Item 1. Financial Statements
CHINA GREEN AGRICULTURE,
INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
December 31,
2020
|
|
|
June 30,
2020
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
9,826,386
|
|
|
$
|
11,934,778
|
|
Accounts receivable, net
|
|
|
102,412,975
|
|
|
|
105,693,326
|
|
Inventories, net
|
|
|
90,830,515
|
|
|
|
98,921,081
|
|
Prepaid expenses and other current assets
|
|
|
4,104,630
|
|
|
|
3,567,912
|
|
Amount due from related parties
|
|
|
178,678
|
|
|
|
66
|
|
Advances to suppliers, net
|
|
|
34,409,623
|
|
|
|
65,081,818
|
|
Total Current Assets
|
|
|
241,762,807
|
|
|
|
285,198,981
|
|
|
|
|
|
|
|
|
|
|
Plant, property and equipment, net
|
|
|
23,330,179
|
|
|
|
22,928,334
|
|
Other assets
|
|
|
405,290
|
|
|
|
260,362
|
|
Other non-current assets
|
|
|
10,803,381
|
|
|
|
10,943,875
|
|
Intangible assets, net
|
|
|
16,653,569
|
|
|
|
15,751,625
|
|
Goodwill
|
|
|
7,617,568
|
|
|
|
7,045,006
|
|
Total Assets
|
|
$
|
300,572,794
|
|
|
$
|
342,128,183
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
17,527,362
|
|
|
$
|
17,719,093
|
|
Customer deposits
|
|
|
8,881,013
|
|
|
|
7,342,590
|
|
Accrued expenses and other payables
|
|
|
15,282,706
|
|
|
|
14,139,324
|
|
Amount due to related parties
|
|
|
4,345,258
|
|
|
|
4,212,407
|
|
Taxes payable
|
|
|
32,408,684
|
|
|
|
31,645,452
|
|
Short term loans
|
|
|
4,131,000
|
|
|
|
3,537,500
|
|
Interest payable
|
|
|
784,890
|
|
|
|
725,895
|
|
Total Current Liabilities
|
|
|
83,360,912
|
|
|
|
79,322,261
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
83,360,912
|
|
|
|
79,322,261
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred Stock, $.001 par value, 20,000,000 shares authorized,
zero shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $.001 par value, 115,197,165 shares authorized, 6,350,129
and 6,350,129 shares issued and outstanding as of December 31, 2020 and June 30, 2020, respectively
|
|
|
6,350
|
|
|
|
6,350
|
|
Additional paid-in capital
|
|
|
155,455,332
|
|
|
|
155,455,332
|
|
Statutory reserve
|
|
|
29,245,366
|
|
|
|
29,743,991
|
|
Retained earnings
|
|
|
41,373,386
|
|
|
|
111,864,338
|
|
Accumulated other comprehensive loss
|
|
|
(8,868,553
|
)
|
|
|
(34,264,089
|
)
|
Total Stockholders’ Equity
|
|
|
217,211,881
|
|
|
|
262,805,922
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
300,572,794
|
|
|
$
|
342,128,183
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
CHINA GREEN AGRICULTURE,
INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
|
|
Three Months Ended
December 31,
|
|
|
Six Months Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
14,901,875
|
|
|
$
|
14,521,485
|
|
|
|
29,431,187
|
|
|
$
|
33,576,301
|
|
Gufeng
|
|
|
22,436,394
|
|
|
|
22,266,549
|
|
|
|
38,264,597
|
|
|
|
38,589,766
|
|
Yuxing
|
|
|
2,682,195
|
|
|
|
2,461,510
|
|
|
|
5,105,683
|
|
|
|
5,001,221
|
|
VIEs - others
|
|
|
8,320,878
|
|
|
|
10,315,465
|
|
|
|
19,698,107
|
|
|
|
23,219,292
|
|
Total net sales
|
|
|
48,341,342
|
|
|
|
49,565,009
|
|
|
|
92,499,574
|
|
|
|
100,386,580
|
|
Cost of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
|
10,921,417
|
|
|
|
10,127,892
|
|
|
|
21,606,881
|
|
|
|
20,620,422
|
|
Gufeng
|
|
|
19,846,423
|
|
|
|
19,755,967
|
|
|
|
33,824,240
|
|
|
|
34,209,975
|
|
Yuxing
|
|
|
2,140,856
|
|
|
|
2,110,321
|
|
|
|
4,182,928
|
|
|
|
4,162,317
|
|
VIEs - others
|
|
|
7,008,527
|
|
|
|
8,750,344
|
|
|
|
16,149,737
|
|
|
|
19,414,134
|
|
Total cost of goods sold
|
|
|
39,917,223
|
|
|
|
40,744,524
|
|
|
|
75,763,786
|
|
|
|
78,406,848
|
|
Gross profit
|
|
|
8,424,119
|
|
|
|
8,820,485
|
|
|
|
16,735,788
|
|
|
|
21,979,732
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
3,349,155
|
|
|
|
3,856,972
|
|
|
|
8,061,111
|
|
|
|
7,487,327
|
|
General and administrative expenses
|
|
|
43,537,527
|
|
|
|
32,761,531
|
|
|
|
76,481,622
|
|
|
|
49,103,323
|
|
Total operating expenses
|
|
|
46,886,682
|
|
|
|
36,618,503
|
|
|
|
84,542,733
|
|
|
|
56,590,650
|
|
Income (loss) from operations
|
|
|
(38,462,563
|
)
|
|
|
(27,798,018
|
)
|
|
|
(67,806,945
|
)
|
|
|
(34,610,918
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
(49,064
|
)
|
|
|
(73,263
|
)
|
|
|
(54,229
|
)
|
|
|
(103,454
|
)
|
Interest income
|
|
|
20,987
|
|
|
|
53,262
|
|
|
|
43,392
|
|
|
|
106,886
|
|
Interest expense
|
|
|
(67,185
|
)
|
|
|
(87,496
|
)
|
|
|
(123,953
|
)
|
|
|
(164,698
|
)
|
Total other income (expense)
|
|
|
(95,262
|
)
|
|
|
(107,497
|
)
|
|
|
(134,790
|
)
|
|
|
(161,266
|
)
|
Income (loss) before income taxes
|
|
|
(38,557,825
|
)
|
|
|
(27,905,515
|
)
|
|
|
(67,941,736
|
)
|
|
|
(34,772,183
|
)
|
Provision for income taxes
|
|
|
(1,478,838
|
)
|
|
|
(824,635
|
)
|
|
|
(3,047,841
|
)
|
|
|
(375,504
|
)
|
Net income (loss)
|
|
|
(40,036,663
|
)
|
|
|
(27,080,880
|
)
|
|
|
(70,989,577
|
)
|
|
|
(34,396,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
11,927,692
|
|
|
|
10,330,982
|
|
|
|
25,395,536
|
|
|
|
(7,036,503
|
)
|
Comprehensive income (loss)
|
|
$
|
(28,108,971
|
)
|
|
$
|
(16,749,898
|
)
|
|
|
(45,594,041
|
)
|
|
$
|
(41,433,182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
6,350,129
|
|
|
|
5,474,979
|
|
|
|
6,350,129
|
|
|
|
4,989,745
|
|
Basic net earnings per share
|
|
$
|
(6.30
|
)
|
|
$
|
(4.95
|
)
|
|
|
(11.18
|
)
|
|
$
|
(6.89
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
6,350,129
|
|
|
|
5,474,979
|
|
|
|
6,350,129
|
|
|
|
4,989,745
|
|
Diluted net earnings per share
|
|
|
(6.30
|
)
|
|
|
(4.95
|
)
|
|
|
(11.18
|
)
|
|
|
(6.89
|
)
|
The accompanying notes
are an integral part of these unaudited condensed consolidated financial statements.
CHINA GREEN AGRICULTURE,
INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31,
2020 AND 2019
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
Total
|
|
|
|
Number Of
|
|
|
Common
|
|
|
Paid In
|
|
|
Statutory
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Capital
|
|
|
Reserve
|
|
|
Earnings
|
|
|
Income
(loss)
|
|
|
Equity
|
|
BALANCE, JUNE 30, 2020
|
|
|
6,350,129
|
|
|
$
|
6,350
|
|
|
$
|
155,455,332
|
|
|
|
29,743,991
|
|
|
|
111,864,338
|
|
|
|
(34,264,089
|
)
|
|
|
262,805,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,989,577
|
)
|
|
|
|
|
|
|
(70,989,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer to statutory reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(498,625
|
)
|
|
|
498,625
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,395,536
|
|
|
|
25,395,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2020
|
|
|
6,350,129
|
|
|
$
|
6,350
|
|
|
$
|
155,455,332
|
|
|
$
|
29,245,366
|
|
|
$
|
41,373,386
|
|
|
$
|
(8,868,553
|
)
|
|
$
|
217,211,881
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
Accumulated
Other
|
|
|
Total
|
|
|
|
Number Of
|
|
|
Common
|
|
|
Paid In
|
|
|
Statutory
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Capital
|
|
|
Reserve
|
|
|
Earnings
|
|
|
Income
(Loss)
|
|
|
Equity
|
|
BALANCE, JUNE 30, 2019
|
|
|
3,986,912
|
|
|
$
|
3,987
|
|
|
$
|
138,012,445
|
|
|
|
31,237,891
|
|
|
|
247,122,574
|
|
|
|
(19,821,211
|
)
|
|
|
396,555,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,396,679
|
)
|
|
|
|
|
|
|
(34,396,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock for consulting services
|
|
|
931,000
|
|
|
|
931
|
|
|
|
10,251,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,252,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock for convertible notes
|
|
|
995,000
|
|
|
|
995
|
|
|
|
4,974,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,975,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
59,567
|
|
|
|
60
|
|
|
|
329,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
330,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer to statutory reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(546,377
|
)
|
|
|
546,377
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,036,503
|
)
|
|
|
(7,036,503
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2019
|
|
|
5,972,479
|
|
|
$
|
5,972
|
|
|
$
|
153,567,460
|
|
|
$
|
30,691,515
|
|
|
$
|
213,272,272
|
|
|
$
|
(26,857,714
|
)
|
|
$
|
370,679,505
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
CHINA GREEN AGRICULTURE,
INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
|
|
Six Months Ended
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(70,989,577
|
)
|
|
$
|
(34,396,679
|
)
|
Adjustments to reconcile Net income (loss) to net cash
provided by (used in) operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,867,471
|
|
|
|
2,370,218
|
|
Provision for losses on accounts receivable
|
|
|
38,475,657
|
|
|
|
27,670,550
|
|
Gain (Loss) on disposal of property, plant and equipment
|
|
|
1,562
|
|
|
|
33,837
|
|
Amortization of debt discount
|
|
|
-
|
|
|
|
41,719
|
|
Inventories impairment
|
|
|
30,791,832
|
|
|
|
-
|
|
Change in fair value of derivative liability
|
|
|
-
|
|
|
|
(17,741
|
)
|
Changes in operating assets
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(27,015,611
|
)
|
|
|
(40,783,391
|
)
|
Amount due from related parties
|
|
|
(172,434
|
)
|
|
|
(147,492
|
)
|
Other current assets
|
|
|
(251,484
|
)
|
|
|
(224,409
|
)
|
Inventories
|
|
|
(15,219,180
|
)
|
|
|
44,905,007
|
|
Advances to suppliers
|
|
|
34,718,741
|
|
|
|
1,662,134
|
|
Other assets
|
|
|
994,332
|
|
|
|
932,053
|
|
Changes in operating liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(1,558,575
|
)
|
|
|
(3,495,243
|
)
|
Customer deposits
|
|
|
909,131
|
|
|
|
1,090,142
|
|
Tax payables
|
|
|
580,112
|
|
|
|
(2,446,447
|
)
|
Accrued expenses and other payables
|
|
|
630,812
|
|
|
|
705,810
|
|
Interest payable
|
|
|
-
|
|
|
|
25,600
|
|
Net cash provided by (used in) operating activities
|
|
|
(6,237,210
|
)
|
|
|
(2,074,331
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of plant, property, and equipment
|
|
|
(92,801
|
)
|
|
|
(50,533
|
)
|
Change in construction in process
|
|
|
(119,489
|
)
|
|
|
-
|
|
Net cash provided by (used in) investing activities
|
|
|
(212,290
|
)
|
|
|
(50,533
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from the sale of common stock
|
|
|
-
|
|
|
|
10,252,000
|
|
Proceeds from loans
|
|
|
306,000
|
|
|
|
279,600
|
|
Advance from related party
|
|
|
-
|
|
|
|
400,000
|
|
Net cash provided by (used in) financing activities
|
|
|
306,000
|
|
|
|
10,939,200
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate change on cash and cash equivalents
|
|
|
4,035,108
|
|
|
|
(2,367,640
|
)
|
Net increase in cash and cash equivalents
|
|
|
(2,108,392
|
)
|
|
|
6,446,696
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning balance
|
|
|
11,934,778
|
|
|
|
72,259,804
|
|
Cash and cash equivalents, ending balance
|
|
$
|
9,826,386
|
|
|
$
|
78,706,500
|
|
|
|
|
|
|
|
|
|
|
Supplement disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Interest expense paid
|
|
$
|
123,953
|
|
|
$
|
68,293
|
|
Income taxes paid
|
|
$
|
239,711
|
|
|
$
|
108,974
|
|
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
CHINA
GREEN AGRICULTURE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
China Green Agriculture, Inc. (the “Company”,
“Parent Company” or “Green Nevada”), through its subsidiaries, is engaged in the research, development,
production, distribution and sale of humic acid-based compound fertilizer, compound fertilizer, blended fertilizer, organic compound
fertilizer, slow-release fertilizers, highly-concentrated water-soluble fertilizers and mixed organic-inorganic compound fertilizer
and the development, production and distribution of agricultural products.
