NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
China
Green Agriculture, Inc. (the “Company”, “Parent Company” or “Green Nevada”), through its subsidiaries,
is engaged in the research, development, production, distribution and sale of humic acid-based compound fertilizer, compound fertilizer,
blended fertilizer, organic compound fertilizer, slow-release fertilizers, highly-concentrated water-soluble fertilizers and mixed organic-inorganic
compound fertilizer and the development, production and distribution of agricultural products.
Unless
the context indicates otherwise, as used in this Report, the following are the references herein of all the subsidiaries of the Company
(i) Green Agriculture Holding Corporation (“Green New Jersey”), a wholly-owned subsidiary of Green Nevada, incorporated in
the State of New Jersey; (ii) Shaanxi TechTeam Jinong Humic Acid Product Co., Ltd. (“Jinong”), a wholly-owned subsidiary
of Green New Jersey organized under the laws of the PRC; (iii) Xi’an Hu County Yuxing Agriculture Technology Development Co., Ltd.
(“Yuxing”), a Variable Interest Entity (“VIE”) in the in the PRC controlled by Jinong through a series of contractual
agreements; (iv) Beijing Gufeng Chemical Products Co., Ltd., a wholly-owned subsidiary of Jinong in the PRC (“Gufeng”), and
(v) Beijing Tianjuyuan Fertilizer Co., Ltd., Gufeng’s wholly-owned subsidiary in the PRC (“Tianjuyuan”).
On
June 30, 2016 the Company, through its wholly-owned subsidiary Jinong, entered into strategic acquisition agreements and a series of
contractual agreements with the shareholders of the following six companies that are organized under the laws of the PRC and would be
deemed VIEs: Shaanxi Lishijie Agrochemical Co., Ltd. (“Lishijie”), Songyuan Jinyangguang Sannong Service Co., Ltd. (“Jinyangguang”),
Shenqiu County Zhenbai Agriculture Co., Ltd. (“Zhenbai”), Weinan City Linwei District Wangtian Agricultural Materials Co.,
Ltd. (“Wangtian”), Aksu Xindeguo Agricultural Materials Co., Ltd. (“Xindeguo”), and Xinjiang Xinyulei Eco-agriculture
Science and Technology co., Ltd. (“Xinyulei”). On January 1, 2017, the Company, through its wholly-owned subsidiary Jinong,
entered into strategic acquisition agreements and a series of contractual agreements with the shareholders of the following two companies
that are organized under the laws of the PRC and would be deemed VIEs, Sunwu County Xiangrong Agricultural Materials Co., Ltd. (“Xiangrong”),
and Anhui Fengnong Seed Co., Ltd. (“Fengnong”).
On
November 30, 2017, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the
series of contractual agreements with the shareholders of Zhenbai.
On
June 2, 2021, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series
of contractual agreements with the shareholders of Xindeguo, Xinyulei and Xiangrong.
On
December 1, 2021, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the
series of contractual agreements with the shareholders of Lishijie.
On
December 31, 2021, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the
series of contractual agreements with the shareholders of Fengnong.
On
March 31, 2022, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series
of contractual agreements with the shareholders of Jinyangguang.
On
March 31, 2022, the Company, through its wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series
of contractual agreements with the shareholders of Wangtian.
Yuxing
may also collectively be referred to as the “the VIE Company”.
The
Company’s corporate structure as of March 31, 2022 is set forth in the diagram below:
NOTE
2 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principle
of consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Green New Jersey,
Jinong, Gufeng, Tianjuyuan, and the VIE Companies. All significant inter-company accounts and transactions have been eliminated in consolidation.
For
purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation in accordance
with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s consolidated
financial statements have been presented with its former VIEs Xindeguo, Xinyulei, Xiangrong, Lishijie, Fengnong, Jinyangguang and Wangtian
as a discontinued operation. See Note 21, “Discontinued Operations,” for more information.
Effective
June 16, 2013, Yuxing was converted from being a wholly-owned foreign enterprise 100% owned by Jinong to a domestic enterprise 100% owned
one natural person, who is not affiliated to the Company (“Yuxing’s Owner”). Effective the same day, Yuxing’s
Owner entered into a series of contractual agreements with Jinong pursuant to which Yuxing became the VIE of Jinong.
VIE
assessment
A
VIE is an entity (1) that has total equity at risk that is not sufficient to finance its activities without additional subordinated financial
support from other entities, (2) where the group of equity holders does not have the power to direct the activities of the entity that
most significantly impact the entity’s economic performance, or the obligation to absorb the entity’s expected losses or
the right to receive the entity’s expected residual returns, or both, or (3) where the voting rights of some investors are not
proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns
of the entity, or both, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor
that has disproportionately few voting rights. In order to determine if an entity is considered a VIE, the Company first performs a qualitative
analysis, which requires certain subjective decisions regarding its assessments, including, but not limited to, the design of the entity,
the variability that the entity was designed to create and pass along to its interest holders, the rights of the parties, and the purpose
of the arrangement. If the Company cannot conclude after a qualitative analysis whether an entity is a VIE, it performs a quantitative
analysis. The qualitative analysis considered the design of the entity, the risks that cause variability, the purpose for which the entity
was created, and the variability that the entity was designed to pass along to its variable interest holders. When the primary beneficiary
could not be identified through a qualitative analysis, we used internal cash flow models to compute and allocate expected losses or
expected residual returns to each variable interest holder based upon the relative contractual rights and preferences of each interest
holder in the VIE’s capital structure.
Use
of estimates
The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during
the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However,
actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties, including uncertainty
in the current economic environment due to the recent outbreak of a novel strain of the COVID-19.
Leases
The
Company determines if an arrangement is a lease or contains a lease at inception. Operating lease right-of-use assets and lease liabilities
are recognized at commencement based on the present value of lease payments over the lease term. As the implicit rate is typically not
readily determinable in the Company’s lease agreements, the Company uses its incremental borrowing rate as of the lease commencement
date to determine the present value of the lease payments. The incremental borrowing rate is based on the Company’s specific rate
of interest to borrow on a collateralized basis, over a similar term and in a similar economic environment as the lease. Lease expense
is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recognized on the
balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Additionally, the
Company accounts for lease and non-lease components as a single lease component for its identified asset classes. As of March 31, 2022,
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 March 31, 2022 and June 30, 2021 were $44,645,026 and $18,515,829, respectively. There is no insurance securing these
deposits in China. In addition, the Company also had $6,791,369 and $78,115 in cash in two banks in the United States as of March 31,
2022 and June 30, 2021, respectively. Cash overdraft as of balance sheet date will be reflected as liabilities in the balance sheet.
The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank
accounts.
Accounts
receivable
Management
regularly reviews the composition of accounts receivable and analyzes customer credit worthiness, current economic trends and changes
in customer payment patterns to evaluate the adequacy of these reserves at each year-end. Accounts considered uncollectible are provisioned
for /written off based upon management’s assessment. As of March 31, 2022, and June 30, 2021, the Company had accounts receivable
of $40,158,928 and $102,783,004, net of allowance for doubtful accounts of $32,797,394 and $23,738,987, respectively. The company recorded
bad debt expense in the amount of $ 40 million and $ 61 million for nine months ended March 31, 2022 and 2021, 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 March 31, 2022, and 2021, the Company had no reserve for obsolete goods. The company confirmed the loss
of $4 million and $11 million of inventories for nine months ended March 31, 2022 and 2021, 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 March 31, 2022 and 2021, 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 March 31, 2022, and June 30, 2021, the Company had customer
deposits of $5,803,179 and $6,257,215, respectively.
Earnings
per share
Basic
earnings per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted
earnings per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common
shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options
and stock awards.
