The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
The consolidated statements of cash flows are
presented with the combined cash flows from discontinued operations with cash flows from continuing operations within each cash flow statement
category.
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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 and Wangtian.
Yuxing may also collectively be referred to
as the “the VIE Company”.
The Company’s corporate structure as of December 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 Company.
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, Lishijie, Jinyangguang, Wangtian and Fengnong as a discontinued operation.
Effective June 16, 2013, Yuxing was converted
from being a wholly owned foreign enterprise 100% owned by Jinong to a domestic enterprise 100% owned one natural person, who is not affiliated
to the Company (“Yuxing’s Owner”). Effective the same day, Yuxing’s Owner entered into a series of contractual
agreements with Jinong pursuant to which Yuxing became the VIE of Jinong.
VIE assessment
A VIE is an entity (1) that has total equity at
risk that is not sufficient to finance its activities without additional subordinated financial support from other entities, (2) where
the group of equity holders does not have the power to direct the activities of the entity that most significantly impact the entity’s
economic performance, or the obligation to absorb the entity’s expected losses or the right to receive the entity’s expected
residual returns, or both, or (3) where the voting rights of some investors are not proportional to their obligations to absorb the expected
losses of the entity, their rights to receive the expected residual returns of the entity, or both, and substantially all of the entity’s
activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. In order to determine
if an entity is considered a VIE, the Company first performs a qualitative analysis, which requires certain subjective decisions regarding
its assessments, including, but not limited to, the design of the entity, the variability that the entity was designed to create and pass
along to its interest holders, the rights of the parties, and the purpose of the arrangement. If the Company cannot conclude after a qualitative
analysis whether an entity is a VIE, it performs a quantitative analysis. The qualitative analysis considered the design of the entity,
the risks that cause variability, the purpose for which the entity was created, and the variability that the entity was designed to pass
along to its variable interest holders. When the primary beneficiary could not be identified through a qualitative analysis, we used internal
cash flow models to compute and allocate expected losses or expected residual returns to each variable interest holder based upon the
relative contractual rights and preferences of each interest holder in the VIE’s capital structure.
Use of estimates
The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these
estimates using the best information available at the time the estimates are made. However, actual results and outcomes may differ from
management’s estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment
due to the recent outbreak of a novel strain of the COVID-19.
Leases
The Company determines if an arrangement is a
lease or contains a lease at inception. Operating lease right-of-use assets and lease liabilities are recognized at commencement based
on the present value of lease payments over the lease term. As the implicit rate is typically not readily determinable in the Company’s
lease agreements, the Company uses its incremental borrowing rate as of the lease commencement date to determine the present value of
the lease payments. The incremental borrowing rate is based on the Company’s specific rate of interest to borrow on a collateralized
basis, over a similar term and in a similar economic environment as the lease. Lease expense is recognized on a straight-line basis over
the lease term. Leases with an initial term of 12 months or less are not recognized on the balance sheet; the Company recognizes lease
expense for these leases on a straight-line basis over the lease term. Additionally, the Company accounts for lease and non-lease components
as a single lease component for its identified asset classes. As of December 31, 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 December 31, 2022 and
June 30, 2022 were $74,060,128 and $57,714,868, respectively. There is no insurance securing these deposits in China. In addition,
the Company also had $59,020 and $55,435 in cash in two banks in the United States as of December 31, 2022 and June 30, 2022, 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, 2022, and June 30, 2022, the Company had accounts receivable of $ 27,681,097 and $28,792,891, net of allowance
for doubtful accounts of $56,174,302 and $58,000,266, respectively. The impact of COVID-19 caused the difficulty of accounts receivable
collection from 2020 as numerous distributors encountered significant difficulties and/or hardships in their businesses amid the pandemic.