Unless the context indicates otherwise,
as used in this Report, the following are the references herein of all the subsidiaries of the Company (i) Green Agriculture Holding
Corporation (“Green New Jersey”), a wholly-owned subsidiary of Green Nevada, incorporated in the State of New Jersey;
(ii) Shaanxi TechTeam Jinong Humic Acid Product Co., Ltd. (“Jinong”), a wholly-owned subsidiary of Green New Jersey
organized under the laws of the PRC; (iii) Xi’an Hu County Yuxing Agriculture Technology Development Co., Ltd. (“Yuxing”),
a Variable Interest Entity (“VIE”) in the in 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 December 31,
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 December
31, 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 December 31, 2020 and June 30, 2020 were $9,756,745 and $11,866,308, respectively. There is no insurance securing these
deposits in China. In addition, the Company also had $69,641 and $68,470 in cash in two banks in the United States as of December
31, 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 December 31, 2020, and June 30, 2020, the Company had accounts receivable of $102,412,975
and $105,693,326, net of allowance for doubtful accounts of $31,196,455 and $38,466,200, respectively. The company recorded bad
debt expense in the amount of $ 38 million and $ 28 million for six months ended December 31, 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 December 31, 2020, and 2019, the Company had no reserve for obsolete goods. The company confirmed the loss of
$31 million and $18 million of inventories for six months ended December 31, 2020 and 2019, respectively.
Intangible Assets
The Company records intangible assets
acquired individually or as part of a group at fair value. Intangible assets with definitive lives are amortized over the useful
life of the intangible asset, which is the period over which the asset is expected to contribute directly or indirectly to the
entity’s future cash flows. The Company evaluates intangible assets for impairment at least annually and more often whenever
events or changes in circumstances indicate that the carrying value may not be recoverable. Whenever any such impairment exists,
an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. The Company has not recorded
impairment of intangible assets as of December 31, 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 December 31, 2020, and June 30, 2020, the Company had customer deposits
of $8,881,013 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
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Net income (loss) for Basic Earnings Per Share
|
|
$
|
(40,036,663
|
)
|
|
$
|
(27,080,880
|
)
|
Basic Weighted Average Number of Shares
|
|
|
6,350,129
|
|
|
|
5,474,979
|
|
Net income (loss) Per Share – Basic
|
|
$
|
(6.30
|
)
|
|
$
|
(4.95
|
)
|
Net income (loss) for Diluted Earnings Per Share
|
|
$
|
(30,952,914
|
)
|
|
$
|
(27,080,880
|
)
|
Diluted Weighted Average Number of Shares
|
|
|
6,350,129
|
|
|
|
5,474,979
|
|
Net income (loss) Per Share – Diluted
|
|
$
|
(6.30
|
)
|
|
$
|
(4.95
|
)
|
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Net Income for Basic Earnings Per Share
|
|
$
|
(70,989,577
|
)
|
|
$
|
(34,396,679
|
)
|
Basic Weighted Average Number of Shares
|
|
|
6,350,129
|
|
|
|
4,989,745
|
|
Net Income Per Share – Basic
|
|
$
|
(11.18
|
)
|
|
$
|
(6.89
|
)
|
Net Income for Diluted Earnings Per Share
|
|
$
|
(70,989,577
|
)
|
|
$
|
(34,396,679
|
)
|
Diluted Weighted Average Number of Shares
|
|
|
6,350,129
|
|
|
|
4,989,745
|
|
Net Income Per Share – Diluted
|
|
$
|
(11.18
|
)
|
|
$
|
(6.89
|
)
|
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 December 31, 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:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Raw materials
|
|
$
|
25,106,028
|
|
|
$
|
43,177,071
|
|
Supplies and packing materials
|
|
$
|
410,239
|
|
|
$
|
465,746
|
|
Work in progress
|
|
$
|
299,260
|
|
|
$
|
374,756
|
|
Finished goods
|
|
$
|
65,014,988
|
|
|
$
|
54,903,508
|
|
Total
|
|
$
|
90,830,515
|
|
|
$
|
98,921,081
|
|
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Building and improvements
|
|
$
|
40,871,707
|
|
|
$
|
37,799,650
|
|
Auto
|
|
|
3,460,239
|
|
|
|
3,207,619
|
|
Machinery and equipment
|
|
|
19,104,231
|
|
|
|
17,601,852
|
|
Total property, plant and equipment
|
|
|
63,436,177
|
|
|
|
58,609,121
|
|
Less: accumulated depreciation
|
|
|
(40,105,998
|
)
|
|
|
(35,680,787
|
)
|
Total
|
|
$
|
23,330,179
|
|
|
$
|
22,928,334
|
|
NOTE 6 – INTANGIBLE ASSETS
Intangible assets consisted of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Land use rights, net
|
|
$
|
9,447,307
|
|
|
$
|
8,850,905
|
|
Technology patent, net
|
|
|
2,006
|
|
|
|
2,069
|
|
Customer relationships, net
|
|
|
832,443
|
|
|
|
908,933
|
|
Non-compete agreement
|
|
|
144,713
|
|
|
|
230,669
|
|
Trademarks
|
|
|
6,227,100
|
|
|
|
5,759,049
|
|
Total
|
|
$
|
16,653,569
|
|
|
$
|
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 $11,197,289). 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 $160,030). 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 $1,114,620). The intangible asset is being amortized over the grant period of 50 years.
The Land Use Rights consisted of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Land use rights
|
|
$
|
12,471,938
|
|
|
|
11,534,506
|
|
Less: accumulated amortization
|
|
|
(3,024,631
|
)
|
|
|
(2,683,601
|
)
|
Total land use rights, net
|
|
$
|
9,447,307
|
|
|
|
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 $898,885) 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 $1,407,600) 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:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Technology know-how
|
|
$
|
2,311,022
|
|
|
$
|
2,137,317
|
|
Less: accumulated amortization
|
|
|
(2,309,016
|
)
|
|
|
(2,135,248
|
)
|
Total technology know-how, net
|
|
$
|
2,006
|
|
|
$
|
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 $9,945,000) 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
$2,520,243) and is amortized over the remaining useful life of seven to ten years.
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Customer relationships
|
|
$
|
12,198,629
|
|
|
$
|
11,281,739
|
|
Less: accumulated amortization
|
|
|
(11,366,186
|
)
|
|
|
(10,372,806
|
)
|
Total customer relationships, net
|
|
$
|
832,443
|
|
|
$
|
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 $201,960) 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 $941,054) and is amortized over the remaining useful life of five years using the straight-line method.
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Non-compete agreement
|
|
$
|
1,249,007
|
|
|
$
|
1,155,127
|
|
Less: accumulated amortization
|
|
|
(1,104,294
|
)
|
|
|
(924,458
|
)
|
Total non-compete agreement, net
|
|
$
|
144,713
|
|
|
$
|
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 $6,227,100) and is subject to an annual impairment test.
AMORTIZATION EXPENSE
Estimated amortization expenses of intangible
assets for the next five twelve months periods ended December 31, are as follows:
Twelve
Months Ended on December 31,
|
|
Expense
($)
|
|
2021
|
|
|
768,524
|
|
2022
|
|
|
594,402
|
|
2023
|
|
|
519,970
|
|
2024
|
|
|
381,232
|
|
2025
|
|
|
355,516
|
|
NOTE 7 – OTHER NON-CURRENT ASSETS
Other non-current assets mainly include
advance payments related to leasing land for use by the Company. As of December 31, 2020, the balance of other non-current assets
was $10,803,381, 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 $1 million and $1 million
as expenses for the six months ended December 31, 2020 and 2019, respectively.
Estimated amortization expenses of the
lease advance payments for the next four twelve-month periods ended December 31 and thereafter are as follows:
Twelve
months ending December 31,
|
|
|
|
2022
|
|
$
|
2,054,025
|
|
2023
|
|
$
|
2,054,025
|
|
2024
|
|
$
|
2,054,025
|
|
2025 and thereafter
|
|
$
|
4,641,306
|
|
NOTE 8 – ACCRUED EXPENSES AND OTHER PAYABLES
Accrued expenses and other payables consisted of the following:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Payroll and welfare payable
|
|
$
|
182,416
|
|
|
$
|
168,705
|
|
Accrued expenses
|
|
|
8,565,068
|
|
|
|
7,640,130
|
|
Other payables
|
|
|
6,406,906
|
|
|
|
6,211,818
|
|
Other levy payable
|
|
|
128,316
|
|
|
|
118,671
|
|
Total
|
|
$
|
15,282,706
|
|
|
$
|
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 $3,901,500). For the six months Ended December 31, 2020 and 2019, Yuxing has sold approximately
$176,409 and $300,210 products to 900LH.com.
As of December 31, 2020, and June 30,
2020, the amount due to related parties was $4,345,258 and $4,212,407, respectively. As of December 31, 2020, and June
30, 2020, $1,071,000 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 December 31, 2020, and June 30,
2020, the Company’s subsidiary, Jinong, owed 900LH.com $12,779 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 $3,745).
NOTE 10 – LOAN PAYABLES
As of December 31, 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
|
|
|
December 31,
2020
|
|
1
|
|
Postal Saving Bank of China - Pinggu Branch
|
|
June 17, 2020-June 16, 2021
|
|
|
5.66
|
%
|
|
|
2,295,000
|
|
2
|
|
Beijing Bank - Pinggu Branch
|
|
June 22, 2020-June 22, 2021
|
|
|
5.22
|
%
|
|
|
1,530,000
|
|
3
|
|
Postal Saving Bank of China - Pinggu Branch
|
|
August 6, 2020-August 5, 2021
|
|
|
5.66
|
%
|
|
|
306,000
|
|
|
|
Total
|
|
|
|
|
|
|
|
$
|
4,131,000
|
|
The interest expense from short-term loans
was $123,953 and $164,698 for the period ended December 31, 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 ($7,803,000) with a term of three years and an annual interest rate of 3%.
