation
guidance and examples in the following key areas: 1) identifying performance obligations and 2) licenses of intellectual property.
In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and
Practical Expedients (“ASU 2016-12”). The amendments do not change the core principles of the standard, but clarify
the guidance on assessing collectability, presenting sales taxes, measuring noncash consideration and certain transition matters.
This update becomes effective concurrently with ASU No. 2014-09. The Company adopted ASU 2016-12 effective April 1, 2018. There
was no impact on the Company’s financial statements as a result of adopting Topic 606 for the year ended March 31, 2020
and 2019.
Leases
In
July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which provides an additional, optional
transition method related to implementing the new leases standard. ASU 2018-11 provides that companies can initially apply the
new lease standard at adoption and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the
period of adoption. The Company adopted the guidance as of April 1, 2019, there is no cumulative-effect adjustment to the Company’s
opening balance of retained earnings in the period of adoption. See Note 9 - Leases for further details.
We
do not believe any recently issued but not yet effective accounting standards, if currently adopted, would have a material effect
on the consolidated financial position, statements of operations and cash flows.
NOTE
3. PREPAID EXPENSES
Prepaid
expenses include prepaid paddy planting production materials, prepayment of rice processing charges, and prepayment for products
to be purchased. As of March 31, 2020 and 2019, prepayments and deferred expenses were $48,789 and $121,257, respectively.
NOTE
4. LONG-TERM LEASE PREPAYMENTS
Long-term
lease prepayments include land rent prepayment over one year. As of March 31, 2020 and 2019, long-term lease prepayments were
$nil and $273,275. As a result of the adoption of the new accounting standards applicable to leases, long-term lease prepayments
were reclassified to offset the lease liability as of March 31, 2020.
NOTE
5. INVENTORIES
Inventories
are comprised of growing costs, harvesting costs, raw materials, and finished goods (including harvesting agricultural produce
paddy and processed rice and other agricultural products).
Growing
costs, also referred to as agricultural costs, consist of seeds, cultivation, fertilization, labor costs and soil improvement,
pest control and irrigation.
Harvest
costs are comprised of labor and equipment expenses incurred to harvest and deliver crops to the packinghouses.
Raw
materials include all costs of materials purchased to be used in production of the Company’s products.
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
5. INVENTORIES (Continued)
Agricultural
produce paddy is grown in Lvxin’s planting base. This crop has distinct growing, harvest, and selling periods, each
of which lasts approximately four to six months. During the growing period (usually April to September), agricultural costs are
capitalized, as they are associated with benefiting and preparing the crops for the harvest and selling period. During the harvest
and selling period, harvest costs and agricultural costs are capitalized as inventories, then recorded as a cost of sales in accordance
with FIFO recognition of historical costs when the inventory is sold.
Most
agricultural costs, including capitalized agricultural costs and certain other costs, such as indirect labor including farm supervision
and management and irrigation that benefit multiple crops, are allocated to crops on a per-kilogram basis.
The
cost of harvesting agricultural produce paddy includes all relevant expenditures incurred before and during the entire cultivation
period and after harvesting, mainly including seed, fertilizer and other production materials, land rent, labor, and other related
costs, subject to impairment if the cost of inventory exceeds net realizable value.
Manufactured
goods, rice and other products includes all expenditures incurred in bringing the goods to the point of sale and putting them
in a saleable condition.
The
Company values inventory on its balance sheet at the lower of cost or net realizable value. As of March 31, 2019, based on recent
sales experience, the Company determined that the net realizable value of its inventory at that time was less than the costs incurred
in producing the inventory. Therefore, an impairment charge was made as of March 31, 2019. As of March 31, 2020, market conditions
indicated that the cost of inventory would be recoverable, so no impairment was recorded. As of March 31 2020 and 2019, inventories
consisted of the following:
|
|
March 31
|
|
|
March 31
|
|
|
|
2020
|
|
|
2019
|
|
Growing cost
|
|
$
|
-
|
|
|
$
|
70,211
|
|
Selenium enriched paddy
|
|
|
557,085
|
|
|
|
396,800
|
|
Rice and other products
|
|
|
41,153
|
|
|
|
68,662
|
|
Packing and other materials
|
|
|
15,457
|
|
|
|
10,170
|
|
Total inventories at cost
|
|
|
613,695
|
|
|
|
545,843
|
|
Inventory-impairment
|
|
|
-
|
|
|
|
(29,439
|
)
|
Inventories, net
|
|
$
|
613,695
|
|
|
$
|
516,404
|
|
Due
to the COVID-19 pandemic, the Company did not have any sale of paddy in the last quarter of the year ended of March 31,2020, and
had a decrease of $123,559 than the same period of last year.
