美國
證券交易委員會
華盛頓特區，20549
表格
截至季度結束
或者
過渡期從________到________
委員會
文件編號：
（公司章程中指定的準確公司名稱）
（住所的州或其他司法轄區 文件號碼） |
（國稅局僱主 (主要 執行人員之地址) |
主要執行辦公室地址(郵政編碼)
(
根據交易所法規（17 CFR 240.14a-12）第14a-12規定的招股材料
(前 主要執行辦公室地址) (郵政編碼)
根據法案第12(b)節註冊的證券:
| 每類股票的名稱 | 交易符號 | 在每個交易所註冊的名稱 | ||
請勾選標記以指示註冊者是否（1）在過去12個月內（或註冊者需要提交這些報告的更短時間內）已提交證券交易所法案第13或15（d）節要求提交的所有報告，及 （2）是否已被提交要求過去90天的提交要求所制約。
通過勾選圓圈表明註冊者是否在過去12個月內(或註冊者需要提交這些文件的較短期限內)已經遞交規章S-T(本章第232.405條)規定的每個交互式數據文件。
在勾選標記處表示註冊人是大型加速提交人、加速提交人、非加速提交人、小型報告公司還是新興增長公司。請參閱證券交易法120億條規則中「大型加速提交人」、「加速提交人」、「小型報告公司」和「新興增長公司」的定義。
| 大型加速文件提交人 | ☐ | 加速文件提交人 | ☐ |
| ☒ | 小型報告公司 | ||
| 新興成長公司 |
如果是新興成長型企業，請打勾，以表明註冊人已選擇不使用遵守《證券交易法》第13(a)條所規定的任何新的或修訂後的財務會計準則的延長過渡期。 ☐
請勾選適用的圓圈，表示註冊登記者是否是空殼公司(根據交易所法案第12b-2條的定義)。是 ☐ 否
截至2024年11月14日，有 每股普通股的面值爲$ 每股，流通。
目錄
| 頁碼 | ||
| 第一部分 財務信息 | 1 | |
| 項目 1. | 基本報表 | 1 |
| 壓縮的綜合資產負債表（未經審計） | 1 | |
| 簡明綜合收益表（損益表）（未經審計） | 2 | |
| 未經審計的壓縮合並股東權益變動表 | 3 | |
| 壓縮的現金流量表（未經審計） | 4 | |
| 基本報表註釋（未經審計） | 5 | |
| 項目 2. | 分銷計劃 | 42 |
| 項目 3. | 有關市場風險的定量和定性披露 | 58 |
| 項目 4. | 控制和程序 | 58 |
| 第二部分.其他信息 | 59 | |
| 項目 1. | 法律訴訟 | 59 |
| Interest expense, net | 風險因素 | 59 |
| 項目 2. | 未註冊的股票股權銷售和籌款用途 | 59 |
| 項目 3. | 對優先證券的違約 | 59 |
| 項目 4. | 礦山安全披露 | 59 |
| 項目5。 | 其他信息 | 59 |
| 項目 6. | 展示資料 | 60 |
| 簽名 | 61 | |
| i |
在2024年10月21日，公司的股東批准了公司普通股的反向股票拆分，每股面值爲0.001美元（「普通股」），比例不低於1比2，且不超過1比24，具體比例由公司的董事會（「董事會」）判斷。隨後在2024年10月23日，董事會批准了普通股的1比24反向股票拆分，該拆分於2024年11月12日生效（「反向股票拆分」）。由於反向股票拆分，二十四股拆分前的普通股自動合併並轉換爲一股已發行並流通的普通股，無需股東採取任何行動。除非另有說明，本報告中所有股票數量和每股金額均已按照普通股的1比24反向股票拆分進行呈現。
| ii |
第I部分。財務信息
項目1.基本報表
尚高生命科學， INC.
