美国
证券交易委员会
华盛顿特区，20549
表格
截至季度结束
或者
过渡期从________到________
委员会
文件编号：
（公司章程中指定的准确公司名称）
（住所的州或其他司法辖区 文件号码） |
（国税局雇主 (主要 执行人员之地址) |
主要执行办公室地址(邮政编码)
(
根据交易所法规（17 CFR 240.14a-12）第14a-12规定的招股材料
(前 主要执行办公室地址) (邮政编码)
根据法案第12(b)节注册的证券:
| 每类股票的名称 | 交易符号 | 在每个交易所注册的名称 | ||
请勾选标记以指示注册者是否（1）在过去12个月内（或注册者需要提交这些报告的更短时间内）已提交证券交易所法案第13或15（d）节要求提交的所有报告，及 （2）是否已被提交要求过去90天的提交要求所制约。
通过勾选圆圈表明注册者是否在过去12个月内(或注册者需要提交这些文件的较短期限内)已经递交规章S-T(本章第232.405条)规定的每个交互式数据文件。
在勾选标记处表示注册人是大型加速提交人、加速提交人、非加速提交人、小型报告公司还是新兴增长公司。请参阅证券交易法120亿条规则中“大型加速提交人”、“加速提交人”、“小型报告公司”和“新兴增长公司”的定义。
| 大型加速文件提交人 | ☐ | 加速文件提交人 | ☐ |
| ☒ | 小型报告公司 | ||
| 新兴成长公司 |
如果是新兴成长型企业，请打勾，以表明注册人已选择不使用遵守《证券交易法》第13(a)条所规定的任何新的或修订后的财务会计准则的延长过渡期。 ☐
请勾选适用的圆圈，表示注册登记者是否是空壳公司(根据交易所法案第12b-2条的定义)。是 ☐ 否
截至2024年11月14日，有 每股普通股的面值为$ 每股，流通。
目录
| 页码 | ||
| 第一部分 财务信息 | 1 | |
| 项目 1. | 基本报表 | 1 |
| 压缩的综合资产负债表（未经审计） | 1 | |
| 简明综合收益表（损益表）（未经审计） | 2 | |
| 未经审计的压缩合并股东权益变动表 | 3 | |
| 压缩的现金流量表（未经审计） | 4 | |
| 基本报表注释（未经审计） | 5 | |
| 项目 2. | 分销计划 | 42 |
| 项目 3. | 有关市场风险的定量和定性披露 | 58 |
| 项目 4. | 控制和程序 | 58 |
| 第二部分.其他信息 | 59 | |
| 项目 1. | 法律诉讼 | 59 |
| Interest expense, net | 风险因素 | 59 |
| 项目 2. | 未注册的股票股权销售和筹款用途 | 59 |
| 项目 3. | 对优先证券的违约 | 59 |
| 项目 4. | 矿山安全披露 | 59 |
| 项目5。 | 其他信息 | 59 |
| 项目 6. | 展示资料 | 60 |
| 签名 | 61 | |
| i |
在2024年10月21日，公司的股东批准了公司普通股的反向股票拆分，每股面值为0.001美元（“普通股”），比例不低于1比2，且不超过1比24，具体比例由公司的董事会（“董事会”）判断。随后在2024年10月23日，董事会批准了普通股的1比24反向股票拆分，该拆分于2024年11月12日生效（“反向股票拆分”）。由于反向股票拆分，二十四股拆分前的普通股自动合并并转换为一股已发行并流通的普通股，无需股东采取任何行动。除非另有说明，本报告中所有股票数量和每股金额均已按照普通股的1比24反向股票拆分进行呈现。
| ii |
第I部分。财务信息
项目1.基本报表
尚高生命科学， INC.
汇编简明资产负债表
| 九月三十日， | 6月30日， | |||||||
| 2024 | 2024 | |||||||
| (未经审计) | ||||||||
| 资产 | ||||||||
| 流动资产： | ||||||||
| 现金及现金等价物 | $ | $ | ||||||
| 受限现金 | ||||||||
| 应收账款，净额 | ||||||||
| 应收关联方 | ||||||||
| 净存货 | ||||||||
| 预付供应商款，净额 | ||||||||
| 衍生金融资产 | ||||||||
| 其他流动资产净额 | ||||||||
| 总流动资产 | ||||||||
| 物业和设备，净值 | ||||||||
| 土地使用权，净 | ||||||||
| 无形资产-净额 | ||||||||
| 商誉 | ||||||||
| 经营租赁使用权资产 | ||||||||
| 资产总计 | $ | $ | ||||||
| 负债和股东权益 | ||||||||
| 流动负债： | ||||||||
| 短期贷款 | $ | $ | ||||||
| 长期贷款-流动部分 | ||||||||
| 应付账款 | ||||||||
| 合同责任 | ||||||||
| 由于关联方相关事项 | ||||||||
| 其他应付款及预提费用 | ||||||||
| 经营租赁负债 - 流动负债 | ||||||||
| 应付可转换票据 - 流动 | ||||||||
| 递延收入 | ||||||||
| 应付税款 | ||||||||
| 流动负债合计 | ||||||||
| 应付所得税-非流动负债部分 | ||||||||
| 非流动经营租赁负债 | ||||||||
| 可转换债券应付款-非流动 | ||||||||
| 长期贷款-非流动 | ||||||||
| 递延所得税负债 | ||||||||
| 负债合计 | ||||||||
| 承诺和 contingencies | ||||||||
| 股本： | ||||||||
| 普通股;每股面值$, 授权股份； 及 于2024年9月30日和2024年6月30日发行并流通的股份* | ||||||||
| 额外实收资本 | ||||||||
| 应收订阅款 | ( | ) | ||||||
| 已认购的普通股 | ||||||||
| 法定公积金 | ||||||||
| 累积赤字 | ( | ) | ( | ) | ||||
| 累计其他综合损失 | ( | ) | ( | ) | ||||
| 尚高生命科学公司的股东权益总额。 | ||||||||
| 非控股权益 | ||||||||
| 总股本 | ||||||||
| 负债和所有者权益总计 | $ | $ | ||||||
| * |
附注是这些未经审计的简明综合财务报表的组成部分。
| 1 |
尚高生命科学， INC.
压缩 合并收入（亏损）及综合收入（亏损）报表
(未经审计)
截至三个月末 九月三十日， | ||||||||
| 2024 | 2023 | |||||||
| 收入 | $ | $ | ||||||
| 收入成本 | ||||||||
| 产品成本 | ||||||||
| 业务和销售相关的税收 | ||||||||
| 营业成本总额 | ||||||||
| 毛利润 | ||||||||
| 经营费用 | ||||||||
| 一般和行政费用 | ||||||||
| 销售费用 | ||||||||
| 研发费用 | ||||||||
| 总营业费用 | ||||||||
| 营业亏损 | ( | ) | ( | ) | ||||
| 其他收入（支出） | ||||||||
| 衍生金融资产的投资收益 | ||||||||
| 其他收入（费用），净额 | ( | ) | ||||||
| 债务发行及其他成本的摊销 | ( | ) | ( | ) | ||||
| 利息费用，净额 | ( | ) | ( | ) | ||||
| 其他支出总额 | ( | ) | ( | ) | ||||
| 继续经营的税前利润减损前利润 | ( | ) | ( | ) | ||||
| 所得税的福利 | ( | ) | ( | ) | ||||
| 持续经营业务净亏损 | ( | ) | ( | ) | ||||
| 已停业的业务: | ||||||||
| 已停业业务的净损失 | ( | ) | ||||||
| 停止经营业务处置收益 | ||||||||
| 终止经营活动的净利润 | ||||||||
| 净利润（损失） | ( | ) | ||||||
| 归属于少数股东的净亏损 | ( | ) | ( | ) | ||||
| 尚高生命科学股份有限公司所净利润（损失） | $ | ( | ) | $ | ||||
| 综合收益（亏损） | ||||||||
| 净利润（亏损） | $ | ( | ) | $ | ||||
| 外币翻译损失的其他综合收益 | ||||||||
| 总的全面收入（亏损） | ( | ) | ||||||
| 减: 非控制权益全面亏损 | ( | ) | ( | ) | ||||
| 归属于尚高生命科学公司的综合收益（损失） | $ | ( | ) | $ | ||||
| 加权平均股本和摊薄后的每股数* | ||||||||
| 每股普通股基本和稀释收益（亏损） | $ | ) | $ | |||||
| 每股盈利（亏损） | ||||||||
| 持续经营业务 - 基本和摊薄 | ) | ) | ||||||
| 终止操作-基本和稀释 | ||||||||
| 普通股每股净收益（亏损）-基本和稀释 | ) | |||||||
| * |
附注是这些未经审计的简明综合财务报表的组成部分。
| 2 |
尚高生命科学， INC.
未经审计的 简明合并股东权益变动表
截至2024年和2023年9月30日的三个月
（未经审计）
| 普通股票 | 订阅 | 普通股 | 其他补充 实缴 | 法定 | 累积 | 累积 其它 综合 | 非 控股 | 总计 | ||||||||||||||||||||||||||||||||
| 股份* | 金额 | 应收款 | $ | 资本 | 储备 | 赤字 | 亏损 | 利息 | 资本 | |||||||||||||||||||||||||||||||
| 2023年6月30日的余额 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| 收购Wintus | ( | ) | ||||||||||||||||||||||||||||||||||||||
| 处置Tenet-Jove | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| 为可转换票据赎回发行普通股 | ||||||||||||||||||||||||||||||||||||||||
| 为管理层和员工发行普通股 | ||||||||||||||||||||||||||||||||||||||||
| 本期持续经营的净亏损 | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| 本期已终止控件的净利润（亏损） | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| 外汇翻译收益（损失） | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| 截至2023年9月30日的余额 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| 2024年6月30日余额 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
| 股票发行 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| 发行普通股以赎回可转换票据 | ||||||||||||||||||||||||||||||||||||||||
| 为管理层和员工发行的普通股 | ||||||||||||||||||||||||||||||||||||||||
| 本年度持续经营的净亏损 | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| 外币翻译盈利 | - | |||||||||||||||||||||||||||||||||||||||
| 截至2024年9月30日的余额 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| * |
附注是这些未经审计的简明综合财务报表的组成部分。
| 3 |
尚高生命科学， INC.
简明综合现金流量表
（未经审计）
截至三个月末 九月三十日， | ||||||||
| 2024 | 2023 | |||||||
| 经营活动产生的现金流量： | ||||||||
| 净利润（亏损） | $ | ( | ) | $ | ||||
| 来自停止运营业务的净收入，净税后小计 | ||||||||
| 持续经营的净亏损 | ( | ) | ( | ) | ||||
| 调整以达到净利润（损失）与经营活动现金流量净额的调和： | ||||||||
| 折旧和摊销 | ||||||||
| 处置财产和设备的收益 | ( | ) | ||||||
| 信用损失和可疑账款准备 | ||||||||
| 库存准备的冲回 | ( | ) | ( | ) | ||||
| 递延所得税收益 | ( | ) | ( | ) | ||||
| 租赁资产摊销 | ||||||||
| 为管理层和员工发行普通股 | ||||||||
| 债务发行及其他成本的摊销 | ||||||||
| 可转换票据的应计利息费用 | ||||||||
| 第三方应计利息收入 | ( | ) | ||||||
| 运营资产和负债的变化： | ||||||||
| 应收账款 | ||||||||
| 预付款项 | ( | ) | ||||||
| 存货 | ( | ) | ( | ) | ||||
| 其他流动资产 | ( | ) | ||||||
| 应付账款 | ( | ) | ||||||
| 合同责任 | ||||||||
| 递延收入 | ||||||||
| 其他应付款及预提费用 | ( | ) | ||||||
| 其他长期应付款 | ( | ) | ||||||
| 营运租赁负债 | ( | ) | ||||||
| 应付税款 | ( | ) | ( | ) | ||||
| 持续经营活动产生的净现金流量 | ( | ) | ( | ) | ||||
| 已停用经营活动产生的净现金流出 | ( | ) | ||||||
| 用于经营活动的净现金 | ( | ) | ( | ) | ||||
| 投资活动产生的现金流量： | ||||||||
| 物业和设备的收购 | ( | ) | ( | ) | ||||
| 处置固定资产所得 | ||||||||
| 对第三方贷款的支付 | ( | ) | ( | ) | ||||
| 对关联方贷款的支付 | ||||||||
| 衍生金融资产的支付 | ( | ) | ( | ) | ||||
| 衍生金融资产的赎回 | ||||||||
| 子公司的收购，净现金 | ||||||||
| 业务收购的预付款 | ( | ) | ||||||
| 处置VIEs - Tenet-Jove，扣除现金后 | ( | ) | ||||||
| 642.0 | ( | ) | ( | ) | ||||
| 已停用投资活动产生的净现金流出 | ||||||||
| 投资活动所使用的净现金 | ( | ) | ( | ) | ||||
| 筹资活动产生的现金流量： | ||||||||
| 短期贷款所得款项 | ||||||||
| 偿还短期贷款 | ( | ) | ( | ) | ||||
| 长期贷款的收入 | ||||||||
| 长期贷款的偿还 | ( | ) | ( | ) | ||||
| 向第三方偿还贷款 | ( | ) | ||||||
| 可转换票据偿还 | ( | ) | ||||||
| 普通股发行收入 | ||||||||
| 向关联方偿还预付款 | ( | ) | ( | ) | ||||
| 来自持续经营的融资活动的净现金流入金额 | ||||||||
| 已停止经营业务的筹资活动提供的净现金（使用的现金） | ||||||||
| 融资活动提供的净现金 | ||||||||
| 汇率变动对现金、现金等价物和限制性现金的影响 | ||||||||
| 现金、现金等价物和受限制资金的净减少额 | ( | ) | ( | ) | ||||
| 现金、现金等价物和限制性现金 - 期初 | ||||||||
| 现金、现金等价物和限制性现金 - 期末 | $ | $ | ||||||
| 补充现金流量披露： | ||||||||
| 支付的利息现金 | $ | $ | ||||||
| 补充非现金经营、投资和融资活动： | ||||||||
| 为可转换票据赎回发行普通股 | $ | $ | ||||||
| 发行普通股以获取上一年的收益 | $ | $ | ||||||
| 发行普通股以进行业务收购 | $ | $ | ||||||
| 转让Tenet Jove的权益以进行Wintus的业务收购 | $ | $ | ||||||
| 交易租赁义务获取的右 of use 资产 | $ | $ | ||||||
附注是这些未经审计的简明综合财务报表的组成部分。
| 4 |
注释1 - 组织和业务性质 Mobiquity Technologies, Inc. 及其运营子公司（统称为“Mobiquity”、“我们”、“公司”或“本公司”）是一家下一代位置数据情报公司。本公司提供准确、独特、大规模的位置数据和洞察，以用于营销和研究。我们提供了一个最精确和多方位的移动数据收集和分析解决方案，采用多种地理位置技术。本公司正寻求从其数据收集和分析中实施多种新的收入流，包括但不限于广告、数据许可、步行流量报告、归因报告、房地产规划、财务预测和定制研究。此外，我们还是一家广告和营销技术开发商，专注于创建、自动化和维护广告技术操作系统（分为ATOS）。ATOS平台结合了基于人工智能（或AI）和机器学习（ML）的优化技术，进行自动广告投放，管理和运营数字广告活动。
尚高生命科学公司成立于1997年8月20日，公司成立于特拉华州，是一家控股公司，其主要目的是在中国发展业务机会（中华人民共和国或中国）。
2004年12月30日，公司通过交换获得了北京天达科技发展有限公司的全部已发行股份（“天达科技”），一家中国公司，以公司普通股的限制性股份，公司的唯一经营业务变为其子公司天达科技。天达科技成立于2003年12月15日，根据中国法律。因此，天达科技变为
在2008年12月31日、2011年6月11日和2012年5月24日，Tenet-Jove与以下实体签订了一系列合同，包括《执行业务合作协议》、《及时报告协议》、《股权质押协议》和《执行期权协议》（统称为“VIE协议”），这些实体分别是安康长寿药品（集团）有限公司（“安康长寿集团”）、烟台智胜国际货运代理有限公司（“智胜货运”）和青岛智合胜农产品服务有限公司（“青岛智合胜”）。2014年2月24日，Tenet-Jove与尚高生命科学（北京）生物科技有限公司（“智胜生物科技”）签署了同一系列合同，该公司成立于2014年。智胜生物科技、智胜货运和青岛智合胜统称为“智胜VIEs”。
根据VIE协议，Tenet-Jove拥有向智盛VIEs和安康长寿集团提供与其业务运营和管理相关的咨询服务的独家权利。所有上述合同协议都要求Tenet-Jove承担智盛VIEs和安康长寿集团活动中的大部分损失风险，并有权获得大部分其剩余收益。实质上，Tenet-Jove已成为智盛VIEs和安康长寿集团运营的主要受益方。因此，智盛VIEs和安康长寿集团被视为根据《财务会计准则委员会》（FASB）会计准则法规》（ASC）810“合并”下的可变利益实体（“VIEs”）。因此这些实体的账目与Tenet-Jove的账目合并。
由于
尚高生命科学有效地受到智胜VIEs和安康长寿集团的主要股东控制，尚高生命科学拥有
2017年9月30日，天泰高科成立了新疆尚高泰和农业科技有限公司（“新疆泰和”），注册资本人民币
在2016年12月10日，Tenet-Jove与天津泰基电子商务有限公司（“天津泰基”）签署了一份购买协议，
这是一家总部位于中国天津的在线电子商务公司，专注于分销洛布玛相关产品及大创100日元店的品牌产品，
根据该协议，Tenet-Jove将收购天津泰基的
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2019年3月13日，Tenet-Jove成立了北京天杰新麻生物技术有限公司（“TNB”），注册资本为人民币