NOTE
6. INCOME TAXES
A
reconciliation of loss before income taxes for domestic and foreign locations for the year ended March 31, 2020 and 2019 is as
follows:
|
|
For the year ended
March 31
|
|
|
|
2020
|
|
|
2019
|
|
United States
|
|
$
|
(192,183
|
)
|
|
$
|
(141,847
|
)
|
Foreign
|
|
|
(254,419
|
)
|
|
|
(682,711
|
)
|
(Loss) before income taxes
|
|
$
|
(446,602
|
)
|
|
$
|
(824,558
|
)
|
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
6. INCOME TAXES (Continued)
The
difference between the U.S. federal statutory income tax rate and the Company’s effective tax rate was as follows:
|
|
March 31
|
|
|
March 31
|
|
|
|
2020
|
|
|
2019
|
|
U.S. federal statutory income tax rate
|
|
|
21
|
%
|
|
|
21
|
%
|
U.S. Valuation allowance
|
|
|
(21
|
)%
|
|
|
(21
|
)%
|
Rates for Tianci Liangtian and Yuxinqi, net
|
|
|
25
|
%
|
|
|
25
|
%
|
PRC Valuation allowance
|
|
|
(25
|
)%
|
|
|
(25
|
)%
|
Rate for Lvxxin
|
|
|
0
|
%
|
|
|
0
|
%
|
The Company’s effective tax rate
|
|
|
(0
|
)%
|
|
|
(0
|
)%
|
The
Company did not recognize deferred tax assets since it is not likely to realize such deferred taxes. The deferred tax would apply
to the Company in the U.S. and Yuxinqi and Tianci Liangtian, in China.
As
of March 31, 2020, Yuxinqi and Tianci Liangtian have total net operating loss carry forwards of approximately $663,000 in the
PRC that expire in 2024. Due to the uncertainty of utilizing these carry forwards, the Company provided a 100% allowance on all
deferred tax assets of approximately $166,000 and $102,000 related to its operations in the PRC as of March 31, 2020 and 2019,
respectively. The PRC valuation allowance has increased by approximately $64,000 and $102,000 for the year ended March 31, 2020
and 2019, respectively.
The
Company has incurred losses from its United States operations during all periods presented of approximately $397,000. The Company's
United States operations consist solely of ownership of its foreign subsidiaries, and the losses arise from administration expenses.
Accordingly, management provided a 100% valuation allowance of approximately $83,000 and $43,000 against the deferred tax assets
related to the Company’s United States operations as of March 31, 2020 and 2019, respectively, because the deferred tax
benefits of the net operating loss carry forwards in the United States will not likely be utilized. The US valuation allowance
has increased by approximately $40,000 and $30,000 for the year ended March 31, 2020 and 2019, respectively.
The
Company is subject to examination by the Internal Revenue Service (IRS) in the United States as well as by the taxing authorities
in China, where the firm has significant business operations. The tax years under examination vary by jurisdiction. The table
below presents the earliest tax year that remain subject to examination by major jurisdiction.
|
|
The year as of
|
U.S. Federal
|
|
March 31, 2019
|
China
|
|
January 31, 2016
|
United
States
The
Company is subject to the U.S. corporation tax rate of 21%.
Samoa
Organic
Agricultural (Samoa) Co., Ltd was incorporated in Samoa and, under the current laws of Samoa, it is not subject to income tax.
China
Tianci
Liantian and Yuxinqi are subject to a 25% standard enterprise income tax in the PRC. There was no provision for income taxes for
the year ended March 31, 2020 and 2019.