The company recorded bad debt expense in the amount of $2 and $25 million (included bad debt expense from discontinuing operations) for
six months ended December 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 December
31, 2022, and 2021, the Company had no reserve for obsolete goods. The company confirmed the loss of $2 million and $11 million of inventories
for the six months ended December 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 December 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 December 31, 2022, and June 30, 2022, the Company had customer deposits of $7,518,719 and $7,994,669,
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 | |
| | |
2022 | | |
2021 | |
| (Loss) from continuing operations for Basic Earnings Per Share | |
$ | (3,596,545 | ) | |
$ | (23,214,278 | ) |
| (Loss) from discontinued operations for Basic Earnings Per Share | |
| - | | |
| (8,768,658 | ) |
| (Loss) for Basic Earnings Per Share | |
| (3,596,545 | ) | |
| (31,982,936 | ) |
| Basic Weighted Average Number of Shares | |
| 13,306,467 | | |
| 8,487,629 | |
| (Loss) from continuing operations Per Share – Basic | |
$ | (0.27 | ) | |
$ | (2.74 | ) |
| (Loss) from discontinued operations Per Share – Basic | |
$ | - | | |
$ | (1.03 | ) |
| Net (Loss) Per Share – Basic | |
$ | (0.27 | ) | |
$ | (3.77 | ) |
| (Loss) from continuing operations for Diluted Earnings Per Share | |
$ | (3,596,545 | ) | |
$ | (23,214,278 | ) |
| (Loss) from discontinued operations for Diluted Earnings Per Share | |
$ | - | | |
$ | (8,768,658 | ) |
| (Loss) for Diluted Earnings Per Share | |
$ | (3,596,545 | ) | |
$ | (31,982,936 | ) |
| Diluted Weighted Average Number of Shares | |
| 13,306,467 | | |
| 8,487,629 | |
| (Loss) from continuing operations Per Share – Diluted | |
$ | (0.27 | ) | |
| (2.74 | ) |
| (Loss) from discontinued operations Per Share – Diluted | |
$ | - | | |
$ | (1.03 | ) |
| Net (Loss) Per Share – Diluted | |
$ | (0.27 | ) | |
$ | (3.77 | ) |
| | |
Six Months Ended | |
| | |
December 31 | |
| | |
2022 | | |
2021 | |
| (Loss) from continuing operations for Basic Earnings Per Share | |
$ | (4,124,660 | ) | |
$ | (36,559,724 | ) |
| (Loss) from discontinued operations for Basic Earnings Per Share | |
| - | | |
| (10,500,420 | ) |
| (Loss) for Basic Earnings Per Share | |
| (4,124,660 | ) | |
| (47,060,144 | ) |
| Basic Weighted Average Number of Shares | |
| 13,118,610 | | |
| 8,487,629 | |
| (Loss) from continuing operations Per Share – Basic | |
$ | (0.31 | ) | |
$ | (4.31 | ) |
| (Loss) from discontinued operations Per Share – Basic | |
$ | - | | |
$ | (1.24 | ) |
| Net (Loss) Per Share – Basic | |
$ | (0.31 | ) | |
$ | (5.54 | ) |
| (Loss) from continuing operations for Diluted Earnings Per Share | |
$ | (4,124,660 | ) | |
$ | (36,559,724 | ) |
| (Loss) from discontinued operations for Diluted Earnings Per Share | |
$ | - | | |
$ | (10,500,420 | ) |
| (Loss) for Diluted Earnings Per Share | |
$ | (4,124,660 | ) | |
$ | (47,060,144 | ) |
| Diluted Weighted Average Number of Shares | |
| 13,118,610 | | |
| 8,487,629 | |
| (Loss) from continuing operations Per Share – Diluted | |
$ | (0.31 | ) | |
| (4.31 | ) |
| (Loss) from discontinued operations Per Share – Diluted | |
$ | - | | |
$ | (1.24 | ) |
| Net (Loss) Per Share – Diluted | |
$ | (0.31 | ) | |
$ | (5.54 | ) |
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 CONCERN
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, 2022 through December 31, 2022 and may continue to incur operating losses and generate
negative cash flows as the Company implements its future business plan. If the situation exists, there could be substantial doubt about
the Company’s ability to continue as 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, | |
| | |
2022 | | |
2022 | |
| Raw materials | |
$ | 7,212,269 | | |
$ | 7,986,436 | |
| Supplies and packing materials | |
$ | 443,933 | | |
$ | 469,524 | |
| Work in progress | |
$ | 186,862 | | |
$ | 198,591 | |
| Finished goods | |
$ | 37,977,784 | | |
$ | 33,543,635 | |
| Total | |
$ | 45,820,848 | | |
$ | 42,198,186 | |
The company confirmed the loss of $2 million and
$11 million of inventories for the six months ended December 31, 2022 and 2021, respectively.