The
components of basic and diluted earnings per share consist of the following:
| |
Three Months Ended | |
| |
March 31, | |
| |
2022 | | |
2021 | |
(Loss) from continuing operations for Basic Earnings Per Share | |
$ | (30,595,680 | ) | |
$ | (15,838,043 | ) |
(Loss) from discontinued operations for Basic Earnings Per Share | |
| (7,483,147 | ) | |
| 1,023,254 | |
(Loss) for Basic Earnings Per Share | |
| (38,078,827 | ) | |
| (14,814,789 | ) |
Basic Weighted Average Number of Shares | |
| 8,487,629 | | |
| 6,350,129 | |
(Loss) from continuing operations Per Share – Basic | |
$ | (3.60 | ) | |
$ | (2.49 | ) |
(Loss) Income from discontinued operations Per Share – Basic | |
$ | (0.88 | ) | |
$ | 0.16 | |
Net (Loss) Per Share – Basic | |
$ | (4.49 | ) | |
$ | (2.33 | ) |
(Loss) from continuing operations for Diluted Earnings Per Share | |
$ | (30,595,680 | ) | |
$ | (15,838,043 | ) |
(Loss) Income from discontinued operations for Diluted Earnings Per Share | |
$ | (7,483,147 | ) | |
| 1,023,254 | |
(Loss) for Diluted Earnings Per Share | |
$ | (38,078,827 | ) | |
| (14,814,789 | ) |
Diluted Weighted Average Number of Shares | |
| 8,487,629 | | |
| 6,350,129 | |
(Loss) from continuing operations Per Share – Diluted | |
$ | (3.60 | ) | |
$ | (2.49 | ) |
(Loss) Income from discontinued operations Per Share – Diluted | |
$ | (0.88 | ) | |
$ | 0.16 | |
Net (Loss) Per Share – Diluted | |
$ | (4.49 | ) | |
$ | (2.33 | ) |
| |
Nine Months Ended | |
| |
March 31, | |
| |
2022 | | |
2021 | |
(Loss) from continuing operations for Basic Earnings Per Share | |
$ | (67,155,404 | ) | |
| (85,093,611 | ) |
(Loss) from discontinued operations for Basic Earnings Per Share | |
| (17,983,567 | ) | |
| (710,755 | ) |
(Loss) for Basic Earnings Per Share | |
| (85,138,971 | ) | |
| (85,804,366 | ) |
Basic Weighted Average Number of Shares | |
| 8,487,629 | | |
| 6,350,129 | |
(Loss) from continuing operations Per Share – Basic | |
$ | (7.91 | ) | |
$ | (13.40 | ) |
(Loss) Income from discontinued operations Per Share – Basic | |
$ | (2.12 | ) | |
$ | (0.11 | ) |
Net (Loss) Per Share – Basic | |
$ | (10.03 | ) | |
$ | (13.51 | ) |
(Loss) from continuing operations for Diluted Earnings Per Share | |
$ | (67,155,404 | ) | |
$ | (85,093,611 | ) |
(Loss) Income from discontinued operations for Diluted Earnings Per Share | |
$ | (17,983,567 | ) | |
| (710,755 | ) |
(Loss) for Diluted Earnings Per Share | |
$ | (85,138,971 | ) | |
| (85,804,366 | ) |
Diluted Weighted Average Number of Shares | |
| 8,487,629 | | |
| 6,350,129 | |
(Loss) from continuing operations Per Share – Diluted | |
$ | (7.91 | ) | |
$ | (13.40 | ) |
(Loss) Income from discontinued operations Per Share – Diluted | |
$ | (2.12 | ) | |
$ | (0.11 | ) |
Net (Loss) Per Share – Diluted | |
$ | (10.03 | ) | |
$ | (13.51 | ) |
Recent
accounting pronouncements
In
December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”),
ASU 2019-12, “Simplifying the Accounting for Income Taxes.” ASU 2019-12 eliminates certain exceptions within ASC 740,
“Income Taxes,” and clarifies certain aspects of ASC 740 to promote consistency among reporting entities. ASU 2019-12
is effective for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted. Most amendments
within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or
modified retrospective basis. The Company evaluated the impact that with the adoption of ASU 2019-12, and it did not have any impact
on its consolidated financial statements.
In
August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts
in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required
under current GAAP. The ASU also removes certain settlement conditions that are required for equity contracts to qualify for the derivative
scope exception and simplifies the diluted earnings per share calculation in certain areas. The amendments in this ASU are effective
for annual and interim periods beginning after December 15, 2023, although early adoption is permitted. The Company is in the process
of evaluating the impact of this new guidance on its financial statements.
NOTE
3 – GOING CERCERN
The
Company’s financial statements are prepared assuming that the Company will continue as a going concern. The Company has incurred
operating losses and had negative operating cash flows during the reporting period from July 1, 2021 through March 31, 2022. 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:
| |
March 31, | | |
June 30, | |
| |
2022 | | |
2021 | |
Raw materials | |
$ | 18,092,714 | | |
$ | 18,023,063 | |
Supplies and packing materials | |
$ | 535,420 | | |
$ | 431,076 | |
Work in progress | |
$ | 224,145 | | |
$ | 252,873 | |
Finished goods | |
$ | 32,713,241 | | |
$ | 45,608,891 | |
Total | |
$ | 51,565,520 | | |
$ | 64,315,903 | |
NOTE
5 – PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment consisted of the following:
| |
March 31, | | |
June 30, | |
| |
2022 | | |
2021 | |
Building and improvements | |
$ | 42,131,601 | | |
$ | 41,429,653 | |
Auto | |
| 3,069,686 | | |
| 3,472,838 | |
Machinery and equipment | |
| 19,853,802 | | |
| 19,369,913 | |
Total property, plant and equipment | |
| 65,055,089 | | |
| 64,272,403 | |
Less: accumulated depreciation | |
| (44,566,259 | ) | |
| (42,051,387 | ) |
Total | |
$ | 20,488,830 | | |
$ | 22,221,016 | |
NOTE
6 – INTANGIBLE ASSETS
Intangible
assets consisted of the following:
| |
March 31, | | |
June 30, | |
| |
2022 | | |
2021 | |
Land use rights, net | |
$ | 9,291,217 | | |
$ | 9,330,109 | |
Technology patent, net | |
| - | | |
| - | |
Customer relationships, net | |
| - | | |
| 656,625 | |
Non-compete agreement | |
| - | | |
| 16,589 | |
Trademarks | |
| 6,507,757 | | |
| 6,404,328 | |
Total | |
$ | 15,798,974 | | |
$ | 16,407,651 | |
LAND
USE RIGHT
On
September 25, 2009, Yuxing was granted a land use right for approximately 88 acres (353,000 square meters or 3.8 million square feet)
by the People’s Government and Land & Resources Bureau of Hu County, Xi’an, Shaanxi Province. The fair value of the related
intangible asset was determined to be the respective cost of RMB73,184,895 (or $11,511,984). The intangible asset is being amortized
over the grant period of 50 years using the straight-line method.
On
August 13, 2003, Tianjuyuan was granted a certificate of Land Use Right for a parcel of land of approximately 11 acres (42,726 square
meters or 459,898 square feet) at Ping Gu District, Beijing. The purchase cost was recorded at RMB1,045,950 (or $164,528). The intangible
asset is being amortized over the grant period of 50 years.
On
August 16, 2001, Jinong received a land use right as a contribution from a shareholder, which was granted by the People’s Government
and Land & Resources Bureau of Yangling District, Shaanxi Province. The fair value of the related intangible asset at the time of
the contribution was determined to be RMB7,285,099 (or $1,145,946). The intangible asset is being amortized over the grant period of
50 years.
The
Land Use Rights consisted of the following:
| |
March 31, | | |
June 30, | |
| |
2022 | | |
2021 | |
Land use rights | |
$ | 12,657,930 | | |
| 12,456,753 | |
Less: accumulated amortization | |
| (3,366,713 | ) | |
| (3,126,644 | ) |
Total land use rights, net | |
$ | 9,291,217 | | |
| 9,330,109 | |
TECHNOLOGY
PATENT
On
August 16, 2001, Jinong was issued a technology patent related to a proprietary formula used in the production of humic acid. The fair
value of the related intangible asset was determined to be the respective cost of RMB 5,875,068 (or $924,148) and is being amortized
over the patent period of 10 years using the straight-line method. This technology patent has been fully amortized.
On
July 2, 2010, the Company acquired Gufeng and its wholly-owned subsidiary Tianjuyuan. The fair value of the acquired technology patent
was estimated to be RMB9,200,000 (or $1,447,160) and is amortized over the remaining useful life of six years using the straight-line
method. As of March 31, 2022, this technology patent is fully amortized.