彙編簡明資產負債表
| 九月三十日， | 6月30日， | |||||||
| 2024 | 2024 | |||||||
| (未經審計) | ||||||||
| 資產 | ||||||||
| 流動資產： | ||||||||
| 現金及現金等價物 | $ | $ | ||||||
| 受限現金 | ||||||||
| 應收賬款，淨額 | ||||||||
| 應收關聯方 | ||||||||
| 淨存貨 | ||||||||
| 預付供應商款，淨額 | ||||||||
| 衍生金融資產 | ||||||||
| 其他流動資產淨額 | ||||||||
| 總流動資產 | ||||||||
| 物業和設備，淨值 | ||||||||
| 土地使用權，淨 | ||||||||
| 無形資產-淨額 | ||||||||
| 商譽 | ||||||||
| 經營租賃使用權資產 | ||||||||
| 資產總計 | $ | $ | ||||||
| 負債和股東權益 | ||||||||
| 流動負債： | ||||||||
| 短期貸款 | $ | $ | ||||||
| 長期貸款-流動部分 | ||||||||
| 應付賬款 | ||||||||
| 合同責任 | ||||||||
| 由於關聯方相關事項 | ||||||||
| 其他應付款及預提費用 | ||||||||
| 經營租賃負債 - 流動負債 | ||||||||
| 應付可轉換票據 - 流動 | ||||||||
| 遞延收入 | ||||||||
| 應付稅款 | ||||||||
| 流動負債合計 | ||||||||
| 應付所得稅-非流動負債部分 | ||||||||
| 非流動經營租賃負債 | ||||||||
| 可轉換債券應付款-非流動 | ||||||||
| 長期貸款-非流動 | ||||||||
| 遞延所得稅負債 | ||||||||
| 負債合計 | ||||||||
| 承諾和 contingencies | ||||||||
| 股本： | ||||||||
| 普通股;每股面值$, 授權股份； 及 於2024年9月30日和2024年6月30日發行並流通的股份* | ||||||||
| 額外實收資本 | ||||||||
| 應收訂閱款 | ( | ) | ||||||
| 已認購的普通股 | ||||||||
| 法定公積金 | ||||||||
| 累積赤字 | ( | ) | ( | ) | ||||
| 累計其他綜合損失 | ( | ) | ( | ) | ||||
| 尚高生命科學公司的股東權益總額。 | ||||||||
| 非控股權益 | ||||||||
| 總股本 | ||||||||
| 負債和所有者權益總計 | $ | $ | ||||||
| * |
附註是這些未經審計的簡明綜合財務報表的組成部分。
| 1 |
尚高生命科學， INC.
壓縮 合併收入（虧損）及綜合收入（虧損）報表
(未經審計)
截至三個月末 九月三十日， | ||||||||
| 2024 | 2023 | |||||||
| 收入 | $ | $ | ||||||
| 收入成本 | ||||||||
| 產品成本 | ||||||||
| 業務和銷售相關的稅收 | ||||||||
| 營業成本總額 | ||||||||
| 毛利潤 | ||||||||
| 經營費用 | ||||||||
| 一般和行政費用 | ||||||||
| 銷售費用 | ||||||||
| 研發費用 | ||||||||
| 總營業費用 | ||||||||
| 營業虧損 | ( | ) | ( | ) | ||||
| 其他收入（支出） | ||||||||
| 衍生金融資產的投資收益 | ||||||||
| 其他收入（費用），淨額 | ( | ) | ||||||
| 債務發行及其他成本的攤銷 | ( | ) | ( | ) | ||||
| 利息費用，淨額 | ( | ) | ( | ) | ||||
| 其他支出總額 | ( | ) | ( | ) | ||||
| 繼續經營的稅前利潤減損前利潤 | ( | ) | ( | ) | ||||
| 所得稅的福利 | ( | ) | ( | ) | ||||
| 持續經營業務淨虧損 | ( | ) | ( | ) | ||||
| 已停業的業務: | ||||||||
| 已停業業務的淨損失 | ( | ) | ||||||
| 停止經營業務處置收益 | ||||||||
| 終止經營活動的淨利潤 | ||||||||
| 淨利潤（損失） | ( | ) | ||||||
| 歸屬於少數股東的淨虧損 | ( | ) | ( | ) | ||||
| 尚高生命科學股份有限公司所淨利潤（損失） | $ | ( | ) | $ | ||||
| 綜合收益（虧損） | ||||||||
| 淨利潤（虧損） | $ | ( | ) | $ | ||||
| 外幣翻譯損失的其他綜合收益 | ||||||||
| 總的全面收入（虧損） | ( | ) | ||||||
| 減: 非控制權益全面虧損 | ( | ) | ( | ) | ||||
| 歸屬於尚高生命科學公司的綜合收益（損失） | $ | ( | ) | $ | ||||
| 加權平均股本和攤薄後的每股數* | ||||||||
| 每股普通股基本和稀釋收益（虧損） | $ | ) | $ | |||||
| 每股盈利（虧損） | ||||||||
| 持續經營業務 - 基本和攤薄 | ) | ) | ||||||
| 終止操作-基本和稀釋 | ||||||||
| 普通股每股淨收益（虧損）-基本和稀釋 | ) | |||||||
| * |
附註是這些未經審計的簡明綜合財務報表的組成部分。
| 2 |
尚高生命科學， INC.
