The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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 PRC controlled by Jinong
through a series of contractual agreements; (iv) Beijing Gufeng Chemical Products Co., Ltd., a wholly-owned subsidiary of Jinong
in the PRC (“Gufeng”), and (v) Beijing Tianjuyuan Fertilizer Co., Ltd., Gufeng’s wholly-owned subsidiary in
the PRC (“Tianjuyuan”).
On
June 30, 2016 the Company, through its wholly-owned subsidiary Jinong, entered into strategic acquisition agreements and a series
of contractual agreements with the shareholders of the following six companies that are organized under the laws of the PRC and
would be deemed VIEs: Shaanxi Lishijie Agrochemical Co., Ltd. (“Lishijie”), Songyuan Jinyangguang Sannong Service
Co., Ltd. (“Jinyangguang”), Shenqiu County Zhenbai Agriculture Co., Ltd. (“Zhenbai”), Weinan City Linwei
District Wangtian Agricultural Materials Co., Ltd. (“Wangtian”), Aksu Xindeguo Agricultural Materials Co., Ltd. (“Xindeguo”),
and Xinjiang Xinyulei Eco-agriculture Science and Technology co., Ltd. (“Xinyulei”). On January 1, 2017, the Company,
through its wholly-owned subsidiary Jinong, entered into strategic acquisition agreements and a series of contractual agreements
with the shareholders of the following two companies that are organized under the laws of the PRC and would be deemed VIEs, Sunwu
County Xiangrong Agricultural Materials Co., Ltd. (“Xiangrong”), and Anhui Fengnong Seed Co., Ltd. (“Fengnong”).
On
November 30, 2017, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements
and the series of contractual agreements with the shareholders of Zhenbai.
Yuxing,
Lishijie, Jinyangguang, Wangtian, Xindeguo, Xinyulei, Xiangrong and Fengnong may also collectively be referred to as the “the
VIE Companies”; Lishijie, Jinyangguang, Wangtian, Xindeguo, Xinyulei, Xiangrong and Fengnong may also collectively be referred
to as “the sales VIEs” or “the sales VIE companies”.
The
Company’s corporate structure as of September 30, 2020 is set forth in the diagram below:
NOTE
2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principle
of consolidation
The
accompanying unaudited condensed consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Green New Jersey, Jinong, Gufeng, Tianjuyuan, and the VIE Companies. All significant
inter-company accounts and transactions have been eliminated in consolidation.
Effective
June 16, 2013, Yuxing was converted from being a wholly-owned foreign enterprise 100% owned by Jinong to a domestic enterprise
100% owned one natural person, who is not affiliated to the Company (“Yuxing’s Owner”). Effective the same day,
Yuxing’s Owner entered into a series of contractual agreements with Jinong pursuant to which Yuxing became the VIE of Jinong.
VIE
assessment
A
VIE is an entity (1) that has total equity at risk that is not sufficient to finance its activities without additional
subordinated financial support from other entities, (2) where the group of equity holders does not have the power to direct
the activities of the entity that most significantly impact the entity’s economic performance, or the obligation to
absorb the entity’s expected losses or the right to receive the entity’s expected residual returns, or both, or
(3) where the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the
entity, their rights to receive the expected residual returns of the entity, or both, and substantially all of the
entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting
rights. 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 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 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 pandemic outbreak of the novel coronavirus (“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 September 30, 2020, the Company does not have any material leases for the implementation of
ASC 842.
Cash
and cash equivalents and concentration of cash
For
statement of cash flows purposes, the Company considers all cash on hand and in banks, certificates of deposit with state owned
banks in the PRC and banks in the United States, and other highly-liquid investments with maturities of three months or less,
when purchased, to be cash and cash equivalents. The Company maintains large sums of cash in three major banks in China. The aggregate
cash in such accounts and on hand as of September 30, 2020 and June 30, 2020 were $12,790,017 and $11,866,308, respectively. There
is no insurance securing these deposits in China. In addition, the Company also had $41,905 and $68,470 in cash in two banks in
the United States as of September 30, 2020 and June 30, 2020, 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 September 30, 2020, and June 30, 2020, the Company
had accounts receivable of $109,201,762 and $105,693,326, net of allowance for doubtful accounts of $24,860,835 and $38,466,200,
respectively. The company recorded bad debt expense in the amount of $ 18 million and $ 14 million for three months ended September
30, 2020 and 2019, 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 September 30, 2020, and 2019, the Company had no reserve for obsolete
goods.