No.
|
|
Related Acquisitions of Sales VIEs
|
|
Issuance Date
|
|
Maturity Date
|
|
Notional Interest
Rate
|
|
|
Conversion Price
|
|
|
Notional Amount
(in RMB)
|
|
1
|
|
Wangtian, Lishijie, Xindeguo, Xinyulei, Jinyangguang
|
|
June 30, 2016
|
|
June 30, 2019
|
|
|
3
|
%
|
|
$
|
5.00
|
|
|
|
39,000,000
|
|
2
|
|
Fengnong, Xiangrong
|
|
January 1, 2017
|
|
December 31, 2019
|
|
|
3
|
%
|
|
$
|
5.00
|
|
|
|
12,000,000
|
|
The convertible notes take priority over
the preferred stock and common stock of Jinong, and any other class or series of capital stocks Jinong issues in the future in
terms of interests and payments in the event of any liquidation, dissolution or winding up of Jinong. On or after the third anniversary
of the issuance date of the note, noteholders may request Jinong to process the note conversion to convert the note into shares
of the Company’s common stock. The notes cannot be converted prior to the mature date. The per share conversion price of
the notes is the higher of the following: (i) $5.00 per share or (ii) 75% of the closing price of the Company’s common stock
on the date the noteholder delivers the conversion notice. Due to the discontinuation of VIE agreements with Zhenbai’s shareholders,
certain convertible notes issued on June 30, 2016 with a face amount of RMB 12,000,000 ($1,836,000) were tendered back to the
Company. All outstanding balance of unpaid principal and accrued interest in the tendered convertible notes were forfeited.
On November 15, 2019, the Company issued
995,000 shares of common stock at the price of $5.00 per share for the total amount of $4,975,000 to the holders of the Company’s
convertible notes payable in connection with the payment of the convertible notes’ principal and interests. The convertible
notes were issued on June 30, 2016 and matured on June 30, 2019.
On February 14, 2020, the Company issued
377,650 shares of common stock at the price of $5.00 per share for the total amount of $1,888,250 to the holders of the Company’s
convertible notes payable in connection with the payment of the convertible notes’ principal and interests. The convertible
notes were issued on January 1, 2017 and matured on January 1, 2020.
The Company determined that the fair value
of the convertible notes payable was 0 as of December 31, 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 December 31,
2020, the accumulated amortization of this discount into accretion expenses was $1,375,499. As of December 31, 2019, the accumulated
amortization of this discount into accretion expenses was $1,375,511.
NOTE 12 – TAXES PAYABLE
Enterprise Income Tax
Effective January 1, 2008, the Enterprise
Income Tax (“EIT”) law of the PRC replaced the tax laws for Domestic Enterprises (“DEs”) and Foreign Invested
Enterprises (“FIEs”). The EIT rate of 25% replaced the 33% rate that was applicable to both DEs and FIEs. The two-year
tax exemption and three-year 50% tax reduction tax holiday for production-oriented FIEs was eliminated. Since January 1, 2008,
Jinong became subject to income tax in China at a rate of 15% as a high-tech company, because of the expiration of its tax exemption
on December 31, 2007. Accordingly, it made provision for income taxes for the six-month period ended December 31, 2020 and 2019
of $273,796 and $-857,195, respectively.
Value-Added Tax
All the Company’s fertilizer products
that are produced and sold in the PRC were subject to a Chinese Value-Added Tax (VAT) of 13% of the gross sales price. On April
29, 2008, the PRC State of Administration of Taxation (SAT) released Notice #56, “Exemption of VAT for Organic Fertilizer
Products”, which allows certain fertilizer products to be exempt from VAT beginning June 1, 2008. The Company submitted
the application for exemption in May 2009, which was granted effective September 1, 2009, continuing through December 31, 2015.
On August 10, 2015 and August 28, 2015, the SAT released Notice #90. “Reinstatement of VAT for Fertilizer Products”,
and Notice #97, “Supplementary Reinstatement of VAT for Fertilizer Products”, which restore the VAT of 13%
of the gross sales price on certain fertilizer products includes non-organic fertilizer products starting from September 1, 2015,
but granted taxpayers a reduced rate of 3% from September 1, 2015 through June 30, 2016.
On April 28, 2017, the PRC State of Administration
of Taxation (SAT) released Notice 2017 #37, “Notice on Policy of Reduced Value Added Tax Rate,” under which,
effective July 1, 2017, all the Company’s fertilizer products that are produced and sold in the PRC are subject to a Chinese
Value-Added Tax (VAT) of 11% of the gross sales price. The tax rate was reduced 2% from 13%.
On April 4, 2018, the PRC State of Administration
of Taxation (SAT) released Notice 2018 #32, “Notice on Adjustment of VAT Tax Rate,” under which, effective
May 1, 2018, all the Company’s fertilizer products that are produced and sold in the PRC are subject to a Chinese Value-Added
Tax (VAT) of 10% of the gross sales price. The tax rate was reduced 1% from 11%.
On March 20, 2019, the PRC State of Administration
of Taxation (SAT) released Notice 2019 #39, “Announcement on Policies Concerning Deepening the Reform of Value Added
Tax,” under which, effective April 1, 2019, all the Company’s fertilizer products that are produced and sold in
the PRC are subject to a Chinese Value-Added Tax (VAT) of 9% of the gross sales price. The tax rate was reduced 1% from 10%.
Income Taxes and Related Payables
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
VAT provision
|
|
$
|
(254,916
|
)
|
|
$
|
(257,068
|
)
|
Income tax payable
|
|
|
2,231,626
|
|
|
|
1,704,543
|
|
Other levies
|
|
|
1,421,439
|
|
|
|
1,187,442
|
|
Repatriation tax
|
|
|
29,010,535
|
|
|
|
29,010,535
|
|
Total
|
|
$
|
32,408,684
|
|
|
$
|
31,645,452
|
|
The provision for income taxes consists of the following
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Current tax - foreign
|
|
$
|
3,047,841
|
|
|
$
|
(375,504
|
)
|
Deferred tax
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
3,047,841
|
|
|
$
|
(375,504
|
)
|
Significant components of deferred tax assets were as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Deferred Tax Benefit
|
|
|
35,936,326
|
|
|
|
33,743,546
|
|
Valuation allowance
|
|
|
(35,936,326
|
)
|
|
|
(33,743,546
|
)
|
Total deferred tax assets
|
|
$
|
-
|
|
|
|
-
|
|
Tax Rate Reconciliation
Our effective tax rates were approximately
-4.5% and-1.1% for the six months Ended December 31, 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 six months Ended December 31, 2020 and 2019 for the following reasons:
December 31, 2020
|
|
China
|
|
|
|
|
|
United
States
|
|
|
|
|
|
|
|
|
|
|
|
|
15%
- 25%
|
|
|
|
|
|
21%
|
|
|
|
|
|
Total
|
|
|
|
|
Pretax
income (loss)
|
|
$
|
(66,971,669
|
)
|
|
|
|
|
|
|
(970,067
|
)
|
|
|
|
|
|
$
|
(67,941,736
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax expense (benefit)
|
|
|
(16,742,917
|
)
|
|
|
25.0
|
%
|
|
|
(203,714
|
)
|
|
|
21.0
|
%
|
|
|
(16,946,631
|
)
|
|
|
|
|
High-tech income benefits on Jinong
|
|
|
1,528,049
|
|
|
|
(2.3)
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
1,528,049
|
|
|
|
|
|
Losses
from subsidiaries in which no benefit is recognized
|
|
|
15,985,920
|
|
|
|
(23.9
|
)%
|
|
|
-
|
|
|
|
-
|
|
|
|
15,985,920
|
|
|
|
|
|
Change
in valuation allowance on deferred tax asset from US tax benefit
|
|
|
2,276,790
|
|
|
|
(3.4)
|
%
|
|
|
203,714
|
|
|
|
(21.0
|
)%
|
|
|
2,480,504
|
|
|
|
|
|
Actual tax expense
|
|
$
|
3,047,841
|
|
|
|
(4.6
|
)%
|
|
$
|
-
|
|
|
|
-
|
%
|
|
$
|
3,047,841
|
|
|
|
(4.5
|
)%
|
December 31, 2019
|
|
China
15% - 25%
|
|
|
|
|
|
United
States
21%
|
|
|
|
|
|
Total
|
|
|
|
|
Pretax
income (loss)
|
|
$
|
(33,920,976
|
)
|
|
|
|
|
|
|
(851,206
|
)
|
|
|
|
|
|
$
|
(34,772,182
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax expense (benefit)
|
|
|
(8,480,244
|
)
|
|
|
25.0
|
%
|
|
|
(178,753
|
)
|
|
|
21.0
|
%
|
|
|
(8,658,997
|
)
|
|
|
|
|
High-tech income benefits on Jinong
|
|
|
571,464
|
|
|
|
(1.7
|
)%
|
|
|
-
|
|
|
|
-
|
|
|
|
571,464
|
|
|
|
|
|
Losses
from subsidiaries in which no benefit is recognized
|
|
|
7,533,276
|
|
|
|
(22.2
|
)%
|
|
|
-
|
|
|
|
-
|
|
|
|
7,533,276
|
|
|
|
|
|
Change
in valuation allowance on deferred tax asset from US tax benefit
|
|
|
-
|
|
|
|
|
|
|
|
178,753
|
|
|
|
(21.0
|
)%
|
|
|
178,753
|
|
|
|
|
|
Actual tax expense
|
|
$
|
(375,504
|
)
|
|
|
(1.1
|
)%
|
|
$
|
-
|
|
|
|
-
|
%
|
|
$
|
(375,504
|
)
|
|
|
(1.1
|
)%
|
NOTE 13 – STOCKHOLDERS’
EQUITY
Common Stock
On November 15, 2019, the Company issued
995,000 shares of common stock at the price of $5.00 per share for the total amount of $4,975,000 to the holders of the Company’s
convertible notes payable in connection with the payment of the convertible notes’ principal and interests. The convertible
notes were issued on June 30, 2016 and matured on June 30, 2019.
On February 14, 2020, the Company issued
377,650 shares of common stock at the price of $5.00 per share to the holders of the Company’s convertible notes payable
in connection with the payment of the convertible notes’ principal and interests. The convertible notes were issued on January
1, 2017 and matured on January 1, 2020.
There were no shares of common stock issued
during the six months ended December 31, 2020.
As of December 31, 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 December 31, 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 two vendors from which the
Company purchased more than 10% of its raw materials, with the total of 22.2% of its raw materials for the six months ended December
31, 2020. Total purchases from these vendors are $20,257,292 for the six-month period ended December 31, 2020.
There was only one vendor which the Company
purchased more than 10% of its raw materials, with the total of 10.4% of its raw materials for the six months ended December 31,