于2020年7月23日，上海嘉盈国际贸易有限公司（"上海嘉盈"）注册资本为人民币
2021年1月7日，内蒙古尚高生命科学中亨彼生物技术有限公司（“SZB”）成立，注册资本为人民币
2021年12月7日，公司成立了尚高生命科学研究有限公司（“生命科学”），注册资本为美元
2022年4月13日，公司成立了尚高生命科学集团香港有限公司（“尚高生命”），作为一家全资拥有的实体，注册资本为美元
2023年5月16日，福州美达健康管理有限公司（“福州美达”），前名庞克星球（福州）健康管理有限公司，注册资本为人民币
在2023年5月16日，江苏新康科技有限公司（“新康”）成立，注册资本为人民币
2023年5月23日，尚高生命科学成立了北京尚高崇实信息咨询有限公司（"崇实"），注册资本为人民币
2021年6月8日，Tenet-Jove与各方签署了一份重组协议。根据重组协议的条款，
(i) 公司将安康长寿的所有权益转让给榆社县广元林业发展有限公司（“广元”）的股东，以换取对广元的控制权，
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在
2022年12月30日，尚高生命科学完成了对
在
2023年5月29日，尚高生命科学与梦伙伴有限公司（BVI公司）（“梦伙伴”），
重庆维特斯集团（根据中国大陆法律注册的公司）（“维特斯”），以及梦伙伴的部分股东（“维特斯卖方”）签订股票购买协议，根据该协议，尚高生命科学将收购
公司目前通过其子公司运营三个主要业务领域：1）Biowin专注于开发、生产和分发创新的快速诊断产品和相关的医疗设备，用于治疗最常见的疾病（“快速诊断和其他产品”）；2）Wintus 专门从事生产、加工和分发诸如丝绸和丝绸面料等农产品以及贸易新鲜水果；以及（3）Fuzhou Meida 经营着一家以健康为导向的连锁餐厅，专门为代谢缓慢和代谢紊乱恢复中的人群开发健康餐。由于上述收购，公司经营的业务部门由Tenet-Jove及其子公司Guangyuan和Zhisheng VIEs经营，其中Tenet-Jove为主要受益人（“Tenet-Jove处置集团”），被归类为公司未经审计的简明合并财务报表中的停止经营。这些业务部门包括：1）Tenet-Jove 从事制造与销售蓝灰贝母及相关产品，中文名为“罗布麻”，包括由罗布麻制成的治疗性服装和纺织品；2）青岛致和升和广元从事种植、加工和分发绿色农产品（“农产品”）；3）致盛货运提供国内和国际物流服务（“货运服务”）。
备注2。经营情况
根据公司未经审计的简明综合财务报表披露，截至2024年9月30日，公司持续营运中出现了重复的净损失，金额为美元
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尽管 这些负面的财务趋势，截至2024年9月30日，公司采取了以下措施以增强公司的流动性：
| 1) | 2024年6月20日，公司与某些非美国投资者（以下简称“购买方”）签订证券购买协议，根据该协议，公司同意出售，购买方同意购买，分别而非共同，总计 股份公司的普通股（以下简称“股票”），每股以US$ 的发行价格出售，预计募集资金总额为US$ |
| 2) | 2024年7月11日，公司与EF Hutton LLC（作为几家承销商的代表）签订承销协议，涉及普通股的首次公开发行（以下简称“发行”），每股公开发行价格为US$ ，共计募集总额约为US$ 每股，预计募集的总金额约为US$ |
| 3) | 2024年8月22日，公司与22名购买者（以下简称“购买者”）签订了一项证券购买协议（“SPA”），每位购买者均为公司的不相关第三方。根据SPA，购买者同意购买，公司同意发行并卖给购买者，合计
股公司普通股，每股面值为美元
的购买价格为每股美元。 每股价格为US$，总购买价格为 |
| 4) | 公司从商业银行和第三方借款。截至2024年9月30日，公司的短期贷款为US$百万，长期贷款为US$ |
管理层 相信以上措施将共同为公司在提交日期后的12个月内提供足够的流动性以满足其未来的流动需求。
注意 3 - 重要会计政策摘要
报告的表述基础和合并原则
附带的审计未进行的简明合并基本报表已按照美国公认会计原则（“US GAAP”）为符合SEC规则的中期财务信息编制，并且一直一致地应用。管理层认为，所有被认为必要的调整（包括正常的经常性应计项目）都已包含在内。中期结果不一定能代表全年结果。这些基本报表应与公司截至2024年6月30日的年度报告Form 10-K中包含的经过审计的基本报表及其注释一起阅读，该报告于2024年9月30日提交。
未经审计的简明合并基本报表包括公司及其附属公司的基本报表，公司是主要受益人，包括公司拥有的香港注册实体和中国注册实体。收购或处置的子公司业绩记录在未经审计的简明合并损益表中，从收购生效日或直至处置生效日为止，视情况而定。
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变量利益实体的合并
VIEs一般是指缺乏足够的股本来为其业务提供资金支持，需要从其他方获得额外的财务支持，或其股东缺乏足够的决策能力。所有VIE及其附属机构都必须进行评估，以判断对VIE的风险和回报的主要受益人。要求主要受益人根据财务报告要求合并VIE。
VIEs及VIEs子公司没有合并资产可作为VIEs及VIEs子公司债务担保，只能用于清偿VIEs及VIEs子公司的债务。
由于VIE是根据中华人民共和国公司法设立的有限责任公司，VIE的债权人或受益人在正常业务过程中对VIE的任何责任不得依靠公司的一般信用。
在任何协议中，包括明确的协议和隐含的变量利益，均没有要求公司或其子公司向VIE及其子公司提供财务支持的条款。然而，如果VIE及其子公司需要财务支持，公司或其子公司可根据选择，且遵循法定限制和规定，通过向VIE及其子公司的股东提供贷款或向VIE及其子公司提供委托贷款的方式，向VIE及其子公司提供财务支持。
截至2023年10月，VIE及其子公司的资产账面价值和为停止运营而持有的合并收入信息如下：
截至三个月结束 九月三十日， | ||||||||
| 2024 | 2023 | |||||||
| 营业利润 | $ | $ | ||||||
| 净利润 | $ | $ | ||||||
非控制权益
美国通用会计准则要求，在子公司和附属公司中非控制性权益应在公司的资产负债表的股权部分报告。此外，归属于这些实体的非控制性权益在净亏损中的金额会在未经审计的简明合并损益表和综合损益表中单独报告。
风险和不确定因素
公司的运营位于中国，并受特殊考虑和重大风险的影响，这些风险通常不会影响北美和西欧的公司。 其中包括与政治、经济、法律环境和外汇兑换等相关的风险。 该公司的业绩可能受到中国政治、监管和社会条件变化以及政府政策或法规解读、抗通货膨胀措施、货币兑换、汇款至国外以及税收税率和方法等因素的不利影响。 尽管公司尚未因这些因素遭受损失，并相信自己符合现行法律法规，但不能保证公司将来会继续如此。
| 9 |
使用估计值
根据美国通用会计准则，准备未经审计的简明合并基本报表需要管理层做出估计和假设，这些将影响到资产和负债的报告金额以及于未经审计的简明合并基本报表日期的或有资产和负债的披露，以及报告期间的营业收入和费用的报告金额。管理层需要做出的重要估计包括但不限于固定资产和无形资产的使用年限、长期资产的可收回性、应收账款和其他流动资产的预期信用损失评估、递延税款的估值准备和存货准备。实际结果可能与这些估计有所不同。
营业收入 确认
公司主要通过销售罗布麻产品、其他农产品、健康餐以及快速诊断和其他产品以及根据ASC 606向外部客户提供物流服务和其他加工服务来实现营业收入。ASC 606建立了关于报告与向客户提供商品或服务的实体的合同产生的收入和现金流的性质、金额、时间和不确定性的原则。核心原则要求实体确认收入，以描绘向客户转移商品或服务的过程中，符合履行义务的商品或服务获得满足时实体预期将获得的交换而确权的对价金额。
采纳ASC 606《与客户签订合同的营业收入》，当满足以下五个步骤时，营业收入得以确认：(i) 确定与客户签订的合同；(ii) 确定合同中的履约义务；(iii) 判定交易价格；(iv) 将交易价格分配给履约义务；(v) 当（或随着）每项履约义务得到履行时，确认营业收入。公司通过审核现有客户合同，以识别应用新要求所产生的差异，包括评估其履约义务、交易价格、客户支付、控制转移以及主体与代理方考量。根据ASC 606的规定，公司评估是否适宜记录产品销售的总金额及相关成本，还是记录作为佣金所赚取的净金额。当公司是主体时，即公司在其转移给客户之前就取得了指定商品或服务的控制权时，应该在期望交换而得的针对指定商品或服务的总价值中确认营业收入。当公司是代理商，其义务是协助第三方实现其指定商品或服务的履约义务时，应该根据公司为安排其他方提供指定商品或服务所赚取的佣金金额，在净金额中确认营业收入。根据评估，公司得出结论，在适用于Topic 606范围内的当前营业收入流的时间和模式方面没有变化，因此，在采纳ASC 606后，公司的财务报表没有发生实质性变化。
更具体地说，与公司产品和服务相关的营业收入通常按以下方式确认：
产品销售 公司在客户接收产品，商品所有权转移并且不存在有关客户接受的不确定性；存在安排的确凿证据；销售价格已确定或可确定；并且预计可以收回款项的时候，才确认从产品销售中获得的营业收入。
营业收入 来自服务提供：公司仅在这些类型的服务交易中充当代理。来自国内航空和陆地货运服务的营业收入在服务履行时根据基础合同的规定确认，或者在商品从客户仓库释放时确认；服务价格是固定或可确定的；并且可收回性被视为可能。
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现金及现金等价物
现金及现金等价物包括手头现金、存入资金和其他高流动性投资，这些投资在购买时其原始到期日不超过三个月，且可以自由提取或使用。公司主要将现金存放在中国内地的各家金融机构。截至2024年9月30日和2024年6月30日，公司持有的
根据中国法律，通常要求在中国的商业银行保护存款人的权利及其对存款资金的利益，尤其是持有第三方现金存款的银行。中国银行受到一系列风险控制监管标准的约束，中国银行监管机构有权接管任何面临重大信用危机的中国银行的控件和管理。公司监控所使用的银行，并且没有遇到任何问题。
应收账款，净额
应收账款按净现值记录，包括账面价值减去必要的信用损失准备金。截至2024年9月30日和2024年6月30日，信用损失准备金分别为美元。
预付款 给供应商，净额
预付款项
向供应商的预付款是指为尚未收到的材料向供应商支付的款项。截至2024年9月30日和2024年6月30日，
对供应商不可收回预付款的备抵金额为美元
信用 损失
2023年7月1日，公司采用了会计准则更新2016-13“金融工具-信贷损失（第326号课题），金融工具信贷损失的计量”，其取代了已发生的损失方法论，改为了一种被称为当前预期信贷损失（“CECL”）方法论。信贷损失会计准则的采纳对2023年7月1日公司的合并财务报表没有实质影响。
公司在未经审计的简明合并资产负债表中包含的应收账款和其他应收款纳入其他流动资产的范围内，符合ASC主题326的规定。公司根据对各种因素的评估，估算信用损失准备金的预期信用和可收回性趋势，这些因素包括历史经验、应收账款和其他应收款余额的年龄、客户和其他债务人的信用评级、当前的经济状况、合理且可支持的未来经济状况预测，以及可能影响其从客户和其他债务人处收款能力的其他因素。当事实和情况表明某项应收款不太可能收回时，公司还会提供专门的备抵准备。
ASC 话题 326 也适用于未经审计的简明合并资产负债表中包括在其他流动资产中的对第三方的贷款。管理层根据个别基础估计不具有相似风险特征的贷款的信用损失准备。确定上述信用损失准备时考虑的关键因素包括估计的贷款收回进度、贴现率以及借款人的资产和财务表现。
预期 信用损失作为一般和管理费用列在未经审计的简明合并损益表及综合损益表上。在所有收款尝试失败后，应收款项将从准备金中核销。如果公司收回之前预留的金额，公司将减少特定的信用损失准备金。
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存货， 净额
库存按成本或净变现价值两者中的较低值列示，包括与公司产品相关的原材料、在制品和成品。净变现价值是正常业务过程中估计的销售价格减去完成和销售产品所需的任何成本。成本采用加权平均法确定。公司定期评估其库存情况，并为某些可能无法销售或其成本超过净变现价值的库存记录库存准备。截至2024年9月30日和2024年6月30日，库存准备金为 和US$
业务 收购
业务 收购按照收购法进行会计处理。收购法要求报告实体识别收购方，判断收购日期，确认和计量所收购的可识别资产、承担的负债以及对被收购实体的任何非控股权益，并确认和计量从购买中产生的商誉或便宜采购收益。被收购方的业绩从收购日期起纳入公司的合并基本报表。收购的资产和承担的负债在收购日期按其公允价值入账，购买价格超过分配金额的部分作为商誉入账，如果被收购的净资产的公允价值超过购买价格，便宜采购收益则被记录为收益。公允价值评估的调整通常在计量期内（不超过12个月）记录为商誉。收购法还要求将与收购相关的交易和收购后重组费用作为已确认的费用进行计入，并要求公司确认和计量某些资产和负债，包括那些由业务合并中的或有事项和或有对价产生的资产和负债。
商誉
商誉 表示购买价格超出所收购资产的公允价值的部分。商誉减值测试将报告单位的公允价值与其资产总额（包括商誉）进行比较。如果报告单位的资产总额超过其公允价值，则会被视为受损。为了衡量减值损失的金额，将报告单位商誉的隐含公允价值与商誉的总价值进行比较。商誉的隐含公允价值的确定方式与在业务组合中确认的商誉金额相同。如果报告单位的商誉账面价值超过商誉的隐含公允价值，则将认可减值损失，金额等于该超额。对于这些测试，公司每个报告单位的公允价值都是使用估值技术的组合确定的，包括折现现金流量法。为了证实每个报告单位执行的折现现金流分析，还利用了市场方法，使用可观察的市场数据，如类似业务线的可比公司，这些公司是上市的，或者是公开或私人交易的一部分（如果有的话）。
租约
承租人 会计
公司遵循FASB ASC No. 842， 租赁 （“Topic 842”）公司租赁办公空间、仓库和农田，根据Topic 842分类为经营租赁。根据Topic 842，承租人需要在起始日期认可所有租赁的以下内容（除了通常为12个月或更短的短期租赁）：(i) 租赁负债，即承租人根据折现基础计量的租赁付款义务；和 (ii) 使用权益（“ROU”）资产，即代表承租人在租赁期内使用或控制使用指定资产的权益。
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根据未来最低租赁支付的现值在起始日确认营运租赁ROU资产和营运租赁负债。由于大部分公司的租赁合同未规定隐含利率，因此公司根据起始日可获得的信息使用其增量借贷利率确定未来支付的现值。营运租赁ROU资产还包括已支付的租金，不包括租赁激励，包括已发生的初始直接成本。公司的租赁条款可能包括延期或终止租赁的期权，当公司有充分理由行使该期权时。 最低租赁支付的租赁费用按租赁期限的直线基础分摊。所有营运租赁ROU资产每年进行减值审计。截至2024年9月30日和2023年，公司未确认其ROU资产任何减值。
出租方 会计
公司将办公室出租给第三方，根据第842号准则，这被分类为租赁经营。来自租赁经营的营业收入以直线方式在未经审计的简化合并利润表和综合收益表中的其他收入中确认，在租赁期内按照直线法分期确认。
物业 和设备，净值
物业和设备以成本计价，减去累计折旧和摊销。对新增、重大更新和改善的支出进行资本化，而对维护和修理的支出则按发生时计入费用。折旧采用直线法计算，减去预计的残值（如有），并依据资产的预估使用寿命进行计算。农田租赁改善的摊销期限以租赁期限或基础资产的估计使用寿命中较短者为准。公司的物业和设备的预估使用寿命如下：
| 预计使用寿命 | ||
| 建筑物 | ||
| 机械和设备 | ||
| 汽车 | ||
| 办公设备 | ||
| 农田租赁权益改善 | ||
| 固定装置和家具 |
在建工程包括生产或自用目的建设中的物业和设备。在建工程按成本减少已认可的减值损失计量。在建工程在完成并准备好供预期使用时划分类到适当的物业和设备类别。这些资产的折旧按照其他资产的相同基础在资产准备好供预期使用时开始计提。
土地使用权，净
根据中国有关土地使用权的法律法规，城市地区的土地属于国家所有，而农村和郊区的土地，除非国家另有规定，通常由被国家指定为农村居民的个体集体拥有。根据土地所有权与使用权分离的法律原则，政府赋予个人和公司在特定时间内使用土地的权利。土地使用权通常是预付的，按成本减去累计摊销列示。摊销是根据土地使用权的使用寿命，通过直线法提供的。使用寿命是
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开多 资产
有限寿命资产和无形资产在需要时进行减值测试。为评估资产的回收性而进行的，当未打折的未来现金流量无法足以收回资产账面金额时，资产的价值被写下至公允价值。公司的长期资产主要包括房地产和设备、土地使用权、租赁资产和投资。截至2024年9月30日和2023年，公司没有认定长期资产减值。
衍生金融资产
衍生金融资产按公允价值计量，并在未经审核的简明合并资产负债表中作为资产或负债确认，具体归类为其他流动资产或非流动资产，或其他流动负债或非流动负债，这取决于到期日和承诺。衍生品公允价值的变化要么定期在未经审核的简明合并综合收益表中确认，要么在其他综合收益中确认，这取决于衍生品的使用情况及其是否符合对冲会计的要求。
公司选择性地使用金融工具来管理与原材料价格波动相关的市场风险，以应对丝绸产品的风险。这些金融敞口作为公司风险管理程序的一个组成部分进行监控和管理。 公司不参与投机或交易目的的衍生工具。公司的衍生金融资产不符合对冲会计的要求。因此，公允价值的变动在未经审计的简明合并损益表和综合收益表中被确认为“衍生金融资产的投资收益”。衍生金融资产的现金流与受经济对冲关系影响项目的现金流归类于同一类别。 衍生品的估计公允价值是基于相关市场信息确定的。
衍生财务资产作为净额列示，前提是满足以下所有条件： (a) 双方各自欠对方可确定金额； (b) 报告方具有偿还所欠金额和对方所欠金额的权利； (c) 报告方有意进行抵消； 和 (d) 抵销权在法律上是可执行的。
截至2024年9月30日和2024年6月30日，未结衍生金融资产为US$
金融工具的公允价值
本公司遵循ASC 820“公允价值计量和披露”的规定。ASC 820澄清了公允价值的定义，规定了公允价值的计量方法，并建立了公允价值层次结构，以对用于计量公允价值的输入进行分类，如下所示：
层次1适用于有活跃市场中的相同资产或负债的报价价值。
第2级适用于那些资产或负债，其输入不同于第一级报价的价格，但能够被观察到，例如在活跃市场中类似资产或负债的报价；在成交量不足或交易不频繁的市场中，完全相同的资产或负债的报价（活跃度较低的市场）；或模型导出的估值，其中显著的输入可被观察到或可以主要通过可观察的市场数据推导或证实。
第3级适用于资产或负债，其估值方法中存在对资产或负债的公允价值测量具有重要意义但不可观察输入。
由于这些工具的短期性质，目前资产和负债中包含的金融工具的账面价值与其公允价值接近。
所得税
递延税务资产和负债是由于未审计的简化合并财务报表中现有资产和负债的账面金额与各自的税基之间的差异而产生的未来税务后果的确认。递延税务资产和负债是使用预期适用于有税收入的所得税率进行计量的，这些差异预计将在相关年份内得到恢复或结算。税率变化对递延税务资产和负债的影响在包括法案生效日期的期间内在经营结果中确认。当有必要时，会设立估值备抵，以将递延税务资产减少到预期可以实现的金额。
ASC 740-10-25“所得税不确定性会计”的规定为未审计的合并财务报表中所采取的（或预计将在税务申报中采取的）税务立场的确认和计量设定了一个更可能的阈值。本标准还提供了关于所得税资产和负债的确认、当前和递延所得税资产和负债的分类、与税务立场相关的利息和罚款的会计处理以及相关披露的指导。截止2024年9月30日和2024年6月30日，公司没有任何不确定的税务立场。截止2024年9月30日，公司没有对非美国子公司的未分配盈利提供递延税款，因为公司政策是将这些盈利无限期地再投资于非美国业务。与无限期再投资的盈利相关的递延税负债的量化是不可行的。
公司的美国联邦所得税申报和某些州所得税申报的诉讼时效截止日期仍然为2022年及以后。截至2024年9月30日，公司中国的子公司在2019年12月31日至2023年12月31日结束的税务年度仍然需要中国税务机构进行法定审查。