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 September 30, 2020 and 2019, 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 September 30, 2020, and June 30, 2020, the
Company had customer deposits of $9,223,513 and $7,342,590, 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
|
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Net income (loss) for Basic Earnings Per Share
|
|
$
|
(30,952,914
|
)
|
|
$
|
(7,315,799
|
)
|
Basic Weighted Average Number of Shares
|
|
|
6,350,129
|
|
|
|
4,504,510
|
|
Net income (loss) Per Share – Basic
|
|
$
|
(4.87
|
)
|
|
$
|
(1.62
|
)
|
Net income (loss) for Diluted Earnings Per Share
|
|
$
|
(30,952,914
|
)
|
|
$
|
(7,315,799
|
)
|
Diluted Weighted Average Number of Shares
|
|
|
6,350,129
|
|
|
|
4,504,510
|
|
Net income (loss) Per Share – Diluted
|
|
$
|
(4.87
|
)
|
|
$
|
(1.62
|
)
|
Recent
accounting pronouncements
In
August 2018, the FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” ASU
2018-13 modifies the disclosure requirements on fair value measurements from Accounting Standards Codification (“ASC”)
820, “Fair Value Measurement.” ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15,
2019, with early adoption permitted. The effect of the adoption of ASU 2018-13 will be a change to the disclosure requirements
for certain fair value measurements.
In
August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement that is a Service Contract.” ASU 2018-15 requires customers in a cloud computing arrangement that is a service
contract to follow the internal-use software guidance in ASC 350-40, “Intangibles—Goodwill and Other—Internal-Use
Software,” to determine which implementation costs may be capitalized. ASU 2018-15 is effective for interim and annual reporting
periods beginning after December 15, 2019, with early adoption permitted. The amendments in ASU 2018-15 can be applied either
retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company does not expect
the adoption of ASU 2018-15 to have a material impact on its unaudited condensed consolidated financial statements.
In
December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” ASU 2019-12 eliminates
certain exceptions within ASC 740, “Income Taxes,” and clarifies certain aspects of ASC 740 to promote consistency
among reporting entities. ASU 2019-12 is effective for interim and annual reporting periods beginning after December 15, 2020,
with early adoption permitted. Most amendments within the standard are required to be applied on a prospective basis, while certain
amendments must be applied on a retrospective or modified retrospective basis. The Company is evaluating the impact that adoption
of ASU 2019-12 will have on its unaudited condensed consolidated financial statements.