Lvxin
products sales and services are exempt from enterprise income tax, according to the “PRC Income Tax Law” Article 27
(1), which states that income from agricultural, forestry, animal husbandries and the fisheries Industries shall be exempt from
business income taxes.
NOTE
7. OTHER PAYABLES
Other
payables consisted of the following as of the periods indicated:
|
|
March 31
|
|
|
March 31
|
|
|
|
2020
|
|
|
2019
|
|
Xun Jianjun
|
|
$
|
-
|
|
|
$
|
14,901
|
|
Advances for shares
|
|
|
8,167
|
|
|
|
53,300
|
|
Others
|
|
|
244
|
|
|
|
83
|
|
|
|
$
|
8,411
|
|
|
$
|
68,284
|
|
As
of March 31, 2019, the Company had received an advance for 41,000 shares to be issued of $53,300. The shares were subsequently
issued on June 21, 2019. As of March 31, 2020, the Company had received $8,167 for the sale of common shares to be issued of which
$7,500 was refunded on April 3, 2020.
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
8. RELATED PARTY TRANSACTIONS
Amounts
due to related parties consisted of the following as of the periods indicated:
|
|
March 31
|
|
|
March 31
|
|
|
|
2020
|
|
|
2019
|
|
Hao Shuping
|
|
$
|
44,772
|
|
|
$
|
47,489
|
|
Shen Zhenai
|
|
|
37,647
|
|
|
|
9,952
|
|
Lou Zhengui
|
|
|
31,249
|
|
|
|
34,866
|
|
Xun Jianjun
|
|
|
7,766
|
|
|
|
-
|
|
|
|
$
|
121,434
|
|
|
$
|
92,307
|
|
Hao
Shuping is the main shareholder of the Company, Shen Zhenai is the President, Chairman of the Board, director and shareholder
of the Company, and Xun Jianjun is the CEO and shareholder of the Company. These advances represent temporary borrowings for operating
costs between the Company and management. They are non-interest bearing and due on demand.
Lou
Zhengui is the principal manager of Lvxin , also a minority shareholder of Lvxin and Organic Agriculture. The balance represents
advances for expenses paid to suppliers by Lou Zhengui. The balance is non-interest bearing and due on demand.
NOTE
9. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
On
April 1, 2019, the Company adopted FASB ASC 842, “Leases” (“new lease standard”). The new lease standard
was adopted using the optional transition method approach that allows for the cumulative effect adjustment to be recorded without
restating prior periods. The Company has elected the practical expedient package related to the identification, classification
and accounting for initial direct costs whereby prior conclusions do not have to be reassessed for leases that commenced before
the effective date. As the Company will not reassess such conclusions, the Company has not adopted the practical expedient to
use hindsight to determine the likelihood of whether a lease will be extended or terminated or whether a purchase option will
be exercised.
In
November 2017, Tianci Liangtian leased office space from November 20, 2017 to December 5, 2018 under an operating lease agreement
(approximately 666 square meters). Under the terms of the lease, Tianci Liangtian paid approximately $1,592 in lease deposits
and committed to make annual lease payments. In December 2018, Yuxingqi renewed the lease agreement. Under the terms, Yuxingqi
committed to make annual lease payments of RMB290,000 (approximately US$42,000) for the period from December 6, 2018 to December
5, 2019. On December 20, 2019, Yuxingqi renewed the lease agreement. Under the terms, Yuxingqi committed to make annual lease
payments of RMB290,000 (approximately US$42,000, including VAT tax) for the period from December 20, 2019 to December 19, 2020,
of which RMB150,000 (approximately US$22,000) payment was made on December 23, 2019. As of March 31, 2020, US$25,727 and US$18,630
was accounted as operating lease right-of-use assets and operating lease liabilities (current), respectively.
In
April 2018, Lvxin leased office space of approximately 177 square meters under a one-year lease agreement. Lvxin paid approximately
US$4,500 as rent. The office contained our administrative functions, sales, e-commerce operations and marketing functions. After
April 2019, Lvxin did not renew this office lease agreement.
The
Company leases 1,228 acres of land for cultivating pursuant to more than 300 lease agreements with individual farmers. Some of
the leases are paid annually, and some of the leases are paid in advance for periods from 2 to 22 years. These prepayments reduced
the related lease liabilities. The Company accounts for the land rental costs as a cost of production of paddy.