The
technology know-how consisted of the following:
| |
March 31, | | |
June 30, | |
| |
2022 | | |
2021 | |
Technology know-how | |
$ | 2,371,308 | | |
$ | 2,333,621 | |
Less: accumulated amortization | |
| (2,371,308 | ) | |
| (2,333,621 | ) |
Total technology know-how, net | |
$ | - | | |
$ | - | |
CUSTOMER
RELATIONSHIPS
On
July 2, 2010, the Company acquired Gufeng and its wholly-owned subsidiary Tianjuyuan. The fair value of the acquired customer relationships
was estimated to be RMB65,000,000 (or $10,224,500) and is amortized over the remaining useful life of ten years. On June 30, 2016 and
January 1, 2017, the Company acquired the sales VIE Companies. The fair value of the acquired customer relationships was estimated to
be RMB8,808,783 (or $1,385,622) and is amortized over the remaining useful life of seven to ten years.
| |
March 31, | | |
June 30, | |
| |
2022 | | |
2021 | |
Customer relationships | |
$ | 10,224,500 | | |
$ | 12,028,177 | |
Less: accumulated amortization | |
| (10,224,500 | ) | |
| (11,371,552 | ) |
Total customer relationships, net | |
$ | - | | |
$ | 656,625 | |
NON-COMPETE
AGREEMENT
On
July 2, 2010, the Company acquired Gufeng and its wholly-owned subsidiary Tianjuyuan. The fair value of the acquired non-compete agreement
was estimated to be RMB1,320,000 (or $207,636) and is amortized over the remaining useful life of five years using the straight-line
method. On June 30, 2016 and January 1, 2017, the Company acquired the sales VIE Companies. The fair value of the acquired non-compete
agreements was estimated to be RMB3,099,908 (or $487,616) and is amortized over the remaining useful life of five years using the straight-line
method.
| |
March 31, | | |
June 30, | |
| |
2022 | | |
2021 | |
Non-compete agreement | |
$ | 207,636 | | |
$ | 959,345 | |
Less: accumulated amortization | |
| (207,636 | ) | |
| (942,756 | ) |
Total non-compete agreement, net | |
$ | - | | |
$ | 16,589 | |
TRADEMARKS
On
July 2, 2010, the Company acquired Gufeng and its wholly-owned subsidiary Tianjuyuan. The preliminary fair value of the acquired trademarks
was estimated to be RMB40,700,000 (or $6,402,110) and is subject to an annual impairment test.
AMORTIZATION
EXPENSE
Estimated
amortization expenses of intangible assets for the next five twelve months periods ended March 31, are as follows:
Twelve
Months Ended on March 31, |
|
Expense
($) |
|
2023 |
|
|
518,338 |
|
2024 |
|
|
387,328 |
|
2025 |
|
|
295,240 |
|
2026 |
|
|
278,206 |
|
2027 |
|
|
63,191 |
|
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 March 31, 2022, the balance
of other non-current assets was $8,460,119, which was the lease fee advances for agriculture lands that the Company engaged in Shiquan
County from 2023 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 $1.6 million
and $1.5 million as expenses for the nine months ended March 31, 2022 and 2021, respectively.
Estimated
amortization expenses of the lease advance payments for the next four twelve-month periods ended March 31 and thereafter are as follows:
Twelve
months ending March 31, |
|
|
|
2024 |
|
$ |
2,111,753 |
|
2025 |
|
$ |
2,111,753 |
|
2026 |
|
$ |
2,111,753 |
|
2027 |
|
$ |
2,124,861 |
|
NOTE
8 – ACCRUED EXPENSES AND OTHER PAYABLES
Accrued
expenses and other payables consisted of the following:
| |
March 31, | | |
June 30, | |
| |
2022 | | |
2021 | |
Payroll and welfare payable | |
$ | 187,897 | | |
$ | 184,910 | |
Accrued expenses | |
| 8,248,651 | | |
| 7,957,290 | |
Other payables | |
| 86,146,668 | | |
| 5,326,796 | |
Other levy payable | |
| 131,922 | | |
| 129,825 | |
Total | |
$ | 94,715,138 | | |
$ | 13,598,821 | |
NOTE
9 – AMOUNT DUE TO RELATED PARTIES
At
the end of December 2015, Yuxing entered into a sales agreement with the Company’s affiliate, 900LH.com Food Co., Ltd. (“900LH.com”,
previously announced as Xi’an Gem Grain Co., Ltd) pursuant to which Yuxing is to supply various vegetables to 900LH.com for its
incoming seasonal sales at the holidays and year ends (the “Sales Agreement”). The contingent contracted value of the Sales
Agreement is RMB 25,500,000 (approximately $4,011,150). For the nine months ended March 31, 2022 and 2021, Yuxing has sold approximately
$56,615 and $175,948 products to 900LH.com.
As of March 31, 2022, and June 30, 2021, the amount
due to related parties was $5,238,700 and $4,976,689, respectively. As of March 31, 2022, and June 30, 2021, $1,101,100 and
$1,083,600, respectively, were amounts that Gufeng borrowed from a related party, Xi’an Techteam Science& Technology Industry
(Group) Co. Ltd., a company controlled by Mr. Zhuoyu Li, Chairman and CEO of the Company, representing unsecured, non-interest-bearing
loans that are due on demand. These loans are not subject to written agreements. For the nine months ended March 31, 2022,
Mr. Zhuoyu Li made unsecured non-interest-bearing advances with an amount of $150,000 to the Company which is due on demand without maturity
and paid professional expenses incurred by the Company on the Company’s behalf with amount of $94,000.
As
of March 31, 2022, and June 30, 2021, the Company’s subsidiary, Jinong, owed 900LH.com $7,951 and $12,688, respectively.
On
July 1, 2020, Jinong signed an office lease with Kingtone Information Technology Co., Ltd. (“Kingtone Information”), of which
Mr. Zhuoyu Li, Chairman and CEO of the Company, served as Chairman. Pursuant to the lease, Jinong rented 612 square meters (approximately
6,588 square feet) of office space from Kingtone Information. The lease provides for a two-year term effective as of July 1, 2020 with
monthly rent of RMB24,480 (approximately $3,851).
NOTE
10 – LOAN PAYABLES
As
of March 31, 2022, the short-term loan payables consisted of three loans which mature on dates ranging from May 27, 2021 through May
26, 2022 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 |
|
|
March 31,
2022 |
|
1 |
|
Postal
Saving Bank of China - Pinggu Branch |
|
May 27, 2021-May 26, 2022 |
|
|
5.66 |
% |
|
|
2,359,500 |
|
2 |
|
Beijing
Bank - Pinggu Branch |
|
May 27, 2021-May 26, 2022 |
|
|
5.66 |
% |
|
|
314,600 |
|
3 |
|
Postal
Saving Bank of China - Pinggu Branch |
|
May 25, 2021-May 21, 2022 |
|
|
5.22 |
% |
|
|
1,573,000 |
|
|
|
Total |
|
|
|
|
|
|
|
$ |
4,247,100 |
|
The
interest expense from short-term loans was $203,796 and $181,269 for the period ended March 31, 2022 and 2021, respectively.
NOTE
11 – CONVERTIBLE NOTES PAYABLE
Relating
to the acquisition of the VIE Companies, the Company subsidiary, Jinong, issued to the VIE Companies shareholders convertible notes payable
twice, in the aggregate notional amount of RMB 51,000,000 ($7,803,000) with a term of three years and an annual interest rate of 3%.
No. |
|
Related
Acquisitions of Sales VIEs |
|
Issuance
Date |
|
Maturity
Date |
|
Notional
Interest
Rate |
|
|
Conversion
Price |
|
|
Notional
Amount
(in RMB) |
|
1 |
|
Wangtian,
Lishijie, Xindeguo, Xinyulei, Jinyangguang |
|
June 30, 2016 |
|
June 30, 2019 |
|
|
3 |
% |
|
$ |
5.00 |
|
|
|
39,000,000 |
|
2 |
|
Fengnong,
Xiangrong |
|
January 1, 2017 |
|
December 31, 2019 |
|
|
3 |
% |
|
$ |
5.00 |
|
|
|
12,000,000 |
|
The
convertible notes take priority over the preferred stock and common stock of Jinong, and any other class or series of capital stocks
Jinong issues in the future in terms of interests and payments in the event of any liquidation, dissolution or winding up of Jinong.