2019. Total purchases from this vendor are $3,534,955 for the six-month period ended December 31, 2019.
No customer accounted for over 10% of the Company’s sales
for the six months Ended December 31, 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
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
Revenues from unaffiliated customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
14,901,875
|
|
|
$
|
14,521,485
|
|
|
$
|
29,431,187
|
|
|
$
|
33,576,301
|
|
Gufeng
|
|
|
22,436,394
|
|
|
|
22,266,549
|
|
|
|
38,264,597
|
|
|
|
38,589,766
|
|
Yuxing
|
|
|
2,682,195
|
|
|
|
2,461,510
|
|
|
|
5,105,683
|
|
|
|
5,001,221
|
|
Sales VIEs
|
|
|
8,320,878
|
|
|
|
10,315,465
|
|
|
|
19,698,107
|
|
|
|
23,219,292
|
|
Consolidated
|
|
$
|
48,341,342
|
|
|
$
|
49,565,009
|
|
|
$
|
92,499,574
|
|
|
$
|
100,386,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
(6,822,917
|
)
|
|
$
|
(6,345,818
|
)
|
|
$
|
(5,064,240
|
)
|
|
$
|
(5,767,775
|
)
|
Gufeng
|
|
|
(29,684,059
|
)
|
|
|
(21,628,851
|
)
|
|
|
(60,820,293
|
)
|
|
|
(33,129,109
|
)
|
Yuxing
|
|
|
151,213
|
|
|
|
141,271
|
|
|
|
288,426
|
|
|
|
295,949
|
|
Sales VIEs
|
|
|
(1,592,608
|
)
|
|
|
547,915
|
|
|
|
(1,240,771
|
)
|
|
|
4,841,232
|
|
Reconciling item (1)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Reconciling item (2)
|
|
|
455,876
|
|
|
|
(512,534
|
)
|
|
|
-
|
|
|
|
(851,214
|
)
|
Consolidated
|
|
$
|
(37,492,495
|
)
|
|
$
|
(27,798,017
|
)
|
|
$
|
(66,836,878
|
)
|
|
$
|
(34,610,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
(6,808,850
|
)
|
|
$
|
(5,381,542
|
)
|
|
$
|
(5,290,807
|
)
|
|
$
|
(4,857,441
|
)
|
Gufeng
|
|
|
(29,815,966
|
)
|
|
|
(21,682,935
|
)
|
|
|
(61,009,636
|
)
|
|
|
(33,194,889
|
)
|
Yuxing
|
|
|
167,650
|
|
|
|
140,943
|
|
|
|
304,559
|
|
|
|
295,498
|
|
Sales VIEs
|
|
|
(1,702,737
|
)
|
|
|
355,224
|
|
|
|
(1,734,009
|
)
|
|
|
4,223,710
|
|
Reconciling item (1)
|
|
|
2
|
|
|
|
1
|
|
|
|
2
|
|
|
|
7
|
|
Reconciling item (2)
|
|
|
(1,876,485
|
)
|
|
|
(512,534
|
)
|
|
|
(3,246,858
|
)
|
|
|
(851,214
|
)
|
Reconciling item (3)
|
|
|
(277
|
)
|
|
|
(36
|
)
|
|
|
(12,827
|
)
|
|
|
(12,350
|
)
|
Consolidated
|
|
$
|
(40,036,663
|
)
|
|
$
|
(27,080,879
|
)
|
|
$
|
(70,989,577
|
)
|
|
$
|
(34,396,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
202,293
|
|
|
$
|
190,770
|
|
|
$
|
394,871
|
|
|
$
|
381,848
|
|
Gufeng
|
|
|
303,556
|
|
|
|
516,523
|
|
|
|
608,667
|
|
|
|
1,036,858
|
|
Yuxing
|
|
|
311,775
|
|
|
|
293,996
|
|
|
|
610,571
|
|
|
|
589,649
|
|
Sales VIEs
|
|
|
129,414
|
|
|
|
180,739
|
|
|
|
253,363
|
|
|
|
361,862
|
|
Consolidated
|
|
$
|
947,039
|
|
|
$
|
1,182,028
|
|
|
$
|
1,867,471
|
|
|
$
|
2,370,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
|
-
|
|
|
|
19,188
|
|
|
|
-
|
|
|
|
25,600
|
|
Gufeng
|
|
|
67,185
|
|
|
|
68,204
|
|
|
|
123,953
|
|
|
|
138,993
|
|
Yuxing
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Sales VIEs
|
|
|
-
|
|
|
|
(77,098
|
)
|
|
|
-
|
|
|
|
(77,097
|
)
|
Consolidated
|
|
$
|
67,185
|
|
|
$
|
10,294
|
|
|
$
|
123,953
|
|
|
$
|
87,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditure:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
53,381
|
|
|
$
|
20,371
|
|
|
$
|
57,048
|
|
|
$
|
24,949
|
|
Gufeng
|
|
|
18,308
|
|
|
|
-
|
|
|
|
35,753
|
|
|
|
-
|
|
Yuxing
|
|
|
-
|
|
|
|
18,762
|
|
|
|
-
|
|
|
|
25,585
|
|
Sales VIEs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consolidated
|
|
$
|
71,689
|
|
|
$
|
39,132
|
|
|
$
|
92,801
|
|
|
$
|
50,533
|
|
|
|
As of
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
84,809,661
|
|
|
$
|
83,055,679
|
|
Gufeng
|
|
|
167,150,529
|
|
|
|
213,038,203
|
|
Yuxing
|
|
|
37,626,582
|
|
|
|
34,310,053
|
|
Sales VIEs
|
|
|
46,392,824
|
|
|
|
44,715,491
|
|
Reconciling item (1)
|
|
|
(35,572,923
|
)
|
|
|
(33,157,364
|
)
|
Reconciling item (2)
|
|
|
166,121
|
|
|
|
166,121
|
|
Consolidated
|
|
$
|
300,572,794
|
|
|
$
|
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 $3,745).
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 $437).
Accordingly, the Company recorded an aggregate
of $24,318 and $23,414 as rent expenses from these committed property leases for the six-month periods ended December 31, 2020
and 2019, respectively. The contingent rent expenses herein for the next five twelve-month periods ended December 31, are as follows:
Years
ending December 31,
|
|
|
|
2021
|
|
$
|
48,635
|
|
2022
|
|
|
48,635
|
|
2023
|
|
|
48,635
|
|
2024
|
|
|
48,635
|
|
2025
|
|
|
48,635
|
|
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 December 31, 2020 and June 30, 2020:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,301,431
|
|
|
$
|
712,301
|
|
Accounts receivable, net
|
|
|
26,634,008
|
|
|
|
33,727,918
|
|
Inventories
|
|
|
31,402,330
|
|
|
|
22,995,075
|
|
Other current assets
|
|
|
1,082,989
|
|
|
|
593,942
|
|
Related party receivable
|
|
|
178,678
|
|
|
|
66
|
|
Advances to suppliers
|
|
|
2,143,448
|
|
|
|
520,901
|
|
Total Current Assets
|
|
|
62,742,884
|
|
|
|
58,550,203
|
|
|
|
|
|
|
|
|
|
|
Plant, Property and Equipment, Net
|
|
|
8,661,703
|
|
|
|
8,513,395
|
|
Other assets
|
|
|
96,383
|
|
|
|
59,575
|
|
Intangible Assets, Net
|
|
|
9,803,637
|
|
|
|
9,391,626
|
|
Goodwill
|
|
|
2,714,799
|
|
|
|
2,510,745
|
|
Total Assets
|
|
$
|
84,019,406
|
|
|
$
|
79,025,544
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
15,588,427
|
|
|
|
16,416,828
|
|
Customer deposits
|
|
|
1,104,555
|
|
|
|
86,430
|
|
Accrued expenses and other payables
|
|
|
7,934,163
|
|
|
|
6,996,544
|
|
Amount due to related parties
|
|
|
45,104,164
|
|
|
|
41,549,931
|
|
Total Current Liabilities
|
|
$
|
69,731,309
|
|
|
$
|
65,049,733
|
|
Total Liabilities
|
|
$
|
69,731,309
|
|
|
$
|
65,049,733
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
14,288,097
|
|
|
|
13,975,811
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
84,019,406
|
|
|
$
|
79,025,544
|
|
|
|
Three Months Ended
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
$
|
11,003,073
|
|
|
$
|
12,776,975
|
|
Expenses
|
|
|
12,538,159
|
|
|
|
12,280,810
|
|
Net income (loss)
|
|
$
|
(1,535,086
|
)
|
|
$
|
496,165
|
|
|
|
Six Months Ended
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
$
|
24,803,790
|
|
|
$
|
28,220,513
|
|
Expenses
|
|
|
26,233,239
|
|
|
|
23,701,306
|
|
Net income
|
|
$
|
(1,429,449
|
)
|
|
$
|
4,519,207
|
|
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 December 31, 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.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
The following discussion and analysis
of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial
statements and the notes to those financial statements appearing elsewhere in this report. This discussion and analysis contain
forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as the slow-down
of the macro-economic environment in China and its impact on economic growth in general, the competition in the fertilizer industry
and the impact of such competition on pricing, revenues and margins, the weather conditions in the areas where our customers are
based, the cost of attracting and retaining highly skilled personnel, the prospects for future acquisitions, and the factors set
forth elsewhere in this report, our actual results may differ materially from those anticipated in these forward-looking statements.
With these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this report will
in fact occur. You should not place undue reliance on the forward-looking statements contained in this report.
The forward-looking statements speak
only as of the date on which they are made, and, except to the extent required by U.S. federal securities laws, we undertake no
obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is
made or to reflect the occurrence of unanticipated events. Further, the information about our intentions contained in this
report is a statement of our intention as of the date of this report and is based upon, among other things, the existing regulatory
environment, industry conditions, market conditions and prices, and our assumptions as of such date. We may change our intentions,
at any time and without notice, based upon any changes in such factors, in our assumptions or otherwise.
Unless the context indicates otherwise,
as used in the notes to the financial statements of the Company, the following are the references herein of all the subsidiaries
of the Company (i) Green Agriculture Holding Corporation (“Green New Jersey”), a wholly-owned subsidiary of Green
Nevada incorporated in the State of New Jersey; (ii) Shaanxi TechTeam Jinong Humic Acid Product Co., Ltd. (“Jinong”),
a wholly-owned subsidiary of Green New Jersey organized under the laws of the PRC; (iii) Xi’an Hu County Yuxing Agriculture
Technology Development Co., Ltd. (“Yuxing”), a Variable Interest Entity in the PRC (“VIE”) controlled
by Jinong through contractual agreements; (iv) Shaanxi Lishijie Agrochemical Co., Ltd. (“Lishijie”), a VIE controlled
by Jinong through contractual agreements; (v) Songyuan Jinyangguang Sannong Service Co., Ltd. (“Jinyangguang”), a
VIE in the PRC controlled by Jinong through contractual agreements; (vi) Weinan City Linwei District Wangtian Agricultural Materials
Co., Ltd. (“Wangtian”), a VIE controlled by Jinong through contractual agreements; (vii) Aksu Xindeguo Agricultural
Materials Co., Ltd. (“Xindeguo”), a VIE controlled by Jinong through contractual agreements; (vii) Xinjiang Xinyulei
Eco-agriculture Science and Technology Co., Ltd (“Xinyulei”), a VIE controlled by Jinong through contractual agreements;
(ix) Sunwu County Xiangrong Agricultural Materials Co., Ltd. (“Xiangrong”), a VIE controlled by Jinong through contractual
agreements; (x) Anhui Fengnong Seed Co., Ltd. (“Fengnong”), a VIE controlled by Jinong through contractual agreements;
(xi) Beijing Gufeng Chemical Products Co., Ltd., a wholly-owned subsidiary of Jinong in the PRC (“Gufeng”); and (xii)
Beijing Tianjuyuan Fertilizer Co., Ltd., Gufeng’s wholly-owned subsidiary in the PRC (“Tianjuyuan”). 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”.
Unless the context otherwise requires,
all references to (i) “PRC” and “China” are to the People’s Republic of China; (ii) “U.S.
dollar,” “$” and “US$” are to United States dollars; and (iii) “RMB”, “Yuan”
and Renminbi are to the currency of the PRC or China.
Overview
We are engaged in research, development,
production and sale of various types of fertilizers and agricultural products in the PRC through our wholly-owned Chinese subsidiaries,
Jinong and Gufeng (including Gufeng’s subsidiary Tianjuyuan), and our VIE, Yuxing. Our primary business is fertilizer products,
specifically humic-acid based compound fertilizer produced by Jinong and compound fertilizer, blended fertilizer, organic compound
fertilizer, slow-release fertilizer, highly-concentrated water-soluble fertilizer and mixed organic-inorganic compound fertilizer
produced by Gufeng. In addition, through Yuxing, we develop and produce various agricultural products, such as top-grade fruits,
vegetables, flowers and colored seedlings. For financial reporting purposes, our operations are organized into three business
segments: fertilizer products (Jinong), fertilizer products (Gufeng) and agricultural products production (Yuxing).
The fertilizer business conducted by Jinong
and Gufeng generated approximately 73.2% and 71.9% of our total revenues for the six months Ended December 31, 2020 and 2019,
respectively. The sales VIEs generated 21.3% and 23.1% of our revenues for the six months Ended December 31, 2020 and 2019, respectively.
Yuxing serves as a research and development base for our fertilizer products.
Fertilizer Products
As of December 31, 2020, we had developed
and produced a total of 676 different fertilizer products in use, of which 91 were developed and produced by Jinong, 334 by Gufeng,
and 251 by the VIE Companies.