2017年12月22日，"减税和就业法案"（"该法案"）出台。根据该法案的规定，美国企业税率从
增值税
销售营业收入代表货物的开票价值，减去增值税（VAT）
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外币翻译
公司在财务报告中使用美元指数（“美元”，“USD”或“US$”）。公司的子公司和VIE以人民币 （“RMB”）作为其功能货币保持账目记录，中国大陆的货币。
一般而言，为了合并目的，公司将其子公司和VIE的资产和负债按照财务报表日适用的汇率转换为美元，而收入和现金流量表则按照报告期间的平均汇率进行转换。因此，在现金流量表上报告的资产和负债金额未必与资产负债表上对应余额的变化一致。股权账户按照历史汇率转换。由子公司和VIE财务报表翻译导致的调整被记录为累计其他全面损失。
截至2024年9月30日和2024年6月30日的资产负债表金额，除权益外，分别按照美元指数翻译为
可转换票据
根据ASC 470的规定 债务转换和其他选择权根据ASC 470要求，应当在发行时单独确认转换工具中存在的潜在有利转换要素，通过将相当于该要素内在价值的部分收益分配给额外资本公积。发行成本应按比例分配给债务主体和转换要素。后续应对推迟支付的融资成本进行贴现和摊销，可转换票据后续以摊销成本计量。
研究与开发支出
研发成本与新过程的开发以及对现有过程的重大改进和完善有关，依据FASB ASC 730“研发”在发生时计入费用。这些研发成本主要包括员工费用、咨询费用、材料和测试成本，以及用于研发活动的固定资产折旧和其他杂项费用。截止2024年和2023年9月30日的三个月内，来自持续运营的总研发费用为美金
综合收益（亏损）
全面收益（损失）由两个元件组成，即净利润（损失）和其他全面收益。由于将基本报表表达为美元指数而产生的外汇翻译收益，报告在未经审计的简明综合收益（损失）和综合收益（损失）合并报表中的其他全面收益中。
公司根据ASC 260“每股收益”（“ASC 260”）计算每股收益（亏损）。ASC 260要求具有复杂资本结构的公司提供基本和摊薄后的每股收益。基本每股收益是以净收入（亏损）除以期间内的加权平均普通股份来衡量的。摊薄后每股收益类似于基本每股收益，但在每股股份的稀释效应上呈现出潜在普通股份（例如，未行使转换债券、期权和认股证书）按照期间开始时或者发行日期进行换股后的情况。对于增加每股收入或减少每股亏损的反稀释效应的潜在普通股份被排除在摊薄每股收益的计算之外。截至2024年9月30日和2023年的三个月，没有反稀释效应。
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截至三个月结束 9月30日, | ||||||||
| 2024 | 2023 | |||||||
| 持续经营的净亏损归属于尚高生命科学 | $ | ( | ) | $ | ( | ) | ||
| 已终止经营的净利润归属于尚高生命科学 | ||||||||
| 归属于尚高生命科学的净利润（亏损） | ( | ) | ||||||
| 加权平均普通股股份 - 基本和稀释* | ||||||||
| 每股普通股的持续经营净亏损 | ||||||||
| 基本和摊薄 | $ | ) | $ | ) | ||||
| 来自终止经营的每股净收益 | ||||||||
| 基本和摊薄 | $ | $ | ||||||
| 每股净收益（亏损） | ||||||||
| 基本和摊薄 | $ | ) | $ | |||||
| * |
新会计准则
在 2023年12月，FASB发布了ASU第2023-09号，"所得税（主题740）：所得税披露的改进"。该 ASU要求提供额外的定量和定性所得税披露，以帮助基本报表用户更好地评估一个实体的运营及相关的税务风险、税收规划和运营机会如何影响其税率及未来现金流的前景。该ASU适用于2024年12月15日之后开始的年度报告期，允许提前采用，且可以按前瞻性或追溯性基准应用。公司计划于2025年7月1日生效采用该指引，目前公司正在评估采用该ASU对其基本报表的影响。
2024年3月，FASB发布了ASU 2024-01《薪酬-股票薪酬（主题718）范围应用利润权益及类似奖励》。该标准澄清了利润权益及类似奖励是否属于会计准则法规编码主题718范围之内。该标准自2024年12月15日之后开始生效。允许提前采纳。公司计划于2025年7月1日起采纳此指引，目前正评估该ASU对其基本报表的影响。
在 2024年3月，FASb发布了ASU第2024-02号，“编纂改进 - 删除对概念声明的引用的修订”。 ASU 2024-02删除了编纂中对各种FASb概念声明的引用。ASU第2024-02号中的指导原则适用于2024年12月15日之后开始的财政年度，包括这些财政年度内的中期，并且可以在实体首次应用修订的日期之后，对所有新交易进行前瞻性应用，或追溯应用于首次应用修订的最早比较期间的开始。允许提前采用。公司计划于2025年7月1日生效并采用该指导原则，当前正在评估采纳此ASU对其财务报表的影响。
公司认为其他最近的会计准则更新不会对公司的未经审计的简明综合财务报表产生重大影响。
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注释 4 – 账户应收款项，净额
应收账款净额包括以下内容：
| 2024年9月30日 | 2024年6月30日 | |||||||
| 应收账款 | $ | $ | ||||||
| 减：信贷损失准备 | ( | ) | ( | ) | ||||
| 应收账款，净额 | $ | $ | ||||||
资产减值准备的变动如下:
| 2024年9月30日 | 2024年6月30日 | |||||||
| 开始余额 | $ | $ | ||||||
| 子公司收购 | ||||||||
| 计入准备金 | ||||||||
| 减少：处置VIE | ( | ) | ||||||
| 外币转化调整 | ||||||||
| 结束余额 | $ | $ | ||||||
注意 5 – 存货，净额
净存货包括以下内容：
| 2024年9月30日 | 2024年6月30日 | |||||||
| 原材料 | $ | $ | ||||||
| 在制品 | ||||||||
| 成品 | ||||||||
| 减少：库存准备金 | ( | ) | ||||||
| 总存货，净额 | $ | $ | ||||||
在制品主要包括直接成本，如seed选择、肥料、人工成本和分包商费用，在租赁农田上种植农产品时支出的费用，以及包括对农田租金和农田开发成本的预付款摊销在内的间接成本。所有成本都会累积，直到丰收时，然后根据销售情况分配给已收割作物的成本。
注意 6-随后事件净供应商预付款
向供应商的预付款净额包括以下内容:
| 2024年9月30日 | 2024年6月30日 | |||||||
| 预付款项 | $ | $ | ||||||
| 减：坏账准备 | ( | ) | ( | ) | ||||
| 预付供应商账款净额 | $ | $ | ||||||
对供应商的预付款主要是付款给尚未收到原材料或产品的供应商。
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应收账款减值准备的变动如下：
| 2024年9月30日 | 2024年6月30日 | |||||||
| 开始余额 | $ | $ | ||||||
| 子公司收购 | ||||||||
| 计入准备金 | ||||||||
| 减少：处置VIE | ( | ) | ||||||
| 外币转化调整 | ||||||||
| 结束余额 | $ | $ | ||||||
注7 - 股东赤字其他流动资产净额
其他 流动资产，净额包括以下内容：
| September 30, 2024 | June 30, 2024 | |||||||
| Loans to third parties (1) | $ | $ | ||||||
| Other receivables (2) | ||||||||
| Prepayment for business acquisition (3) | ||||||||
| Short-term deposits | ||||||||
| Prepaid expenses | ||||||||
| Subtotal | ||||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Total other current assets, net | $ | $ | ||||||
| 1) | |
| 2) |
| 18 |
| 3) |
Movement of allowance for credit losses is as follows:
| September 30, 2024 | June 30, 2024 | |||||||
| Beginning balance | $ | $ | ||||||
| Acquisition of subsidiaries | ||||||||
| Charge to allowance | ||||||||
| Less: disposal of VIEs | ( | ) | ||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
NOTE 8 - PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following:
| September 30, 2024 | June 30, 2024 | |||||||
| Buildings | $ | $ | ||||||
| Machinery and equipment | ||||||||
| Motor vehicles | ||||||||
| Office equipment | ||||||||
| Fixture and furniture | ||||||||
| Construction in progress | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Less: accumulated impairment for property and equipment | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation
and amortization expense charged to the continuing operations was US$
Depreciation
and amortization expense charged to the discontinued operations was and US$
The
Company also provides its customers with specialized testing devices as its customers could only use these devices to generate results
from these rapid diagnostic products. The ownership of these specialized testing devices is not transferred to its customers, but remains
as the Company’s properties. The specialized testing devices will be returned to the Company when they are no longer required by
the customer. As of September 30, 2024 and June 30, 2024, properties with net book values of US$
| 19 |
On
May 29, 2023, the Company’s Board approved the pledge of real estate property as collateral to guarantee a personal loan of Yuying
Zhang, the former chairman of the Board and legal representative of Tenet-Jove. This collateral was provided in exchange for the transfer
of the real estate title from Yuying Zhang to a subsidiary of the Company. According to the memorandum between the Company and Yuying
Zhang, it was anticipated that the loan would be repaid and the pledge would be released before May 31, 2024. The Company retains the
right to claim full compensation if the property is not released by the due date. On May 24, 2023, Yuying Zhang entered into a loan agreement
with Weiqing Guo for a principal amount of RMB
In addition, the Company also pledged certain property and equipment for the Company’s bank loans and its related party’s personal loan (see Note 12 and Note 13).
NOTE 9 - LAND USE RIGHTS, NET
Land
use rights are recognized at cost less accumulated amortization. According to the Chinese laws and regulations regarding land use rights,
land in urban districts is owned by the state, while land in the rural areas and suburban areas, except otherwise provided for by the
state, is collectively owned by individuals designated as resident farmers by the state. However, in accordance with the legal principle
that land ownership is separate from the right to the use of the land, the government grants the user a “land use right”
to use the land. The Company has the land use right to use the land for
| September 30, 2024 | June 30, 2024 | |||||||
| Land use rights | $ | $ | ||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Total land use rights, net | $ | $ | ||||||
Amortization
expense charged to the continuing operations was US$
The estimated future amortization expenses are as follows:
| 12 months ending September 30: | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
| 20 |
NOTE 10 - LEASES
Lessee
The
Company leases offices space and warehouse under non-cancelable operating leases, with terms ranging from one to seven and a half years.
The lease terms vary from
When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company discounts lease payments based on an estimate of its incremental borrowing rate. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The table below presents the operating lease related assets and liabilities recorded on the balance sheets.
| September 30, 2024 | June 30, 2024 | |||||||
| ROU lease assets | $ | $ | ||||||
| Operating lease liabilities – current | ||||||||
| Operating lease liabilities – non-current | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of September 30, 2024 and June 30, 2024:
| September 30, 2024 | June 30, 2024 | |||||||
| Remaining lease term and discount rate: | ||||||||
| Weighted average remaining lease term (years) | ||||||||
| Weighted average discount rate | % | % | ||||||
The components of lease expenses for continuing operations were as follows:
| For the three months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Lease cost | ||||||||
| Amortization of right-of-use assets | $ | $ | ||||||
| Interest of operating lease liabilities | ||||||||
| Total lease cost | $ | $ | ||||||
Rent
expenses totaled US$
Rent
expenses totaled and US$
| 21 |
The following is a schedule, by years, of maturities of lease liabilities as of September 30, 2024:
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Present value of lease liabilities | $ |
Lessor
On
September 21, 2023, the Company entered into a two-year rental agreement with a third party to lease its property for its office space.