On or after the third anniversary of the issuance date of the note, noteholders may request Jinong to process the note conversion to
convert the note into shares of the Company’s common stock. The notes cannot be converted prior to the mature date. The per share
conversion price of the notes is the higher of the following: (i) $5.00 per share or (ii) 75% of the closing price of the Company’s
common stock on the date the noteholder delivers the conversion notice. Due to the discontinuation of VIE agreements with Zhenbai’s
shareholders, certain convertible notes issued on June 30, 2016 with a face amount of RMB 12,000,000 ($1,836,000) were tendered back
to the Company. All outstanding balance of unpaid principal and accrued interest in the tendered convertible notes were forfeited.
On
November 15, 2019, the Company issued 995,000 shares of common stock at the price of $5.00 per share for the total amount of $4,975,000
to the holders of the Company’s convertible notes payable in connection with the payment of the convertible notes’ principal
and interests. The convertible notes were issued on June 30, 2016 and matured on June 30, 2019.
On
February 14, 2020, the Company issued 377,650 shares of common stock at the price of $5.00 per share for the total amount of $1,888,250
to the holders of the Company’s convertible notes payable in connection with the payment of the convertible notes’ principal
and interests. The convertible notes were issued on January 1, 2017 and matured on December 31, 2019.
The
Company determined that the fair value of the convertible notes payable was 0 as of March 31, 2022 and June 30, 2021. Aside from the
forfeiture of the convertible notes previously issued to Zhenbai’s shareholders, the difference between the fair value of the
notes and the face amount of the notes is being amortized to accretion implied interest expense over the three-year life of the
notes. The accumulated amortization of this discount into accretion expenses was $1,375,499 and $1,375,499
as of March 31, 2022 and 2021.
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 nine-month period ended March 31, 2022 and 2021 of 0 and $277,685, 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
| |
March 31, | | |
June 30, | |
| |
2022 | | |
2021 | |
VAT provision | |
$ | (392,037 | ) | |
$ | (284,940 | ) |
Income tax payable | |
| (2,434,156 | ) | |
| 1,136,929 | |
Other levies | |
| 691,203 | | |
| 2,679,970 | |
Repatriation tax | |
| 29,010,535 | | |
| 29,010,535 | |
Total | |
$ | 26,875,545 | | |
$ | 32,542,494 | |
The provision for income taxes consists of the following
| |
March 31, | | |
March 31, | |
| |
2022 | | |
2021 | |
Current tax - foreign | |
$ | 629,176 | | |
$ | 3,283,395 | |
Deferred tax | |
| - | | |
| - | |
Total | |
$ | 629,176 | | |
$ | 3,283,395 | |
Significant components of deferred tax assets were as follows:
| |
March 31, | | |
June 30, | |
| |
2022 | | |
2021 | |
Deferred tax assets | |
| | |
| |
Deferred Tax Benefit | |
| 36,946,301 | | |
| 36,359,106 | |
Valuation allowance | |
| (36,946,301 | ) | |
| (36,359,106 | ) |
Total deferred tax assets | |
$ | - | | |
| - | |
Tax Rate Reconciliation
Our effective tax rates were approximately -0.7%
and-4.0% for the nine months ended March 31, 2022 and 2021, 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 nine months ended March 31, 2022 and 2021 for the following reasons:
March 31, 2022
| |
China | | |
| | |
United States | | |
| | |
| | |
| |
| |
15% - 25% | | |
| | |
21% | | |
| | |
Total | | |
| |
Pretax income (loss) | |
$ | (83,931,363 | ) | |
| | | |
| (578,432 | ) | |
| | | |
$ | (84,509,795 | ) | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Expected income tax expense (benefit) | |
| (20,982,841 | ) | |
| 25.0 | % | |
| (121,471 | ) | |
| 21.0 | % | |
| (21,104,312 | ) | |
| | |
High-tech income benefits on Jinong | |
| 2,862,403 | | |
| (3.4 | )% | |
| - | | |
| - | | |
| 2,862,403 | | |
| | |
Losses from subsidiaries in which no benefit is recognized | |
| 18,162,419 | | |
| (21.6 | )% | |
| - | | |
| - | | |
| 18,162,419 | | |
| | |
Change in valuation allowance on deferred tax asset from US tax benefit | |
| 587,195 | | |
| (0.7 | )% | |
| 121,471 | | |
| (21.0 | )% | |
| 708,066 | | |
| | |
Actual tax expense | |
$ | 629,176 | | |
| (0.7 | )% | |
$ | - | | |
| - | % | |
$ | 629,176 | | |
| (0.7 | )% |
March 31, 2021
| |
China | | |
| | |
United States | | |
| | |
| | |
| |
| |
15% - 25% | | |
| | |
21% | | |
| | |
Total | | |
| |
Pretax income (loss) | |
$ | (81,169,349 | ) | |
| | | |
| (1,351,622 | ) | |
| | | |
$ | (82,520,971 | ) | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Expected income tax expense (benefit) | |
| (20,292,337 | ) | |
| 25.0 | % | |
| (283,841 | ) | |
| 21.0 | % | |
| (20,576,178 | ) | |
| | |
High-tech income benefits on Jinong | |
| 2,667,471 | | |
| (3.3 | )% | |
| - | | |
| - | | |
| 2,667,471 | | |
| | |
Losses from subsidiaries in which no benefit is recognized | |
| 18,725,422 | | |
| (23.1 | )% | |
| - | | |
| - | | |
| 18,725,422 | | |
| | |
Change in valuation allowance on deferred tax asset from US tax benefit | |
| 2,182,839 | | |
| (2.7 | )% | |
| 283,841 | | |
| (21.0 | )% | |
| 2,466,680 | | |
| | |
Actual tax expense | |
$ | 3,283,395 | | |
| (4.0 | )% | |
$ | - | | |
| - | % | |
$ | 3,283,395 | | |
| (4.0 | )% |
NOTE 13 – STOCKHOLDERS’ EQUITY
Common Stock
On November 23, 2021,
the Company entered into a Share Purchase Agreement with certain non-US investors, giving them the right to purchase up to 13,142,857
shares of the Company’s common stock, par value $0.001 per share, at the price of $15 per share in a transaction exempt from registration
under the Securities Act of 1933, as amended, in reliance on an exemption provided by Rule 903 of Regulation S and/or Section 4(a)(2)
of the Securities Act. The aggregate purchase price for the issuable shares is up to $197,142,855.
On April 4, 2022, the
Company completed the issuance of 1,314,286 shares of its Common Stock to Ran Caihua for $19,714,290 and 2,286,857 shares of its Common
Stock to Xu Xiuzhen for $34,302,855. Both sales were made pursuant to a Share Purchase Agreement dated November 23, 2021 in transactions
exempt from registration under the Securities Act of 1933, as amended, in reliance on an exemption provided by Rule 903 of Regulation
S and/or Section 4(a)(2) of the Securities Act.
On April 8, 2022, the Company issued 52,695 shares
of common stock to settle the payable of consulting services under the 2009 Plan. The value of the stock was $440,000 and was based on
the fair value of the Company’s common stock on the grant date of March 15, 2022 when the Company authorized the grant.
There were no shares of common stock issued during
the nine months ended March 31, 2022 and 2021.
As of March 31, 2022, the Company received $70,774,275
stock purchase fund and booked it as other payables.
As of March 31, 2022, and June 30, 2021, there
were 8,487,629 and 8,487,629 shares of common stock issued and outstanding, respectively.