未經審計的 簡明合併股東權益變動表
截至2024年和2023年9月30日的三個月
（未經審計）
| 普通股票 | 訂閱 | 普通股 | 其他補充 實繳 | 法定 | 累積 | 累積 其它 綜合 | 非 控股 | 總計 | ||||||||||||||||||||||||||||||||
| 股份* | 金額 | 應收款 | $ | 資本 | 儲備 | 赤字 | 虧損 | 利息 | 資本 | |||||||||||||||||||||||||||||||
| 2023年6月30日的餘額 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| 收購Wintus | ( | ) | ||||||||||||||||||||||||||||||||||||||
| 處置Tenet-Jove | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| 爲可轉換票據贖回發行普通股 | ||||||||||||||||||||||||||||||||||||||||
| 爲管理層和員工發行普通股 | ||||||||||||||||||||||||||||||||||||||||
| 本期持續經營的淨虧損 | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| 本期已終止控件的淨利潤（虧損） | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| 外匯翻譯收益（損失） | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| 截至2023年9月30日的餘額 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| 2024年6月30日餘額 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||
| 股票發行 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| 發行普通股以贖回可轉換票據 | ||||||||||||||||||||||||||||||||||||||||
| 爲管理層和員工發行的普通股 | ||||||||||||||||||||||||||||||||||||||||
| 本年度持續經營的淨虧損 | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| 外幣翻譯盈利 | - | |||||||||||||||||||||||||||||||||||||||
| 截至2024年9月30日的餘額 | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| * |
附註是這些未經審計的簡明綜合財務報表的組成部分。
| 3 |
尚高生命科學， INC.
簡明綜合現金流量表
（未經審計）
截至三個月末 九月三十日， | ||||||||
| 2024 | 2023 | |||||||
| 經營活動產生的現金流量： | ||||||||
| 淨利潤（虧損） | $ | ( | ) | $ | ||||
| 來自停止運營業務的淨收入，淨稅後小計 | ||||||||
| 持續經營的淨虧損 | ( | ) | ( | ) | ||||
| 調整以達到淨利潤（損失）與經營活動現金流量淨額的調和： | ||||||||
| 折舊和攤銷 | ||||||||
| 處置財產和設備的收益 | ( | ) | ||||||
| 信用損失和可疑賬款準備 | ||||||||
| 庫存準備的衝回 | ( | ) | ( | ) | ||||
| 遞延所得稅收益 | ( | ) | ( | ) | ||||
| 租賃資產攤銷 | ||||||||
| 爲管理層和員工發行普通股 | ||||||||
| 債務發行及其他成本的攤銷 | ||||||||
| 可轉換票據的應計利息費用 | ||||||||
| 第三方應計利息收入 | ( | ) | ||||||
| 運營資產和負債的變化： | ||||||||
| 應收賬款 | ||||||||