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
| | |
December 31, | | |
June 30, | |
| | |
2022 | | |
2022 | |
| Building and improvements | |
$ | 38,974,366 | | |
$ | 39,988,862 | |
| Auto | |
| 2,856,918 | | |
| 2,892,073 | |
| Machinery and equipment | |
| 18,451,269 | | |
| 18,913,581 | |
| Total property, plant and equipment | |
| 60,282,553 | | |
| 61,794,515 | |
| Less: accumulated depreciation | |
| (42,781,922 | ) | |
| (42,924,364 | ) |
| Total | |
$ | 17,500,631 | | |
$ | 18,870,152 | |
For the six month ended December 31, 2022, total
depreciation expense for the continuing entities was $1,109,917, decreased $106,435, or 8.8%, from $1,216,352 for the six month ended
December 31, 2021.
NOTE 6 – INTANGIBLE ASSETS
Intangible assets consisted of the following:
| | |
December 31, | | |
June 30, | |
| | |
2022 | | |
2022 | |
| Land use rights, net | |
$ | 8,384,158 | | |
$ | 8,758,704 | |
| Technology patent, net | |
| - | | |
| - | |
| Customer relationships, net | |
| - | | |
| - | |
| Non-compete agreement | |
| - | | |
| - | |
| Trademarks | |
| 5,994,749 | | |
| 6,176,784 | |
| Total | |
$ | 14,378,907 | | |
$ | 14,935,488 | |
LAND USE RIGHT
On September 25, 2009, Yuxing was granted a land
use right for approximately 88 acres (353,000 square meters or 3.8 million square feet) by the People’s Government and Land &
Resources Bureau of Hu County, Xi’an, Shaanxi Province. The fair value of the related intangible asset was determined to be the
respective cost of RMB73,184,895 (or $10,604,491). 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 $151,558). 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 $1,055,611). 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, | |
| | |
2022 | | |
2022 | |
| Land use rights | |
$ | 11,660,102 | | |
| 12,014,170 | |
| Less: accumulated amortization | |
| (3,275,944 | ) | |
| (3,255,466 | ) |
| Total land use rights, net | |
$ | 8,384,158 | | |
| 8,758,704 | |
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 $851,297) 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 $1,333,080)
and is amortized over the remaining useful life of six years using the straight-line method. As of December 31, 2022, this technology
patent is fully amortized.
The technology know-how consisted of the following:
| | |
December 31, | | |
June 30, | |
| | |
2022 | | |
2022 | |
| Technology know-how | |
$ | 2,184,377 | | |
$ | 2,250,708 | |
| Less: accumulated amortization | |
| (2,184,377 | ) | |
| (2,250,708 | ) |
| 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 $9,418,500)
and is amortized over the remaining useful life of ten years.
| | |
December 31, | | |
June 30, | |
| | |
2022 | | |
2022 | |
| Customer relationships | |
$ | 9,418,500 | | |
$ | 9,704,500 | |
| Less: accumulated amortization | |
| (9,418,500 | ) | |
| (9,704,500 | ) |
| Total customer relationships, net | |
$ | - | | |
$ | - | |
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 $191,268) and is amortized over
the remaining useful life of five years using the straight-line method.
| | |
December 31, | | |
June 30, | |
| | |
2022 | | |
2022 | |
| Non-compete agreement | |
$ | 191,268 | | |
$ | 197,076 | |
| Less: accumulated amortization | |
| (191,268 | ) | |
| (197,076 | ) |
| Total non-compete agreement, net | |
$ | - | | |
$ | - | |
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 RMB41,371,630 (or $5,994,749)
and is subject to an annual impairment test.