Preferred Stock
Under the Company’s Articles of Incorporation,
the Board has the authority, without further action by stockholders, to designate up to 20,000,000 shares of preferred stock in one or
more series and to fix the rights, preferences, privileges, qualifications and restrictions granted to or imposed upon the preferred stock,
including dividend rights, conversion rights, voting rights, rights and terms of redemption, liquidation preference and sinking fund terms,
any or all of which may be greater than the rights of the common stock. If the Company sells preferred stock under its registration statement
on Form S-3, it will fix the rights, preferences, privileges, qualifications and restrictions of the preferred stock of each series in
the certificate of designation relating to that series and will file the certificate of designation that describes the terms of the series
of preferred stock the Company offers before the issuance of the related series of preferred stock.
As of March 31, 2022, 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 six vendors from which the Company
purchased more than 10% of its raw materials, with the total of 66.4% of its raw materials for the nine months ended March 31, 2022. Total
purchase from these vendors were $75,165,338 for the nine-month period ended March 31, 2021.
There was only one vendor from which the Company
purchased more than 10% of its raw materials, with the total of 11.2% of its raw materials for the nine months ended March 31, 2021. Total
purchase from this vendor was $13,506,092 for the nine-month period ended March 31, 2021.
There was only one customer counted over 10% of
the Company’s sales, with the total of 10.1% of the Company’s sales for the nine months ended March 31, 2022. Total sale to
this customer was $13,345,924 for the nine-month period ended March 31, 2021.
No customer accounted for over 10% of the Company’s sales for
the nine months ended March 31, 2021.
Litigation
On June 5, 2020, an individual filed suit pro
se (as in, representing oneself without an attorney) in the Southern District of Florida federal court alleging violations of the Securities
Exchange Act. The Company believes the action is without merit and vigorously opposed it. The company moved to dismiss the litigation
and for attorney’s fees from the plaintiff. On November 2, 2020, the case was transferred to the United States District Court for
The Southern District Of New York. On September 30, 2021, the Southern District of New York federal court presiding over the case dismissed
all claims against the company, its executives, and its independent directors. The dismissal was without prejudice and the plaintiff can
appeal or amend within 30 days. The plaintiff amended the complaint on Oct 30, 2021. The Company intends to move to dismiss it.
NOTE 15 – SEGMENT REPORTING
The Company is organized into four main business
segments, based on location and product: Jinong (fertilizer production), Gufeng (fertilizer production), Yuxing (agricultural products
production) and the sales VIEs. Each of the four operating segments referenced above has separate and distinct general ledgers. The chief
operating decision maker (“CODM”) receives financial information, including revenue, gross margin, operating income (expense)
and net income (loss) produced from the various general ledger systems to make decisions about allocating resources and assessing performance;
however, the principal measure of segment profitability or loss used by the CODM is net income (loss) by segment.
| |
Three Months Ended | | |
Three Months Ended | | |
Nine Months Ended | | |
Nine Months Ended | |
| |
March 31, 2022 | | |
March 31, 2021 | | |
March 31, 2022 | | |
March 31, 2021 | |
Revenues from unaffiliated customers: | |
| | |
| | |
| | |
| |
Jinong | |
$ | 13,385,022 | | |
$ | 15,818,610 | | |
$ | 43,513,283 | | |
$ | 45,249,797 | |
Gufeng | |
| 45,205,467 | | |
| 48,438,434 | | |
| 81,567,133 | | |
| 86,703,031 | |
Yuxing | |
| 2,548,383 | | |
| 3,055,588 | | |
| 8,256,480 | | |
| 8,161,271 | |
Sales VIEs | |
| - | | |
| - | | |
| - | | |
| - | |
Consolidated | |
$ | 61,138,872 | | |
$ | 67,312,632 | | |
$ | 133,336,896 | | |
$ | 140,114,099 | |
| |
| | | |
| | | |
| | | |
| | |
Operating income (loss): | |
| | | |
| | | |
| | | |
| | |
Jinong | |
$ | (5,300,141 | ) | |
$ | (4,562,066 | ) | |
$ | (11,587,451 | ) | |
$ | (9,626,306 | ) |
Gufeng | |
| (26,737,974 | ) | |
| (11,120,630 | ) | |
| (56,636,587 | ) | |
| (71,940,923 | ) |
Yuxing | |
| 143,158 | | |
| 174,453 | | |
| 460,517 | | |
| 462,879 | |
Reconciling item (1) | |
| - | | |
| - | | |
| - | | |
| - | |
Reconciling item (2) | |
| (78,453 | ) | |
| (381,561 | ) | |
| (579,382 | ) | |
| (1,351,629 | ) |
Consolidated | |
$ | (31,973,410 | ) | |
$ | (15,889,804 | ) | |
$ | (68,342,903 | ) | |
$ | (82,455,979 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss): | |
| | | |
| | | |
| | | |
| | |
Jinong | |
$ | (5,243,617 | ) | |
$ | (4,546,023 | ) | |
$ | (11,449,612 | ) | |
$ | (9,836,830 | ) |
Gufeng | |
| (26,790,346 | ) | |
| (11,179,039 | ) | |
| (56,904,522 | ) | |
| (72,188,675 | ) |
Yuxing | |
| 204,488 | | |
| 174,804 | | |
| 601,492 | | |
| 479,363 | |
Reconciling item (1) | |
| 946 | | |
| 5 | | |
| 951 | | |
| 7 | |
Reconciling item (2) | |
| (78,454 | ) | |
| (287,609 | ) | |
| (1,166,578 | ) | |
| (3,534,468 | ) |
Reconciling item (3) | |
| 1,311,304 | | |
| (181 | ) | |
| 1,762,866 | | |
| (13,008 | ) |
Consolidated | |
$ | (30,595,680 | ) | |
$ | (15,838,043 | ) | |
$ | (67,155,404 | ) | |
$ | (85,093,611 | ) |
| |
| | | |
| | | |
| | | |
| | |
Depreciation and Amortization: | |
| | | |
| | | |
| | | |
| | |
Jinong | |
$ | 211,645 | | |
$ | 206,810 | | |
$ | 629,332 | | |
$ | 601,680 | |
Gufeng | |
| 207,187 | | |
| 326,677 | | |
| 617,578 | | |
| 935,344 | |
Yuxing | |
| 324,846 | | |
| 318,190 | | |
| 968,799 | | |
| 928,761 | |
Consolidated | |
$ | 743,677 | | |
$ | 851,677 | | |
$ | 2,215,708 | | |
$ | 2,465,785 | |
| |
| | | |
| | | |
| | | |
| | |
Interest expense: | |
| | | |
| | | |
| | | |
| | |
Jinong | |
| - | | |
| - | | |
| - | | |
| - | |
Gufeng | |
| 65,278 | | |
| 57,316 | | |
| 203,707 | | |
| 181,269 | |
Yuxing | |
| - | | |
| - | | |
| - | | |
| - | |
Consolidated | |
$ | 65,278 | | |
$ | 57,316 | | |
$ | 203,707 | | |
$ | 181,269 | |
| |
| | | |
| | | |
| | | |
| | |
Capital Expenditure: | |
| | | |
| | | |
| | | |
| | |
Jinong | |
$ | 8,139 | | |
$ | 2,020 | | |
$ | 29,411 | | |
$ | 59,068 | |
Gufeng | |
| 121 | | |
| 38,380 | | |
| 29,542 | | |
| 74,133 | |
Yuxing | |
| 854 | | |
| 106,540 | | |
| 33,978 | | |
| 106,540 | |
Consolidated | |
$ | 9,115 | | |
$ | 146,941 | | |
$ | 92,931 | | |
$ | 239,742 | |
| |
As of | |
| |
March 31, | | |
June 30, | |
| |
2022 | | |
2021 | |
Identifiable assets: | |
| | |
| |
Jinong | |
$ | 107,536,195 | | |
$ | 85,585,344 | |
Gufeng | |
| 107,380,389 | | |
| 130,346,782 | |
Yuxing | |
| 42,146,255 | | |
| 38,516,348 | |
Sales VIEs | |
| - | | |
| 43,862,592 | |
Reconciling item (1) | |
| (11,781,851 | ) | |
| (31,748,448 | ) |
Reconciling item (2) | |
| 166,121 | | |
| 166,121 | |
Consolidated | |
$ | 245,447,108 | | |
$ | 266,728,738 | |
(1) |
Reconciling amounts refer to the unallocated assets or expenses of Green New Jersey. |
(2) |
Reconciling amounts refer to the unallocated assets or expenses of the Parent Company. |
(3) |
The comparative numbers are excluding discontinued entities |
NOTE 16 – COMMITMENTS AND CONTINGENCIES
On July 1, 2020, Jinong signed an office lease
with Kingtone Information Technology Co., Ltd. (“Kingtone Information”), of which Mr. Zhuoyu Li, Chairman and CEO of the Company,
served as Chairman. Pursuant to the lease, Jinong rented 612 square meters (approximately 6,588 square feet) of office space from Kingtone
Information. The lease provides for a two-year term effective as of July 1, 2020 with monthly rent of RMB24,480 (approximately $3,851).