| 預付款項 | ( | ) | ||||||
| 存貨 | ( | ) | ( | ) | ||||
| 其他流動資產 | ( | ) | ||||||
| 應付賬款 | ( | ) | ||||||
| 合同責任 | ||||||||
| 遞延收入 | ||||||||
| 其他應付款及預提費用 | ( | ) | ||||||
| 其他長期應付款 | ( | ) | ||||||
| 營運租賃負債 | ( | ) | ||||||
| 應付稅款 | ( | ) | ( | ) | ||||
| 持續經營活動產生的淨現金流量 | ( | ) | ( | ) | ||||
| 已停用經營活動產生的淨現金流出 | ( | ) | ||||||
| 用於經營活動的淨現金 | ( | ) | ( | ) | ||||
| 投資活動產生的現金流量： | ||||||||
| 物業和設備的收購 | ( | ) | ( | ) | ||||
| 處置固定資產所得 | ||||||||
| 對第三方貸款的支付 | ( | ) | ( | ) | ||||
| 對關聯方貸款的支付 | ||||||||
| 衍生金融資產的支付 | ( | ) | ( | ) | ||||
| 衍生金融資產的贖回 | ||||||||
| 子公司的收購，淨現金 | ||||||||
| 業務收購的預付款 | ( | ) | ||||||
| 處置VIEs - Tenet-Jove，扣除現金後 | ( | ) | ||||||
| 642.0 | ( | ) | ( | ) | ||||
| 已停用投資活動產生的淨現金流出 | ||||||||
| 投資活動所使用的淨現金 | ( | ) | ( | ) | ||||
| 籌資活動產生的現金流量： | ||||||||
| 短期貸款所得款項 | ||||||||
| 償還短期貸款 | ( | ) | ( | ) | ||||
| 長期貸款的收入 | ||||||||
| 長期貸款的償還 | ( | ) | ( | ) | ||||
| 向第三方償還貸款 | ( | ) | ||||||
| 可轉換票據償還 | ( | ) | ||||||
| 普通股發行收入 | ||||||||
| 向關聯方償還預付款 | ( | ) | ( | ) | ||||
| 來自持續經營的融資活動的淨現金流入金額 | ||||||||
| 已停止經營業務的籌資活動提供的淨現金（使用的現金） | ||||||||
| 融資活動提供的淨現金 | ||||||||
| 匯率變動對現金、現金等價物和限制性現金的影響 | ||||||||
| 現金、現金等價物和受限制資金的淨減少額 | ( | ) | ( | ) | ||||
| 現金、現金等價物和限制性現金 - 期初 | ||||||||
| 現金、現金等價物和限制性現金 - 期末 | $ | $ | ||||||
| 補充現金流量披露： | ||||||||
| 支付的利息現金 | $ | $ | ||||||
| 補充非現金經營、投資和融資活動： | ||||||||
| 爲可轉換票據贖回發行普通股 | $ | $ | ||||||
| 發行普通股以獲取上一年的收益 | $ | $ | ||||||
| 發行普通股以進行業務收購 | $ | $ | ||||||
| 轉讓Tenet Jove的權益以進行Wintus的業務收購 | $ | $ | ||||||
| 交易租賃義務獲取的右 of use 資產 | $ | $ | ||||||
附註是這些未經審計的簡明綜合財務報表的組成部分。
| 4 |
註釋1 - 組織和業務性質 Mobiquity Technologies, Inc. 及其運營子公司（統稱爲「Mobiquity」、「我們」、「公司」或「本公司」）是一家下一代位置數據情報公司。本公司提供準確、獨特、大規模的位置數據和洞察，以用於營銷和研究。我們提供了一個最精確和多方位的移動數據收集和分析解決方案，採用多種地理位置技術。本公司正尋求從其數據收集和分析中實施多種新的收入流，包括但不限於廣告、數據許可、步行流量報告、歸因報告、房地產規劃、財務預測和定製研究。此外，我們還是一家廣告和營銷技術開發商，專注於創建、自動化和維護廣告技術操作系統（分爲ATOS）。ATOS平台結合了基於人工智能（或AI）和機器學習（ML）的優化技術，進行自動廣告投放，管理和運營數字廣告活動。