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
9. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (Continued)
The
Company’s adoption of the new lease standard included new processes and controls regarding asset financing transactions,
financial reporting and a system-related implementation required for the new lease standard. The impact of the adoption of the
new lease standard included the recognition of right-of-use (“ROU”) assets and lease liabilities. The adoption of
the new lease standard resulted in additional net lease assets and net lease liabilities of approximately $2.01 million and $1.74
million, respectively, as of March 31, 2020. For the year ended March 31, 2020, the amortization was $400,085.
Operating
leases are reflected on our balance sheet within ROU assets and the related current and non-current operating lease liabilities.
ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to
make lease payments arising from the lease agreement. ROU assets and liabilities are recognized at the commencement date, or the
date on which the lessor makes the underlying asset available for use, based upon the present value of the lease payments over
the respective lease term. Lease expense is recognized on a straight-line basis over the lease term, subject to any changes in
the lease or expectation regarding the terms.
As
of March 31, 2020, the Company has the following amounts recorded on the Company’s consolidated balance sheet:
|
|
As
of
March 31,
2020
|
|
Assets
|
|
|
|
Right-of-use asset(non-current)
|
|
$
|
2,007,274
|
|
Total
|
|
$
|
2,007,274
|
|
Liabilities
|
|
|
|
|
Lease liability(current)
|
|
$
|
316,889
|
|
Lease liability(non-current)
|
|
|
1,424,600
|
|
Total
|
|
$
|
1,741,489
|
|
Office lease:
|
|
|
Remaining Lease Term
|
|
1 year, renewal option
|
Incremental borrowing rate
|
|
4.9%
|
|
|
|
Land lease:
|
|
|
Remaining Lease Term
|
|
From 1 to 10 years, no renewal option
|
Incremental borrowing rate
|
|
4.9%
|
The
components of lease expense were as follows:
|
|
For
the year ended
March 31,
2020
|
|
Amortization of ROU Asset
|
|
|
|
Land lease
|
|
$
|
360,812
|
|
Office Lease
|
|
|
39,273
|
|
Total lease expense
|
|
$
|
400,085
|
|
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
9. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (Continued)
Future
annual minimum lease payments for non-cancellable operating leases are as follows:
Year Ending March 31:
|
|
Operating Leases
(Unaudited)
|
|
2021
|
|
$
|
401,309
|
|
2022
|
|
|
293,650
|
|
2023
|
|
|
272,098
|
|
2024
|
|
|
194,798
|
|
2025
|
|
|
206,684
|
|
Thereafter
|
|
|
760,523
|
|
Total
|
|
|
2,129,062
|
|
Less: imputed interest
|
|
|
387,573
|
|
Total
|
|
$
|
1,741,489
|
|
|
|
|
|
|
Reconciliation to lease liabilities:
|
|
|
|
|
Lease liabilities - current
|
|
$
|
316,889
|
|
Lease liabilities - long-term
|
|
|
1,424,600
|
|
Total Lease Liabilities
|
|
$
|
1,741,489
|
|
NOTE
10. REVENUE
The
Company sells paddy and selenium-enriched paddy products, rice and other agricultural products. All revenue is recognized when
it is both earned and realized. The Company’s policy is to recognize the sale when the products, ownership and risk of loss
have transferred to the purchasers, and collection of the sales proceeds, if not prepaid, is reasonably assured, all of which
generally occur when the customer receives the products. Accordingly, revenue is recognized at the point in time when delivery
is made.
Our
revenue results for the years ended March 31, 2020 and 2019 were primarily the result of paddy and milled rice and other production
sales:
|
|
The Year Ended March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
Sales
|
|
|
%
|
|
|
Sales
|
|
|
%
|
|
Milled Rice and other production
|
|
$
|
256,999
|
|
|
|
25
|
%
|
|
$
|
245,045
|
|
|
|
22
|
%
|
Paddy
|
|
|
754,709
|
|
|
|
75
|
%
|
|
|
878,268
|
|
|
|
78
|
%
|
|
|
$
|
1,011,708
|
|
|
|
100
|
%
|
|
$
|
1,123,313
|
|
|
|
100
|
%
|
NOTE
11. CONTINGENCIES
Loss
contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case
the guarantee would be disclosed.