In February 2004, Tianjuyuan signed a fifty-year
lease with the village committee of Dong Gao Village and Zhen Nan Zhang Dai Village in the Beijing Ping Gu District, at a monthly rent
of RMB 2,958(approximately $465).
On August 1, 2021, Jinyangguang signed a one-year
lease for 1,236.88 square meters (approximately 13,315 square feet) commercial space with monthly rent of RMB12,500 (approximately $1,966)
effective August 1, 2021.
Accordingly, the Company recorded an aggregate
of $89,573 and $36,994 as rent expenses from these committed property leases for the nine-month periods ended March 31, 2022 and 2021,
respectively. The contingent rent expenses herein for the next five twelve-month periods ended March 31, are as follows:
Years ending March 31, | | |
| |
2023 | | |
$ | 51,792 | |
2024 | | |
| 51,792 | |
2025 | | |
| 51,792 | |
2026 | | |
| 51,792 | |
2027 | | |
| 51,792 | |
NOTE 17 – VARIABLE INTEREST ENTITIES
In accordance with accounting standards regarding
consolidation of variable interest entities, VIEs are generally entities that lack sufficient equity to finance their activities without
additional financial support from other parties or whose equity holders lack adequate decision-making ability. All VIEs with which a company
is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required
to consolidate the VIE for financial reporting purposes.
Green Nevada through one of its subsidiaries,
Jinong, entered into a series of agreements (the “VIE Agreements”) with Yuxing for it to qualify as a VIE, effective June
16, 2013.
The Company has concluded, based on the contractual
arrangements, that Yuxing is a VIE and that the Company’s wholly-owned subsidiary, Jinong, absorbs a majority of the risk of loss
from the activities of Yuxing, thereby enabling the Company, through Jinong, to receive a majority of Yuxing expected residual returns.
On June 30, 2016 and January 1, 2017, the Company,
through its wholly-owned subsidiary Jinong, entered into strategic acquisition agreements and into a series of contractual agreements
to qualify as VIEs with the shareholders of the sales VIE Companies.
Jinong, the sales VIE Companies, and the shareholders
of the sales VIE Companies also entered into a series of contractual agreements for the sales VIE Companies to qualify as VIEs (the “VIE
Agreements”).
On November 30, 2017, the Company, through its
wholly-owned subsidiary Jinong, exited the VIE agreements with the shareholders of Zhenbai.
On June 2, 2021, the Company, through its wholly-owned
subsidiary Jinong, exited the VIE agreements with the shareholders of Xinjiang and Xiangrong.
On December 1, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Lishijie.
On December 31, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Fengnong.
On March 31, 2022, the Company, through its wholly-owned
subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of
Jinyangguang.
On March 31, 2022, the Company, through its wholly-owned
subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of
Wangtian.
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 March 31, 2022 and June 30, 2021:
|
|
March 31, |
|
|
June 30, |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
- |
|
|
$ |
253,566 |
|
Accounts receivable, net |
|
|
|
|
|
|
35,360,138 |
|
Inventories |
|
|
|
|
|
|
6,681,758 |
|
Other current assets |
|
|
|
|
|
|
477,693 |
|
Advances to suppliers |
|
|
|
|
|
|
277,563 |
|
Total Current Assets |
|
|
|
|
|
|
43,050,718 |
|
|
|
|
|
|
|
|
|
|
Plant, Property and Equipment, Net |
|
|
|
|
|
|
138,662 |
|
Other assets |
|
|
|
|
|
|
|
|
Intangible Assets, Net |
|
|
|
|
|
|
673,213 |
|
Total Assets |
|
$ |
|
|
|
$ |
43,862,593 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
|
14,736,412 |
|
Customer deposits |
|
|
|
|
|
|
167,059 |
|
Accrued expenses and other payables |
|
|
|
|
|
|
9,162,742 |
|
Total Current Liabilities |
|
$ |
|
|
|
$ |
24,066,213 |
|
Total Liabilities |
|
$ |
|
|
|
$ |
24,066,213 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
19,796,380 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity |
|
$ |
|
|
|
$ |
43,862,593 |
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Revenue |
|
$ |
- |
|
|
$ |
21,811,360 |
|
Expenses |
|
|
|
|
|
|
20,613,304 |
|
Net income (loss) |
|
$ |
|
|
|
$ |
1,198,056 |
|
|
|
Nine Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
Revenue |
|
$ |
- |
|
|
$ |
46,615,150 |
|
Expenses |
|
|
|
|
|
|
46,846,543 |
|
Net income |
|
$ |
|
|
|
$ |
(231,393 |
) |
NOTE 18 – BUSINESS COMBINATIONS
On June 30, 2016, the Company, through its wholly-owned
subsidiary Jinong, entered into strategic acquisition agreements and also into a series of contractual agreements to qualify as VIEs with
the shareholders of Shaanxi Lishijie Agrochemical Co., Ltd., Songyuan Jinyangguang Sannong Service Co., Ltd., Shenqiu County Zhenbai Agriculture
Co., Ltd., Weinan City Linwei District Wangtian Agricultural Materials Co., Ltd., Aksu Xindeguo Agricultural Materials Co., Ltd., and
Xinjiang Xinyulei Eco-agriculture Science and Technology Co., Ltd.
Subsequently, on January 1, 2017, Jinong entered
into similar strategic acquisition agreements and a series of contractual agreements to qualify as VIEs with the shareholders of Sunwu
County Xiangrong Agricultural Materials Co., Ltd., and Anhui Fengnong Seed Co., Ltd.
On November 30, 2017, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Zhenbai.
On June 2, 2021, the Company, through its wholly-owned
subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of
Xindeguo, Xinyulei and Xiangrong.
On December 1, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Lishijie.
On December 31, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Fengnong.
On March 31, 2022, the Company, through its wholly-owned
subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of
Jinyangguang.
On March 31, 2022, the Company, through its wholly-owned
subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of
Wangtian.
The VIE Agreements are as follows:
Entrusted Management Agreements
Pursuant to the terms of certain Entrusted
Management Agreements dated June 30, 2016 and January 1, 2017, between Jinong and the shareholders of the sales VIE Companies (the “Entrusted
Management Agreements”), the sales VIE Companies and their shareholders agreed to entrust the operations and management of its business
to Jinong. According to the Entrusted Management Agreement, Jinong possesses the full and exclusive right to manage the sales VIE Companies’
operations, assets and personnel, has the right to control all the sales VIE Companies’ cash flows through an entrusted bank account,
is entitled to the sales VIE Companies’ net profits as a management fee, is obligated to pay all the sales VIE Companies’
payables and loan payments, and bears all losses of the sales VIE Companies. The Entrusted Management Agreements will remain in effect
until (i) the parties mutually agree to terminate the agreement; (ii) the dissolution of the sales VIE Companies; or (iii) Jinong acquires
all the assets or equity of the sales VIE Companies (as more fully described below under “Exclusive Option Agreements”).
Exclusive Technology Supply Agreements
Pursuant to the terms of certain Exclusive Technology
Supply Agreements dated June 30, 2016 and January 1, 2017, between Jinong and the sales VIE companies (the “Exclusive Technology
Supply Agreements”), Jinong is the exclusive technology provider to the sales VIE companies. The sales VIE companies agreed to pay
Jinong all fees payable for technology supply prior to making any payments under the Entrusted Management Agreement. The Exclusive Technology
Supply Agreements shall remain in effect until (i) the parties mutually agree to terminate the agreement; (ii) the dissolution of the
sales VIE companies; or (iii) Jinong acquires the sales VIE companies (as more fully described below under “Exclusive Option Agreements”).