AMORTIZATION EXPENSE
Estimated amortization expenses of intangible
assets for the next five twelve months periods ended December 31, are as follows:
| Twelve Months Ended on December 31, | |
Expense
($) | |
| 2023 | |
| 400,225 | |
| 2024 | |
| 282,563 | |
| 2025 | |
| 261,370 | |
| 2026 | |
| 234,878 | |
| 2027 | |
| 232,840 | |
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, 2022, the balance of other non-current assets was $6,330,346,
which was the lease fee advances for agriculture lands that the Company engaged in Shiquan County from 2024 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, 2022 and 2021, 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, | |
| |
| 2024 | |
$ | 1,945,283 | |
| 2025 | |
$ | 1,945,283 | |
| 2026 | |
$ | 1,945,283 | |
| 2027 | |
$ | 494,498 | |
`
NOTE 8 – ACCRUED EXPENSES AND OTHER PAYABLES
Accrued expenses and other payables consisted of the following:
| | |
December 31, | | |
June 30, | |
| | |
2022 | | |
2022 | |
| Payroll and welfare payable | |
$ | 174,584 | | |
$ | 178,341 | |
| Accrued expenses | |
| 8,442,479 | | |
| 7,636,524 | |
| Other payables | |
| 5,187,104 | | |
| 5,794,686 | |
| Other levy payable | |
| 121,522 | | |
| 125,213 | |
| Total | |
$ | 13,925,689 | | |
$ | 13,734,764 | |
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 RMB25,500,000 (approximately
$3,694,950). For the six months ended December 31, 2022 and 2021, Yuxing has sold approximately 0 and 0 products to 900LH.com.
The amount due from 900LH.com to Yuxing was $10,100
and $13,064 as of December 31, 2022 and June 30, 2022, respectively.
As of December 31, 2022, and June 30, 2022, the
amount due to related parties was $5,399,365 and $5,192,496, respectively. As of December 31, 2022, and June 30, 2022, $1,014,300
and $1,045,100, 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, 2022, and June 30, 2022,
$4,355,449 and $4,105,449, respectively were advances from Mr. Zhuoyu Li, Chairman and CEO of the Company. The advances were unsecured
and non-interest-bearing.
As of December 31, 2022, and June 30, 2022, the
Company’s subsidiary, Jinong, owed 900LH.com 0 and $11,431, respectively.
On July 1, 2022, 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, 2022 with monthly rent of RMB28,000 (approximately $4,057).
NOTE 10 – LOAN PAYABLES
As of December 31, 2022, the loan payables consisted
of four loans which mature on dates ranging from June 22, 2023 through August 18, 2024 with interest rates ranging from 3.9% to 5.66%.
The first two loans are collateralized by Tianjuyuan’s land use right and building ownership right.
| No. | |
Payee | |
Loan period
per agreement | |
Interest
Rate | | |
December 31,
2022 | |
| 1 | |
Postal Saving Bank of China - Pinggu Branch | |
June 23, 2022-June 22, 2023 | |
| 5.66 | % | |
| 2,463,300 | |
| 2 | |
Beijing Bank - Pinggu Branch | |
June 24, 2022-June 23, 2023 | |
| 5.22 | % | |
| 1,449,000 | |
| 3 | |
Industrial Bank Co. Ltd | |
Aug.19, 2022-Aug.18,2024 | |
| 3.98 | % | |
| 1,159,200 | |
| 4 | |
Xian Bank | |
September 30, 2022-September 29, 2023 | |
| 3.90 | % | |
| 1,738,800 | |
| | |
Total | |
| |
| | | |
$ | 6,810,300 | |
The interest expense from loans was $149,983 and
$138,429 (for continuing operations only) for the period ended December 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 ($7,389,900) 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 ($1,738,800) were tendered back to the Company. All outstanding balance of unpaid principal and accrued
interest in the tendered convertible notes were forfeited.
On November 21, 2019, the Company issued 995,000
shares of common stock at the price of $5.00 per share for the total amount of $4,975,000 to the holders of the Company’s convertible
notes payable in connection with the payment of the convertible notes’ principal and interests. The convertible notes were issued
on June 30, 2016 and matured on June 30, 2019.
On February 14, 2020, the Company issued 377,650
shares of common stock at the price of $5.00 per share for the total amount of $1,888,250 to the holders of the Company’s convertible
notes payable in connection with the payment of the convertible notes’ principal and interests. The convertible notes were issued
on January 1, 2017 and matured on December 31, 2019.
The Company determined that the fair value of
the convertible notes payable was 0 as of December 31, 2022 and June 30, 2022, respectively. 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, 2022, the accumulated
amortization of this discount into accretion expenses was $1,375,499. As of December 31, 2021, the accumulated amortization of this discount
into accretion expenses was $1,375,499.