The
Company was not subject to any material loss contingencies as of March 31, 2020 or 2019 and through the date of this report.
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
12. NON-CONTROLLING INTERESTS
Lvxin
is the Company’s majority-owned subsidiary which is consolidated in the Company’s financial statements with a non-controlling
interest (NCI) recognized. The Company holds a 51% interest in Lvxin as of March 31, 2020 and 2019 (see Note 12).
As
of March 31, 2020 and 2019, the NCI in the consolidated balance sheet was $ 23,977 and $3,759, respectively.
NOTE
13. SUBSEQUENT EVENTS
The
sale of shares
During
the period from April 1, 2020 to the date of filling this report, the Company received an advance of $137,900 for the sale of
91,000 shares to be issued and refunded $7,500 previously received for the sale of shares on April 3, 2020.
Divestment of
Lvxin
On
April 30, 2020 (the “Distribution Date”), the Company completed the divestment of its subsidiary Lvxin as its subsidiary,
Heilongjiang Tianci Liangtian Agricultural Technology Development Co., Ltd, transfered its 51% equity interest in Lvxin to Lou
Zhengui, the representative of the minority shareholders in Lvxin. Tianci Liangtian retained responsibility for the liabilities
incurred by Lvxin prior to April 30, 2020, including debt of 257,731RMB (approx. US$36,380) owed by Lvxin to Yuxingqi, which is
a subsidiary of Tianci Liangtian. Tianci Liangtian also waived a debt of 3,672,002RMB (approx. US$518,321) owed by Lvxin to Tianci
Liangtian.
In
exchange for the 51% interest in Lvxin, Lou Zhengui assumed debt of 300,000RMB (approx. US$42,350) owed by Tianci Liangtian to
Hao Shuping, a member of the Company's Board of Directors.
The
Company incurred $941,819 of investment loss from the divestment of Lvxin by Tianci Liangtian.
After
the Distribution Date, the Company does not beneficially own any shares of common stock of Lvxin and will no longer consolidate
Lvxin with its financial results. Beginning in the first quarter of fiscal year 2021, Lvxin’s historical financial results
for periods prior to the Distribution Date will be reflected in the Company’s consolidated financial statements as a discontinued
operation (the “Lvxin Discontinued Operations”).
The
following unaudited Pro Forma Consolidated Statements of Income and cash flow of the Company for the years ended March 31,
2020 are presented as if the divestment had occurred as of April 1, 2019 in that they reflect the reclassification
of Lvxin as a Discontinued Operation for all periods presented. The following unaudited Pro Forma Condensed Consolidated Balance
Sheets of the Company as of March 31, 2020 is presented as if the divestment occurred on March 31, 2020.
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
13. SUBSEQUENT EVENTS (Continued)
The
unaudited Pro Forma Consolidated Financial Statements are presented based on information currently available including certain
assumptions and estimates. They are intended for informational purposes only, and do not purport to represent what the Company’s
financial position and operating results would have been had the divestment and related events occurred on the dates
indicated above, or to project the Company’s financial position or results of operations for any future date or period.
Furthermore, they do not reflect all actions that may be undertaken by the Company after the divestment and disposition
of Lvxin.
The
unaudited Pro Forma Consolidated Financial Statements and the accompanying notes should be read in conjunction with the audited
Consolidated Financial Statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” included in the Company’s Annual Report for the fiscal year ended March 31, 2020.
In
the enclosed unaudited Pro Forma Consolidated Statements of Income, cash flow and Balance Sheets, the amounts reflected in the
columns presented are described below:
Historical
Organic Agricultural
This
column reflects the Company’s historical financial statements for the periods presented and does not reflect any adjustments
related to the divestment and related events. The historical Organic Agricultural Consolidated Balance Sheet as of March 31,
2020 and the Consolidated Statement of Income and cash flow for the year ended March 31, 2020 were derived from the Company’s
audited Consolidated Financial Statements included in its Annual Report for the year ended March 31, 2020.