Shareholder’s Voting Proxy Agreements
Pursuant to the terms of certain Shareholder’s
Voting Proxy Agreements dated June 30, 2016 and January 1, 2017, among Jinong and the shareholders of the sales VIE companies (the “Shareholder’s
Voting Proxy Agreements”), the shareholders of the sales VIE companies irrevocably appointed Jinong as their proxy to exercise on
such shareholders’ behalf all of their voting rights as shareholders pursuant to PRC law and the Articles of Association of the
sales VIE companies, including the appointment and election of directors of the sales VIE companies. Jinong agreed that it shall maintain
a board of directors, the composition and appointment of which shall be approved by the Board of the Company. The Shareholder’s
Voting Proxy Agreements will remain in effect until Jinong acquires all the assets or equity of the sales VIE companies.
Exclusive Option Agreements
Pursuant to the terms of certain Exclusive Option
Agreements dated June 30, 2016 and January 1, 2017, among Jinong, the sales VIE companies, and the shareholders of the sales VIE companies
(the “Exclusive Option Agreements”), the shareholders of the sales VIE companies granted Jinong an irrevocable and exclusive
purchase option (the “Option”) to acquire the sales VIE companies’ equity interests and/or remaining assets, but only
to the extent that the acquisition does not violate limitations imposed by PRC law on such transactions. The Option is exercisable at
any time at Jinong’s discretion so long as such exercise and subsequent acquisition of the sales VIE companies does not violate
PRC law. The consideration for the exercise of the Option is to be determined by the parties and memorialized in the future by definitive
agreements setting forth the kind and value of such consideration. Jinong may transfer all rights and obligations under the Exclusive
Option Agreements to any third parties without the approval of the shareholders of the sales VIE companies so long as a written notice
is provided. The Exclusive Option Agreements may be terminated by mutual agreements or by 30 days written notice by Jinong.
Equity Pledge Agreements
Pursuant to the terms of certain Equity Pledge
Agreements dated June 30, 2016 and January 1, 2017, among Jinong and the shareholders of the sales VIE companies (the “Pledge Agreements”),
the shareholders of the sales VIE companies pledged all of their equity interests in the sales VIE companies to Jinong, including the
proceeds thereof, to guarantee all of Jinong’s rights and benefits under the Entrusted Management Agreements, the Exclusive Technology
Supply Agreements, the Shareholder’ Voting Proxy Agreements and the Exclusive Option Agreements. Prior to termination of the Pledge
Agreements, the pledged equity interests cannot be transferred without Jinong’s prior written consent. The Pledge Agreements may
be terminated only upon the written agreement of the parties.
Non-Compete Agreements
Pursuant to the terms of certain Non-Compete Agreements
dated June 30, 2016 and January 1, 2017, among Jinong and the shareholders of the sales VIE companies (the “Non-Compete Agreements”),
the shareholders of the sales VIE companies agreed that during the period beginning on the initial date of their services with Jinong,
and ending five (5) years after termination of their services with Jinong, without Jinong’s prior written consent, they will not
provide services or accept positions including but not limited to partners, directors, shareholders, managers, proxies or consultants,
provided by any profit making organizations with businesses that may compete with Jinong. They will not solicit or interfere with any
of the Jinong’s customers, or solicit, induce, recruit or encourage any person engaged or employed by Jinong to terminate his or
her service or engagement. If the shareholders of the sales VIE companies breach the non-compete obligations contained therein, Jinong
is entitled to all loss and damages; if the damages are difficult to determine, remedies bore the shareholders of the sales VIE companies
shall be no less than 50% of the salaries and other expenses Jinong provided in the past.
The Company entered these VIE Agreements as a
way for the Company to have more control over the distribution of its products. The transactions are accounted for as business combinations
in accordance with ASC 805. A summary of the purchase price allocations at fair value is below:
For acquisitions made on June 30, 2016:
Cash | |
$ | 708,737 | |
Accounts receivable | |
| 6,422,850 | |
Advances to suppliers | |
| 1,803,180 | |
Prepaid expenses and other current assets | |
| 807,645 | |
Inventories | |
| 7,787,043 | |
Machinery and equipment | |
| 140,868 | |
Intangible assets | |
| 270,900 | |
Other assets | |
| 3,404,741 | |
Goodwill | |
| 3,158,179 | |
Accounts payable | |
| (3,962,670 | ) |
Customer deposits | |
| (3,486,150 | ) |
Accrued expenses and other payables | |
| (4,653,324 | ) |
Taxes payable | |
| (16,912 | ) |
Purchase price | |
$ | 12,385,087 | |
A summary of the purchase consideration paid is below:
Cash | |
$ | 5,568,500 | |
Convertible notes | |
| 6,671,769 | |
Derivative liability | |
| 144,818 | |
| |
$ | 12,385,087 | |
The cash component of the purchase price for these
acquisitions made on June 30, 2016 was paid in July and August 2016.
For acquisitions made on January 1, 2017:
Working Capital | |
$ | 941,192 | |
Machinery and equipment | |
| 222,875 | |
Intangible assets | |
| 1440 | |
Goodwill | |
| 684,400 | |
Customer Relationship | |
| 522,028 | |
Non-compete Agreement | |
| 392,852 | |
Purchase price | |
$ | 2,764,787 | |
A summary of the purchase consideration paid is below:
Cash | |
$ | 1,201,888 | |
Convertible notes | |
| 1,559,350 | |
Derivative liability | |
| 3,549 | |
| |
$ | 2,764,787 | |
The cash component of the purchase price for these
acquisitions made on January 1, 2017 was paid during March 2017.
On November 30, 2017, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Zhenbai. In return, the shareholders of Zhenbai agreed to tender the whole payment consideration in the SAA back to the Company with
early termination penalties. The convertible notes paid to Zhenbai’s shareholders and the accrued interest has been forfeited.
For the discontinuation of Zhenbai made on November
30, 2017, the Company gave up the control of the following assets in Zhenbai:
Working Capital | |
$ | 1,179,352 | |
Intangible assets | |
| 896,559 | |
Customer Relationship | |
| 684,727 | |
Non-compete Agreement | |
| 211,833 | |
Goodwill | |
| 538,488 | |
Total Asset | |
$ | 2,614,401 | |
In return, the purchase consideration returned to the Company from
Zhenbai’s shareholders is summarized below:
Cash | |
$ | 461,330 | |
Interest Payable | |
| 83,039 | |
Convertible notes | |
| 1,724,683 | |
Derivative liability | |
| 13,353 | |
Total Payback | |
$ | 2,282,406 | |
Net Loss | |
$ | (331,995 | ) |
On June 10, 2021, the Company, through its wholly-owned
subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of
Xindeguo and Xinyulei. In return, the shareholders of Xindeguo and Xinyulei agreed to pay cash with amount of RMB1,850,000 (approximately
$286,935) to the Company.
For the discontinuation of Xindeguo and Xinyulei
made on June 10, 2021, the Company gave up the control of the following assets in Xindeguo and Xinyulei:
Working Capital | |
$ | (1,135,366 | ) |
Intangible Assets | |
| 28,050 | |
Long-term equity investment | |
| 139,320 | |
Goodwill | |
| 1,257,784 | |
Total Asset | |
| 288,898 | |
In return, the purchase consideration returned
to the Company from Xindeguo and Xinyulei’s shareholders is summarized below:
Cash | |
$ | 286,380 | |
Total Payback | |
$ | 288,898 | |
Net Gain (Loss) | |
| (2,518 | ) |
On June 10, 2021, the Company, through its wholly-owned
subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of
Xiangrong. In return, the shareholders of Xiangrong agreed to pay cash with amount of RMB24,430,000 (approximately $3,789,093) to the
Company.