尚高生命科學公司成立於1997年8月20日，公司成立於特拉華州，是一家控股公司，其主要目的是在中國發展業務機會（中華人民共和國或中國）。
2004年12月30日，公司通過交換獲得了北京天達科技發展有限公司的全部已發行股份（「天達科技」），一家中國公司，以公司普通股的限制性股份，公司的唯一經營業務變爲其子公司天達科技。天達科技成立於2003年12月15日，根據中國法律。因此，天達科技變爲
在2008年12月31日、2011年6月11日和2012年5月24日，Tenet-Jove與以下實體簽訂了一系列合同，包括《執行業務合作協議》、《及時報告協議》、《股權質押協議》和《執行期權協議》（統稱爲「VIE協議」），這些實體分別是安康長壽藥品（集團）有限公司（「安康長壽集團」）、煙臺智勝國際貨運代理有限公司（「智勝貨運」）和青島智合勝農產品服務有限公司（「青島智合勝」）。2014年2月24日，Tenet-Jove與尚高生命科學（北京）生物科技有限公司（「智勝生物科技」）簽署了同一系列合同，該公司成立於2014年。智勝生物科技、智勝貨運和青島智合勝統稱爲「智勝VIEs」。
根據VIE協議，Tenet-Jove擁有向智盛VIEs和安康長壽集團提供與其業務運營和管理相關的諮詢服務的獨家權利。所有上述合同協議都要求Tenet-Jove承擔智盛VIEs和安康長壽集團活動中的大部分損失風險，並有權獲得大部分其剩餘收益。實質上，Tenet-Jove已成爲智盛VIEs和安康長壽集團運營的主要受益方。因此，智盛VIEs和安康長壽集團被視爲根據《財務會計準則委員會》（FASB）會計準則法規》（ASC）810「合併」下的可變利益實體（「VIEs」）。因此這些實體的賬目與Tenet-Jove的賬目合併。
由於
尚高生命科學有效地受到智勝VIEs和安康長壽集團的主要股東控制，尚高生命科學擁有
2017年9月30日，天泰高科成立了新疆尚高泰和農業科技有限公司（「新疆泰和」），註冊資本人民幣
在2016年12月10日，Tenet-Jove與天津泰基電子商務有限公司（「天津泰基」）簽署了一份購買協議，
這是一家總部位於中國天津的在線電子商務公司，專注於分銷洛布瑪相關產品及大創100日元店的品牌產品，
根據該協議，Tenet-Jove將收購天津泰基的
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2019年3月13日，Tenet-Jove成立了北京天傑新麻生物技術有限公司（「TNB」），註冊資本爲人民幣
於2020年7月23日，上海嘉盈國際貿易有限公司（"上海嘉盈"）註冊資本爲人民幣
2021年1月7日，內蒙古尚高生命科學中亨彼生物技術有限公司（「SZB」）成立，註冊資本爲人民幣
2021年12月7日，公司成立了尚高生命科學研究有限公司（「生命科學」），註冊資本爲美元
2022年4月13日，公司成立了尚高生命科學集團香港有限公司（「尚高生命」），作爲一家全資擁有的實體，註冊資本爲美元
2023年5月16日，福州美達健康管理有限公司（「福州美達」），前名龐克星球（福州）健康管理有限公司，註冊資本爲人民幣
在2023年5月16日，江蘇新康科技有限公司（「新康」）成立，註冊資本爲人民幣
2023年5月23日，尚高生命科學成立了北京尚高崇實信息諮詢有限公司（"崇實"），註冊資本爲人民幣
2021年6月8日，Tenet-Jove與各方簽署了一份重組協議。根據重組協議的條款，
(i) 公司將安康長壽的所有權益轉讓給榆社縣廣元林業發展有限公司（「廣元」）的股東，以換取對廣元的控制權，
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在
2022年12月30日，尚高生命科學完成了對
在
2023年5月29日，尚高生命科學與夢夥伴有限公司（BVI公司）（「夢夥伴」），
重慶維特斯集團（根據中國大陸法律註冊的公司）（「維特斯」），以及夢夥伴的部分股東（「維特斯賣方」）簽訂股票購買協議，根據該協議，尚高生命科學將收購