NOTE
3 – GOING CERCERN
The
Company’s financial statements are prepared assuming that the Company will continue as a going concern. The Company has
incurred operating losses and had negative operating cash flows during the reporting period from July 1, 2020 through September
30, 2020. 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:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Raw materials
|
|
$
|
39,637,241
|
|
|
$
|
43,177,071
|
|
Supplies and packing materials
|
|
$
|
466,880
|
|
|
$
|
465,746
|
|
Work in progress
|
|
$
|
383,552
|
|
|
$
|
374,756
|
|
Finished goods
|
|
$
|
67,407,644
|
|
|
$
|
54,903,508
|
|
Total
|
|
$
|
107,895,317
|
|
|
$
|
98,921,081
|
|
NOTE
5 – PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment consisted of the following:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Building and improvements
|
|
$
|
39,322,322
|
|
|
$
|
37,799,650
|
|
Auto
|
|
|
3,325,579
|
|
|
|
3,207,619
|
|
Machinery and equipment
|
|
|
18,312,530
|
|
|
|
17,601,852
|
|
Total property, plant and equipment
|
|
|
60,960,431
|
|
|
|
58,609,121
|
|
Less: accumulated depreciation
|
|
|
(37,836,354
|
)
|
|
|
(35,680,787
|
)
|
Total
|
|
$
|
23,124,076
|
|
|
$
|
22,928,334
|
|
NOTE
6 – INTANGIBLE ASSETS
Intangible
assets consisted of the following:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Land use rights, net
|
|
$
|
9,148,309
|
|
|
$
|
8,850,905
|
|
Technology patent, net
|
|
|
2,042
|
|
|
|
2,069
|
|
Customer relationships, net
|
|
|
865,518
|
|
|
|
908,933
|
|
Non-compete agreement
|
|
|
189,592
|
|
|
|
230,669
|
|
Trademarks
|
|
|
5,991,040
|
|
|
|
5,759,049
|
|
Total
|
|
$
|
16,196,501
|
|
|
$
|
15,751,625
|
|
LAND
USE RIGHT
On
September 25, 2009, Yuxing was granted a land use right for approximately 88 acres (353,000 square meters or 3.8 million square
feet) by the People’s Government and Land & Resources Bureau of Hu County, Xi’an, Shaanxi Province. The fair value
of the related intangible asset was determined to be the respective cost of RMB73,184,895 (or $10,772,817). 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 $153,964).
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 $1,072,367). The intangible asset is being amortized over
the grant period of 50 years.
The
Land Use Rights consisted of the following:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Land use rights
|
|
$
|
11,999,147
|
|
|
|
11,534,506
|
|
Less: accumulated amortization
|
|
|
(2,850,838
|
)
|
|
|
(2,683,601
|
)
|
Total land use rights, net
|
|
$
|
9,148,309
|
|
|
|
8,850,905
|
|
TECHNOLOGY
PATENT
On
August 16, 2001, Jinong was issued a technology patent related to a proprietary formula used in the production of humic acid.
The fair value of the related intangible asset was determined to be the respective cost of RMB 5,875,068 (or $864,810) 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 $1,354,240) and is amortized over the remaining useful life of six years using the
straight-line method. As of June 30, 2020, this technology patent is fully amortized.
The
technology know-how consisted of the following:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Technology know-how
|
|
$
|
2,223,414
|
|
|
$
|
2,137,317
|
|
Less: accumulated amortization
|
|
|
(2,221,373
|
)
|
|
|
(2,135,248
|
)
|
Total technology know-how, net
|
|
$
|
2,042
|
|
|
$
|
2,069
|
|
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 $9,568,000) 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 RMB16,472,179 (or $2,424,705) and is amortized over the remaining useful life of seven to ten years.
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Customer relationships
|
|
$
|
11,736,197
|
|
|
$
|
11,281,739
|
|
Less: accumulated amortization
|
|
|
(10,870,679
|
)
|
|
|
(10,372,806
|
)
|
Total customer relationships, net
|
|
$
|
865,518
|
|
|
$
|
908,933
|
|
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 $194,304) 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 RMB6,150,683 (or $905,381) and is amortized over the remaining useful life
of five years using the straight-line method.
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Non-compete agreement
|
|
$
|
1,201,657
|
|
|
$
|
1,155,127
|
|
Less: accumulated amortization
|
|
|
(1,012,065
|
)
|
|
|
(924,458
|
)
|
Total non-compete agreement, net
|
|
$
|
189,592
|
|
|
$
|
230,669
|
|
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 $5,991,040) and is subject to an annual impairment test.
AMORTIZATION
EXPENSE
Estimated
amortization expenses of intangible assets for the next five twelve months periods ended September 30, are as follows:
Twelve
Months Ended on September 30,
|
|
Expense
($)
|
|
2021
|
|
|
784,659
|
|
2022
|
|
|
591,115
|
|
2023
|
|
|
535,304
|
|
2024
|
|
|
389,121
|
|
2025
|
|
|
342,150
|
|
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 September 30, 2020, the balance of other non-current assets
was $10,889,269, which was the lease fee advances for agriculture lands that the Company engaged in Shiquan County from 2021 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 $0.5
million and $0.5 million as expenses for the three months ended September 30, 2020 and 2019, respectively.