For the discontinuation of Xiangrong made on June
10, 2021, the Company gave up the control of the following assets in Xiangrong:
Working Capital | |
$ | 2,930,551 | |
Intangible assets | |
| 23,890 | |
Goodwill | |
| 316,200 | |
Total Asset | |
$ | 3,270,641 | |
In return, the purchase consideration returned to the Company from
Xiangrong’s shareholders is summarized below:
Cash | |
$ | 3,781,764 | |
Total Payback | |
$ | 3,270,641 | |
Net Gain (Loss) | |
| 511,123 | |
On December 1, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Lishijie. In return, the shareholders of Lishijie agreed to pay cash with amount of RMB3,500,000 (approximately $550,550) to the Company
before December 31, 2021.
For the discontinuation of Lishijie made on November
1, 2021, the Company gave up the control of the following assets in Lishijie:
Working Capital | |
$ | 358,715 | |
Intangible assets | |
| 128,677 | |
| |
| | |
Total Asset | |
$ | 487,392 | |
In return, the purchase consideration returned
to the Company from Lishijie’s shareholders is summarized below:
Cash | |
$ | 550,550 | |
Total Payback | |
$ | 487,392 | |
Net Gain (Loss) | |
| 63,158 | |
On December 31, 2021, the Company, through its
wholly-owned subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders
of Fengnong. In return, the shareholders of Fengnong agreed to pay cash with amount of RMB8,750,000 (approximately $1,376,375) to the
Company.
For the discontinuation of Fengnong made on December
31, 2021, the Company gave up the control of the following assets in Fengnong:
Working Capital | |
$ | 805,005 | |
Fixed Assets | |
| 91,033 | |
Intangible Assets | |
| 86,456 | |
| |
| | |
Total Asset | |
| 982,494 | |
In return, the purchase consideration returned to the Company from
Fengnong’s shareholders is summarized below:
Cash | |
$ | 1,376,375 | |
Total Payback | |
$ | 982,494 | |
Net Gain (Loss) | |
| 393,881 | |
On March 31, 2022, the Company, through its wholly-owned
subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of
Jinyangguang. In return, the shareholders of Jinyangguang agreed to pay cash with amount of RMB3,200,000 (approximately $503,360) to the
Company before April 30, 2022.
For the discontinuation of Jinyangguang made on
March 31, 2022, the Company gave up the control of the following assets in Jinyangguang:
Working Capital | |
$ | (621,154 | ) |
Intangible assets | |
$ | 103,532 | |
| |
| | |
Total Asset | |
$ | (517,622 | ) |
In return, the purchase consideration returned
to the Company from Jinyangguang’s shareholders is summarized below:
Cash | |
$ | 503,360 | |
Total Payback | |
$ | (517,622 | ) |
Net Gain (Loss) | |
$ | 1,020,982 | |
On March 31, 2022, the Company, through its wholly-owned
subsidiary Jinong, discontinued the strategic acquisition agreements and the series of contractual agreements with the shareholders of
Wangtian. In return, the shareholders of Wangtian agreed to pay cash with amount of RMB8,500,000 (approximately $1,337,050) to the Company.
For the discontinuation of Wangtian made on March
31, 2022, the Company gave up the control of the following assets in Wangtian:
Working Capital | |
$ | 833,252 | |
Fixed Assets | |
| 34,394 | |
Intangible Assets | |
| 170,514 | |
| |
| | |
Total Asset | |
| 1,038,160 | |
In
return, the purchase consideration returned to the Company from Wangtian’s shareholders is summarized below:
Cash | |
$ | 1,337,050 | |
Total Payback | |
$ | 1,038,160 | |
Net Gain (Loss) | |
| 298,890 | |
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.
After the initial outbreak of the COVID-19, some
instances of COVID-19 infections have emerged in various regions of China from time to time, including the infections caused by the Omicron
variants since early 2022. Our headquarters office in Xian was closed again from December 2021 to January 2022 and our employees worked
remotely for two months. In connection with the intensifying efforts to contain the spread of COVID-19, the local government took a number
of actions, which included quarantining individuals infected with or suspected of having COVID-19, prohibiting residents from free travel,
encouraging employees of enterprises to work remotely from home and cancelling public activities, among others.
In the year of 2022, more pandemic restrictions
had been tightened throughout China to control the spread of COVID-19 in the community, and varying levels of temporary restrictions and
other measures are reinstated to contain the infections, such as those in Shanghai since March 2022 and those in Beijing since May 2022.
Substantially all our revenues are generated in
China. Consequently, our results of operations were adversely and materially affected by COVID-19. Any potential impact to our results
will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of COVID-19
and the actions taken by government authorities and other entities to contain COVID-19 or treat its impact, almost all of which are beyond
our control. Potential impacts include, but are not limited to, the following:
|
● |
temporary closure of offices, travel restrictions or suspension of transportation of our products to our customers and our suppliers have been negatively affected, and could continue to be negatively affected, on their ability to supply our demands; |
|
● |
our customers that are negatively impacted by the outbreak of COVID-19 may reduce their budgets to purchase our products and services, which may materially adversely impact our revenue; |
|
● |
we may have to provide significant sales incentives to our customers in response to the outbreak, which may in turn materially adversely affect our financial condition and operating results; |
|
● |
the business operations of our customers and suppliers have been and could continue to be negatively impacted by the outbreak, result in loss of customers or disruption of our services, which may in turn materially adversely affect our financial condition and operating results; |
|
● |
any disruption of our supply chain, logistics providers or customers could adversely impact our business and results of operations, including causing our suppliers to cease manufacturing products for a period or materially delay delivery to customers, which may also lead to loss of customers, as well as reputational, competitive and business harm to us; |
|
● |
many of our customers, distributors, suppliers and other partners are individuals and small and medium-sized enterprises (SMEs), which may not have strong cash flows or be well capitalized, and may be vulnerable to an epidemic outbreak and slowing macroeconomic conditions. If the SMEs that we work with cannot weather COVID-19 and the resulting economic impact, or cannot resume business as usual after a prolonged outbreak, our revenues and business operations may be materially and adversely impacted; |
|
● |
the global stock markets have experienced, and may continue to experience, significant decline from the COVID-19 outbreak, which could materially adversely affect our stock price; |
Because of the uncertainty surrounding the COVID-19
outbreak, the financial impact related to the outbreak of and response to the COVID-19 cannot be reasonably estimated at this time, but
our results for the full fiscal year of 2020, 2021 and first three quarters of fiscal year of 2022 had been adversely affected.
In general, our business could be adversely
affected by the effects of epidemics, including, but not limited to, the COVID-19, avian influenza, severe acute respiratory
syndrome (SARS), the influenza A virus, the Ebola virus, or other outbreaks. In response to an epidemic or other outbreaks,
government and other organizations may adopt regulations and policies that could lead to severe disruption to our daily operations,
including temporary closure of our offices and other facilities. These severe conditions may cause us and/or our partners to make
internal adjustments, including but not limited to, temporarily closing business, limiting business hours, and setting restrictions
on travel and/or visits with clients and partners for a prolonged period. Various impacts arising from severe conditions may cause
business disruption, resulting in material, adverse effects to our financial condition and results of operations.
We are taking
significant measures to mitigate the financial and operational impacts of COVID-19 as well as additional actions to improve our
liquidity through cost reduction and conservation measures.
NOTE 20 – SUBSEQUENT EVENTS
In accordance with ASC
855-10, the Company has analyzed its operations after March 31, 2022 to the date these unaudited condensed consolidated financial statements
were available to be issued and has determined that there were below significant subsequent events or transactions that would require
recognition or disclosure in the unaudited condensed consolidated financial statements.
On April 4, 2022, the
Company completed the issuance of 1,314,286 shares of its Common Stock to Ran Caihua for $19,714,290 and 2,286,857 shares of its Common
Stock to Xu Xiuzhen for $34,302,855. Both sales were made pursuant to a Share Purchase Agreement dated November 23, 2021 in transactions
exempt from registration under the Securities Act of 1933, as amended, in reliance on an exemption provided by Rule 903 of Regulation
S and/or Section 4(a)(2) of the Securities Act.
On April 8, 2022, the Company issued 52,695 shares
of common stock to settle the payable of consulting services under the 2009 Plan. The value of the stock was $440,000 and was based on
the fair value of the Company’s common stock on the grant date of March 15, 2022 when the Company authorized the grant.