Lvxin
Discontinued Operations
The
unaudited pro forma financial information related to the Lvxin Discontinued Operations has been prepared in accordance with the
discontinued operations guidance in Accounting Standards Codification 205, “Financial Statement Presentation” and
therefore does not reflect what the Company’s or Lvxin’s results of operations would have been on a stand-alone basis
and are not necessarily indicative of the Company’s or Lvxin’s future results of operations. Discontinued Operations
do not include any allocation of general corporate overhead expenses of the Company to Lvxin. The information in the Lvxin Discontinued
Operations column in the unaudited Pro Forma Consolidated Statements of Income was prepared based on the Company’s annual
audited financial statements and only include costs that are directly attributable to the operating results of Lvxin.
The
Company believes that the adjustments included within the Lvxin Discontinued Operations column of the unaudited Pro Forma Consolidated
Financial Statements are consistent with the guidance for discontinued operations in accordance with U.S. GAAP. The Company’s
current estimates on a discontinued operations basis are preliminary and could change as the Company finalizes the accounting
for the discontinued operations to be reported in the Annual Report on Form 10-K for the year ending March 31,
2021.
Pro
Forma Adjustments
The
information in the “Pro Forma Adjustments” columns in the unaudited Pro Forma Consolidated Statements of Income and
the unaudited Pro Forma Condensed Consolidated Balance Sheets reflect additional pro forma adjustments which are further described
in the accompanying notes. The Pro Forma Adjustments are based on available information and assumptions that the Company’s
management believes are reasonable, that reflect the impact of events directly attributable to the divestment that are
factually supportable, and for purposes of the Pro Forma Statements of Income, are expected to have a continuing impact on the
Company. The Pro Forma Adjustments do not reflect future events that may occur after the divestment.
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
13. SUBSEQUENT EVENTS (Continued)
Organic
Agricultural Company Limited
Pro
Forma Consolidated Statements of Income (Unaudited)
For the Year Ended
March 31, 2020
(EXPRESSED
IN U.S. DOLLARS)
|
|
Historical Organic
Agricultural
|
|
|
Lvxin
Discontinued
Operations
|
|
|
Pro Forma
Adjustments
|
|
|
Pro Forma Organic
Agricultural
Continuing
Operations
|
|
Revenue
|
|
$
|
1,011,708
|
|
|
$
|
(774,232
|
)
|
|
$
|
19,523
|
(A)
|
|
$
|
256,999
|
|
Cost
of sales
|
|
|
902,269
|
|
|
|
(717,155
|
)
|
|
|
15,159
|
(A)
|
|
|
200,273
|
|
Gross
profit
|
|
|
109,439
|
|
|
|
(57,077
|
)
|
|
|
4,364
|
|
|
|
56,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
508,382
|
|
|
|
(499
|
)
|
|
|
-
|
|
|
|
507,883
|
|
Selling
and marketing expenses
|
|
|
49,611
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49,611
|
|
Total
operating costs and expenses
|
|
|
557,993
|
|
|
|
(499
|
)
|
|
|
-
|
|
|
|
557,494
|
|
Operating
(loss)
|
|
|
(448,554
|
)
|
|
|
(56,578
|
)
|
|
|
4,364
|
|
|
|
(500,768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (loss)
|
|
|
1,952
|
|
|
|
(435
|
)
|
|
|
-
|
|
|
|
1,517
|
|
(Loss)
before provision for income taxes
|
|
|
(446,602
|
)
|
|
|
(57,013
|
)
|
|
|
4,364
|
|
|
|
(499,251
|
)
|
Provision
for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
loss
|
|
|
(446,602
|
)
|
|
|
(57,013
|
)
|
|
|
4,364
|
|
|
|
(499,251
|
)
|
Less:
Net income attributable to non-controlling interests
|
|
|
27,936
|
|
|
|
(27,936
|
)
|
|
|
-
|
|
|
|
-
|
|
Net
(loss) attributable to common shareholders
|
|
$
|
(474,538
|
)
|
|
$
|
(29,077
|
)
|
|
$
|
4,364
|
|
|
$
|
(499,251
|
)
|