Rental income of US$
NOTE 11 - ACQUISITION
Acquisition of Guangyuan
On
June 8, 2021, Tenet-Jove entered into a Restructuring Agreement with various parties. Pursuant to the terms of the Restructuring Agreement,
(i) the Company transferred all of its rights and interests in Ankang Longevity to the Shareholders of Yushe County Guangyuan Forest
Development Co., Ltd. (“Guangyuan”) in exchange for the control of
The management determined that July 5, 2021 was the acquisition date of Guangyuan. The acquisition provides a unique opportunity for the Company to enter the market of planting fast-growing bamboo willows and scenic greening trees.
The transaction was accounted for in accordance with the provisions of ASC 805-10, Business Combinations. The Company retained independent appraisers to advise management in the determination of the fair value of the various assets acquired and liabilities assumed. The values assigned in these financial statements represent management’s best estimate of fair values as of the Acquisition Date.
As required by ASC 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Non-controlling Interest, management conducted a review to reassess whether they identified all the assets acquired and all the liabilities assumed, and followed ASC 805-20’s measurement procedures for recognition of the fair value of net assets acquired.
| 22 |
The following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed:
| Due from related party | $ | |||
| Inventory | ||||
| Other current assets | ||||
| Right of use assets | ||||
| Long-term investments and other non-current assets | ||||
| Other payables and other current liabilities | ( | ) | ||
| Operating lease liabilities | ( | ) | ||
| Total purchase price for acquisition, net of US$ | $ |
Under ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. Acquisition-related costs were for the three months ended September 30, 2024 and 2023.
The
Company has included the operating results of Guangyuan in the unaudited condensed consolidated financial statements since the Acquisition
Date. in net sales and US$
Acquisition of Biowin
On
October 21, 2022, the Company, through its wholly-owned subsidiary, Shineco Life, entered into a stock purchase agreement with the Seller
and Biowin, pursuant to which Shineco Life would acquire
The transaction was accounted for in accordance with the provisions of ASC 805-10, Business Combinations. The Company retained independent appraisers to advise management in the determination of the fair value of the various assets acquired and liabilities assumed. The values assigned in these financial statements represent management’s best estimate of fair values as of the Acquisition Date.
As required by ASC 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Non-controlling Interest, management conducted a review to reassess whether they identified all the assets acquired and all the liabilities assumed, and followed ASC 805-20’s measurement procedures for recognition of the fair value of net assets acquired.
The
excess of the purchase price over the aggregate fair value of assets acquired was allocated to goodwill which amounted to US$
The
management performed an evaluation on the impairment of goodwill, and due to the lower-than-expected revenue and profit and unfavorable
business environment, the management recorded an impairment loss on goodwill of Biowin, which amounted to US$
| 23 |
The identifiable goodwill acquired and the carrying value consisted of the following:
| September 30, 2024 | June 30, 2024 | |||||||
| Goodwill | $ | $ | ||||||
| Less: impairment for goodwill | ( | ) | ( | ) | ||||
| Goodwill, net | $ | $ | ||||||
The following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed:
| Accounts receivable, net | $ | |||
| Inventories, net | ||||
| Other current assets, net | ||||
| Property and equipment, net | ||||
| Intangible assets | ||||
| Operating lease right-of-use assets | ||||
| Goodwill | ||||
| Deferred tax assets, net | ||||
| Short-term bank loans | ( | ) | ||
| Accounts payable | ( | ) | ||
| Advances from customers | ( | ) | ||
| Other current liabilities | ( | ) | ||
| Operating lease liabilities - non-current | ( | ) | ||
| Deferred tax liabilities | ( | ) | ||
| Non-controlling interest | ( | ) | ||
| Total purchase price for acquisition, net of US$ | $ |
The fair value of identified intangible assets, which are trademarks and patents, and its estimated useful lives as of September 30, 2024 is as follows:
| Average | ||||||||
| Useful Life | ||||||||
| (in Years) | ||||||||
| Intangible assets | $ | |||||||
| Less: accumulated amortization | ( | ) | ||||||
| Total intangible assets, net | $ | |||||||
The
amortization expense of intangible assets was US$
Under ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are expensed in the periods in which the costs are incurred. Acquisition-related costs were for the three months ended September 30, 2024 and 2023.
The
Company has included the operating results of Biowin in continuing operations in its unaudited condensed consolidated financial statements
since the Acquisition Date. US$
| 24 |
Acquisition of Wintus
On
May 29, 2023, Shineco Life entered into a stock purchase agreement with Dream Partner, Wintus and the Wintus Sellers, pursuant to which
Shineco Life shall acquire
The transaction was accounted for in accordance with the provisions of ASC 805-10, Business Combinations. The Company retained independent appraisers to advise management in the determination of the fair value of the various assets acquired and liabilities assumed. The values assigned in these financial statements represent management’s best estimate of fair values as of the Acquisition Date.
As required by ASC 805-20, Business Combinations—Identifiable Assets and Liabilities, and Any Non-controlling Interest, management conducted a review to reassess whether they identified all the assets acquired and all the liabilities assumed, and followed ASC 805-20’s measurement procedures for recognition of the fair value of net assets acquired.
The
excess of the purchase price over the aggregate fair value of assets acquired was allocated to goodwill, which amounted to US$
The
management performed an evaluation on the impairment of goodwill, and due to the lower-than-expected revenue and profit and unfavorable
business environment, our management recorded an impairment loss on the goodwill of Wintus, which amounted to US$
The identifiable goodwill acquired and the carrying value consisted of the following:
| September 30, 2024 | June 30, 2024 | |||||||
| Goodwill | $ | $ | ||||||
| Less: impairment for goodwill | ( | ) | ( | ) | ||||
| Goodwill, net | $ | $ | ||||||
| 25 |
The following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed:
| Accounts receivable, net | $ | |||
| Advances to suppliers, net | ||||
| Inventories, net | ||||
| Derivative financial assets | ||||
| Other current assets, net | ||||
| Property and equipment, net | ||||
| Intangible assets | ||||
| Operating lease right-of-use assets | ||||
| Goodwill | ||||
| Short-term bank loans | ( | ) | ||
| Accounts payable | ( | ) | ||
| Advances from customers | ( | ) | ||
| Tax payable | ( | ) | ||
| Deferred income | ( | ) | ||
| Other current liabilities | ( | ) | ||
| Long-term bank loans | ( | ) | ||
| Operating lease liabilities - non-current | ( | ) | ||
| Deferred tax liabilities | ( | ) | ||
| Non-controlling interest | ( | ) | ||
| Total purchase price for acquisition, net of US$ | $ |
The fair value of identified intangible assets, which are trademarks and patents, and its estimated useful lives as of September 30, 2024 is as follows:
| Average | ||||||
| Useful Life | ||||||
| (in Years) | ||||||
| Intangible assets | $ | |||||
| Less: accumulated amortization | ( | ) | ||||
| Total intangible assets, net | $ | |||||
The
amortization expense of intangible assets was US$
Under
ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component
of consideration transferred, but are expensed in the periods in which the costs are incurred. Acquisition-related costs were and
US$
The
Company has included the operating results of Wintus in continuing operations in its unaudited condensed consolidated financial statements
since the Acquisition Date. US$
| 26 |
NOTE 12 - RELATED PARTY TRANSACTIONS
Due from Related Parties, Net
The Company has made temporary advances to certain stockholders and senior management of the Company and to other entities that are either owned by family members of those stockholders or to other entities that the Company has investments in.
As of September 30, 2024 and June 30, 2024, the outstanding amounts due from related parties consisted of the following:
| September 30, 2024 | June 30, 2024 | |||||||
| Chongqing Yufan Trading Co., Ltd (“Chongqing Yufan”) | $ | $ | ||||||
| Chongqing Dream Trading Co., Ltd | ||||||||
| Wintus China Limited | ||||||||
| Fujian Xinglinchun Health Industry Co., Ltd | ||||||||
| Subtotal | ||||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Total due from related parties, net | $ | $ | ||||||
Due to Related Parties
As
of September 30, 2024 and June 30, 2024, the Company had related party payables of US$
As of September 30, 2024 and June 30, 2024, the outstanding amounts due to related parties consisted of the following:
| September 30, 2024 | June 30, 2024 | |||||||
| Wang Sai | $ | $ | ||||||
| Huang Shanchun | ||||||||
| Liu Fengming | ||||||||
| Zhan Jiarui | ||||||||
| Liu Xiqiao | ||||||||
| Lyu Jiajia (a) | ||||||||
| Zhao Pengfei | ||||||||
| Wang Xiaohui | ||||||||
| Chi Keung Yan | ||||||||
| Fuzhou Medashan Biotechnology Co., Ltd. | ||||||||
| Chongqing Fuling District Renyi Zhilu Silk Industry Co., Ltd | ||||||||
| Chongqing Huajian Housing Development Co., Ltd (“Chongqing Huajian”) | ||||||||
| Total due to related parties | $ | $ | ||||||
| a. | On
September 27, 2023, the Company entered into a loan agreement with Lyu Jiajia to borrow US$ |
| 27 |
Interest
expenses on loans due to related parties were US$
Interest
expenses on loans due to related parties were and US$
Sales to a Related Party
The
Company made sales of US$
Loan guarantee provided by related parties
The Company’s related parties provide a guarantee for the Company’s bank loans (see Note 13).
Loan guarantee provided to a related party
As
of September 30, 2024 and June 30, 2024, Chongqing Wintus (New Star) Enterprises Group (“Chongqing Wintus”) provided a guarantee
that amounted to US$
Lease from a related party
The Company entered into a two-year lease agreement for the lease of office space from a related party company, of which the CEO is the Company’s shareholder.
As
of September 30, 2024, the operating lease right-of-use assets and corresponding operating lease liabilities of leases from the related
party were US$
As
of June 30, 2024, the operating lease right-of-use assets and corresponding operating lease liabilities of leases from the related party
were US$
During
the three months ended September 30, 2024 and 2023, the Company incurred operating lease expenses in leases from the related party of
US$
NOTE 13 – LOANS
Short-term loans
Short-term loans from third parties
During
the year ended June 30, 2024, the Company entered into loan agreements with two third parties. These short-term loans from third
parties are mainly used for short-term funding to support the Company’s working capital needs. These loans bear interest or no
interest and have terms of no more than three months. As of June 30, 2024, the outstanding balance of short-term loans from third
parties amounted to US$
The
Company recorded interest expenses from continuing operations of US$
Short-term bank loans
Short-term bank loans consisted of the following:
| Lender | September 30, 2024 | Maturity Date | Int. Rate/Year | |||||||
| Jiangnan Rural Commercial Bank(a) | $ | % | ||||||||
| Bank of Jiangsu | % | |||||||||
| Bank of China(b) | % | |||||||||
| United Overseas Bank(c) | % | |||||||||
| Industrial and Commercial Bank of China | % | |||||||||
| Bank of China(d) | % | |||||||||
| Chongqing Rural Commercial Bank(e) | % | |||||||||
| Industrial and Commercial Bank of China(f) | % | |||||||||
| Total short-term bank loans | $ | |||||||||
The loans outstanding were guaranteed by the following properties, entities or individuals:
| a. | |
| b. | |
| c. | |
| d. |
| e. | |
| f. |
| 28 |
| Lender | June 30, 2024 | Maturity Date | Int. Rate/Year | |||||||
| Jiangnan Rural Commercial Bank(a) | $ | % | ||||||||
| Bank of Jiangsu | % | |||||||||
| Bank of China(b) | % | |||||||||
| United Overseas Bank(c) | % | |||||||||
| Industrial and Commercial Bank of China | % | |||||||||
| Industrial and Commercial Bank of China(d) | % | |||||||||
| Bank of China(e) | % | |||||||||
| Chongqing Rural Commercial Bank(f) | % | |||||||||
| Total short-term bank loans | $ | |||||||||
The loans outstanding were guaranteed by the following properties, entities or individuals:
| a. | |
| b. | |
| c. | |
| d. | |
| e. |
| f. |
| 29 |
Long-term loans
Long-term bank loans consisted of the following:
| Lender | September 30, 2024 | Maturity Date | Int. Rate/Year | |||||||
| Chongqing Rural Commercial Bank(a) | $ | % | ||||||||
| Bank of Chongqing(b) | % | |||||||||
| Total long-term bank loans | $ | |||||||||
| Long-term bank loans-current | $ | |||||||||
| Long-term bank loans-non-current | $ | |||||||||
The loans outstanding were guaranteed by the following properties, entities or individuals:
| a. | |
| b. |
| Lender | June 30, 2024 | Maturity Date | Int. Rate/Year | |||||||
| Chongqing Rural Commercial Bank(a) | $ | % | ||||||||
| Bank of Chongqing(b) | % | |||||||||
| Total long-term bank loans | $ | |||||||||
| Long-term bank loans-current | $ | |||||||||
| Long-term bank loans-non-current | $ | |||||||||
The loans outstanding were guaranteed by the following properties, entities or individuals:
| a. | |
| b. |
| 30 |
The future maturities of long-term bank loans as of September 30, 2024 were as follows:
| Twelve months ending September 30, | ||||
| 2025 | $ | |||
| 2026 | ||||
| Total long-term bank loans | $ | |||
The
Company recorded interest expenses from continuing operations of US$
NOTE 14 - CONVERTIBLE NOTES PAYABLE
On
June 16, 2021, the Company entered into a Securities Purchase Agreement pursuant to which the Company issued an unsecured convertible
promissory note with a maturity date of June 17, 2022 (“the Note”) to an institutional accredited investor Streeterville
Capital, LLC (“Investor”). The Note has the original principal amount of US$
On
July 16, 2021, the Company entered into a Securities Purchase Agreement (the “July Agreement”) pursuant to which the Company
issued two unsecured convertible promissory notes with a maturity term (the “Notes”) to the same Investor. The first
convertible promissory note (“Note #1”) has an original principal amount of US$
| 31 |
On
August 19, 2021, the Company entered into a Securities Purchase Agreement (the “Agreement”) pursuant to which the Company
issued an unsecured convertible promissory note with a maturity date of August 23, 2022 (the “Note”) to the same Investor.
The Note has an original principal amount of US$
For
the above-mentioned convertible promissory notes issued, interest accrues on the outstanding balance of these notes at
For
the three months ended September 30, 2024 and 2023, a total of US$
As
of September 30, 2024, shares of the Company’s common stock totaling were issued by the Company to the Investor equaling
principal and interests amounted to US$
NOTE 15 - TAXES
(a) Corporate Income Taxes
The Company is subject to income taxes on an entity basis on income arising in or derived from the location in which each entity is domiciled.
Shineco
is incorporated in the United States and has no operating activities. Shineco Life is incorporated in Hong Kong
and is subject to profit taxes in Hong Kong at a rate of
| 32 |
On
December 22, 2017, The Act was enacted. The Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign
subsidiaries, and future foreign earnings are subject to U.S. taxation. The change in rate has caused the Company to re-measure its income
tax liability and record an estimated income tax expense of US$
i) The components of the income tax provision (benefit) were as follows:
| For the three months ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Current income tax provision | $ | $ | ||||||
| Deferred income tax benefit | ( | ) | ( | ) | ||||
| Total income tax benefit | ( | ) | ( | ) | ||||
| Less: income tax provision, held for discontinued operations | ||||||||
| Income tax benefit, held for continuing operations | $ | ( | ) | $ | ( | ) | ||
ii) The components of the deferred tax liability were as follows:
| September 30, 2024 | June 30, 2024 | |||||||
| Deferred tax assets: | ||||||||
| Allowance for credit loss/doubtful accounts | $ | $ | ||||||
| Inventory reserve | ||||||||
| Net operating loss carry-forwards | ||||||||
| Total | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Total deferred tax assets | ||||||||
| Deferred tax liability: | ||||||||
| Intangible assets | ( | ) | ( | ) | ||||
| Total deferred tax liability | ( | ) | ( | ) | ||||
| Deferred tax liability, net | $ | ( | ) | $ | ( | ) | ||
Movement of the valuation allowance:
| September 30, 2024 | June 30, 2024 | |||||||
| Beginning balance | $ | $ | ||||||
| Acquisition of subsidiaries | ||||||||
| Disposal of Tenet Jove | ( | ) | ||||||
| Current year addition | ||||||||
| Exchange difference | ( | ) | ||||||
| Valuation allowance | $ | $ | ||||||
| 33 |
(b) Value-Added Tax
The
Company is subject to a VAT for selling goods.