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, 2022 and 2021 of 0 and 0, 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, | |
| | |
2022 | | |
2022 | |
| VAT provision | |
$ | (324,824 | ) | |
$ | (384,574 | ) |
| Income tax payable | |
| (2,242,271 | ) | |
| (2,310,360 | ) |
| Other levies | |
| 620,660 | | |
| 639,237 | |
| Repatriation tax | |
| 29,010,535 | | |
| 29,010,535 | |
| Total | |
$ | 27,064,100 | | |
$ | 26,954,838 | |
The provision for income taxes consists of the following:
| | |
December 31, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| Current tax - foreign | |
$ | - | | |
$ | 587,195 | |
| Deferred tax | |
| - | | |
| - | |
| Total | |
$ | - | | |
$ | 587,195 | |
Significant components of deferred tax assets were as follows:
| | |
December 31, | | |
June 30, | |
| | |
2022 | | |
2022 | |
| Deferred tax assets | |
| | |
| |
| Deferred Tax Benefit | |
| 34,033,815 | | |
| 35,067,278 | |
| Valuation allowance | |
| (34,033,815 | ) | |
| (35,067,278 | ) |
| Total deferred tax assets | |
$ | - | | |
| - | |
Tax Rate Reconciliation
Our effective tax rates were approximately 0%
and-1.3% for the six months ended December 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 six months Ended December 31, 2022 and 2021 for the following reasons:
December 31, 2022
| | |
China
15% - 25% | | |
| | |
United
States 21% | | |
| | |
Total | | |
| |
| Pretax loss | |
$ | (2,412,874 | ) | |
| | | |
| (1,711,786 | ) | |
| | | |
$ | (4,124,660 | ) | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Expected income tax expense (benefit) | |
| (603,219 | ) | |
| 25.0 | % | |
| (359,475 | ) | |
| 21.0 | % | |
| (962,693 | ) | |
| | |
| High-tech income benefits on Jinong | |
| 142,607 | | |
| (5.9 | )% | |
| - | | |
| - | | |
| 142,607 | | |
| | |
| Losses from subsidiaries in which no benefit is recognized | |
| 460,612 | | |
| (19.1 | )% | |
| - | | |
| - | | |
| 460,612 | | |
| | |
| Change in valuation allowance on deferred tax asset from US tax benefit | |
| - | | |
| 0 | % | |
| 359,475 | | |
| (21.0 | )% | |
| 359,475 | | |
| | |
| Actual tax expense | |
$ | - | | |
| 0 | % | |
$ | - | | |
| 0 | % | |
$ | - | | |
| 0 | % |
December 31, 2021
| | |
China | | |
| | |
United | | |
| | |
| | |
| |
| | |
15% - 25% | | |
| | |
States 21% | | |
| | |
Total | | |
| |
| Pretax income (loss) | |
$ | (45,972,026 | ) | |
| | | |
| (500,923 | ) | |
| | | |
$ | (46,472,949 | ) | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Expected income tax expense (benefit) | |
| (11,493,007 | ) | |
| 25.0 | % | |
| (105,194 | ) | |
| 21.0 | % | |
| (11,598,200 | ) | |
| | |
| High-tech income benefits on Jinong | |
| 1,551,499 | | |
| (3.4 | )% | |
| - | | |
| - | | |
| 1,551,499 | | |
| | |
| Losses from subsidiaries in which no benefit is recognized | |
| 9,941,508 | | |
| (21.6 | )% | |
| - | | |
| - | | |
| 9,941,508 | | |
| | |
| Change in valuation allowance on deferred tax asset from US tax benefit | |
| 587,195 | | |
| (1.3 | )% | |
| 105,194 | | |
| (21.0 | )% | |
| 692,389 | | |
| | |
| Actual tax expense | |
$ | 587,195 | | |
| (1.3 | )% | |
$ | - | | |
| - | % | |
$ | 587,195 | | |
| (1.3 | )% |
| (1) |
The numbers are excluding discontinued entities. |
NOTE 13 – STOCKHOLDERS’ EQUITY
Common Stock
On August 2, 2022, the Company completed the issuance
of 1,117,142 shares of its Common Stock for $16,757,130 to P Kevin HODL Ltd, an entity owned and controlled by Mr. Zhibiao Pan, who was
subsequently appointed as the Company’s co-Chief Executive Officer on August 25, 2022. This sale was made pursuant to the 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 November 25, 2022, the Company issued 122,305
shares of common stock to settle the payable of consulting services under the 2009 Plan. The value of the stock was $658,000 and was based
on the fair value of the Company’s common stock on the grant date of November 12, 2022 when the Company authorized the grant.