Basic
and diluted (loss) per share
|
|
|
(0.04
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.04
|
)
|
Weighted
average number of shares outstanding- basic and diluted
|
|
|
11,414,862
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,414,862
|
|
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
13. SUBSEQUENT EVENTS (Continued)
Organic
Agricultural Company Limited
Pro
Forma Consolidated Balance Sheet (Unaudited)
As
of March 31, 2020
(EXPRESSED
IN U.S. DOLLARS)
|
|
Historical Organic Agricultural
|
|
|
Lvxin
Discontinued
Operations
|
|
|
Pro Forma
Adjustments
|
|
|
Pro Forma Organic Agricultural
Continuing
Operations
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
242,174
|
|
|
$
|
(1,340
|
)
|
|
|
-
|
|
|
$
|
240,834
|
|
Accounts receivable
|
|
|
5,212
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,212
|
|
Inventories
|
|
|
613,695
|
|
|
|
(649,172
|
)
|
|
|
92,087
|
(B)
|
|
|
56,610
|
|
Other receivables
|
|
|
13,105
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,105
|
|
Prepaid expenses
|
|
|
48,789
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48,789
|
|
Total current assets
|
|
|
922,975
|
|
|
|
(650,512
|
)
|
|
|
92,087
|
|
|
|
364,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
4,498
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,498
|
|
Operating lease right-of-use assets
|
|
|
2,007,274
|
|
|
|
(1,981,547
|
)
|
|
|
-
|
|
|
|
25,727
|
|
Total assets
|
|
$
|
2,934,747
|
|
|
$
|
(2,632,059
|
)
|
|
|
92,087
|
|
|
$
|
394,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
69,437
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
69,437
|
|
Customer deposits
|
|
|
88,131
|
|
|
|
-
|
|
|
|
-
|
|
|
|
88,131
|
|
Due to related parties
|
|
|
121,434
|
|
|
|
(591,445
|
)
|
|
|
554,299
|
(B)
|
|
|
84,288
|
|
Operating lease liabilities (current)
|
|
|
316,889
|
|
|
|
(298,259
|
)
|
|
|
-
|
|
|
|
18,630
|
|
Other payables
|
|
|
8,411
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,411
|
|
Total current liabilities
|
|
$
|
604,302
|
|
|
$
|
(889,704
|
)
|
|
|
554,299
|
|
|
$
|
268,897
|
|
Operating lease liabilities (non-current)
|
|
|
1,424,600
|
|
|
|
(1,424,600
|
)
|
|
|
-
|
|
|
|
-
|
|
Total liabilities
|
|
$
|
2,028,902
|
|
|
$
|
(2,314,304
|
)
|
|
|
554,299
|
|
|
$
|
268,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
11,694
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,694
|
|
Additional Paid-in Capital
|
|
|
2,612,954
|
|
|
|
(544,162
|
)
|
|
|
-
|
|
|
|
2,068,792
|
|
(Deficit)
|
|
|
(1,752,671
|
)
|
|
|
240,321
|
|
|
|
(462,212
|
)(A),(B)
|
|
|
(1,974,562
|
)
|
Other comprehensive income (loss)
|
|
|
9,891
|
|
|
|
10,063
|
|
|
|
-
|
|
|
|
19,954
|
|
Total shareholders’ equity of the Company
|
|
|
881,868
|
|
|
|
(293,778
|
)
|
|
|
(462,212
|
)
|
|
|
125,878
|
|
Non-controlling interest
|
|
|
23,977
|
|
|
|
(23,977
|
)
|
|
|
-
|
|
|
|
-
|
|
Total equity
|
|
|
905,845
|
|
|
|
(317,755
|
)
|
|
|
(462,212
|
)
|
|
|
125,878
|
|
Total liabilities and equity
|
|
$
|
2,934,747
|
|
|
$
|
(2,632,059
|
)
|
|
$
|
92,087
|
|
|
$
|
394,775
|
|
ORGANIC
AGRICULTURAL COMPANY LIMITED AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS
IN US DOLLARS)
NOTE
13. SUBSEQUENT EVENTS (Continued)
The
following table summarizes the pro forma cash flows for the year ended March 31, 2020:
|
|
|
|
|
For the Year Ended March 31, 2020
|
|
|
|
Historical
Organic Agricultural
|
|
|
Lvxin Discontinued Operations
|
|
|
Pro Forma Adjustments
|
|
|
Pro Forma Continuing Operations
|
|
Net cash (used in) operating activities
|
|
|
(524,933
|
)
|
|
|
(151
|
)
|
|
|
-
|
|
|
|
(525,084
|
)
|
Net cash (used in) investing activities
|
|
|
(1,318
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,318
|
)
|
Net cash provided by financing activities
|
|
|
771,247
|
|
|
|
-
|
|
|
|
-
|