In the event that the PRC tax authorities dispute the date on which revenue is recognized for tax purposes, the PRC tax office has the right to assess a penalty based on the amount of the taxes which are determined to be late or deficient, and the penalty will be expensed in the period if and when a determination is made by the tax authorities. There were no assessed penalties during the three months ended September 30, 2024 and 2023, respectively.
(c) Taxes Payable
Taxes payable consisted of the following:
| September 30, 2024 | June 30, 2024 | |||||||
| Income tax payable | $ | $ | ||||||
| Value added tax payable | ||||||||
| Business tax and other taxes payable | ||||||||
| Total tax payable | $ | $ | ||||||
| Income tax payable - current portion | $ | $ | ||||||
| Income tax payable – non-current portion | $ | $ | ||||||
NOTE 16 - STOCKHOLDERS’ EQUITY
Initial Public Offering
On
September 28, 2016, the Company completed its initial public offering of
shares of the Common Stock (before the effect of the reverse stock splits
mentioned below) at a price of US$
per share for gross proceeds of US$
Statutory Reserve
The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”).
Appropriations
to the statutory surplus reserve are required to be at least
| 34 |
On
July 10, 2020, the Company’s stockholders approved a
On
April 10, 2021, the Company issued shares of common stock to selected investors at a price of US$ per share. The Company
received net proceeds of US$
On
August 30, 2023, the Board of Directors of the Company approved the issuance of shares of common stock pursuant to the Company’s
2023 Equity Incentive Plan (the “2023 Plan”) in the aggregate amount of shares (the “Shares”) to its non-officer
employees. The fair value of the Shares was US$
On
May 29, 2023, Shineco Life entered into a stock purchase agreement with Dream Partner, Wintus and the Wintus Sellers, pursuant to which
Shineco Life shall acquire
On
December 22, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain non-US
investors (the “Investors”). Under the Purchase Agreement, the Company agreed to sell to the Investors up to shares
(the “Shares”) of its common stock at a per share purchase price of US$ for gross proceeds of up to US$
On
February 1, 2024, the Company’s stockholders approved a
On
June 18, 2024, the Board of Directors of the Company approved the issuance of shares of common stock pursuant to the Company’s
2024 Equity Incentive Plan (the “2024 Plan”) in the aggregate amount of shares (the “Shares”) to its non-officer
employees. The fair value of the Shares was US$
| 35 |
On
June 20, 2024, the Company entered into a securities purchase agreement with certain non-U.S. investors (the “Purchasers”),
pursuant to which the Company agreed to sell, and the Purchasers agreed to purchase, severally and not jointly, an aggregate of
shares of common stock of the Company (the “Shares”) at an offering price of US$ per share for gross proceeds of up
to US$
On
July 11, 2024, the Company entered into an Underwriting Agreement with EF Hutton LLC, as the representative for several underwriters,
relating to the underwritten public offering (the “Offering”) of shares of the Common Stock at a public offering price of US$ per share, for aggregate gross proceeds of approximately US$
On
August 22, 2024, the Company entered into a securities purchase agreement (the “SPA”) with 22 purchasers, each an
unrelated third party to the Company (collectively, the “Purchasers”). Pursuant to the SPA, the Purchasers agree to
purchase, and the Company agreed to issue and sell to the Purchasers, an aggregate of
shares of the Company’s common stock, par value US$
per share (the “Shares”), at a purchase price of US$
per share, and for an aggregate purchase price of US$
On
October 21, 2024, the Company’s stockholders approved a
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NOTE 17 - CONCENTRATIONS AND RISKS
The
Company maintains principally all bank accounts in the PRC. The cash balance held in the PRC bank accounts was US$
During
the three months ended September 30, 2024 and 2023, almost
For
the three months ended September 30, 2024, two customers accounted for approximately
For
the three months ended September 30, 2023, two customers accounted for approximately
For the three months ended September 30, 2024, one vendor accounted for approximately % of the Company’s total purchases from the continuing operations.
For the three months ended September 30, 2023, one vendor accounted for approximately % of the Company’s total purchases from the continuing operations.
NOTE 18 - COMMITMENTS AND CONTINGENCIES
Lease commitments
The
Group leases offices for operation under operating leases. Future minimum lease payments of US$
Legal Contingencies
On
November 26, 2021, the Company filed a complaint in the Supreme Court of the State of New York, New York County against Lei Zhang and
Yan Li, as defendants, and Transhare Corporation (“Transhare”), as a nominal defendant, asserting that defendants had not
paid for certain restricted shares of the Company’s common stock pursuant to stock purchase agreements they executed with the Company.
In December, defendants filed an answer and counterclaim against the Company, which they amended on January 27, 2022 after the Company
moved to dismiss their counterclaims. They brought claims for, among others, breach of contract, breach of the covenant of good faith
and fair dealing, and fraud, asserting that the Company made false and materially misleading statements, specifically regarding the sale
of such shares to Lei Zhang and Yan Li and the removal of their restrictive legends. Defendants are seeking money damages of at least
US$
Nominal defendant Transhare Corporation moved to dismiss the defendants’ counterclaim against it for wrongful refusal to remove restrictions pursuant to 6 Del. C. § 8-401, and its motion was fully submitted in April 2022. On September 9, 2022, the Court granted Transhare Corporation’s motion to dismiss defendants’ counterclaim for wrongful refusal to remove restrictions. Defendants have appealed the Court’s September 9, 2022 order dismissing defendants’ counterclaim for wrongful refusal to remove restrictions. On October 3, 2022, the parties submitted a stipulation dismissing defendants’ outstanding counterclaim against Transhare Corporation seeking declaratory judgment.
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The
Company participated in a formal mediation with the defendants Lei Zhang and Yan Li on September 18, 2023. As a result of the mediation,
the parties were able to reach a settlement agreement in December 2023. The parties executed a Settlement Agreement on December 21, 2023,
and the claims by each side were formally dismissed by the court on December 22, 2023. The subscription receivable amounted to US$
NOTE 19 - SEGMENT REPORTING
ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments on a basis consistent with the Group’s internal organizational management structure as well as information about geographical areas, business segments, and major customers in for details on the Group’s business segments.
The Company’s chief operating decision maker has been identified as the Chief Executive Officer who reviews the financial information of separate operating segments when making decisions about allocating resources and assessing performance of the Group. Based on management’s assessment, the Company has determined that it has following operating segments according to its major products and locations as follows:
| ● | Developing, manufacturing, and distributing of specialized fabrics, textile products, and other by-products derived from an indigenous Chinese plant called Apocynum Venetum, commonly known as “Bluish Dogbane” or known in Chinese as “Luobuma” (referred to herein as Luobuma), which are reclassified as discontinued operations: |
| The operating companies of this segment, namely Tenet-Jove and Tenet Huatai, specialize in Luobuma growing, development and manufacturing of relevant products, as well as purchasing Luobuma raw materials processing. | |
| This segment’s operations are focused in the north region of Mainland China, mostly carried out in Beijing, Tianjin, and Xinjiang. | |
| ● | Planting, processing, and distributing of green and organic agricultural produce as well as growing and cultivating of Chinese Yew trees (“Other agricultural products”), which are reclassified as discontinued operations: |
| The operating company of this segment, Qingdao Zhihesheng, is engaged in the business of growing and distributing green and organic vegetables and fruits. This segment has been focusing its efforts on the growing and cultivating of Chinese yew trees (formally known as “taxus media”), a small evergreen tree whose branches can be used for the production of medications believed to be anti-cancer and the tree itself can be used as an ornamental indoor bonsai tree, which are known to have the effect of purifying air quality. The operations of Zhihesheng are located in the East and North regions of Mainland China, mostly carried out in Shandong Province and in Beijing, where Zhihesheng have newly developed over 100 acres of modern greenhouses for cultivating yew trees and other plants. | |
| The other operating company of this segment, Guangyuan, is engaged in the business of landscaping, afforestation, road greening, scenic greening, garden engineering, landscaping construction, and green afforestation, especially in planting fast-growing bamboo willows and scenic greening trees. The operations of Guangyuan are located in the North regions of Mainland China, mostly carried out in Shanxi Province, where Guangyuan has developed over 350 acres of farmland for cultivating bamboo willows and other plants. | |
| ● | Providing domestic air and overland freight forwarding services (“Freight services”), which are reclassified as discontinued operations: |
| The operating company of this segment, Zhisheng Freight, is engaged in the business of providing domestic air and overland freight forwarding services by outsourcing these services to a third party. The Company merely serves as an agent and its obligation is to facilitate third-party logistic companies in fulfilling its performance obligation for specified freight services. |
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| ● | Developing, producing and distributing innovative rapid diagnostic products and related medical devices for the most common diseases (“Rapid Diagnostic and Other Products”): |
| The operating company of this segment, Biowin, specializes in the development, production and distribution of innovative rapid diagnostic products and related medical devices for the most common diseases. The operations of this segment are located in Jiangsu Province. Its products are sold not only in China but also overseas in countries such as Germany, Spain, Italy, Thailand, Japan and others. |
| ● | Producing, processing and distribution of agricultural products, such as silk and silk fabrics, as well as trading of fresh fruit (“Other agricultural products”): |
| The
operating company of this segment, Wintus, specializes in producing, processing and distributing agricultural products, such as silk
and silk fabrics, as well as fresh fruit. The operations of this segment are located in Chongqing, China. Wintus has established
approximately |
| ● | Developing and selling healthy meals for people with slow metabolic health and those in recovery from metabolic disorders. (“Healthy meals products”): |
| The operating company of this segment, Fuzhou Meida, operates a health-oriented chain restaurant that focuses on the concept of “improving metabolism through diet.” Fuzhou Meida specializes in developing healthy meals for people with slow metabolic health and those in recovery from metabolic disorders. Fuzhou Meida recently opened its restaurant in Fuzhou City, Fujian Province. The restaurant features an open kitchen and adopts a modern Chinese style, offering a variety of modern Chinese healthy light meals and metabolism-boosting meal sets. The Company plans to gradually establish additional branches in key cities across China, including Beijing, Shanghai, Guangzhou, and other southeastern coastal regions. |
The following table presents summarized information by segment for the three months ended September 30, 2024:
| For the three months ended September 30, 2024 | ||||||||||||||||||||
| Continuing Operations | Discontinued Operations | |||||||||||||||||||
| Rapid diagnostic and other | Other agricultural | Healthy meals | Luobuma | |||||||||||||||||
| products | products | products | products | Total | ||||||||||||||||
| Segment revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Cost of revenue and related business and sales tax | ||||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Gross profit % | % | % | % | % | ||||||||||||||||
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The following table presents summarized information by segment for the three months ended September 30, 2023:
| For the three months ended September 30, 2023 | ||||||||||||||||||||
| Continuing Operations | Discontinued Operations | |||||||||||||||||||
| Rapid diagnostic and other | Other agricultural | Healthy meals | Luobuma | |||||||||||||||||
| products | products | products | products | Total | ||||||||||||||||
| Segment revenue | $ | $ | $ | $ | $ | |||||||||||||||
| Cost of revenue and related business and sales tax | ||||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Gross profit % | % | % | % | % | ||||||||||||||||
Total assets as of September 30, 2024 and June 30, 2024 were as follows:
| September 30, 2024 | June 30, 2024 | |||||||
| Other agricultural products | $ | $ | ||||||
| Rapid diagnostic and other products | ||||||||
| Healthy meals products | ||||||||
| Total assets | $ | $ | ||||||
NOTE 20 - DISCONTINUED OPERATIONS
On
May 29, 2023, Shineco Life entered into a stock purchase agreement with Dream Partner, Wintus and certain shareholders of Dream Partner
(the “Sellers”), pursuant to which Shineco Life shall acquire
In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and non-current liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes benefit, shall be reported as a component of net loss separate from the net loss of continuing operations in accordance with ASC 205-20-45. The results of operations of Tenet-Jove Disposal Group have been reclassified to “net income from discontinued operations” in the unaudited condensed consolidated statements of income (loss) and comprehensive income (loss) for the three months ended September 30, 2024 and 2023.
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The summarized operating result of discontinued operations included in the Company’s unaudited condensed consolidated statements of income (loss) and comprehensive income (loss) consist of the following:
For the Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| REVENUE | $ | $ | ||||||
| COST OF REVENUE | ||||||||
| Cost of products | ||||||||
| Business and sales related tax | ||||||||
| Total cost of revenue | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| General and administrative expenses | ||||||||
| Selling expenses | ||||||||
| Total operating expenses | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ||||||
| OTHER INCOME | ||||||||
| Interest income, net | ||||||||
| Total other income | ||||||||
| LOSS BEFORE BENEFIT FOR INCOME TAXES FROM DISCONTINUED OPERATIONS | ( | ) | ||||||
| BENEFIT FOR INCOME TAXES FROM DISCONTINUED OPERATIONS | ||||||||
| LOSS FROM DISCONTINUED OPERATIONS, NET OFF TAX | ( | ) | ||||||
| INCOME ON DISPOSAL OF DISCONTINUED OPERATIONS | ||||||||
| NET INCOME FROM DISCONTINUED OPERATIONS | ||||||||
| Net loss attributable to non-controlling interest | ( | ) | ||||||
| NET INCOME FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO SHINECO, INC. | $ | $ | ||||||
NOTE 21 - SUBSEQUENT EVENTS
On
October 21, 2024, the Company’s stockholders approved a
These unaudited condensed consolidated financial statements were approved by management and available for issuance on November 14, 2024, and the Company has evaluated subsequent events through this date. No subsequent events required adjustments to or disclosure in these unaudited condensed consolidated financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is subject to the safe harbor created by those sections. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “should,” “will,” “could,” and similar expressions denoting uncertainty or an action that may, will or is expected to occur in the future. These statements involve estimates, assumptions, known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.
Examples of forward-looking statements include:
| ● | the timing of the development of future products; | |
| ● | projections of revenue, earnings, capital structure, and other financial items; | |
| ● | local, regional, national, and global price fluctuations of raw materials; | |
| ● | statements of our plans and objectives, including those that relate to our proposed expansions and the effect such expansions may have on our revenue; | |
| ● | statements regarding the capabilities of our business operations; | |
| ● | statements of expected future economic performance; | |
| ● | the impact of the COVID-19 pandemic; | |
| ● | statements regarding competition in our market; and | |
| ● | assumptions underlying statements regarding us or our business. |
The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. Many factors could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Consequently, you should not place undue reliance on these forward-looking statements.
The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Nonetheless, we reserve the right to make such updates from time to time by press release, periodic report, or other method of public disclosure without the need for specific reference to this Quarterly Report. No such update shall be deemed to indicate that other statements not addressed by such update is incorrect or create an obligation to provide any other updates.
The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes included in this Quarterly Report, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report. All monetary figures are presented in U.S. dollars, unless otherwise indicated.
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General Overview
Shineco, Inc. is a holding company incorporated in Delaware. Prior to the following acquisition and the termination of the VIE structure, as a holding company with no material operations of our own, we conducted a substantial majority of our operations through the operating entities established in the People’s Republic of China, or the PRC, primarily the variable interest entities (the “VIEs”). We did not have any equity ownership of the VIEs, instead we received the economic benefits of the VIEs’ business operations through certain contractual arrangements. Our common stock that currently listed on the Nasdaq Capital Markets are shares of our Delaware holding company. The Chinese regulatory authorities could disallow our structure, which could result in a material change in our operations and the value of our securities could decline or become worthless.
On December 30, 2022, Shineco Life Science Group Hong Kong Co., Limited (“Shineco Life”), a company established under the laws of Hong Kong and a wholly owned subsidiary of the Company, closed the acquisition of 51% of the issued equity interests of Changzhou Biowin Pharmaceutical Co., Ltd. (“Biowin”), a company established under the laws of China, pursuant to the previously announced stock purchase agreement, dated as of October 21, 2022, among Beijing Kanghuayuan Medicine Information Consulting Co., Ltd., a company established under the laws of China (“Seller”), Biowin, the Company and Shineco Life. As the consideration for the acquisition, the Company paid to Seller US$9,000,000 in cash and the Company issued 13,583 shares of the Company’s common stock, par value US$0.001 per share, to the equity holders of Biowin or any persons designated by Biowin. According to a supplementary agreement, dated as of December 30, 2022, by and among Shineco Life, the Seller and Biowin, the Seller owned 51% of the issued equity interests of Biowin before January 1, 2023, and transferred the 51% of the issued equity interests of Biowin together with its controlling rights of production and operation of Biowin to Shineco Life on January 1, 2023.