Below is a table that shows the metric
tons of fertilizer sold by Jinong and Gufeng and the revenue per ton for the periods indicated:
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Change 2019 to 2020
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
|
|
(metric tons)
|
|
|
|
|
|
|
|
Jinong
|
|
|
21,228
|
|
|
|
22,086
|
|
|
|
(858
|
)
|
|
|
-3.9
|
%
|
Gufeng
|
|
|
66,865
|
|
|
|
65,483
|
|
|
|
1,381
|
|
|
|
2.1
|
%
|
|
|
|
88,093
|
|
|
|
87,569
|
|
|
|
523
|
|
|
|
0.6
|
%
|
|
|
Three Months Ended
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(revenue per tons)
|
|
Jinong
|
|
$
|
690
|
|
|
$
|
667
|
|
Gufeng
|
|
|
330
|
|
|
|
341
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Change 2019 to 2020
|
|
|
|
2020
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
|
|
(metric tons)
|
|
|
|
|
|
|
|
Jinong
|
|
|
37,099
|
|
|
|
40,709
|
|
|
|
(3,610
|
)
|
|
|
-8.9
|
%
|
Gufeng
|
|
|
111,689
|
|
|
|
117,935
|
|
|
|
(6,246
|
)
|
|
|
-5.3
|
%
|
|
|
|
148,788
|
|
|
|
158,643
|
|
|
|
(9,856
|
)
|
|
|
-6.2
|
%
|
|
|
Six Months Ended
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(revenue per tons)
|
|
Jinong
|
|
$
|
830
|
|
|
$
|
843
|
|
Gufeng
|
|
|
352
|
|
|
|
330
|
|
For the three months ended December 31,
2020, we sold approximately 88,093 tons of fertilizer products, as compared to 87,569 metric tons for the three months ended December
31, 2019. For the three months ended December 31, 2020, Jinong sold approximately 21,228 metric tons of fertilizer products, as
compared to 22,086 metric tons for the three months ended December 31, 2019. For the three months ended December 31, 2020, Gufeng
sold approximately 66,865 metric tons of fertilizer products, as compared to 65,483 metric tons for the three months ended December
31, 2019.
For the six months ended December 31,
2020, we sold approximately 148,788 metric tons of fertilizer products, as compared to 158,643 metric tons for the six months
ended December 31, 2019. For the six months ended December 31, 2020, Jinong sold approximately 37,099 metric tons of fertilizer
products, a decrease of 3,610 metric tons, or 8.9%, as compared to 40,709 metric tons for the six months ended December 31, 2019.
For the six months ended December 31, 2020, Gufeng sold approximately 111,689 metric tons of fertilizer products, a decrease of
6,246 metric tons, or 5.3% as compared to 117,935 metric tons for the six months ended December 31, 2019.
Our sales of fertilizer products to customers
in five provinces within China accounted for approximately 67.0% of our fertilizer revenue for the three months ended December
31, 2020. Specifically, the provinces and their respective percentage contributing to our fertilizer revenues were Hebei (29.4%),
Heilongjiang (11.1%), Inner Mongolia (10.9%), Liaoning (10.1%) and Shaanxi (5.6%).
As of December 31, 2020, we had a total
of 1,922 distributors covering 22 provinces, 4 autonomous regions and 4 central government-controlled municipalities in China.
Jinong had 1,090 distributors in China. Jinong’s sales are not dependent on any single distributor or any group of distributors.
Jinong’s top five distributors accounted for 3.8% of its fertilizer revenues for the three months ended December 31, 2020.
Gufeng had 334 distributors, including some large state-owned enterprises. Gufeng’s top five distributors accounted for
78.7% of its revenues for the three months ended December 31, 2020.
Agricultural Products
Through Yuxing, we develop, produce and
sell high-quality flowers, green vegetables and fruits to local marketplaces and various horticulture and planting companies.
We also use certain of Yuxing’s greenhouse facilities to conduct research and development activities for our fertilizer
products. The three PRC provinces and municipalities that accounted for 93.7% of our agricultural products revenue for the three
months ended December 31, 2020 were Shaanxi (85.4%), Shanghai (6.3%), and Guangdong (2.0%).
Recent Developments
New Products
During the three months ended December
31, 2020, Jinong did not launch any new fertilizer product. During the three months ended December 31, 2020, Gufeng did not launch
any new fertilizer products but add 4 new distributors.
Strategic Acquisitions
On June 30, 2016 and January 1, 2017,
through Jinong, we entered (i) Strategic Acquisition Agreements (the “SAA”), and (ii) Agreements for Convertible Notes
(the “ACN”), with the shareholders of the companies as identified below (the “Targets”).
June 30, 2016:
|
|
|
|
Cash
|
|
|
Principal
of
|
|
|
|
|
|
Payment
for
|
|
|
Notes
for
|
|
|
|
|
|
Acquisition
|
|
|
Acquisition
|
|
Company
Name
|
|
Business
Scope
|
|
(RMB[1])
|
|
|
(RMB)
|
|
Shaanxi
Lishijie Agrochemical Co., Ltd.
|
|
Sales of pesticides, agricultural
chemicals, chemical fertilizers, agricultural materials; Manufacture and sales of mulches.
|
|
|
10,000,000
|
|
|
|
3,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Songyuan
Jinyangguang Sannong Service Co., Ltd.
|
|
Promotion and consulting services regarding
agricultural technologies; Retail sales of chemical fertilizers (including compound fertilizers and organic fertilizers);
Wholesale and retail sales of pesticides, agricultural machinery and accessories; Collection of agricultural information;
Development of saline-alkali soil; Promotion and development of high-efficiency agriculture and related information technology
solutions for agriculture, agricultural and biological engineering high technologies; E-commerce; Cultivation of freshwater
fish, poultry, fruits, flowers, vegetables, and seeds; Recycling and complex utilization of straw and stalk; Technology transfer
and training; Recycling of agricultural materials ; Ecological industry planning.
|
|
|
8,000,000
|
|
|
|
12,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Shenqiu
County Zhenbai Agriculture Co., Ltd.
|
|
Cultivation of crops; Storage, sales, preliminary
processing and logistics distribution of agricultural by-products; Promotion and application of agricultural technologies;
Purchase and sales of agricultural materials; Electronic commerce.
|
|
|
3,000,000
|
|
|
|
12,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Weinan
City Linwei District Wangtian Agricultural Materials Co., Ltd.
|
|
Promotion and application of new agricultural
technologies; Professional prevention of plant diseases and insect pests; Sales of plant protection products, plastic mulches,
material, chemical fertilizers, pesticides, agricultural medicines, micronutrient fertilizers, hormones, agricultural machinery
and medicines, and gardening tools.
|
|
|
6,000,000
|
|
|
|
12,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Aksu
Xindeguo Agricultural Materials Co., Ltd.
|
|
Wholesale and
retail sales of pesticides; Sales of chemical fertilizers, packaged seeds, agricultural mulches, micronutrient fertilizers,
compound fertilizers, plant growth regulators, agricultural machineries, and water economizers; Consulting services for agricultural
technologies; Purchase and sales of agricultural by- products.
|
|
|
10,000,000
|
|
|
|
12,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinjiang
Xinyulei Eco-agriculture Science and Technology Co., Ltd
|
|
Sales of chemical
fertilizers, packaged seeds, agricultural mulches, micronutrient fertilizers, organic fertilizers, plant growth regulators,
agricultural machineries, and water economizers; Purchase and sales of agricultural by-products; Cultivation of fruits and
vegetables; Consulting services and training for agricultural technologies; Storage services; Sales of articles of daily use,
food and oil; On-line sales of the above-mentioned products.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
37,000,000
|
|
|
|
51,000,000
|
|
(1)
|
The exchange rate
between RMB and U.S. dollars on June 30, 2016 is RMB1=US$0.1508, according to the exchange rate published by Bank of China.
|
|
|
(2)
|
On November 30,
2017, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series
of contractual agreements with the shareholders of Zhenbai. In return, the shareholders of Zhenbai agreed to tender the whole
payment consideration in the SAA back to the Company with early termination penalties. The convertible notes paid to Zhenbai’s
shareholders and the accrued interest has been forfeited.
|
January 1, 2017:
|
|
|
|
Cash
|
|
|
Principal
of
|
|
|
|
|
|
Payment
for
|
|
|
Notes
for
|
|
|
|
|
|
Acquisition
|
|
|
Acquisition
|
|
Company
Name
|
|
Business
Scope
|
|
(RMB[1])
|
|
|
(RMB)
|
|
Sunwu
County Xiangrong Agricultural Materials Co., Ltd.
|
|
Sales of pesticides, agricultural
chemicals, chemical fertilizers, agricultural materials; Manufacture and sales of mulches.
|
|
|
4,000,000
|
|
|
|
6,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Anhui Fengnong Seed
Co., Ltd.
|
|
Wholesale and
retail sales of pesticides; Sales of chemical fertilizers, packaged seeds, agricultural mulches, micronutrient fertilizers,
compound fertilizers and plant growth regulators
|
|
|
4,000,000
|
|
|
|
6,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
8,000,000
|
|
|
|
12,000,000
|
|
(1)
|
The exchange rate
between RMB and U.S. dollars on January 1, 2017 is RMB1=US$0.144, according to the exchange rate published by Bank of China.
|
Pursuant to the SAA and the ACN, the shareholders
of the Targets, while retaining possession of the equity interests and continuing to be the legal owners of such interests, agreed
to pledge and entrust all their equity interests, including the proceeds thereof but excluding any claims or encumbrances, and
the operations and management of its business to Jinong, in exchange of an aggregate amount of RMB45,000,000 (approximately $6,885,000)
to be paid by Jinong within three days following the execution of the SAA, ACN and the VIE Agreements, and convertible notes with
an aggregate face value of RMB 63,000,000 (approximately $9,639,000) with an annual fixed compound interest rate of 3% and term
of three years.
Jinong acquired the Targets using the
VIE arrangement based on our need to further develop our business and comply with the regulatory requirements under the PRC laws.
As our business focuses on the production
of fertilizer, all our business activities intertwine with those in the agriculture industry in China. Specifically, we deal with
compliance, regulation, safety, inspection, and licenses in fertilizer production, farmland use and transfer, growing and distribution
of agriculture goods, agriculture basic supplies, seeds, pesticides, and trades of grains. It is an industry in which heavy regulations
get implemented and strictly enforced. In addition, E-commerce, which is also under strict government regulation in the PRC, has
lately become a sales and distribution channel for agricultural products. Currently, we are developing an online platform to connect
the physical distribution network we either own or lease.
Compared with the regulatory environment
in other jurisdictions, the regulatory environment in the PRC is unique. For example, the “M&A Rules” purports
to require that an offshore special purpose vehicle controlled directly or indirectly by PRC companies or individuals and formed
for purposes of overseas listing through acquisition of PRC domestic interests held by such PRC companies or individuals obtain
the approval of the China Securities Regulatory Commission (the “CSRC”) prior to the listing and trading of such special
purpose vehicle’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published procedures regarding
its approval of overseas listings by special purpose vehicles.
For both e-commerce and agriculture industries,
PRC regulators limit the investment from foreign entities and set particularly rules for foreign-owned entities to conduct business.
We expect these limitations on foreign-owned entities will continue to exist in e-commerce and agriculture industries. The VIE
arrangement, however, provides feasibility for obtaining administrative approval process and avoiding industry restrictions that
can be imposed on an entity that is a wholly-owned subsidiary of a foreign entity. The VIE agreements reduce uncertainty and the
current limitation risk. It is our understanding that the VIE agreements, as well as the control we obtained through VIE arrangement,
are valid and enforceable. Such legal structure does not violate the known, published, and current PRC laws. While there are substantial
uncertainties regarding the interpretation and application of PRC Laws and future PRC laws and regulations, and there can be no
assurance that the PRC authorities will take a view that is not contrary to or otherwise different from our belief and understanding
stated above, we believe the substantial difficulty that we experienced previously to conduct business in agriculture as a foreign
ownership can be greatly reduced by the VIE arrangement. Further, as an integral part of the VIE arrangement, the underlying equity
pledge agreements provide legal protection for the control we obtained. Pursuant to the equity pledge agreements, we have completed
the equity pledge processes with the Targets to ensure the complete control of the interests in the Targets. The shareholders
of the Targets are not entitled to transfer any shares to a third party under the exclusive option agreements. If necessary, they
may transfer shares to our company without consideration.