|
|
|
771,247
|
|
Effect of exchange rate fluctuations on cash and cash equivalents
|
|
|
(15,775
|
)
|
|
|
69
|
|
|
|
-
|
|
|
|
(15,706
|
)
|
Net increase (decrease) in cash and cash equivalents
|
|
|
229,221
|
|
|
|
(82
|
)
|
|
|
-
|
|
|
|
229,139
|
|
Cash and cash equivalents, beginning of year
|
|
|
12,953
|
|
|
|
(1,258
|
)
|
|
|
-
|
|
|
|
11,695
|
|
Cash and cash equivalents, end of year
|
|
$
|
242,174
|
|
|
$
|
(1,340
|
)
|
|
$
|
-
|
|
|
$
|
240,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
unaudited Pro Forma Consolidated Statements of Income and cash flow for the year ended March 31, 2020 and the unaudited Pro
Forma Condensed Consolidated Balance Sheet as of March 31, 2020, include the following pro forma adjustments:
|
(A)
|
Reflects
adjustments for intercompany transactions between the Company’s historical segments, Passive Safety and Lvxin, which
will no longer be eliminated in consolidation subsequent to the divestment.
|
|
(B)
|
Considering
the following that occurred subsequent to March 31, 2020:
|
|
(1)
|
Tianci
Liangtian retained responsibility for the liabilities incurred by Lvxin, including debt of 257,731 RMB (approx. US$36,380)
owed by Lvxin to Yuxingqi, which is a subsidiary of Tianci Liangtian. Tianci Liangtian also waived a debt of 3,672,002 RMB
(approx. US$518,321) owed by Lvxin to Tianci Liangtian.
|
|
|
|
|
(2)
|
In exchange for
the 51% interest in Lvxin, Lou Zhengui assumed the obligation to satisfy a debt of 300,000 Renminbi (approx. US$42,350) owed
by Tianci Liangtian to Hao Shuping, a member of the Company's Board of Directors.
|
|
|
|
|
|
As a result of the
foregoing transactions, the Organic Agricultural pro forma Inventories and Due to Related Parties balances are $56,610 and
$84,288, respectively.
|
The
COVID-19
The
COVID-19 outbreak has had a significant adverse impact and created many uncertainties related to our business, and we expect that
it will continue to do so. The Company is experiencing challenges in sales and has suffered a significant decrease in revenues
which has increased financial uncertainty. Our future business outlook and expectations are very uncertain due to the impact of
the COVID-19 outbreak and are very difficult to quantify. It is difficult to assess or predict the impact of this unprecedented
event on our business, financial results or financial condition. Factors that will impact the extent to which the COVID-19 outbreak
affects our business, financial results and financial condition include: the duration, spread and severity of the outbreak; the
actions taken to contain the virus or treat its impact, including government actions to mitigate the economic impact of the outbreak;
and how quickly and to what extent normal economic and operating conditions can resume, including whether any future outbreaks
interrupt economic recovery.
The
COVID-19 pandemic has led government and other authorities to impose measures intended to control its spread, including restrictions
on freedom of movement, gatherings of large numbers of people, and temporary closure of company operations. The COVID-19 pandemic
have led to significant disruptions in our retail, manufacturing and distribution operations and supply chains. In response to
COVID-19, we have taken steps to reduce operating costs and improve efficiency, including furloughing of our employees. Such steps,
and further changes we may make in the future to reduce our costs, may negatively impact our ability to attract and retain employees.
In addition, the Company follow the government’s epidemic prevention provisions to protect employee from COVID-19.
The
Management of the Company determined that there were no other reportable subsequent events to be adjusted for and/or disclosed
as of the date of filing this report.