Estimated
amortization expenses of the lease advance payments for the next four twelve-month periods ended September 30 and thereafter are
as follows:
Twelve
months ending September 30,
|
|
|
|
2022
|
|
$
|
1,976,160
|
|
2023
|
|
$
|
1,976,160
|
|
2024
|
|
$
|
1,976,160
|
|
2025 and thereafter
|
|
$
|
4,960,789
|
|
NOTE
8 – ACCRUED EXPENSES AND OTHER PAYABLES
Accrued
expenses and other payables consisted of the following:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Payroll and welfare payable
|
|
$
|
122,784
|
|
|
$
|
168,705
|
|
Accrued expenses
|
|
|
8,071,274
|
|
|
|
7,640,130
|
|
Other payables
|
|
|
6,523,049
|
|
|
|
6,211,818
|
|
Other levy payable
|
|
|
123,451
|
|
|
|
118,671
|
|
Total
|
|
$
|
14,840,558
|
|
|
$
|
14,139,324
|
|
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 $3,753,600). For the three months Ended September 30, 2020 and 2019, Yuxing
has sold approximately $169,722 and $199,469 products to 900LH.com.
As
of September 30, 2020, and June 30, 2020, the amount due to related parties was $4,253,472 and $4,212,407, respectively. As
of September 30, 2020, and June 30, 2020, $1,030,400 and $990,500, 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 September 30, 2020, and June 30, 2020, the Company’s subsidiary, Jinong, owed 900LH.com $404,623 and $11,819, 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 $3,603).
NOTE
10 – LOAN PAYABLES
As
of September 30, 2020, 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
|
|
|
September 30,
2020
|
|
1
|
|
Postal Saving Bank of China
- Pinggu Branch
|
|
June
17, 2020-June 16, 2021
|
|
|
5.66
|
%
|
|
|
2,208,000
|
|
2
|
|
Beijing Bank - Pinggu Branch
|
|
June 22, 2020-June
22, 2021
|
|
|
5.22
|
%
|
|
|
1,472,000
|
|
3
|
|
Postal Saving Bank of China - Pinggu Branch
|
|
August 6, 2020-August
5, 2021
|
|
|
5.66
|
%
|
|
|
294,400
|
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
3,974,400
|
|
The
interest expense from short-term loans was $56,768 and $70,789 for the period ended September 30, 2020 and 2019, 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 ($7,507,200) with a term of three years and an annual
interest rate of 3%.
No.
|
|
Related
Acquisitions of Sales VIEs
|
|
Issuance
Date
|
|
Maturity
Date
|
|
Notional
Interest Rate
|
|
|
Conversion
Price
|
|
|
Notional
Amount
(in RMB)
|
|
1
|
|
Wangtian,
Lishijie, Xindeguo, Xinyulei, Jinyangguang
|
|
June
30, 2016
|
|
June
30, 2020
|
|
3
|
%
|
|
$
|
5.00
|
|
|
|
39,000,000
|
|
2
|
|
Fengnong, Xiangrong
|
|
January 1, 2017
|
|
December 31, 2019
|
|
3
|
%
|
|
$
|
5.00
|
|
|
|
12,000,000
|
|
The
convertible notes take priority over the preferred stock and common stock of Jinong, and any other class or series of capital
stocks Jinong issues in the future in terms of interests and payments in the event of any liquidation, dissolution or winding
up of Jinong. On or after the third anniversary of the issuance date of the note, noteholders may request Jinong to process the
note conversion to convert the note into shares of the Company’s common stock. The notes cannot be converted prior to the
mature date. The per share conversion price of the notes is the higher of the following: (i) $5.00 per share or (ii) 75% of the
closing price of the Company’s common stock on the date the noteholder delivers the conversion notice. Due to the discontinuation
of VIE agreements with Zhenbai’s shareholders, certain convertible notes issued on June 30, 2016 with a face amount of RMB
12,000,000 ($1,766,400) were tendered back to the Company. All outstanding balance of unpaid principal and accrued interest in
the tendered convertible notes were forfeited.