While the VIE arrangement provides us
with the feasibility to conduct our business in the E-Commerce and agriculture industries, validity and enforceability of VIE
arrangement is subject to (i) any applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar
laws affecting creditors’ rights generally, (ii) possible judicial or administrative actions or any PRC Laws affecting creditors’
rights, (iii) certain equitable, legal or statutory principles affecting the validity and enforceability of contractual rights
generally under concepts of public interest, interests of the State, national security, reasonableness, good faith and fair dealing,
and applicable statutes of limitation; (iv) any circumstance in connection with formulation, execution or implementation of any
legal documents that would be deemed materially mistaken, clearly unconscionable, fraudulent, coercive at the conclusions thereof;
and (v) judicial discretion with respect to the availability of indemnifications, remedies or defenses, the calculation of damages,
the entitlement to attorney’s fees and other costs, and the waiver of immunity from jurisdiction of any court or from legal
process. Validity and enforceability of VIE arrangement is also subject to risk derived from the discretion of any competent PRC
legislative, administrative or judicial bodies in exercising their authority in the PRC. As a result, there can no assurance that
any of such PRC Laws will not be changed, amended or replaced in the immediate future or in the longer term with or without retrospective
effect.
Results of Operations
Three Months ended December 31, 2020 Compared to the Three
Months ended December 31, 2019.
|
|
2020
|
|
|
2019
|
|
|
Change $
|
|
|
Change %
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
$
|
14,901,875
|
|
|
$
|
14,521,485
|
|
|
|
380,390
|
|
|
|
2.6
|
%
|
Gufeng
|
|
|
22,436,394
|
|
|
|
22,266,549
|
|
|
|
169,845
|
|
|
|
0.8
|
%
|
Yuxing
|
|
|
2,682,195
|
|
|
|
2,461,510
|
|
|
|
220,685
|
|
|
|
9.0
|
%
|
Sales VIEs
|
|
|
8,320,878
|
|
|
|
10,315,465
|
|
|
|
(1,994,587
|
)
|
|
|
-19.3
|
%
|
Net sales
|
|
|
48,341,342
|
|
|
|
49,565,009
|
|
|
|
(1,223,667
|
)
|
|
|
-2.5
|
%
|
Cost of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
|
10,921,417
|
|
|
|
10,127,892
|
|
|
|
793,525
|
|
|
|
7.8
|
%
|
Gufeng
|
|
|
19,846,423
|
|
|
|
19,755,967
|
|
|
|
90,456
|
|
|
|
0.5
|
%
|
Yuxing
|
|
|
2,140,856
|
|
|
|
2,110,321
|
|
|
|
30,535
|
|
|
|
1.4
|
%
|
Sales VIEs
|
|
|
7,008,527
|
|
|
|
8,750,344
|
|
|
|
(1,741,817
|
)
|
|
|
-19.9
|
%
|
Cost of goods sold
|
|
|
39,917,223
|
|
|
|
40,744,524
|
|
|
|
(827,301
|
)
|
|
|
-2.0
|
%
|
Gross profit
|
|
|
8,424,119
|
|
|
|
8,820,485
|
|
|
|
(396,366
|
)
|
|
|
-4.5
|
%
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
3,349,155
|
|
|
|
3,856,972
|
|
|
|
(507,817
|
)
|
|
|
-13.2
|
%
|
General and administrative expenses
|
|
|
43,537,527
|
|
|
|
32,761,531
|
|
|
|
10,775,996
|
|
|
|
32.9
|
%
|
Total operating expenses
|
|
|
46,886,682
|
|
|
|
36,618,503
|
|
|
|
10,268,179
|
|
|
|
28.0
|
%
|
Income (loss) from operations
|
|
|
(38,462,563
|
)
|
|
|
(27,798,018
|
)
|
|
|
(10,664,545
|
)
|
|
|
38.4
|
%
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
(49,064
|
)
|
|
|
(73,263
|
)
|
|
|
24,199
|
|
|
|
-33.0
|
%
|
Interest income
|
|
|
20,987
|
|
|
|
53,262
|
|
|
|
(32,275
|
)
|
|
|
-60.6
|
%
|
Interest expense
|
|
|
(67,185
|
)
|
|
|
(87,496
|
)
|
|
|
20,311
|
|
|
|
-23.2
|
%
|
Total other income (expense)
|
|
|
(95,262
|
)
|
|
|
(107,497
|
)
|
|
|
12,235
|
|
|
|
-11.4
|
%
|
Income (loss) before income taxes
|
|
|
(38,557,825
|
)
|
|
|
(27,905,515
|
)
|
|
|
(10,652,310
|
)
|
|
|
38.2
|
%
|
Provision for income taxes
|
|
|
1,478,838
|
|
|
|
(824,635
|
|
|
|
2,303,473
|
|
|
|
-279.3
|
%
|
Net income (loss)
|
|
$
|
(40,036,663
|
)
|
|
$
|
(27,080,880
|
)
|
|
|
(12,955,783
|
)
|
|
|
47.8
|
%
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
11,927,692
|
|
|
|
10,330,982
|
)
|
|
|
1,596,710
|
|
|
|
15.5
|
%
|
Comprehensive income (loss)
|
|
$
|
(28,108,971
|
)
|
|
$
|
(16,749,898
|
)
|
|
|
(11,359,073
|
)
|
|
|
67.8
|
%
|
Net Sales
Total net sales for the three months ended
December 31, 2020 were $48,341,342 a decrease of $1,223,667 or 2.5%, from $49,565,009 for the three months ended December 31,
2019. This decrease was principally a result of the negative impact on sales volumes due to the COVID-19 pandemic, especially
for VIEs’ net sales.
For the three months ended December 31,
2020, Jinong’s net sales increased $380,390, or 2.6%, to $14,901,875 from $14,521,485 for the three months ended December
31, 2019. This increase was mainly due to Jinong’s higher sales price in the last three months. Jinong’s revenue per
ton is $690 for the three months ended December 31, 2020, increased $23 or 3.4%, as compared to $667 for the three months ended
December 31, 2019.
For the three months ended December 31,
2020, Gufeng’s net sales were $22,436,394, an increase of $169,845 or 0.8%, from $22,266,549 for the three months ended
December 31, 2019. This increase was mainly due to Gufeng’s higher sales volume in the last three months. Gufeng sold approximately
66,865 metric tons of fertilizer products for the three months ended December 31, 2020, increased 1,381 tons or 2.1%, as compared
to 65,483 metric tons for the three months ended December 31, 2019.
For the three months ended December 31,
2020, Yuxing’s net sales were $2,682,195, an increase of $220,685 or 9.0%, from $2,461,510 for the three months ended December
31, 2019. The increase was mainly due to the increase in market demand during the three months ended December 31, 2020.
For the three months ended December 31,
2020, VIEs’ net sales were $8,320,878, a decrease of $1,994,587 or 19.3%, from $10,315,465 for the three months ended December
31, 2019. The decrease was mainly due to the decrease in market demand during the three months ended December 31, 2020.
Cost of Goods Sold
Total cost of goods sold for the three
months ended December 31, 2020 was $39,917,223, a decrease of $827,301, or 2.0%, from $40,744,524 for the three months ended December
31, 2019. The decrease was mainly due to 19.9% decrease in VIEs’ cost of goods sold.
Cost of goods sold by Jinong for the three
months ended December 31, 2020 was $10,921,417, an increase of $793,525, or 7.8%, from $10,127,892 for the three months ended
December 31, 2019. The increase in cost of goods was primarily due to higher product cost in the fiscal year 2021.
Cost of goods sold by Gufeng for the three
months ended December 31, 2020 was $19,846,423, a slightly increase of $90,456, or 0.5%, from $19,755,967 for the three months
ended December 31, 2019. This increase was primarily due to the 0.8% increase in net sale in the fiscal year 2021.
For three months ended December 31, 2020,
cost of goods sold by Yuxing was $2,140,856, an increase of $30,535, or 1.4%, from $2,110,321 for the three months ended December
31, 2019. This increase was mainly due to Yuxing’s higher net sales in the fiscal year 2021.
For three months ended December 31, 2020,
cost of goods sold by VIEs was $7,008,527, a decrease of $1,741,817, or 19.9%, from $8,750,344 for the three months ended December
31, 2019. This decrease was mainly due to VIEs’ lower net sales in the fiscal year 2021.
Gross Profit
Total gross profit for the three months
ended December 31, 2020 decreased by $396,366, or 4.5%, to $8,424,119, as compared to $8,820,485 for the three months ended December
31, 2019. Gross profit margin was 17.4% and 17.8% for the three months Ended December 31, 2020 and 2019, respectively.
Gross profit generated by Jinong decreased
by $413,135, or 9.4%, to $3,980,458 for the three months ended December 31, 2020 from $4,393,593 for the three months ended December
31, 2019. Gross profit margin from Jinong’s sales was approximately 26.7% and 30.3% for the three months Ended December
31, 2020 and 2019, respectively. The decrease in gross profit margin was mainly due to the higher product cost for Jinong in the
fiscal year 2021.
For the three months ended December 31,
2020, gross profit generated by Gufeng was $2,589,971, an increase of $79,389, or 3.2%, from $2,510,582 for the three months ended
December 31, 2019. Gross profit margin from Gufeng’s sales was approximately 11.5% and 11.3% for the six months Ended December
31, 2020 and 2019, respectively.
For the three months ended December 31,
2020, gross profit generated by Yuxing was $541,339, an increase of $190,150, or 54.1% from $351,189 for the three months ended
December 31, 2019. The gross profit margin was approximately 20.2% and 14.3% for the three months Ended December 31, 2020 and
2019, respectively. The increase in gross profit percentage was mainly due to the decrease in product costs.
Gross profit generated by VIEs decreased
by $252,770, or 16.2%, to $1,312,351 for the three months ended December 31, 2020 from $1,565,121 for the three months ended December
31, 2019. Gross profit margin from VIE’s sales was approximately 15.8% and 15.2% for the three months Ended December 31,
2020 and 2019, respectively, which was slightly decreased.
Selling Expenses
Our selling expenses consisted primarily
of salaries of sales personnel, advertising and promotion expenses, freight-out costs and related compensation. Selling expenses
were $3,349,155, or 6.9%, of net sales for the three months ended December 31, 2020, as compared to $3,856,972, or 7.8%, of net
sales for the three months ended December 31, 2019, a decrease of $507,817, or 13.2%. The decrease in selling expense was caused
by the decrease in marketing activities due to the impact of the COVID-19 pandemic.
The selling expenses of Jinong for the
six months ended December 31, 2020 were $2,777,239 or 18.6% of Jinong’s net sales, as compared to selling expenses of $3,527,188
or 24.3% of Jinong’s net sales for the three months ended December 31, 2019.The selling expenses of Yuxing were $9,871 or
0.4% of Yuxing’s net sales for the six months ended December 31, 2020, as compared to $8,872 or 0.4% of Yuxing’s net
sales for the three months ended December 31, 2019. The selling expenses of Gufeng were $73,249 or 0.3% of Gufeng’s net
sales for the three months ended December 31, 2020, as compared to $80,593 or 0.4% of Gufeng’s net sales for the three months
ended December 31, 2019.
General and Administrative Expenses
General and administrative expenses consisted
primarily of related salaries, rental expenses, business development, depreciation and travel expenses incurred by our general
and administrative departments and legal and professional expenses including expenses incurred and accrued for certain litigation.
General and administrative expenses were $43,537,527, or 90.1% of net sales for the three months ended December 31, 2020, as compared
to $32,761,531, or 66.1% of net sales for the three months ended December 31, 2019, an increase of $10,775,996, or 32.9%. The
increase in general and administrative expenses was mainly due to higher general and administrative expenses for Gufeng. Gufeng’s
general and administrative expenses increased $8,812,154 for the three months ended December 31, 2020 comparing with same period
last year. With the impact of COVID-19 pandemic, the overdue outstanding accounts receivable increased significantly comparing
with the previous years. Numerous distributors encountered significant difficulties and/or hardships in their business amid the
pandemic. The company accrued bad debts expense based on the principle of conservatism, which increased the General and Administrative
Expenses.
Total Other Income (Expenses)
Total other income (expenses) consisted
of income from subsidies received from the PRC government, interest income, interest expenses and bank charges. Total other expense
for the three months ended December 31, 2020 was $49,064, as compared to $73,263 for the three months ended December 31, 2019,
a decrease in expense of $24,199 or 33.0%. The decrease in total other expense resulted from lower accretion expense. Accretion
expense decreased due primarily to the expiration of convertible notes on December 2019 and no accretion expense for fiscal year
2021.