On May 29, 2023, Shineco Life entered into a stock purchase agreement with Dream Partner Limited, a BVI corporation (“Dream Partner”), Chongqing Wintus Group, a corporation incorporated under the laws of mainland China (“Wintus”), and certain shareholders of Dream Partner (the “Sellers”), pursuant to which Shineco Life shall acquire 71.42% equity interest in Wintus (the “Acquisition”). On September 19, 2023, the Company closed the Acquisition. As the consideration for the Acquisition, the Company (a) paid the Sellers an aggregate cash consideration of US$2,000,000; (b) issued certain shareholders, as listed in the agreement, an aggregate of 41,667 shares of the Company’s restricted Common Stock; and (c) transferred and sold to the Sellers 100% of the Company’s equity interest in Beijing Tenet-Jove Technological Development Co., Ltd. (“Tenet-Jove Shares”). Following the closing of the Acquisition and the sale of the Tenet-Jove Shares, the Company divested its equity interest in its operating subsidiary Tenet-Jove (“Tenet-Jove Disposal Group”) and thereby terminated its VIE Structure.
We used our subsidiaries’ vertically and horizontally integrated production, distribution, and sales channels to provide health and well-being focused plant-based products. Through our subsidiary, Biowin, which specializes in the development, production and distribution of innovative rapid diagnostic products and related medical devices for the most common diseases, we also stepped into the Point-of-Care Testing industry. Also, following the acquisition of Wintus, we entered into a new business segment of producing, processing and distributing agricultural products, such as silk, silk fabrics and fresh fruit. Meanwhile, our subsidiary, Fuzhou Meida, opened its restaurant, which is a health-oriented chain restaurant that focuses on the concept of “improving metabolism through diet.” As of September 30, 2024, the Company, through its subsidiaries, operates the following main business segments:
Developing, producing and distributing innovative rapid diagnostic products and related medical devices for the most common diseases (“Rapid Diagnostic and Other Products”) - This segment is conducted through Biowin, which specializes in the development, production and distribution of innovative rapid diagnostic products and related medical devices for the most common diseases. The operations of this segment are located in Jiangsu Province. Its products are sold not only in China, but also overseas countries such as Germany, Spain, Italy, Thailand, Japan and other countries.
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Producing, processing and distribution of agricultural products, such as silk and silk fabrics as well as fresh fruits (“Other agricultural products”): – This segment is conducted through Wintus, which specializes in producing, processing and distribution of agricultural products, such as silk and silk fabrics as well as trading of fresh fruit. The operations of this segment are located in Chongqing, China. Its products are sold not only in China, but also overseas countries such as United States, Europe (Germany, France, Italy, Poland), Japan, South Korea, and Southeast Asia (India, Thailand, Indonesia, Bangladesh, Cambodia), among other countries and regions. In addition to silk products, Wintus also engages in fruit trading business. It imports fruits from Southeast Asia and other regions, distributing them through dealers to supermarkets and stores nationwide in China.
Developing and selling healthy meals for people with slow metabolic health and those in recovery from metabolic disorders. (“Healthy meals products”): – This segment is conducted through Fuzhou Meida, which specializes in developing healthy meals for people with slow metabolic health and those in recovery from metabolic disorders. Fuzhou Meida recently opened its restaurant in Fuzhou city, Fujian Province. The restaurant features an open kitchen and adopts a modern Chinese style, offering a variety of modern Chinese healthy light meals and metabolism-boosting meal sets. The Company plans to gradually establish additional branches in key cities across China, including Beijing, Shanghai, Guangzhou, and other southeastern coastal regions.
Tenet-Jove Disposal Group conducts three other business segments. First, developing, manufacturing, and distributing specialized fabrics, textiles, and other by-products derived from an indigenous Chinese plant Apocynum Venetum, known in Chinese as “Luobuma” or “Bluish Dogbane,” as well as Luobuma raw materials processing; this segment is conducted through our wholly owned subsidiary, Tenet-Jove. Second, planting, processing and distributing green and organic agricultural produce, growing and cultivation of yew trees, as well as planting fast-growing bamboo willows and scenic greening trees; this segment is conducted through Qingdao Zhihesheng and Guangyuan. Third, providing domestic air and overland freight forwarding services by outsourcing these services to a third party; this segment is conducted through Zhisheng Freight. These three business segments were reclassified as discontinued operations. The results of operations of Tenet-Jove Disposal Group have been reclassified to “net income from discontinued operations” in the unaudited condensed consolidated statements of income (loss) and comprehensive income (loss) for the three months ended September 30, 2024 and 2023.
Financing Activities
On June 16, 2021, the Company entered into a securities purchase agreement pursuant to which the Company issued an unsecured convertible promissory note with a one-year maturity term to an institutional accredited investor, Streeterville Capital, LLC (“Investor”). The note had an original principal amount of US$3,170,000 and Investor gave consideration of US$3.0 million, reflecting original issue discount of US$150,000 and Investor’s legal fee of US$20,000. Interest accrues on the outstanding balance of the note at 6% per annum. The Company has received the principal in full from the Investor and used the proceeds for general working capital purposes. On September 7, 2022, the Company signed an extension amendment with the Investor to extend the maturity date to June 17, 2023. On October 21, 2022, the Company signed a standstill agreement with the Investor, pursuant to which the Investor would not seek to redeem any portion of the note during the period from October 21, 2022 to January 20, 2023. On January 18, 2023, the Investor re-started the redemption of the notes. On June 15, 2023, the Company signed an extension amendment with the Investor to extend the maturity date to June 17, 2024. On December 21, 2023, the Company entered into a preliminary agreement with the Investor, pursuant to which the Investor would not seek repayment of any portion of the note during the period from December 22, 2023 to April 16, 2024. On June 11, 2024, the Company signed an extension amendment with the Investor to extend the maturity date to June 17, 2025. As of September 30, 2024, no share of the Company’s common stock under this agreement was issued by the Company to the Investor, and the notes balance was US$4,304,949, with a carrying value of US$4,421,085, net of deferred financing costs of US$116,136 was recorded in the accompanying unaudited condensed consolidated balance sheets as of September 30, 2024.
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On July 16, 2021, the Company entered into another securities purchase agreement with the Investor, pursuant to which the Company issued the Investor two unsecured convertible promissory notes each with a one-year maturity term. The first convertible promissory note had an original principal amount of US$3,170,000 and the Investor gave consideration of US$3.0 million, reflecting original issue discount of US$150,000 and Investor’s legal fee of US$20,000. The second convertible promissory note has the original principal amount of US$4,200,000 and Investor gave consideration of US$4.0 million, reflecting original issue discount of US$200,000. Interest accrues on the outstanding balance of the Notes at 6% per annum. The Company has received the principal in full from the Investor and used the proceeds for general working capital purposes. As of September 30, 2024, the Notes was fully converted and shares of the Company’s common stock totaling 8,112 were issued by the Company to the Investor equaling principal and interests amounted to US$7,472,638.
On August 19, 2021, the Company entered into another securities purchase agreement with the Investor, pursuant to which the Company issued the Investor an unsecured convertible promissory note with a one-year maturity term. The note has an original principal amount of US$10,520,000 and Investor gave consideration of US$10.0 million, reflecting original issue discount of US$500,000 and Investor’s legal fee of US$20,000. Interest accrues on the outstanding balance of the note at 6% per annum. The Company has received the principal in full from the Investor and used the proceeds for general working capital purposes. On September 7, 2022, the Company signed an extension amendment with the Investor to extend the maturity date to August 23, 2023. On October 21, 2022, the Company signed a standstill agreement with the Investor, pursuant to which the Investor will not seek to redeem any portion of the note during the period from October 21, 2022 to January 20, 2023. On June 15, 2023, the Company signed an extension amendment with the Investor to extend the maturity date to August 23, 2024. On December 21, 2023, the Company entered into a preliminary agreement with the Investor, pursuant to which the Investor would not seek repayment of any portion of the note during the period from December 22, 2023 to April 16, 2024. On June 11, 2024, the Company signed an extension amendment with the Investor to extend the maturity date to August 23, 2025. As of September 30, 2024, shares of the Company’s common stock totaling 464,763 were issued by the Company to the Investor equaling principal and interests amounted to US$6,370,722 and cash totaling US$1,050,000 was repaid to the Investor. The notes balance was US$6,257,479, with a carrying value of US$6,602,229, net of deferred financing costs of US$344,750 was recorded in the accompanying unaudited condensed consolidated balance sheets as of September 30, 2024.
On June 20, 2024, the Company entered into a securities purchase agreement with certain non-U.S. investors (the “Purchasers”), pursuant to which the Company agreed to sell, and the Purchasers agreed to purchase, severally and not jointly, an aggregate of 58,333 shares of common stock of the Company (the “Shares”) at an offering price of US$120.00 per share for gross proceeds of up to US$7.0 million. In reliance on the Purchasers’ representations to the Company, the Shares issued in this offering were not subject to the registration requirements of the Securities Act, pursuant to Regulation S promulgated thereunder. As of June 30, 2024, proceeds of approximately US$6.4 million were received, and the remaining proceeds were fully received in July 2024, and all of the Shares were issued on July 8, 2024.
On July 11, 2024, the Company entered into an Underwriting Agreement with EF Hutton LLC, as the representative for several underwriters, relating to the underwritten public offering (the “Offering”) of 77,882 shares of the Common Stock at a public offering price of US$25.68 per share, for aggregate gross proceeds of approximately US$2.0 million, prior to deducting underwriting discounts and other offering expenses. In addition, the Company granted the underwriters a 45-day option to purchase up to an additional 11,683 shares of the Common Stock at the public offering price per share, less the underwriting discounts to cover over-allotments, if any. The Offering closed on July 15, 2024, and the 45-day option expired on August 30, 2024. The Offering closed on July 15, 2024, and the 45-day option expired on August 30, 2024. The net proceeds from the offering were approximately US$1.7 million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses.
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On August 22, 2024, the Company entered into a securities purchase agreement (the “SPA”) with 22 purchasers, each an unrelated third party to the Company (collectively, the “Purchasers”). Pursuant to the SPA, the Purchasers agree to purchase, and the Company agreed to issue and sell to the Purchasers, an aggregate of 624,375 shares of the Company’s common stock, par value US$0.001 per share (the “Shares”), at a purchase price of US$13.20 per share, and for an aggregate purchase price of US$8,241,750 (the “Offering”). The SPA, the transaction contemplated thereby, and the issuance of the Shares have been approved by the Company’s board of directors. The closing of the transaction contemplated by the SPA took place on September 10, 2024. As of September 30, 2024, proceeds of approximately US$4.4 million were received, and the remaining proceeds are expected to be fully received by December 31, 2024.
Factors Affecting Financial Performance
We believe that the following factors will affect our financial performance:
Increasing demand for our products – We believe that the increasing demand for our products will have a positive impact on our financial position. We plan to develop new products and expand our distribution network as well as to grow our business through possible mergers and acquisitions of similar or synergetic businesses, all aimed at increasing awareness of our brand, developing customer loyalty, meeting customer demands in various markets and providing solid foundations for our growth. As of the date of this Quarterly Report, however, we do not have any agreements, undertakings or understandings to acquire any such entities and there can be no guarantee that we ever will.
Maintaining effective control of our costs and expenses - Successful cost control depends upon our ability to obtain and maintain adequate material supplies as required by our operations at competitive prices. We will focus on improving our long-term cost control strategies including establishing long-term alliances with certain suppliers to ensure adequate supply is maintained. We will carry forward the economies of scale and advantages from our nationwide distribution network and diversified offerings.
Economic and Political Risks
Our operations are conducted primarily in the PRC and subject to special considerations and significant risks not typically associated with companies operating in North America and/or Western Europe. These include risks with, among others, the political, economic and legal environment and foreign currency exchange. Our results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversions, remittances abroad, and rates and methods of taxation, among other things.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting period. Critical accounting policies are those accounting policies that may be material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance. While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies used in the preparation of our unaudited condensed consolidated financial statements require significant judgments and estimates. For additional information relating to these and other accounting policies, see Note 3 to our unaudited condensed consolidated financial statements included elsewhere in this Report.
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Use of Estimates
Significant estimates required to be made by management include, but are not limited to, useful lives of property and equipment, and intangible assets, the recoverability of long-lived assets, assessment of expected credit losses for accounts receivable and other current asset, the valuation allowance of deferred taxes and inventory reserves. Actual results could differ from those estimates.
Credit Losses
On July 1, 2023, we adopted Accounting Standards Update 2016-13 “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The adoption of the credit loss accounting standard has no material impact on our consolidated financial statements as of July 1, 2023.
Our account receivables and other receivables included in other current assets on the unaudited condensed consolidated balance sheets are within the scope of ASC Topic 326. We make estimates of expected credit and collectability trends for the allowance for credit losses based upon assessment of various factors, including historical experience, the age of the accounts receivable and other receivables balances, credit-worthiness of the customers and other debtors, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from the customers and other debtors. We also provide specific provisions for allowance when facts and circumstances indicate that the receivable is unlikely to be collected.
ASC Topic 326 is also applicable to loans to third parties that are included in the other current assets on the unaudited condensed consolidated balance sheets. Management estimates the allowance for credit losses on loans that do not share similar risk characteristics on an individual basis. The key factors considered when determining the above allowances for credit losses include estimated loan collection schedule, discount rate, and assets and financial performance of the borrowers.
Expected credit losses are recorded as general and administrative expenses on the unaudited condensed consolidated statements of income (loss) and comprehensive income (loss). After all attempts to collect a receivable have failed, the receivable is written off against the allowance. In the event we recover amounts previously reserved for, we will reduce the specific allowance for credit losses.
Inventories, Net
Inventories, which are stated at the lower of cost or net realizable value, consist of raw materials, work-in-progress, and finished goods related to our products. Net realizable value is the estimated selling price in the normal course of business less any costs to complete and sell products. Cost is determined using the weighted average method. We periodically evaluate our inventory and records an inventory reserve for certain inventories that may not be saleable or whose cost exceeds net realizable value. As of September 30, 2024 and June 30, 2024, the inventory reserve was nil and US$30,443, respectively.
Revenue Recognition
We generate our revenue primarily through sales of Luobuma products, other agricultural products, healthy meals and rapid diagnostic and other products, as well as providing logistic services and other processing services to external customers in accordance with ASC 606. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.
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With the adoption of ASC 606, “Revenue from Contracts with Customers,” revenue is recognized when all of the following five steps are met: (i) identify the contract(s) with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; (v) recognize revenue when (or as) each performance obligation is satisfied. The Company has assessed the impact of the guidance by reviewing its existing customer contracts to identify differences that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control, and principal versus agent considerations. In accordance with ASC 606, the Company evaluates whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. When the Company is a principal, that the Company obtains control of the specified goods or services before they are transferred to the customers, the revenue should be recognized in the gross amount of consideration to which it expects to be entitled in exchange for the specified goods or services transferred. When the Company is an agent and its obligation is to facilitate third parties in fulfilling their performance obligation for specified goods or services, the revenue should be recognized in the net amount for the amount of commission which the Company earns in exchange for arranging for the specified goods or services to be provided by other parties. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of Topic 606 and therefore there was no material changes to the Company’s financial statements upon adoption of ASC 606.
More specifically, revenue related to our products and services is generally recognized as follows:
Sales of products: We recognized revenue from the sale of products at the point in time when the goods were delivered and title to the goods passed to the customer, provided that there were no uncertainties regarding customer acceptance; persuasive evidence of an arrangement existed; the sales price was fixed or determinable; and collectability was deemed probable.
Revenue from provision of services: The Company merely acts as an agent in these types of services transactions. Revenue from domestic air and overland freight forwarding services was recognized at the point in time upon the performance of services as stipulated in the underlying contract or when commodities were being released from the customer’s warehouse; the service price was fixed or determinable; and collectability was deemed probable.
Fair Value of Financial Instruments
We follow the provisions of ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs, other than quoted prices in level, that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the asset or liability.
The carrying value of financial instruments included in current assets and liabilities approximate their fair values because of the short-term nature of these instruments.