On
November 15, 2019, the Company issued 995,000 shares of common stock at the price of $5.00 per share for the total amount of $4,975,000
to the holders of the Company’s convertible notes payable in connection with the payment of the convertible notes’
principal and interests. The convertible notes were issued on June 30, 2016 and matured on June 30, 2019.
On
February 14, 2020, the Company issued 377,650 shares of common stock at the price of $5.00 per share for the total amount of $1,888,250
to the holders of the Company’s convertible notes payable in connection with the payment of the convertible notes’
principal and interests. The convertible notes were issued on January 1, 2017 and matured on January 1, 2020.
The
Company determined that the fair value of the convertible notes payable was 0 as of September 30, 2020 and June 30, 2020. Aside
from the forfeiture of the convertible notes previously issued to Zhenbai’s shareholders, the difference between the fair
value of the notes and the face amount of the notes is being amortized to accretion implied interest expense over the three-year
life of the notes. As of September 30, 2020, the accumulated amortization of this discount into accretion expenses was $1,375,499.
As of September 30, 2019, the accumulated amortization of this discount into accretion expenses was $1,354,691.
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 three-month period ended September
30, 2020 and 2019 of $1,569,003 and $449,131, respectively, which is mainly due to the operating income from Jinong and VIEs.
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
|
|
Sept 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
VAT provision
|
|
$
|
(249,770
|
)
|
|
$
|
(257,068
|
)
|
Income tax payable
|
|
|
2,045,268
|
|
|
|
1,704,543
|
|
Other levies
|
|
|
1,381,486
|
|
|
|
1,187,442
|
|
Repatriation tax
|
|
|
29,010,535
|
|
|
|
29,010,535
|
|
Total
|
|
$
|
32,187,519
|
|
|
$
|
31,645,452
|
|
The
provision for income taxes consists of the following
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Current tax - foreign
|
|
$
|
1,569,003
|
|
|
$
|
449,131
|
|
Deferred tax
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
1,569,003
|
|
|
$
|
449,131
|
|
Significant components of deferred tax assets were as follows:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Deferred Tax Benefit
|
|
|
8,065,107
|
|
|
|
33,743,546
|
|
Valuation allowance
|
|
|
(8,065,107
|
)
|
|
|
(33,743,546
|
)
|
Total deferred tax assets
|
|
$
|
-
|
|
|
|
-
|
|
Tax
Rate Reconciliation
Our
effective tax rates were approximately -5.3% and -6.5% for the three Months Ended September 30, 2020 and 2019, respectively. Substantially
all the Company’s income before income taxes and related tax expense are from PRC sources. Actual income tax benefit
reported in the consolidated statements of operations and comprehensive income (loss) differ from the amounts computed by applying
the US statutory income tax rate of 21.0% to income before income taxes for the three months Ended September 30, 2020 and 2019
for the following reasons:
September
30, 2020
|
|
China
|
|
|
|
|
|
United
States
|
|
|
|
|
|
|
|
|
|
|
|
|
15%
- 25%
|
|
|
|
|
|
21%
|
|
|
|
|
|
Total
|
|
|
|
|
Pretax income (loss)
|
|
$
|
(28,928,034
|
)
|
|
|
|
|
|
|
(455,876
|
)
|
|
|
|
|
|
$
|
(29,383,911
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax expense (benefit)
|
|
|
(7,232,009
|
)
|
|
|
25.0
|
%
|
|
|
(95,734
|
)
|
|
|
21.0
|
%
|
|
|
(7,327,742
|
)
|
|
|
|
|