Income Taxes
Jinong is subject to a preferred tax rate
of 15% because of its business being classified as a High-Tech project under the PRC Enterprise Income Tax Law (“EIT”)
that became effective on January 1, 2008. Jinong incurred income tax expenses of 0 for the three months ended December 31, 2020,
as compared to $ (949,683) for the three months ended December 31, 2019, an increase of $949,683, or 100.0%.
Gufeng is subject to a tax rate of 25%,
incurred 0 income tax expenses for the three months ended December 31, 2020, as compared to $(68,015) for the three months ended
December 31, 2019, an increase of $68,015, or 100.0%.
Yuxing has no income tax for the six months
Ended December 31, 2020 and 2019 because of being exempted from paying income tax due to its products fall into the tax exemption
list set out in the EIT.
Net income (loss)
Net loss for the three months ended December
31, 2020 was $40,036,663, an increase in loss of $12,955,783, or 47.8%, compared to net loss of $27,080,880 for the three months
ended December 31, 2019. Net loss as a percentage of total net sales was approximately -82.8% and -54.6% for the three months
Ended December 31, 2020 and 2019, respectively.
Six months ended December 31, 2020 Compared to the Six
months ended December 31, 2019.
|
|
2020
|
|
|
2019
|
|
|
Change $
|
|
|
Change %
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
|
29,431,187
|
|
|
|
33,576,301
|
|
|
|
(4,145,114
|
)
|
|
|
-12.3
|
%
|
Gufeng
|
|
|
38,264,597
|
|
|
|
38,589,766
|
|
|
|
(325,169
|
)
|
|
|
-0.8
|
%
|
Yuxing
|
|
|
5,105,683
|
|
|
|
5,001,221
|
|
|
|
104,462
|
|
|
|
2.1
|
%
|
Sales VIEs
|
|
|
19,698,107
|
|
|
|
23,219,292
|
|
|
|
(3,521,185
|
)
|
|
|
-15.2
|
%
|
Net sales
|
|
|
92,499,574
|
|
|
|
100,386,580
|
|
|
|
(7,887,006
|
)
|
|
|
-7.9
|
%
|
Cost of goods sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jinong
|
|
|
21,606,881
|
|
|
|
20,620,422
|
|
|
|
986,459
|
|
|
|
4.8
|
%
|
Gufeng
|
|
|
33,824,240
|
|
|
|
34,209,975
|
|
|
|
(385,735
|
)
|
|
|
-1.1
|
%
|
Yuxing
|
|
|
4,182,928
|
|
|
|
4,162,317
|
|
|
|
20,611
|
|
|
|
0.5
|
%
|
Sales VIEs
|
|
|
16,149,737
|
|
|
|
19,414,134
|
|
|
|
(3,264,397
|
)
|
|
|
-16.8
|
%
|
Cost of goods sold
|
|
|
75,763,786
|
|
|
|
78,406,848
|
|
|
|
(2,643,062
|
)
|
|
|
-3.4
|
%
|
Gross profit
|
|
|
16,735,788
|
|
|
|
21,979,732
|
|
|
|
(5,243,944
|
)
|
|
|
-23.9
|
%
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
8,061,111
|
|
|
|
7,487,327
|
|
|
|
573,784
|
|
|
|
7.7
|
%
|
General and administrative expenses
|
|
|
76,481,622
|
|
|
|
49,103,323
|
|
|
|
27,378,300
|
|
|
|
55.8
|
%
|
Total operating expenses
|
|
|
84,542,733
|
|
|
|
56,590,650
|
|
|
|
27,952,084
|
|
|
|
49.4
|
%
|
Income (loss) from operations
|
|
|
(67,806,945
|
)
|
|
|
(34,610,918
|
)
|
|
|
(33,196,028
|
)
|
|
|
95.9
|
%
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
(54,229
|
)
|
|
|
(103,454
|
)
|
|
|
49,225
|
|
|
|
-47.6
|
%
|
Interest income
|
|
|
43,392
|
|
|
|
106,886
|
|
|
|
(63,494
|
)
|
|
|
-59.4
|
%
|
Interest expense
|
|
|
(123,953
|
)
|
|
|
(164,698
|
)
|
|
|
40,745
|
|
|
|
-24.7
|
%
|
Total other income (expense)
|
|
|
(134,790
|
)
|
|
|
(161,266
|
)
|
|
|
26,476
|
|
|
|
-16.4
|
%
|
Income (loss) before income taxes
|
|
|
(67,941,736
|
)
|
|
|
(34,772,183
|
)
|
|
|
(33,169,552
|
)
|
|
|
95.4
|
%
|
Provision for income taxes
|
|
|
3,047,841
|
|
|
|
(375,504
|
)
|
|
|
3,423,345
|
|
|
|
-911.7
|
%
|
Net income (loss)
|
|
|
(70,989,577
|
)
|
|
|
(34,396,679
|
)
|
|
|
(36,592,897
|
)
|
|
|
106.4
|
%
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
25,395,536
|
|
|
|
(7,036,503
|
)
|
|
|
32,432,039
|
|
|
|
-460.9
|
%
|
Comprehensive income (loss)
|
|
|
(45,594,041
|
)
|
|
|
(41,433,182
|
)
|
|
|
(4,160,858
|
)
|
|
|
10.0
|
%
|
Net Sales
Total net sales for the six months ended
December 31, 2020 were $92,499,574 a decrease of $7,887,006 or 7.9%, from $100,386,580 for the six months ended December 31, 2019.
This decrease was primarily due to a decrease in VIEs’ net sales.
For the six months ended December 31,
2020, Jinong’s net sales decreased $4,145,114, or 12.3%, to $29,431,187 from $33,576,301 for the six months ended December
31, 2019. This decrease was mainly attributable to the decrease in Jinong’s sales volume in the last six months.
For the six months ended December 31,
2020, Gufeng’s net sales were $38,264,597, a decrease of $325,169, or 0.8%, from $38,589,766 for the six months ended December
31, 2019. This decrease was mainly attributable to the decrease in Gufeng’s sales volume in the last six months.
For the six months ended December 31,
2020, Yuxing’s net sales were $5,105,683, an increase of $104,462 or 2.1%, from $5,001,221 for the six months ended December
31, 2019.
For the six months ended December 31,
2020, VIEs’ net sales were $19,698,107, a decrease of $3,521,185, or 15.2%, from $23,219,292 for the six months ended December
31, 2019. This decrease was mainly attributable to the decrease in market demands in the last six months.
Cost of Goods Sold
Total cost of goods sold for the six months
ended December 31, 2020 was $75,763,786, a decrease of $2,643,062, or 3.4%, from $78,406,848 for the six months ended December
31, 2019. The decrease was mainly due to the decrease in Gufeng’s and VIEs’ cost of goods sold which decreased 1.1%
and 16.8% respectively.
Cost of goods sold by Jinong for the six
months ended December 31, 2020 was $21,606,881, an increase of $986,459, or 4.8%, from $20,620,422 for the six months ended December
31, 2019. The increase in cost of goods was primarily due to the increase in products cost during the last six months.
Cost of goods sold by Gufeng for the six
months ended December 31, 2020 was $33,824,240, a decrease of $385,735, or 1.1%, from $34,209,975 for the six months ended December
31, 2019. This decrease was primarily due to the 0.8% decrease in net sale during the last six months.
For six months ended December 31, 2020,
cost of goods sold by Yuxing was $4,182,928, an increase of $20,611, or 0.5%, from $4,162,317 for the six months ended December
31, 2019. This increase was mainly due to the 2.1% increase in Yuxing’s net sales during the last six months.
For six months ended December 31, 2020,
cost of goods sold by VIEs was $16,149,737, a decrease of $3,264,397, or 16.8%, from $19,414,134 for the six months ended December
31, 2019. This decrease was mainly due to the 15.2% decrease in VIEs’ net sales during the last six months.
Gross Profit
Total gross profit for the six months
ended December 31, 2020 decreased by $5,243,944, or 23.9%, to $16,735,788, as compared to $21,979,732 for the six months ended
December 31, 2019. Gross profit margin was 23.9% and 21.9% for the six months Ended December 31, 2020 and 2019, respectively.
Gross profit generated by Jinong decreased
by $5,131,573 or 39.6%, to $7,824,306 for the six months ended December 31, 2020 from $12,955,879 for the six months ended December
31, 2019. Gross profit margin from Jinong’s sales was approximately 26.6% and 38.6% for the six months Ended December 31,
2020 and 2019, respectively. The decrease in gross profit margin was mainly due to the lower sales prices.
For the six months ended December 31,
2020, gross profit generated by Gufeng was $4,440,357, an increase of $60,566, or 1.4%, from $4,379,791 for the six months ended
December 31, 2019. Gross profit margin from Gufeng’s sales was approximately 11.6% and 11.3% for the six months Ended December
31, 2020 and 2019, respectively. The slightly increase in gross profit margin was mainly due to the increase in unit sales price.
For the six months ended December 31,
2020, gross profit generated by Yuxing was $922,755, an increase of $83,851, or 10.0% from $838,904 for the six months ended December
31, 2019. The gross profit margin was approximately 18.1% and 16.8% for the six months Ended December 31, 2020 and 2019, respectively.
The increase in gross profit percentage was mainly due to the decrease in product costs.
Gross profit generated by VIEs decreased
by $256,788, or 6.7%, to $3,548,370 for the six months ended December 31, 2020 from $3,805,158 for the six months ended December
31, 2019. Gross profit margin from VIE’s sales was approximately 18.0% and 16.4% for the six months Ended December 31, 2020
and 2019, respectively. The increase in gross profit percentage was mainly due to the decrease in product costs.
Selling Expenses
Our selling expenses consisted primarily
of salaries of sales personnel, advertising and promotion expenses, freight-out costs and related compensation. Selling expenses
were $8,061,111, or 8.7%, of net sales for the six months ended December 31, 2020, as compared to $7,487,327, or 7.5%, of net
sales for the six months ended December 31, 2019, an increase of $573,784 or 7.7%.
The selling expenses of Jinong for the
six months ended December 31, 2020 were $7,033,876 or 23.9% of Jinong’s net sales, as compared to selling expenses of $6,827,383
or 20.3% of Jinong’s net sales for the six months ended December 31, 2019.The selling expenses of Yuxing were $21,688 or
0.4% of Yuxing’s net sales for the six months ended December 31, 2020, as compared to $18,224 or 0.4% of Yuxing’s
net sales for the six months ended December 31, 2019. The selling expenses of Gufeng were $140,730 or 0.4% of Gufeng’s net
sales for the six months ended December 31, 2020, as compared to $149,884 or 0.4% of Gufeng’s net sales for the six months
ended December 31, 2019.
General and Administrative Expenses
General and administrative expenses consisted
primarily of related salaries, rental expenses, business development, depreciation and travel expenses incurred by our general
and administrative departments and legal and professional expenses including expenses incurred and accrued for certain litigation.
General and administrative expenses were $76,481,622, or 82.7% of net sales for the six months ended December 31, 2020, as compared
to $49,103,323, or 48.9% of net sales for the six months ended December 31, 2019, an increase of $27,378,300, or 55.8%.
Total Other Expenses
Total other expenses consisted of income
from subsidies received from the PRC government, interest income, interest expenses and bank charges. Total other expense for
the six months ended December 31, 2020 was $54,229, as compared to $103,454, for the six months ended December 31, 2019, a decrease
in expense of $49,225, or 47.6%. The decrease in total other expense resulted from the decrease in accretion expenses. Accretion
expense decreased due primarily to the expiration of convertible notes on December 2019 and no accretion expense for fiscal year
2021.
Income Taxes
Jinong is subject to a preferred tax rate
of 15% as a result of its business being classified as a High-Tech project under the PRC Enterprise Income Tax Law (“EIT”)
that became effective on January 1, 2008. Jinong incurred income tax expenses of $273,796 for the six months ended December 31,
2020, as compared to $(857,195) for the six months ended December 31, 2019, an increase of $1,130,991, or 131.9%.