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Results of Operations for the Three Months Ended September 30, 2024 and 2023
Overview
The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023:
| Three Months Ended September 30, | Variance | |||||||||||||||
| 2024 | 2023 | Amount | % | |||||||||||||
| Revenue | $ | 2,174,285 | $ | 1,645,857 | $ | 528,428 | 32.11 | % | ||||||||
| Cost of revenue | 1,882,444 | 1,546,902 | 335,542 | 21.69 | % | |||||||||||
| Gross profit | 291,841 | 98,955 | 192,886 | 194.92 | % | |||||||||||
| General and administrative expenses | 2,636,575 | 3,259,465 | (622,890 | ) | (19.11 | )% | ||||||||||
| Selling expenses | 32,241 | 47,833 | (15,592 | ) | (32.60 | )% | ||||||||||
| Research and development expenses | 13,418 | 23,698 | (10,280 | ) | (43.38 | )% | ||||||||||
| Loss from operations | (2,390,393 | ) | (3,232,041 | ) | 841,648 | (26.04 | )% | |||||||||
| Investment income from derivative financial assets | 2,277 | 2,768 | (491 | ) | (17.74 | )% | ||||||||||
| Other income (expenses), net | (51,935 | ) | 818 | (52,753 | ) | (6,449.02 | )% | |||||||||
| Amortization of debt issuance and other costs | (188,712 | ) | (166,823 | ) | (21,889 | ) | 13.12 | % | ||||||||
| Interest expenses, net | (222,316 | ) | (369,211 | ) | 146,895 | (39.79 | )% | |||||||||
| Loss before income tax benefit from continuing operations | (2,851,079 | ) | (3,764,489 | ) | 913,410 | (24.26 | )% | |||||||||
| Benefit for income taxes | (292,951 | ) | (251,366 | ) | (41,585 | ) | 16.54 | % | ||||||||
| Net loss from continuing operations | (2,558,128 | ) | (3,513,123 | ) | 954,995 | (27.18 | )% | |||||||||
| Net income from discontinued operations | - | 8,855,247 | (8,855,247 | ) | (100.00 | )% | ||||||||||
| Net income (loss) | $ | (2,558,128 | ) | $ | 5,342,124 | $ | (7,900,252 | ) | (147.89 | )% | ||||||
| Comprehensive income (loss) attributable to Shineco Inc. | $ | (1,842,683 | ) | $ | 5,480,633 | $ | (7,323,316 | ) | (133.62 | )% | ||||||
Revenue
Currently, we, through our PRC subsidiaries, have three major business segments from continuing operations. First, developing, producing and distributing innovative rapid diagnostic and other products and related medical devices for the most common diseases; this segment is conducted through Biowin. Second, producing, processing and distributing silk products, and providing fruit trading business; this segment is conducted through Wintus. Third, developing and selling healthy meals for people with slow metabolic health and those in recovery from metabolic disorders; this segment is conducted through Fuzhou Meida.
The following table sets forth the breakdown of our revenue for the three months ended September 30, 2024 and 2023, respectively:
| Three Months Ended September 30, | Variance | |||||||||||||||||||||||
| 2024 | % | 2023 | % | Amount | % | |||||||||||||||||||
| Rapid diagnostic and other products | $ | 121,865 | 5.61 | % | $ | 135,127 | 8.21 | % | $ | (13,262 | ) | (9.81 | )% | |||||||||||
| Other agricultural products | 2,051,471 | 94.35 | % | 1,510,730 | 91.79 | % | 540,741 | 35.79 | % | |||||||||||||||
| Healthy meal products | 949 | 0.04 | % | - | - | 949 | 100.00 | % | ||||||||||||||||
| Total Amount | $ | 2,174,285 | 100.00 | % | $ | 1,645,857 | 100.00 | % | $ | 528,428 | 32.11 | % | ||||||||||||
For the three months ended September 30, 2024 and 2023, revenue from sales of rapid diagnostic and other products was US$121,865 and US$135,127, respectively, representing a decrease of US$13,262, or 9.81%. The decrease was mainly due to a decline in orders we received from our customers, which resulted from the slow recovery of post pandemic economy in China, as well as a decrease in selling prices as we tried to clear some of our remaining stock during the three months ended September 30, 2024.
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For the three months ended September 30, 2024 and 2023, revenue from sales of other agricultural products was US$2,051,471 and US$1,510,730, respectively, representing an increase of US$540,741, or 35.79%. The increase was because we had three months of revenue during the three months ended September 30, 2024 as compared to two months of revenue during the same period last year as we completed the acquisition of Wintus on July 31, 2023.
For the three months ended September 30, 2024 and 2023, revenue from sales of healthy meal products was US$949 and nil, respectively, representing an increase of US$949, or 100.00%. The increase was mainly due to revenue generated by our subsidiary, Fuzhou Meida, which only started to generate revenue in October 2023.
Cost of Revenue and Related Tax
The following table sets forth the breakdown of the cost of revenue for the three months ended September 30, 2024 and 2023, respectively:
| Three Months Ended September 30, | Variance | |||||||||||||||||||||||
| 2024 | % | 2023 | % | Amount | % | |||||||||||||||||||
| Rapid diagnostic and other products | $ | 56,550 | 3.01 | % | $ | 43,186 | 2.79 | % | $ | 13,364 | 30.95 | % | ||||||||||||
| Other agricultural products | 1,824,720 | 96.93 | % | 1,502,739 | 97.15 | % | 321,981 | 21.43 | % | |||||||||||||||
| Healthy meal products | 249 | 0.01 | % | - | - | 249 | 100.00 | % | ||||||||||||||||
| Business and sales related tax | 925 | 0.05 | % | 977 | 0.06 | % | (52 | ) | (5.32 | )% | ||||||||||||||
| Total Amount | $ | 1,882,444 | 100.00 | % | $ | 1,546,902 | 100.00 | % | $ | 335,542 | 21.69 | % | ||||||||||||
For the three months ended September 30, 2024 and 2023, cost of revenue from sales of rapid diagnostic and other products was US$56,550 and US$43,186, respectively, representing an increase of US$13,364, or 30.95%. The sales of rapid diagnostic and other products decreased; however, cost of revenue from sales of rapid diagnostic and other products increased during the three months ended September 30, 2024, which was mainly due to the clearance of our remaining stock, as discussed in “—Gross Profit ” below.
For the three months ended September 30, 2024 and 2023, cost of revenue from sales of other agricultural products was US$1,824,720 and US$1,502,739, respectively, representing an increase of US$321,981, or 21.43%. The increase was because we had three months of cost during the three months ended September 30, 2024 as compared to two months of cost during the same period last year as we completed the acquisition of Wintus on July 31, 2023.
For the three months ended September 30, 2024 and 2023, cost of revenue from sales of healthy meal products was US$249 and nil, respectively, representing an increase of US$249, or 100.00%. The increase was mainly due to cost of revenue generated by our subsidiary, Fuzhou Meida, which only started to generate revenue in October 2023.
Gross Profit
The following table sets forth the breakdown of the gross profit for the three months ended September 30, 2024 and 2023, respectively:
| Three Months Ended September 30, | Variance | |||||||||||||||||||||||
| 2024 | % | 2023 | % | Amount | % | |||||||||||||||||||
| Rapid diagnostic and other products | $ | 64,948 | 22.25 | % | $ | 91,351 | 92.32 | % | $ | (26,403 | ) | (28.90 | )% | |||||||||||
| Other agricultural products | 226,193 | 77.51 | % | 7,604 | 7.68 | % | 218,589 | 2,874.66 | % | |||||||||||||||
| Healthy meal products | 700 | 0.24 | % | - | - | 700 | 100.00 | % | ||||||||||||||||
| Total Amount | $ | 291,841 | 100.00 | % | $ | 98,955 | 100.00 | % | $ | 192,886 | 194.92 | % | ||||||||||||
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Gross profit from sales of rapid diagnostic and other products decreased by US$26,403, or 28.90%, for the three months ended September 30, 2024 as compared to the same period in 2023. The decrease in gross profit was due to the decrease in sales as well as the decrease in our selling prices as we tried to clear some of our remaining stock during the three months ended September 30, 2024.
Gross profit from sales of other agricultural products increased by US$218,589, or 2,874.66%, for the three months ended September 30, 2024 as compared to the same period in 2023. The increase in gross profit was mainly due to the increase in sales of other agricultural products during the three months ended September 30, 2024.
Gross profit from sales of healthy meal products increased by US$700, or 100.00%, for the three months ended September 30, 2024 as compared to the same period in 2023. The increase was mainly due to gross profit contributed by our subsidiary, Fuzhou Meida, which only started to generate revenue in October 2023.
Expenses
The following table sets forth the breakdown of our operating expenses for the three months ended September 30, 2024 and 2023, respectively:
| Three Months Ended September 30, | Variance | |||||||||||||||||||||||
| 2024 | % | 2023 | % | Amount | % | |||||||||||||||||||
| General and administrative expenses | $ | 2,636,575 | 98.30 | % | $ | 3,259,465 | 97.85 | % | $ | (622,890 | ) | (19.11 | )% | |||||||||||
| Selling expenses | 32,241 | 1.20 | % | 47,833 | 1.44 | % | (15,592 | ) | (32.60 | )% | ||||||||||||||
| Research and development expenses | 13,418 | 0.50 | % | 23,698 | 0.71 | % | (10,280 | ) | (43.38 | )% | ||||||||||||||
| Total Amount | $ | 2,682,234 | 100.00 | % | $ | 3,330,996 | 100.00 | % | $ | (648,762 | ) | (19.48 | )% | |||||||||||
General and Administrative Expenses
For the three months ended September 30, 2024, our general and administrative expenses were US$2,636,575, representing a decrease of US$622,890, or 19.11%, as compared to the same period in 2023. The decrease was mainly due to the decreased professional service fee in relation to the acquisition of Wintus of approximately US$780,000, as well as a decrease in staff compensation in relation to the issuance of restricted shares to the management of approximately US$400,000. The decrease was partially offset by the increased allowance for credit losses and doubtful accounts of approximately US$519,000.
Selling Expenses
For the three months ended September 30, 2024, our selling expenses were US$32,241, representing a decrease of US$15,592, or 32.60%, as compared to the same period in 2023. The decrease was mainly due to the implementation of cost control measurements, as we reduced the number of sales personnel and cut down the spending on selling activities during the three months ended September 30, 2024.
Research and Development Expenses
For the three months ended September 30, 2024, our research and development expenses were US$13,418, representing a decrease of US$10,280, or 43.38%, as compared to the same period in 2023. The decrease was mainly due to less research and development activities towards products development during the three months ended September 30, 2024, as we tried to control our costs during the three months ended September 30, 2024.
Amortization of Debt Issuance and Other Costs
For the three months ended September 30, 2024, our amortization of debt issuance and other costs expenses was US$188,712, representing an increase of US$21,889, or 13.12%, as compared to amortization of debt issuance and other costs expenses of US$166,823 for the same period in 2023. The increase was mainly due to the increased amortization of extension fee as the Company signed certain extension amendments with the investor to extend the maturity date of the convertible notes for one more year.
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Interest Expenses, Net
For the three months ended September 30, 2024, our net interest expenses were US$222,316, representing a decrease of US$146,895, or 39.79%, as compared to net interest expenses of US$369,211 in the same period in 2023. The decrease in net interest expenses was mainly attributable to the increased interest income generated from loans to third parties, which was partially offset by the increased interest expenses on short-term and long-term loans borrowed by Wintus. We had three months of interest expenses on loans during the three months ended September 30, 2024 as compared to two months of interest expenses on loans during the same period last year as we completed the acquisition of Wintus on July 31, 2023.
Benefit for Income Taxes
For the three months ended September 30, 2024, our benefit for income taxes was US$292,951, representing an increase of US$41,585, or 16.54%, as compared to benefit for income taxes of US$251,366 in the same period in 2023. The increase in benefit for income taxes was mainly due to the reversal of deferred tax liabilities as a result of the amortization of intangible assets, which are trademarks, patents and land use rights that were revalued upon the acquisition of Wintus.
Net Loss from Continuing Operations
Our net loss from continuing operations was US$2,558,128 for the three months ended September 30, 2024, a decrease of US$954,995, or 27.18%, from net loss from continuing operations of US$3,513,123 in the same period in 2023. The decrease in net loss from continuing operations was primarily a result of the increase in gross profit and a decrease in general and administrative expenses and interest expenses.
Net Income (Loss) from Discontinued Operations
As mentioned above, due to the acquisition of Wintus mentioned above, the Company’s Luobuma, Agricultural Products and Freight Services business segments, that are operated by the Tenet-Jove Disposal Group, are reclassified as discontinued operations on the Company’s unaudited condensed consolidated financial statements. We had a total net income from discontinued operations of nil and US$8,855,247 for the three months ended September 30, 2024 and 2023, respectively.
The summarized operating results of our discontinued operations included in our unaudited condensed consolidated statement of income (loss) and comprehensive income (loss) is as follows:
| Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | - | $ | 4,439 | ||||
| Cost of revenue | - | 4,183 | ||||||
| Gross profit | - | 256 | ||||||
| Operating expenses | - | 69,980 | ||||||
| Other income, net | - | 20,269 | ||||||
| Loss before income tax | - | (49,455 | ) | |||||
| Provision for income tax | - | - | ||||||
| Net loss from discontinued operations | $ | - | $ | (49,455 | ) | |||
| Income on disposal of discontinued operations | - | 8,904,702 | ||||||
| Total net income from discontinued operations | $ | - | $ | 8,855,247 | ||||
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Net Income (Loss)
Our net loss was US$2,558,128 for the three months ended September 30, 2024, as compared to a net income of US$5,342,124 for the same period in 2023. The increase in net loss was primarily a result of the decreased net income from discontinued operation, partially offset by the decreased net loss from continuing operations, as discussed above.
Comprehensive Income (Loss)
The comprehensive loss was US$2,370,422 for the three months ended September 30, 2024, an increase of US$7,810,511 from a comprehensive income of US$5,440,089 for the three months ended September 30, 2023. After the deduction of non-controlling interest, the comprehensive loss attributable to us was US$1,842,683 for the three months ended September 30, 2024, as compared to a comprehensive income attributable to us in the amount of US$5,480,633 for the three months ended September 30, 2023. The increase in comprehensive loss was due to the increased net loss discussed above.
Treasury Policies
We have established treasury policies with the objectives of achieving effective control of treasury operations and of lowering cost of funds. Therefore, funding for all operations and foreign exchange exposure have been centrally reviewed and monitored from the top level. To manage our exposure to fluctuations in exchange rates and interest rates on specific transactions and foreign currency borrowings, currency structured instruments and other appropriate financial instruments will be used to hedge material exposure, if any.
Our policy precludes us from entering into any derivative contracts purely for speculative activities. Through our treasury policies, we aim to:
(a) Minimize interest risk
This is accomplished by loan re-financing and negotiation. We will continue to closely monitor the total loan portfolio and compare the loan margin spread under our existing agreements against the current borrowing interest rates under different currencies and new offers from banks.
(b) Minimize currency risk
In view of the current volatile currency market, we will closely monitor the foreign currency borrowings at the company level. As of September 30, 2024 and June 30, 2024, except the above-mentioned convertible note, we did not engage in any foreign currency borrowings or loan contracts.
Liquidity and Capital Resources
We currently finance our business operations primarily through advances from our related parties, short-term and long-term loans, convertible notes and the sale of our common stock. Our current cash primarily consists of cash on hand and cash in bank, which is unrestricted as to withdrawal and use and is deposited with banks in China.
As of September 30, 2024, we had approximately US$13.7 million in short-term bank loans and US$1.8 million in long-term bank loans outstanding. We expect that we will be able to renew all of the existing bank loans upon their maturity based on our past experience and outstanding credit history.
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On June 16, 2021, we entered into a securities purchase agreement pursuant to which we issued an unsecured convertible promissory note with a one-year maturity term to an institutional accredited investor Streeterville Capital, LLC (“Investor”). The convertible promissory note has the original principal amount of US$3,170,000 and Investor gave consideration of US$3.0 million, reflecting original issue discount of US$150,000 and Investor’s legal fee of US$20,000. We received principal in full from the Investor. On September 7, 2022, we signed an extension amendment with the Investor to extend the maturity date to June 17, 2023. On October 21, 2022, the Company signed a standstill agreement with the Investor, pursuant to which the Investor would not seek to redeem any portion of the note during the period from October 21, 2022 to January 20, 2023. On January 18, 2023, the Investor re-started the redemption of the notes. On June 15, 2023, the Company signed an extension amendment with the Investor to extend the maturity date to June 17, 2024. On December 21, 2023, the Company entered into a preliminary agreement with the Investor, pursuant to which the Investor would not seek repayment of any portion of the note during the period from December 22, 2023 to April 16, 2024. On June 11, 2024, the Company signed an extension amendment with the Investor to extend the maturity date to June 17, 2025.