High-tech income benefits on Jinong
|
|
|
(178,593
|
)
|
|
|
0.6
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
(178,593
|
)
|
|
|
|
|
Losses
from subsidiaries in which no benefit is recognized
|
|
|
8,065,107
|
|
|
|
(27.9
|
)%
|
|
|
-
|
|
|
|
-
|
|
|
|
8,065,107
|
|
|
|
|
|
Change
in valuation allowance on deferred tax asset from US tax benefit
|
|
|
914,498
|
|
|
|
(3.2)
|
%
|
|
|
95,734
|
|
|
|
(21.0
|
)%
|
|
|
1,010,232
|
|
|
|
|
|
Actual tax expense
|
|
$
|
1,596,003
|
|
|
|
(5.4
|
)%
|
|
$
|
-
|
|
|
|
-
|
%
|
|
$
|
1,569,003
|
|
|
|
(5.3
|
)%
|
September
30, 2019
|
|
China
|
|
|
|
|
|
United
States
|
|
|
|
|
|
|
|
|
|
|
|
|
15%
- 25%
|
|
|
|
|
|
21%
|
|
|
|
|
|
Total
|
|
|
|
|
Pretax income (loss)
|
|
$
|
(6,527,995
|
)
|
|
|
|
|
|
|
(338,673
|
)
|
|
|
|
|
|
$
|
(6,866,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax expense (benefit)
|
|
|
(1,631,999
|
)
|
|
|
25.0
|
%
|
|
|
(71,121
|
)
|
|
|
21.0
|
%
|
|
|
(1,703,120
|
)
|
|
|
|
|
High-tech income benefits on Jinong
|
|
|
(61,659
|
)
|
|
|
0.9
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
(61,659
|
)
|
|
|
|
|
Losses
from subsidiaries in which no benefit is recognized
|
|
|
2,142,789
|
|
|
|
(32.8
|
)%
|
|
|
-
|
|
|
|
-
|
|
|
|
2,142,789
|
|
|
|
|
|
Change
in valuation allowance on deferred tax asset from US tax benefit
|
|
|
-
|
|
|
|
|
|
|
|
71,121
|
|
|
|
(21.0
|
)%
|
|
|
71,121
|
|
|
|
|
|
Actual tax expense
|
|
$
|
449,131
|
|
|
|
(6.9
|
)%
|
|
$
|
-
|
|
|
|
-
|
%
|
|
$
|
449,131
|
|
|
|
(6.5
|
)%
|
NOTE
13 – STOCKHOLDERS’ EQUITY
Common
Stock
There
were no shares of common stock issued during the quarter ended September 30, 2020.
On
July 2, 2019, the Company issued 59,567 shares of common stock to pay off consulting services under the 2009 Plan. The value of
the stock was $330,000 and was based on the fair value of the Company’s common stock on the grant date.
On
August 13, 2019, the Company sold 212,000 shares of common stock at the price of $10.00 per share for total proceeds of $2,120,000
to certain third-party individuals. The issuances were completed pursuant to the exemption from registration provided by Regulation
S promulgated under the Securities Act of 1933, as amended.
On
August 15, 2019, Shaanxi Baoyu Science and Technology Investment Company, a limited liability investment company incorporated
in the People’s Republic of China (“Shaanxi Baoyu”), entered into a certain Stock Purchase Agreement (the “SPA”)
pursuant to Regulation S promulgated under the Securities Act of 1933 with the Company in connection with a private placement
offering of 471,000 shares of Common Stock, par value $0.001 per share, of the Company. The purchase price per share of the offering
was $12.00 for total proceeds of $5,652,000. On August 16, 2019, the Company issued 471,000 Shares of the Company’s Common
Stock, par value $0.001 per share, to Shaanxi Baoyu, pursuant to the SPA.
On
August 19, 2019, the Company sold 248,000 shares of common stock at the price of $10.00 per share for total proceeds of $2,480,000
to certain unrelated individuals. The issuances were completed pursuant to the exemption from registration provided by Regulation
S promulgated under the Securities Act of 1933, as amended.
As
of September 30, 2020, and June 30, 2020, there were 6,350,129 and 6,350,129 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 September 30, 2020, the Company has
20,000,000 shares of preferred stock authorized, with a par value of $.001 per share, of which no shares are issued or outstanding.