There were no shares of common stock issued during
the six month ended December 31, 2021.
As of December 31, 2022, and June 30, 2022, there
were 13,380,914 and 12,141,467 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, 2022, the Company has 20,000,000
shares of preferred stock authorized, with a par value of $0.001 per share, of which no shares are issued or outstanding.
NOTE 14 – CONCENTRATIONS AND LITIGATION
Market Concentration
All the Company’s revenue-generating operations
are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by
the political, economic and legal environments in the PRC, and by the general state of the PRC’s economy.
The Company’s operations in the PRC are
subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe.
These include risks associated with, among other things, the political, economic and legal environment and foreign currency exchange.
The Company’s results may be adversely affected by, among other things, changes in governmental policies with respect to laws and
regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation.
Vendor and Customer Concentration
No vendors accounted over 10% of the Company’s
purchase of raw materials and supplies for the six months ended December 31, 2022 and 2021.
No customer accounted for over 10% of the Company’s sales for
the six months ended December 31, 2022 and 2021.
Litigation
There are no other actions, suits, proceedings,
inquiries or investigations before or by any court, public board, government agency, self-regulatory organization or body pending or,
to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our
common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such,
in which an adverse decision could have a material adverse effect.
NOTE 15 – SEGMENT REPORTING
As of December 31, 2022, the Company was organized
into three main business segments based on location and product: Jinong (fertilizer production), Gufeng (fertilizer production) and Yuxing
(agricultural products production). Each of the three 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
and net income 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 by segment.
| | |
Three Months
Ended | | |
Three Months
Ended | | |
Six Months
Ended | | |
Six Months
Ended | |
| | |
December 31,
2022 | | |
December 31,
2021 | | |
December 31,
2022 | | |
December 31,
2021 | |
| Revenues from unaffiliated customers: | |
| | |
| | |
| | |
| |
| Jinong | |
$ | 9,842,749 | | |
$ | 14,966,519 | | |
$ | 21,990,751 | | |
$ | 30,128,261 | |
| Gufeng | |
| 11,849,718 | | |
| 21,573,414 | | |
| 24,428,540 | | |
| 36,361,666 | |
| Yuxing | |
| 2,846,740 | | |
| 2,819,203 | | |
| 5,717,241 | | |
| 5,708,097 | |
| Consolidated | |
$ | 24,539,207 | | |
$ | 39,359,136 | | |
$ | 52,136,532 | | |
$ | 72,198,024 | |
| | |
| | | |
| | | |
| | | |
| | |
| Operating income (loss): | |
| | | |
| | | |
| | | |
| | |
| Jinong | |
$ | (1,598,264 | ) | |
$ | (2,424,698 | ) | |
$ | (678,621 | ) | |
$ | (6,287,310 | ) |
| Gufeng | |
| (1,547,362 | ) | |
| (20,807,616 | ) | |
| (2,211,092 | ) | |
| (29,898,613 | ) |
| Yuxing | |
| 200,253 | | |
| 154,759 | | |
| 384,247 | | |
| 317,359 | |
| Reconciling item (1) | |
| (734,266 | ) | |
| (46,494 | ) | |
| (1,711,833 | ) | |
| (500,929 | ) |
| Consolidated | |
$ | (3,679,639 | ) | |
$ | (23,124,049 | ) | |
$ | (4,217,299 | ) | |
$ | (36,369,493 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Net income (loss): | |
| | | |
| | | |
| | | |
| | |
| Jinong | |
$ | (1,554,778 | ) | |