公司目前通過其子公司運營三個主要業務領域：1）Biowin專注於開發、生產和分發創新的快速診斷產品和相關的醫療設備，用於治療最常見的疾病（「快速診斷和其他產品」）；2）Wintus 專門從事生產、加工和分發諸如絲綢和絲綢面料等農產品以及貿易新鮮水果；以及（3）Fuzhou Meida 經營着一家以健康爲導向的連鎖餐廳，專門爲代謝緩慢和代謝紊亂恢復中的人群開發健康餐。由於上述收購，公司經營的業務部門由Tenet-Jove及其子公司Guangyuan和Zhisheng VIEs經營，其中Tenet-Jove爲主要受益人（「Tenet-Jove處置集團」），被歸類爲公司未經審計的簡明合併財務報表中的停止經營。這些業務部門包括：1）Tenet-Jove 從事製造與銷售藍灰貝母及相關產品，中文名爲「羅布麻」，包括由羅布麻製成的治療性服裝和紡織品；2）青島致和升和廣元從事種植、加工和分發綠色農產品（「農產品」）；3）致盛貨運提供國內和國際物流服務（「貨運服務」）。
備註2。經營情況
根據公司未經審計的簡明綜合財務報表披露，截至2024年9月30日，公司持續營運中出現了重複的淨損失，金額爲美元
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儘管 這些負面的財務趨勢，截至2024年9月30日，公司採取了以下措施以增強公司的流動性：
| 1) | 2024年6月20日，公司與某些非美國投資者（以下簡稱「購買方」）簽訂證券購買協議，根據該協議，公司同意出售，購買方同意購買，分別而非共同，總計 股份公司的普通股（以下簡稱「股票」），每股以US$ 的發行價格出售，預計募集資金總額爲US$ |
| 2) | 2024年7月11日，公司與EF Hutton LLC（作爲幾家承銷商的代表）簽訂承銷協議，涉及普通股的首次公開發行（以下簡稱「發行」），每股公開發行價格爲US$ ，共計募集總額約爲US$ 每股，預計募集的總金額約爲US$ |
| 3) | 2024年8月22日，公司與22名購買者（以下簡稱「購買者」）簽訂了一項證券購買協議（「SPA」），每位購買者均爲公司的不相關第三方。根據SPA，購買者同意購買，公司同意發行並賣給購買者，合計
股公司普通股，每股面值爲美元
的購買價格爲每股美元。 每股價格爲US$，總購買價格爲 |
| 4) | 公司從商業銀行和第三方借款。截至2024年9月30日，公司的短期貸款爲US$百萬，長期貸款爲US$ |
管理層 相信以上措施將共同爲公司在提交日期後的12個月內提供足夠的流動性以滿足其未來的流動需求。
注意 3 - 重要會計政策摘要
報告的表述基礎和合並原則
附帶的審計未進行的簡明合併基本報表已按照美國公認會計原則（「US GAAP」）爲符合SEC規則的中期財務信息編制，並且一直一致地應用。管理層認爲，所有被認爲必要的調整（包括正常的經常性應計項目）都已包含在內。中期結果不一定能代表全年結果。這些基本報表應與公司截至2024年6月30日的年度報告Form 10-K中包含的經過審計的基本報表及其註釋一起閱讀，該報告於2024年9月30日提交。
未經審計的簡明合併基本報表包括公司及其附屬公司的基本報表，公司是主要受益人，包括公司擁有的香港註冊實體和中國註冊實體。收購或處置的子公司業績記錄在未經審計的簡明合併損益表中，從收購生效日或直至處置生效日爲止，視情況而定。
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變量利益實體的合併
VIEs一般是指缺乏足夠的股本來爲其業務提供資金支持，需要從其他方獲得額外的財務支持，或其股東缺乏足夠的決策能力。所有VIE及其附屬機構都必須進行評估，以判斷對VIE的風險和回報的主要受益人。要求主要受益人根據財務報告要求合併VIE。
VIEs及VIEs子公司沒有合併資產可作爲VIEs及VIEs子公司債務擔保，只能用於清償VIEs及VIEs子公司的債務。
由於VIE是根據中華人民共和國公司法設立的有限責任公司，VIE的債權人或受益人在正常業務過程中對VIE的任何責任不得依靠公司的一般信用。
在任何協議中，包括明確的協議和隱含的變量利益，均沒有要求公司或其子公司向VIE及其子公司提供財務支持的條款。然而，如果VIE及其子公司需要財務支持，公司或其子公司可根據選擇，且遵循法定限制和規定，通過向VIE及其子公司的股東提供貸款或向VIE及其子公司提供委託貸款的方式，向VIE及其子公司提供財務支持。
截至2023年10月，VIE及其子公司的資產賬面價值和爲停止運營而持有的合併收入信息如下：