On July 16, 2021, we entered into a securities purchase agreement pursuant to which we issued two unsecured convertible promissory notes with a one-year maturity term to the same investor. The first convertible promissory note has an original principal amount of US$3,170,000 and the Investor gave consideration of US$3.0 million, reflecting original issue discount of US$150,000 and Investor’s legal fee of US$20,000. The second convertible promissory note has an original principal amount of US$4,200,000 and the Investor gave consideration of US$4.0 million, reflecting original issue discount of US$200,000.
On August 19, 2021, we entered into a securities purchase agreement pursuant to which we issued an unsecured convertible promissory note with a one-year maturity term to the same investor. The Note has the original principal amount of US$10,520,000 and Investor gave consideration of US$10.0 million, reflecting original issue discount of US$500,000 and Investor’s legal fee of US$20,000. We received principal in full from the Investor and we anticipate using the proceeds for general working capital purposes. On September 7, 2022, the Company signed an extension amendment with the Investor to extend the maturity date to August 23, 2023. On October 21, 2022, the Company signed a standstill agreement with the Investor, pursuant to which the Investor will not seek to redeem any portion of the note during the period from October 21, 2022 to January 20, 2023. On June 15, 2023, the Company signed an extension amendment with the Investor to extend the maturity date to August 23, 2024. On December 21, 2023, the Company entered into a preliminary agreement with the Investor, pursuant to which the Investor would not seek repayment of any portion of the note during the period from December 22, 2023 to April 16, 2024. On June 11, 2024, the Company signed an extension amendment with the Investor to extend the maturity date to August 23, 2025.
For the above-mentioned convertible promissory notes issued, as of September 30, 2024, shares of the Company’s common stock totaling 472,875 were issued by the Company to the Investor equaling principal and interests amounted to US$13,843,360, and cash totaling US$1,050,000 was repaid to the Investor. The Notes balance was US$10,562,428, with a carrying value of US$11,023,314, net of deferred financing costs of US$460,886 was recorded in the accompanying unaudited condensed consolidated balance sheets as of September 30, 2024.
On June 20, 2024, the Company entered into a securities purchase agreement with certain non-U.S. investors (the “Purchasers”), pursuant to which the Company agreed to sell, and the Purchasers agreed to purchase, severally and not jointly, an aggregate of 58,333 shares of common stock of the Company (the “Shares”) at an offering price of US$120.00 per share for gross proceeds of up to US$7.0 million. In reliance on the Purchasers’ representations to the Company, the Shares issued in this offering were not subject to the registration requirements of the Securities Act, pursuant to Regulation S promulgated thereunder. As of June 30, 2024, proceeds of approximately US$6.4 million were received, and the remaining proceeds were fully received in July 2024, and all of the Shares were issued on July 8, 2024.
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On July 11, 2024, the Company entered into an Underwriting Agreement with EF Hutton LLC, as the representative for several underwriters, relating to the underwritten public offering (the “Offering”) of 77,882 shares of the Common Stock at a public offering price of US$25.68 per share, for aggregate gross proceeds of approximately US$2.0 million, prior to deducting underwriting discounts and other offering expenses. In addition, the Company granted the underwriters a 45-day option to purchase up to an additional 11,683 shares of the Common Stock at the public offering price per share, less the underwriting discounts to cover over-allotments, if any. The Offering closed on July 15, 2024, and the 45-day option expired on August 30, 2024. The net proceeds from the offering were approximately US$1.7 million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses.
On August 22, 2024, the Company entered into a securities purchase agreement (the “SPA”) with 22 purchasers, each an unrelated third party to the Company (collectively, the “Purchasers”). Pursuant to the SPA, the Purchasers agree to purchase, and the Company agreed to issue and sell to the Purchasers, an aggregate of 624,375 shares of the Company’s common stock, par value US$0.001 per share (the “Shares”), at a purchase price of US$13.20 per share, and for an aggregate purchase price of US$8,241,750 (the “Offering”). The SPA, the transaction contemplated thereby, and the issuance of the Shares have been approved by the Company’s board of directors. The closing of the transaction contemplated by the SPA took place on September 10, 2024. As of September 30, 2024, proceeds of approximately US$4.4 million were received, and the remaining proceeds are expected to be fully received by December 31, 2024.
As disclosed in the Company’s unaudited condensed consolidated financial statements, the Company had recurring net losses from continuing operations of US$2.6 million and US$3.5 million, and cash outflow of US$2.1 million and US$1.3 million from operating activities from continuing operations for the three months ended September 30, 2024 and 2023, respectively. As of September 30, 2024 and June 30, 2024, the Company had accumulated a deficit of US$56.4 million and US$54.3 million, and as of September 30, 2024, the Company had negative working capital of US$7.3 million. The Company’s management believes these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months. In assessing the Company’s going concern, the Company’s management monitors and analyzes the Company’s cash on-hand and its ability to generate sufficient revenue sources in the future to support its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements, operating expenses and capital expenditure obligations. Direct offering and debt financing have been utilized to finance the working capital requirements of the Company. The continuation of the Company as a going concern through the next twelve months is dependent on the continued financial support from its stockholders. The Company’s management believes that the Company’s current access to loans, equity financing as well as financial support from its shareholders will be sufficient to meet its working capital needs for at least the next 12 months. The Company intends to continue to carefully execute its growth plans and manage market risk. If the Company fails to satisfy the Nasdaq Stock Market LLC’s (“Nasdaq”) continued listing requirements, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist its common stock. Any continuing failure to remain in compliance with Nasdaq’s continued listing standards and any subsequent failure to timely resume compliance with Nasdaq’s continued listing standards within the applicable cure period could have adverse consequences and, among other things, substantially impair the Company’s ability to raise additional funds and could result in a loss of institutional investor interest and fewer development opportunities for the Company.
Working Capital
The following table provides the information about our working capital as of September 30, 2024 and June 30, 2024:
| September 30, 2024 | June 30, 2024 | |||||||
| Current assets | $ | 31,687,558 | $ | 20,903,961 | ||||
| Current liabilities | 38,993,149 | 27,562,855 | ||||||
| Working capital | $ | (7,305,591 | ) | $ | (6,658,894 | ) | ||
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The working capital decreased slightly by US$646,697, or 9.7%, as of September 30, 2024 from June 30, 2024, primarily as a result of an increase in contract liabilities and current portion of convertible note, partially offset by an increase in advances to suppliers and other current assets, as well as a decrease in other payables and accrued expenses.
Capital Commitments and Contingencies
Capital commitments refer to the allocation of funds for the possible purchase in the near future for fixed assets or investment. Contingency refers to a condition that arises from past transactions or events, the outcome of which will be confirmed only by the occurrence or non-occurrence of uncertain futures events.
As of September 30, 2024 and June 30, 2024, we had no other material capital commitments or contingent liabilities.
Contractual Obligations
The Company has no long-term fixed contractual obligations or commitments other than leases that are disclosed in Note 10 in the notes to our unaudited condensed consolidated financial statements.
Off-Balance Sheet Commitments and Arrangements
On May 29, 2023, the Board of the Company approved that we pledged our property as collateral to guarantee a personal loan of a related party, Mr. Yuying Zhang, the legal representative of Tenet-Jove. Based on the memorandum entered between us and Mr. Yuying Zhang, Mr. Yuying Zhang was expected to repay his loan and release the pledge before May 31, 2024, and we have the right to claim full compensation if the property fails to be released by the due date. On May 23, 2024, Mr. Yuying Zhang entered into another supplementary agreement with Weiqing Guo, wherein the parties agreed to extend the due date of the principal amount from May 23, 2024 to May 23, 2025, and the real estate property continued to be pledged until May 23, 2025. If Yuying Zhang fails to repay the loan and the property is executed by the Court, the Company has the right to pursue compensation from Zhang Yuying based on the market value of the property. As of September 30, 2024, the net book value of the property was US$1,039,868.
The Company’s subsidiary, Chongqing Wintus (New Star) Enterprises Group, provided a guarantee amounted to US$712,771 for a bank loan borrowed by Chongqing Yufan Trading Co., Ltd, a related party of the Company until December 28, 2025.
Except for the above-mentioned guarantee, we have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own common stock and classified as stockholders’ equity, or that are not reflected in our unaudited condensed consolidated financial statements.
Cash Flows
The following table provides detailed information about our cash flows for the three months ended September 30, 2024 and 2023, respectively:
| Three Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (2,085,232 | ) | $ | (1,503,133 | ) | ||
| Net cash used in investing activities | (3,133,148 | ) | (12,897,211 | ) | ||||
| Net cash provided by financing activities | 5,066,481 | 906,103 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 15,577 | 202,508 | ||||||
| Net decrease in cash, cash equivalents and restricted cash | (136,322 | ) | (13,291,733 | ) | ||||
| Cash, cash equivalents and restricted cash, beginning of the period | 395,036 | 14,166,759 | ||||||
| Cash, cash equivalents and restricted cash, end of the period | $ | 258,714 | $ | 875,026 | ||||
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Operating Activities
Net cash used in operating activities during the three months ended September 30, 2024 was approximately US$2.1 million, consisting of net loss from continuing operations of US$2.6 million, depreciation and amortization expenses of US$1.3 million, and net changes in our operating assets and liabilities, which mainly included an increase in advances to suppliers of US$6.4 million, an increase in inventories of US$0.7 million and a decrease in other payables and accrued expenses of US$1.2 million, partially offset by an increase in contract liabilities of US$6.3 million and an increase in accounts payable of US$0.7 million.
Net cash used in operating activities during the three months ended September 30, 2023 was approximately US$1.5 million, consisting of net loss from continuing operations of US$3.5 million, depreciation and amortization expenses of US$1.0 million, common stock issued for management and employees of US$0.5 million, and net changes in our operating assets and liabilities, which mainly included a decrease in accounts receivable of US$4.0 million, a decrease in advances to suppliers of US$0.7 million and an increase in other payables and accrued expenses of US$0.4 million, partially offset by the decrease in accounts payable of US$5.1 million.
Investing Activities
For the three months ended September 30, 2024, net cash used in investing activities was US$3.1 million, primarily due to prepayment for business acquisition of US$2.6 million and payment made for loans to third parties of US$0.5 million.
For the three months ended September 30, 2023, net cash used in investing activities was US$12.9 million, primarily due to disposal of Tenet-Jove of US$13.9 million, partially offset by the proceeds of business acquisition of Wintus of US$1.0 million.
Financing Activities
For the three months ended September 30, 2024, net cash provided by financing activities amounted to approximately US$5.1 million, due to proceeds from issuance of common stock of US$6.4 million, proceeds from short-term loans of US$5.0 million, proceeds from long-term loans of US$0.6 million, partially offset by the repayment of short-term loans of US$5.2 million and the repayment of long-term loans of US$0.6 million, repayment of loan from third party of US$0.5 million and repayment of convertible note of US$0.4 million.
For the three months ended September 30, 2023, net cash provided by financing activities amounted to approximately US$0.9 million, due to proceeds received from investors for subscription of common stock of US$0.3 million, and proceeds from short-term loans of US$4.0 million, partially offset by the repayment of short-term loans of US$3.6 million.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a small reporting company, we are not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Based on our review, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the period covered by this Quarterly Report due to following material weaknesses:
| ● | a lack of full-time U.S. GAAP personnel in the accounting department to monitor the recording of the transactions; and |
| ● | a lack of segregation of duties for accounting personnel who prepared and reviewed the journal entries. |
In order to address the above material weaknesses, our management has taken the following steps:
| ● | recruiting sufficient qualified professionals with appropriate levels of knowledge and experience to assist in reviewing and resolving accounting issues in routine or complex transactions. To mitigate the reporting risks, we engaged an outside professional consulting firm to supplement our efforts to improve our internal control over financial reporting; |
| ● | improving the communication between management, board of directors, and the Chief Financial Officer; and |
| ● | obtaining proper approval for other significant and non-routine transactions from the board of directors. |
We are committed to monitoring the effectiveness of these measures and making any changes that are necessary and appropriate.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the fiscal quarter ended September 30, 2024. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Other than ordinary routine litigation (of which we are not currently involved), we know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation, and there are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our company except as set forth below:
On May 16, 2017, Ms. Guiqin Li (the “Plaintiff”) commenced a lawsuit against the Company in the People’s Court of Chongqing Pilot Free Trade Zone of China. Plaintiff alleged that due to the misguidance given by the Company’s securities trading department, the Plaintiff did not manage to complete the sales of the Company’s common stock on the day of the Company’s initial public offering in the United States. As the price of the Company’s common stock continued falling after initial public offering, the Plaintiff incurred losses and hence is seeking monetary damages against the Company. Based on the judgment of the initial trial, the Company was required to pay the Plaintiff a settlement payment, including the monetary compensation, interests and other legal fees.
In January 2023, the Company entered into a Settlement Agreement and Release with the Plaintiff, pursuant to which the Company paid the Plaintiff a total sum of US$700,645 (approximately RMB 4.8 million) as settlement payment, and upon acceptance of the settlement payment from the Company, the Plaintiff waived, released, and forever discharged the Company from all past and future claims. As of June 30, 2023, the Company has made the payments in full to the Plaintiff according to the Settlement Agreement and Release.
On November 26, 2021, the Company filed a complaint in the Supreme Court of the State of New York, New York County against Lei Zhang and Yan Li, as defendants, and Transhare Corporation, as a nominal defendant, asserting that defendants had not paid for certain restricted shares of the Company’s common stock pursuant to stock purchase agreements they executed with the Company. In December, defendants filed an answer and counterclaim against the Company, which they amended on January 27, 2022 after the Company moved to dismiss their counterclaims. They brought claims for, among others, breach of contract, breach of the covenant of good faith and fair dealing, and fraud, asserting that the Company made false and materially misleading statements, specifically regarding the sale of such shares to Lei Zhang and Yan Li and the removal of their restrictive legends. Defendants are seeking money damages of at least $9 million, punitive damages of $10 million, plus interest, costs, and fees. In April 2022, the Court granted the Company’s motion for a preliminary injunction to restrain the Company’s transfer agent from removing the restrictive legends on the shares, provided that the Company posts a bond, which the Company declined to do. On June 13, 2022, the restriction imposed on the shares were lifted.
Nominal defendant Transhare Corporation moved to dismiss the defendants’ counterclaim against it for wrongful refusal to remove restrictions pursuant to 6 Del. C. § 8-401, and its motion was fully submitted in April 2022. On September 9, 2022, the Court granted Transhare Corporation’s motion to dismiss defendants’ counterclaim for wrongful refusal to remove restrictions. Defendants have appealed the Court’s September 9, 2022 order dismissing defendants’ counterclaim for wrongful refusal to remove restrictions. On October 3, 2022, the parties submitted a stipulation dismissing defendants’ outstanding counterclaim against Transhare Corporation seeking declaratory judgment.
The Company participated in a formal mediation with the defendants Lei Zhang and Yan Li on September 18, 2023. As a result of the mediation, the parties were able to reach a settlement agreement in December 2023. The parties executed a Settlement Agreement on December 21, 2023, and the claims by each side were formally dismissed by the court on December 22, 2023. The subscription receivable amounted to US$3,024,000 was waived by the Company, and the Company will not retrieve the shares that were issued to the defendants.
ITEM 1A. RISK FACTORS.
As a “smaller reporting company,” we are not required to provide the information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On June 20, 2024, the Company entered into a securities purchase agreement (the “SPA”) with certain non-U.S. investors (the “Purchasers”), pursuant to which the Company agreed to sell, and the Purchasers agreed to purchase, severally and not jointly, an aggregate of 58,333 shares of common stock of the Company (the “Shares”) at an offering price of US$120.00 per share (the “Offering”). Each Purchaser represented that he or she is not a resident of the United States and is not a “U.S. person” as defined in Rule 902(k) of Regulation S under the Securities Act and is not acquiring the Shares for the account or benefit of any U.S. person. The Company has received gross proceeds of US$7.0 million from the Purchasers, and all of the Shares were issued on July 8, 2024.
The above-mentioned issuance of securities of the Company is deemed to be exempt under the Securities Act by virtue of Section 4(2) thereof as the transaction does not involve any public offering. In addition, the issuance was deemed not to fall within Section 5 under the Securities Act and to be further exempt under Rule 901 and 903 of Regulation S promulgated thereunder by virtue of being the issuance of securities to non-U.S. citizens or residents, conducted outside the United States and not using any element of interstate commerce.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS
* This certification is deemed furnished, and not filed, for purposes of section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SHINECO, INC. | ||
| Dated: November 14, 2024 | By: | /s/ Jennifer Zhan |
| Jennifer Zhan | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Dated: November 14, 2024 | By: | /s/ Sai (Sam) Wang |
| Sai (Sam) Wang | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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