$ | (2,387,078 | ) | |
$ | (570,428 | ) | |
$ | (6,205,995 | ) |
| Gufeng | |
| (1,590,123 | ) | |
| (20,950,605 | ) | |
| (2,336,623 | ) | |
| (30,114,176 | ) |
| Yuxing | |
| 282,590 | | |
| 235,065 | | |
| 494,176 | | |
| 397,004 | |
| | |
| - | | |
| - | | |
| - | | |
| - | |
| Reconciling item (1) | |
| 31 | | |
| 2 | | |
| 47 | | |
| 6 | |
| Reconciling item (2) | |
| (734,266 | ) | |
| (563,224 | ) | |
| (1,711,832 | ) | |
| (1,088,123 | ) |
| Reconciling item (3) | |
| - | | |
| (8,317,097 | ) | |
| - | | |
| (10,048,859 | ) |
| Consolidated | |
$ | (3,596,545 | ) | |
$ | (31,982,936 | ) | |
$ | (4,124,660 | ) | |
$ | (47,060,144 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Depreciation and Amortization: | |
| | | |
| | | |
| | | |
| | |
| Jinong | |
$ | 191,858 | | |
$ | 210,294 | | |
$ | 390,103 | | |
$ | 417,687 | |
| Gufeng | |
| 186,394 | | |
| 205,818 | | |
| 380,047 | | |
| 410,392 | |
| Yuxing | |
| 184,594 | | |
| 323,648 | | |
| 454,874 | | |
| 643,953 | |
| Consolidated | |
$ | 562,846 | | |
$ | 739,760 | | |
$ | 1,225,024 | | |
$ | 1,472,031 | |
| | |
| | | |
| | | |
| | | |
| | |
| Interest expense: | |
| | | |
| | | |
| | | |
| | |
| Jinong | |
| 25,127 | | |
| - | | |
| 25,127 | | |
| - | |
| Gufeng | |
| 42,612 | | |
| 66,418 | | |
| 124,856 | | |
| 138,429 | |
| Yuxing | |
| - | | |
| - | | |
| - | | |
| - | |
| Consolidated | |
$ | 67,739 | | |
$ | 66,418 | | |
$ | 149,983 | | |
$ | 138,429 | |
| | |
| | | |
| | | |
| | | |
| | |
| Capital Expenditure: | |
| | | |
| | | |
| | | |
| | |
| Jinong | |
$ | 30,329 | | |
$ | 5,308 | | |
$ | 34,091 | | |
$ | 21,272 | |
| Gufeng | |
| (3,765 | ) | |
| 7,869 | | |
| 216,105 | | |
| 29,420 | |
| Yuxing | |
| 50,584 | | |
| 847 | | |
| 55,493 | | |
| 33,123 | |
| Consolidated | |
$ | 77,148 | | |
$ | 14,024 | | |
$ | 305,689 | | |
$ | 83,816 | |
| | |
As of | |
| | |
December 31, | | |
June 30, | |
| | |
2022 | | |
2022 | |
| Identifiable assets: | |
| | |
| |
| Jinong | |
$ | 106,762,797 | | |
$ | 100,958,241 | |
| Gufeng | |
| 51,468,145 | | |
| 80,923,101 | |
| Yuxing | |
| 39,705,718 | | |
| 40,132,337 | |
| Reconciling item (1) | |
| 7,772,048 | | |
| (27,064,606 | ) |
| Reconciling item (2) | |
| 166,121 | | |
| 166,121 | |
| Consolidated | |
$ | 205,874,829 | | |
$ | 195,115,195 | |
| (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
We are subject to various claims and contingencies
related to lawsuits, certain taxes and environmental matters, as wells commitments under contractual and other commercial obligations.
We recognize liabilities for commitments and contingencies when a loss is probable and estimable.
On July 1, 2022, 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, 2022 with monthly rent of RMB28,000 (approximately $4,057).
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 $429).
Accordingly, the Company recorded an aggregate
of $26,915 and $70,727 as rent expenses from these committed property leases for the six-month periods ended December 31, 2022 and 2021,
respectively. The contingent rent expenses herein for the next five twelve-month periods ended December 31, are as follows:
| Years ending December 31, | |
| |
| 2023 | |
$ | 53,830 | |
| 2024 | |
| 53,830 | |
| 2025 | |
| 53,830 | |
| 2026 | |
| 53,830 | |
| 2027 | |
| 53,830 | |
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 most 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, 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 and Wangtian.