NOTE 14 – CONCENTRATIONS AND LITIGATION
Market Concentration
All the Company’s revenue-generating
operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may
be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC’s economy.
The Company’s operations in the PRC
are subject to specific considerations and significant risks not typically associated with companies in North America and Western
Europe. These include risks associated with, among other things, the political, economic and legal environment and foreign currency
exchange. The Company’s results may be adversely affected by, among other things, changes in governmental policies with respect
to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation.
Vendor and Customer Concentration
There were five vendors from which the
Company purchased more than 10% of its raw materials, with the total of 65.8% of its raw materials for the three months ended September
30, 2020. Total purchases from these vendors are $38,276,289 for the three-month period ended September 30, 2020.
There was only one vendor from which the
Company purchased more than 10% of its raw materials, with the total of 10.6% of its raw materials for the three months ended September
30, 2019. Total purchases from this vendor are $1,859,830 for the three-month period ended September 30, 2019.
No customer accounted for over 10% of the Company’s sales
for the three months Ended September 30, 2020 and 2019.
Litigation
On June 5, 2020, an individual filed suit
pro se (as in, representing oneself without an attorney) in the Southern District of Florida federal court alleging violations
of the Securities Exchange Act. The Company believes the action is without merit and vigorously opposed it. The company has moved
to dismiss the litigation and for attorney’s fees from the plaintiff. The motions are pending.
NOTE 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 September 30,
|
|
Revenues from unaffiliated customers:
|
|
2020
|
|
|
2019
|
|
Jinong
|
|
$
|
14,529,312
|
|
|
$
|
19,054,816
|
|
Gufeng
|
|
|
15,828,203
|
|
|
|
16,323,217
|
|
Yuxing
|
|
|
2,423,488
|
|
|
|
2,539,711
|
|
Sales VIEs
|
|
|
11,377,229
|
|
|
|
12,903,827
|
|
Consolidated
|
|
$
|
44,158,232
|
|
|
$
|
50,821,571
|
|
|
|
|
|
|
|
|
|
|
Operating income (expense):
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
1,758,677
|
|
|
$
|
578,043
|
|
Gufeng
|
|
|
(31,136,234
|
)
|
|
|
(11,500,258
|
|
Yuxing
|
|
|
137,213
|
|
|
|
154,678
|
|
Sales VIEs
|
|
|
351,837
|
|
|
|
4,293,317
|
|
Reconciling item (1)
|
|
|
-
|
|
|
|
-
|
|
Reconciling item (2)
|
|
|
(455,876
|
)
|
|
|
(338,680
|
)
|
Consolidated
|
|
$
|
(29,344,383
|
)
|
|
$
|
(6,812,900
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss):
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
1,518,043
|
|
|
$
|
524,101
|
|
Gufeng
|
|
|
(31,193,670
|
)
|
|
|
(11,511,954
|
)
|
Yuxing
|
|
|
136,909
|
|
|
|
154,555
|
|
Sales VIEs
|
|
|
(31,272
|
)
|
|
|
3,868,486
|
|
Reconciling item (1)
|
|
|
-
|
|
|
|
6
|
|
Reconciling item (2)
|
|
|
(1,370,374
|
)
|
|
|
(338,680
|
)
|
Reconciling item (3)
|
|
|
(12,550
|
)
|
|
|
(12,315
|
)
|
Consolidated
|
|
$
|
(30,095,914
|
)
|
|
$
|
(7,315,800
|
)
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
192,578
|
|
|
$
|
191,078
|
|
Gufeng
|
|
|
305,111
|
|
|
|
520,335
|
|
Yuxing
|
|
|
298,796
|
|
|
|
295,654
|
|
Sales VIEs
|
|
|
123,949
|
|
|
|
181,123
|
|
Consolidated
|
|
$
|
920,432
|
|
|
$
|
1,188,190
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
Jinong
|
|
|
-
|
|
|
|
6,412
|
|
Gufeng
|
|
|
56,768
|
|