Gufeng is subject to a tax rate of 25%,
incurred 0 income tax expenses for the six months ended December 31, 2020, as compared to $(136,291) for the six months ended
December 31, 2019, an increase of $136,291, or 100.0%.
Yuxing has no income tax for the six months
Ended December 31, 2020 and 2019 as a result of being exempted from paying income tax due to its products fall into the tax exemption
list set out in the EIT.
Net Income (loss)
Net loss for the six months ended December
31, 2020 was $70,989,577, an increase of $36,592,897, or 106.4%, compared to $34,396,679 for the six months ended December 31,
2019. Net income (loss) as a percentage of total net sales was approximately -76.7% and -34.3% for the six months Ended December
31, 2020 and 2019, respectively.
Discussion of Segment Profitability Measures
As of December 31, 2020, we were engaged
in the following businesses: the production and sale of fertilizers through Jinong and Gufeng, the production and sale of high-quality
agricultural products by Yuxing, and the sales of agriculture materials by the sales VIEs. For financial reporting purpose, our
operations were organized into four main business segments based on locations and products: Jinong (fertilizer production), Gufeng
(fertilizer production) and Yuxing (agricultural products production) and the sales VIEs. Each of the segments has its own annual
budget about development, production and sales.
Each of the four operating segments referenced
above has separate and distinct general ledgers. The chief operating decision maker (“CODM”) makes decisions with
respect to resources allocation and performance assessment upon receiving financial information, including revenue, gross margin,
operating income and net income (loss) produced from the various general ledger systems; however, net income (loss) by segment
is the principal benchmark to measure profit or loss adopted by the CODM.
For Jinong, the net loss increased by
$433,366, or 8.9%, to $5,290,807 for six months ended December 31, 2020, from $4,857,441 for the six months ended December 31,
2019. The increase in net loss was principally due to higher general and administrative expense.
For Gufeng, the net loss increased by
$27,814,747, or 83.8%, to $61,009,636 for six months ended December 31, 2020 from $33,194,889 for six months ended December 31,
2019. The increase was principally due to the increase in general and administrative expense.
For Yuxing, the net income increased $9,061
or 3.1%, to $304,559 for six months ended December 31, 2020 from $295,498 for six months ended December 31, 2019. The increase
was mainly due to higher sales.
For the sales VIEs, the net income (loss)
was $(1,734,009) for period ended December 31, 2020, decreased by $5,957,718, or 141.1%, from $4,223,709 for six months ended
December 31, 2019. The decrease was mainly due to the increase in general and administrative expenses for the sales VIEs.
Liquidity and Capital Resources
Our principal sources of liquidity include
cash from operations, borrowings from local commercial banks and net proceeds of offerings of our securities.
As of December 31, 2020, cash and cash
equivalents were $9,826,386, a decrease of $2,108,391, or 17.7%, from $11,934,778 as of June 30, 2020.
We intend to use some of the remaining
net proceeds from our securities offerings, as well as other working capital if required, to acquire new businesses, upgrade production
lines and complete Yuxing’s new greenhouse facilities for agriculture products located on 88 acres of land in Hu County,
18 kilometers southeast of Xi’an city. Yuxing purchased a set of agricultural products testing equipment for the year of
2016. We believe that we have sufficient cash on hand and positive projected cash flow from operations to support our business
growth for the next twelve months to the extent we do not have further significant acquisitions or expansions. However, if events
or circumstances occur and we do not meet our operating plan as expected, we may be required to seek additional capital and/or
to reduce certain discretionary spending, which could have a material adverse effect on our ability to achieve our business objectives.
Notwithstanding the foregoing, we may seek additional financing as necessary for expansion purposes and when we believe market
conditions are most advantageous, which may include additional debt and/or equity financings. There can be no assurance that any
additional financing will be available on acceptable terms, if at all. Any equity financing may result in dilution to existing
stockholders and any debt financing may include restrictive covenants.
The following table sets forth a summary of our cash flows
for the periods indicated:
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Net cash provided by (used in) operating activities
|
|
$
|
(6,237,210
|
)
|
|
$
|
(2,074,331
|
)
|
Net cash provided by (used in) investing activities
|
|
|
(212,290
|
)
|
|
|
(50,533
|
)
|
Net cash provided by (used in) financing activities
|
|
|
306,000
|
|
|
|
10,939,200
|
|
Effect of exchange rate change on cash and cash equivalents
|
|
|
4,035,108
|
|
|
|
(2,367,640
|
)
|
Net increase in cash and cash equivalents
|
|
|
(2,108,392
|
)
|
|
|
6,446,696
|
|
Cash and cash equivalents, beginning balance
|
|
|
11,934,778
|
|
|
|
72,259,804
|
|
Cash and cash equivalents, ending balance
|
|
$
|
9,826,386
|
|
|
$
|
78,706,500
|
|
Operating Activities
Net cash used in operating activities
was $6,237,210 for the six months ended December 31, 2020, an increase of $4,162,879, or 200.7%, from cash used in operating activities
of $2,074,331 for the six months ended December 31, 2019. The increase was mainly due to an increase in net loss during the six
months ended December 31, 2020 as compared to the same period in 2019.
Investing Activities
Net cash used in investing activities
for the six months ended December 31, 2020 was $212,290, compared to cash used in investing activities of $50,533 for the six
months ended December 31, 2019. The different was due to Company purchased more plant, property and equipment during the last
six months compared to the same period last year.
Financing Activities
Net cash provided by financing activities
for the six months ended December 31, 2020 was $306,000, compared to $10,939,200 net cash provided in financing activities for
the six months ended December 31, 2019, which was largely attribute to $10,252,000 proceeds from the sale of common stock for
the six months ended December 31, 2019, compared to 0 in the same period this year.
As of December 31, 2020 and June 30, 2020, our loans payable
was as follows:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2020
|
|
Short term loans payable:
|
|
$
|
4,131,000
|
|
|
$
|
3,537,500
|
|
Total
|
|
$
|
4,131,000
|
|
|
$
|
3,537,500
|
|
Accounts Receivable
We had accounts receivable of $102,412,975
as of December 31, 2020, as compared to $105,693,326 as of June 30, 2020, a decrease of $3,280,351, or 3.1%. The decrease was
primarily attributable to Gufeng’s accounts receivable. As of December 31, 2020, Gufeng’s accounts receivable was
$47,494,318, a decrease of $2,073,642, or 4.2%, compared to $49,567,960 as of June 30, 2020.
Allowance for doubtful accounts in accounts
receivable for the six months ended December 31, 2020 was $31,196,455, a decrease of $7,269,745, or 18.9%, from $38,466,220 as
of June 30, 2020. And the allowance for doubtful accounts as a percentage of accounts receivable was 23.3% as of December 31,
2020 and 26.7% as of June 30, 2020.
Deferred assets
We had no deferred assets as of December
31, 2020 and June 30, 2020. During the three months, we assisted the distributors in certain marketing efforts and developing
standard stores to expand our competitive advantage and market shares. Based on the distributor agreements, the amount owed by
the distributors in certain marketing efforts and store development will be expensed over three years if the distributors are
actively selling our products. If a distributor defaults, breaches, or terminates the agreement with us earlier than the contractual
terms, the unamortized portion of the amount owed by the distributor is payable to us immediately. The deferred assets had
been fully amortized as of December 31, 2020.
Inventories
We had inventories of $90,830,515 as of
December 31, 2020, as compared to $98,921,081 as of June 30, 2020, a decrease of $8,090,566, or 8.2%. The decrease was primarily
attributable to Gufeng’s inventory. As of December 31, 2020, Gufeng’s inventory was $58,837,515, compared to $75,129,594
as of June 30, 2020, a decrease of $16,292,079, or 21.7%.
Advances to Suppliers
We had advances to suppliers of $34,409,623
as of December 31, 2020 as compared to $65,081,818 as of June 30, 2020, representing a decrease of $30,672,195, or 47.1%. Our
inventory level may fluctuate from time to time, depending how quickly the raw material is consumed and replenished during the
production process, and how soon the finished goods are sold. The replenishment of raw material relies on management’s
estimate of numerous factors, including but not limited to, the raw materials future price, and spot price along with its volatility,
as well as the seasonal demand and future price of finished fertilizer products. Such estimate may not be accurate, and the purchase
decision of raw materials based on the estimate can cause excessive inventories in times of slow sales and insufficient inventories
in peak times.
Accounts Payable
We had accounts payable of $17,527,362
as of December 31, 2020 as compared to $17,719,093 as of June 30, 2020, representing a decrease of $191,731, or 1.1%. The decrease
was primarily due to the decrease of accounts payable for VIEs. They have accounts payable of $15,479,228 as of December 31, 2020
as compared to $16,315,837 as of June 30, 2020, representing a decrease of $836,609, or 5.1%.
Unearned Revenue (Customer Deposits)
We had customer deposits of $8,881,013
as of December 31, 2020 as compared to $7,342,590 as of June 30, 2020, representing an increase of $1,538,423, or 21.0%. The increase
was mainly attributable to VIEs’ $1,094,291 unearned revenue as of December 31, 2020, compared to $86,430 unearned revenue
as of June 30, 2020, increased $1,007,861, or 1166.1%, caused by the advance deposits made by clients. This increase was due to
seasonal fluctuation and we expect to deliver products to our customers during the next three months at which time we will recognize
the revenue.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Management’s discussion and analysis
of its financial condition and results of operations are based upon our unaudited condensed consolidated financial statements,
which have been prepared in accordance with United States generally accepted accounting principles. Our financial statements reflect
the selection and application of accounting policies which require management to make significant estimates and judgments. See
Note 2 to our unaudited condensed consolidated financial statements, “Basis of Presentation and Summary of Significant Accounting
Policies.” We believe that the following paragraphs reflect the most critical accounting policies that currently affect
our financial condition and results of operations:
Use of estimates
The preparation of unaudited condensed
consolidated financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the amount of
revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the
time the estimates are made. However, actual results could differ materially from those estimates.
Revenue recognition
Sales revenue is recognized at the date
of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, we have
no other significant obligations and collectability is reasonably assured. Payments received before all the relevant criteria
for revenue recognition are satisfied are recorded as unearned revenue.
Our revenue consists of invoiced value
of goods, net of a value-added tax (VAT). No product return or sales discount allowance is made as products delivered and accepted
by customers are normally not returnable and sales discounts are normally not granted after products are delivered.
Cash and cash equivalents
For statement of cash flows purposes,
we consider all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three
months or less, when purchased, to be cash and cash equivalents.
Accounts receivable
Our policy is to maintain reserves for
potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical
bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns
to evaluate the adequacy of these reserves. Any accounts receivable of Jinong and Gufeng that are outstanding for more than 180
days will be accounted as allowance for bad debts, and any accounts receivable of Yuxing that are outstanding for more than 90
days will be accounted as allowance for bad debts.
Deferred assets
Deferred assets represent amounts the
Company advanced to the distributors in their marketing and stores development to expand our competitive advantage and market
shares. Based on the distributor agreements, the amount owed by the distributors in certain marketing efforts and store development
will be expensed over three years if the distributors are actively selling our products. If a distributor defaults, breaches,
or terminates the agreement with us earlier than the realization of the contractual terms, the unamortized portion of the amount
owed by the distributor is to be refunded to us immediately. The deferred assets had been fully amortized as of December
31, 2020.
Segment reporting
FASB ASC 280 requires use of the “management
approach” model for segment reporting. The management approach model is based on the way a company’s management organizes
segments within the company for making operating decisions and assessing performance. Reportable segments are based on products
and services, geography, legal structure, management structure, or any other way management disaggregates a company.
As of December 31, 2020, we were organized
into ten main business units: Jinong (fertilizer production), Gufeng (fertilizer production), Yuxing (agricultural products
production), Lishijie (agriculture sales), Jinyangguang (agriculture sales), Wangtian (agriculture sales), Xindeguo (agriculture
sales), Xinyulei (agriculture sales), Fengnong (agriculture sales) and Xiangrong (agriculture sales). For financial reporting
purpose, our operations were organized into four main business segments based on locations and products: Jinong (fertilizer production),
Gufeng (fertilizer production) and Yuxing (agricultural products production) and the sales VIEs. Each of the segments has its
own annual budget regarding development, production and sales.