截至三個月結束 九月三十日， | ||||||||
| 2024 | 2023 | |||||||
| 營業利潤 | $ | $ | ||||||
| 淨利潤 | $ | $ | ||||||
非控制權益
美國通用會計準則要求，在子公司和附屬公司中非控制性權益應在公司的資產負債表的股權部分報告。此外，歸屬於這些實體的非控制性權益在淨虧損中的金額會在未經審計的簡明合併損益表和綜合損益表中單獨報告。
風險和不確定因素
公司的運營位於中國，並受特殊考慮和重大風險的影響，這些風險通常不會影響北美和西歐的公司。 其中包括與政治、經濟、法律環境和外匯兌換等相關的風險。 該公司的業績可能受到中國政治、監管和社會條件變化以及政府政策或法規解讀、抗通貨膨脹措施、貨幣兌換、匯款至國外以及稅收稅率和方法等因素的不利影響。 儘管公司尚未因這些因素遭受損失，並相信自己符合現行法律法規，但不能保證公司將來會繼續如此。
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使用估計值
根據美國通用會計準則，準備未經審計的簡明合併基本報表需要管理層做出估計和假設，這些將影響到資產和負債的報告金額以及於未經審計的簡明合併基本報表日期的或有資產和負債的披露，以及報告期間的營業收入和費用的報告金額。管理層需要做出的重要估計包括但不限於固定資產和無形資產的使用年限、長期資產的可收回性、應收賬款和其他流動資產的預期信用損失評估、遞延稅款的估值準備和存貨準備。實際結果可能與這些估計有所不同。
營業收入 確認
公司主要通過銷售羅布麻產品、其他農產品、健康餐以及快速診斷和其他產品以及根據ASC 606向外部客戶提供物流服務和其他加工服務來實現營業收入。ASC 606建立了關於報告與向客戶提供商品或服務的實體的合同產生的收入和現金流的性質、金額、時間和不確定性的原則。核心原則要求實體確認收入，以描繪向客戶轉移商品或服務的過程中，符合履行義務的商品或服務獲得滿足時實體預期將獲得的交換而確權的對價金額。
採納ASC 606《與客戶簽訂合同的營業收入》，當滿足以下五個步驟時，營業收入得以確認：(i) 確定與客戶簽訂的合同；(ii) 確定合同中的履約義務；(iii) 判定交易價格；(iv) 將交易價格分配給履約義務；(v) 當（或隨着）每項履約義務得到履行時，確認營業收入。公司通過審核現有客戶合同，以識別應用新要求所產生的差異，包括評估其履約義務、交易價格、客戶支付、控制轉移以及主體與代理方考量。根據ASC 606的規定，公司評估是否適宜記錄產品銷售的總金額及相關成本，還是記錄作爲佣金所賺取的淨金額。當公司是主體時，即公司在其轉移給客戶之前就取得了指定商品或服務的控制權時，應該在期望交換而得的針對指定商品或服務的總價值中確認營業收入。當公司是代理商，其義務是協助第三方實現其指定商品或服務的履約義務時，應該根據公司爲安排其他方提供指定商品或服務所賺取的佣金金額，在淨金額中確認營業收入。根據評估，公司得出結論，在適用於Topic 606範圍內的當前營業收入流的時間和模式方面沒有變化，因此，在採納ASC 606後，公司的財務報表沒有發生實質性變化。
更具體地說，與公司產品和服務相關的營業收入通常按以下方式確認：
產品銷售 公司在客戶接收產品，商品所有權轉移並且不存在有關客戶接受的不確定性；存在安排的確鑿證據；銷售價格已確定或可確定；並且預計可以收回款項的時候，才確認從產品銷售中獲得的營業收入。
營業收入 來自服務提供：公司僅在這些類型的服務交易中充當代理。來自國內航空和陸地貨運服務的營業收入在服務履行時根據基礎合同的規定確認，或者在商品從客戶倉庫釋放時確認；服務價格是固定或可確定的；並且可收回性被視爲可能。
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現金及現金等價物
現金及現金等價物包括手頭現金、存入資金和其他高流動性投資，這些投資在購買時其原始到期日不超過三個月，且可以自由提取或使用。公司主要將現金存放在中國內地的各家金融機構。截至2024年9月30日和2024年6月30日，公司持有的
根據中國法律，通常要求在中國的商業銀行保護存款人的權利及其對存款資金的利益，尤其是持有第三方現金存款的銀行。中國銀行受到一系列風險控制監管標準的約束，中國銀行監管機構有權接管任何面臨重大信用危機的中國銀行的控件和管理。公司監控所使用的銀行，並且沒有遇到任何問題。