As a result of these contractual arrangements,
the Company is entitled to substantially all the economic benefits of Yuxing. The following financial statement amounts and balances of
the VIE (Yuxing) was included in the accompanying consolidated financial statements as of December 31, 2022 and June 30, 2022:
| | |
December 31, | | |
June 30, | |
| | |
2022 | | |
2022 | |
| | |
| | |
| |
| ASSETS | |
| | |
| |
| Current Assets | |
| | |
| |
| Cash and cash equivalents | |
$ | 207,892 | | |
$ | 385,308 | |
| Accounts receivable, net | |
| 700,588 | | |
| 710,143 | |
| Inventories | |
| 24,298,292 | | |
| 22,062,527 | |
| Other current assets | |
| 167,774 | | |
| 22,932 | |
| Related party receivable | |
| 10,100 | | |
| 13,064.00 | |
| Advances to suppliers | |
| 110,141 | | |
| 1,879,704 | |
| Total Current Assets | |
| 25,494,787 | | |
| 25,073,678 | |
| | |
| | | |
| | |
| Plant, Property and Equipment, Net | |
| 6,424,016 | | |
| 6,926,023 | |
| Other assets | |
| 10,288 | | |
| 10,600 | |
| Intangible Assets, Net | |
| 7,776,627 | | |
| 8,122,036 | |
| | |
| - | | |
| | |
| Total Assets | |
$ | 39,705,718 | | |
$ | 40,132,337 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | |
| Accounts payable | |
$ | 104,808 | | |
$ | 107,095 | |
| Customer deposits | |
| 2,963 | | |
| 10,016 | |
| Accrued expenses and other payables | |
| 297,014 | | |
| 306,116 | |
| Amount due to related parties | |
| 41,126,985 | | |
| 42,105,604 | |
| Total Current Liabilities | |
| 41,531,770 | | |
| 42,528,831 | |
| Total Liabilities | |
$ | 41,531,770 | | |
| 42,528,831 | |
| | |
| | | |
| | |
| Stockholders’ equity | |
| (1,826,052 | ) | |
| (2,396,494 | ) |
| | |
| | | |
| | |
| Total Liabilities and Stockholders’ Equity | |
$ | 39,705,718 | | |
$ | 40,132,337 | |
| | |
Three Months Ended
December 31, | |
| | |
2022 | | |
2021 | |
| Revenue | |
$ | 2,846,739 | | |
$ | 2,819,203 | |
| Expenses | |
| 2,564,149 | | |
| 2,584,138 | |
| Net income | |
$ | 282,590 | | |
$ | 235,065 | |
| | |
Six Months Ended
December 31, | |
| | |
2022 | | |
2021 | |
| Revenue | |
$ | 5,717,240 | | |
$ | 5,708,097 | |
| Expenses | |
| 5,223,064 | | |
| 5,311,093 | |
| Net income | |
$ | 494,176 | | |
$ | 397,004 | |
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 and 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 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 and Xinyulei. In return, the shareholders of Xindeguo and Xinyulei agreed
to pay cash with amount of RMB1,850,000 (approximately $286,380) to the Company.
For
the discontinuation of Xindeguo and Xinyulei made on June 2, 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 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 Xiangrong. In return, the shareholders of Xiangrong agreed to pay cash with amount
of RMB24,430,000 (approximately $3,781,764) to the Company.
For
the discontinuation of Xiangrong made on June 2, 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.
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 2022 and first half of fiscal year 2023 had been adversely
affected.
In
general, our business could be adversely affected by the effects of epidemics, including, but not limited to, the COVID-19, avian influenza,
severe acute respiratory syndrome (SARS), the influenza A virus, the Ebola virus, or other outbreaks. In response to an epidemic or other
outbreaks, government and other organizations may adopt regulations and policies that could lead to severe disruption to our daily operations,
including temporary closure of our offices and other facilities. These severe conditions may cause us and/or our partners to make internal
adjustments, including but not limited to, temporarily closing business, limiting business hours, and setting restrictions on travel
and/or visits with clients and partners for a prolonged period. Various impacts arising from severe conditions may cause business disruption,
resulting in material, adverse effects to our financial condition and results of operations.
We
are taking significant measures to mitigate the financial and operational impacts of COVID-19 as well as additional actions to improve
our liquidity through cost reduction and conservation measures.
NOTE
20 – SUBSEQUENT EVENTS
In
accordance with ASC 855-10, the Company has analyzed its operations after December 31, 2021 to the date these unaudited condensed consolidated
financial statements were available to be issued and has determined that there were no significant subsequent events or transactions
that would require recognition or disclosure in the unaudited condensed consolidated financial statements.