|
|
70,789
|
|
Sales VIEs
|
|
|
-
|
|
|
|
1
|
|
Consolidated
|
|
$
|
56,768
|
|
|
$
|
77,202
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditure:
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
3,667
|
|
|
$
|
4,578
|
|
Gufeng
|
|
|
17,445
|
|
|
|
-
|
|
Yuxing
|
|
|
-
|
|
|
|
6,823
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
21,112
|
|
|
$
|
11,401
|
|
|
|
As of
|
|
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Identifiable assets:
|
|
|
|
|
|
|
Jinong
|
|
$
|
89,802,390
|
|
|
$
|
83,055,679
|
|
Gufeng
|
|
|
189,881,663
|
|
|
|
213,038,203
|
|
Yuxing
|
|
|
35,894,886
|
|
|
|
34,310,053
|
|
Sales VIEs
|
|
|
48,594,814
|
|
|
|
44,715,491
|
|
Reconciling item (1)
|
|
|
(34,249,503
|
)
|
|
|
(33,157,364
|
)
|
Reconciling item (2)
|
|
|
166,121
|
|
|
|
166,121
|
|
Consolidated
|
|
$
|
330,090,371
|
|
|
$
|
342,128,183
|
|
(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.
|
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 $3,603).
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 $435).
Accordingly, the Company recorded an aggregate
of $11,897 and $11,729 as rent expenses from these committed property leases for the three-month periods ended September 30, 2020
and 2019, respectively. The contingent rent expenses herein for the next five twelve-month periods ended September 30, are as follows:
Years ending September 30,
|
|
|
|
2021
|
|
$
|
47,586
|
|
2022
|
|
|
47,586
|
|
2023
|
|
|
47,586
|
|
2024
|
|
|
47,586
|
|
2025
|
|
|
47,586
|
|
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 much
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.
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 September 30, 2020 and June 30, 2020:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
667,378
|
|
|
$
|
712,301
|
|
Accounts receivable, net
|
|
|
36,848,525
|
|
|
|
33,727,918
|
|
Inventories
|
|
|
22,740,149
|
|
|
|
22,995,075
|
|
Other current assets
|
|
|
822,549
|
|
|
|
593,942
|
|
Related party receivable
|
|
|
160,895
|
|
|
|
66
|
|
Advances to suppliers
|
|
|
2,371,607
|
|
|
|
520,901
|
|
Total Current Assets
|
|
|
63,611,103
|
|
|
|
58,550,203
|
|
|
|
|
|
|
|
|
|
|
Plant, Property and Equipment, Net
|
|
|
8,594,747
|
|
|
|
8,513,395
|
|
Other assets
|
|
|
70,994
|
|
|
|
59,575
|
|
Intangible Assets, Net
|
|
|
9,600,971
|
|
|
|
9,391,626
|
|
Goodwill
|
|
|
2,611,885
|
|
|
|
2,510,745
|
|
Total Assets
|
|
$
|
84,489,700
|
|
|
$
|
79,025,544
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
17,748,704
|
|
|
|
16,416,828
|
|
Customer deposits
|
|
|
610,086
|
|
|
|
86,430
|
|
Accrued expenses and other payables
|
|
|
7,584,304
|
|
|
|
6,996,544
|
|
Amount due to related parties
|
|
|
43,268,066
|
|
|
|
41,549,931
|
|
Total Current Liabilities
|
|
$
|
69,211,160
|
|
|
$
|
65,049,733
|
|
Total Liabilities
|
|
$
|
69,211,160
|
|
|
$
|
65,049,733
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
15,278,540
|
|
|
|
13,975,811
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
84,489,700
|
|
|
$
|
79,025,544
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
$
|
13,800,717
|
|
|
$
|
15,443,538
|
|
Expenses
|
|
|
13,695,080
|
|
|
|
11,420,496
|
|
Net income (loss)
|
|
$
|
105,637
|
|
|
$
|
4,023,042
|
|
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.
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
|
)
|
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 and first quarter of fiscal year of 2021 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 September 30, 2020 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.