應收賬款，淨額
應收賬款按淨現值記錄，包括賬面價值減去必要的信用損失準備金。截至2024年9月30日和2024年6月30日，信用損失準備金分別爲美元。
預付款 給供應商，淨額
預付款項
向供應商的預付款是指爲尚未收到的材料向供應商支付的款項。截至2024年9月30日和2024年6月30日，
對供應商不可收回預付款的備抵金額爲美元
信用 損失
2023年7月1日，公司採用了會計準則更新2016-13「金融工具-信貸損失（第326號課題），金融工具信貸損失的計量」，其取代了已發生的損失方法論，改爲了一種被稱爲當前預期信貸損失（「CECL」）方法論。信貸損失會計準則的採納對2023年7月1日公司的合併財務報表沒有實質影響。
公司在未經審計的簡明合併資產負債表中包含的應收賬款和其他應收款納入其他流動資產的範圍內，符合ASC主題326的規定。公司根據對各種因素的評估，估算信用損失準備金的預期信用和可收回性趨勢，這些因素包括歷史經驗、應收賬款和其他應收款餘額的年齡、客戶和其他債務人的信用評級、當前的經濟狀況、合理且可支持的未來經濟狀況預測，以及可能影響其從客戶和其他債務人處收款能力的其他因素。當事實和情況表明某項應收款不太可能收回時，公司還會提供專門的備抵準備。
ASC 話題 326 也適用於未經審計的簡明合併資產負債表中包括在其他流動資產中的對第三方的貸款。管理層根據個別基礎估計不具有相似風險特徵的貸款的信用損失準備。確定上述信用損失準備時考慮的關鍵因素包括估計的貸款收回進度、貼現率以及借款人的資產和財務表現。
預期 信用損失作爲一般和管理費用列在未經審計的簡明合併損益表及綜合損益表上。在所有收款嘗試失敗後，應收款項將從準備金中核銷。如果公司收回之前預留的金額，公司將減少特定的信用損失準備金。
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存貨， 淨額
庫存按成本或淨變現價值兩者中的較低值列示，包括與公司產品相關的原材料、在製品和成品。淨變現價值是正常業務過程中估計的銷售價格減去完成和銷售產品所需的任何成本。成本採用加權平均法確定。公司定期評估其庫存情況，併爲某些可能無法銷售或其成本超過淨變現價值的庫存記錄庫存準備。截至2024年9月30日和2024年6月30日，庫存準備金爲 和US$
業務 收購
業務 收購按照收購法進行會計處理。收購法要求報告實體識別收購方，判斷收購日期，確認和計量所收購的可識別資產、承擔的負債以及對被收購實體的任何非控股權益，並確認和計量從購買中產生的商譽或便宜採購收益。被收購方的業績從收購日期起納入公司的合併基本報表。收購的資產和承擔的負債在收購日期按其公允價值入賬，購買價格超過分配金額的部分作爲商譽入賬，如果被收購的淨資產的公允價值超過購買價格，便宜採購收益則被記錄爲收益。公允價值評估的調整通常在計量期內（不超過12個月）記錄爲商譽。收購法還要求將與收購相關的交易和收購後重組費用作爲已確認的費用進行計入，並要求公司確認和計量某些資產和負債，包括那些由業務合併中的或有事項和或有對價產生的資產和負債。
商譽
商譽 表示購買價格超出所收購資產的公允價值的部分。商譽減值測試將報告單位的公允價值與其資產總額（包括商譽）進行比較。如果報告單位的資產總額超過其公允價值，則會被視爲受損。爲了衡量減值損失的金額，將報告單位商譽的隱含公允價值與商譽的總價值進行比較。商譽的隱含公允價值的確定方式與在業務組合中確認的商譽金額相同。如果報告單位的商譽賬面價值超過商譽的隱含公允價值，則將認可減值損失，金額等於該超額。對於這些測試，公司每個報告單位的公允價值都是使用估值技術的組合確定的，包括折現現金流量法。爲了證實每個報告單位執行的折現現金流分析，還利用了市場方法，使用可觀察的市場數據，如類似業務線的可比公司，這些公司是上市的，或者是公開或私人交易的一部分（如果有的話）。
租約
承租人 會計
公司遵循FASB ASC No. 842， 租賃 （「Topic 842」）公司租賃辦公空間、倉庫和農田，根據Topic 842分類爲經營租賃。根據Topic 842，承租人需要在起始日期認可所有租賃的以下內容（除了通常爲12個月或更短的短期租賃）：(i) 租賃負債，即承租人根據折現基礎計量的租賃付款義務；和 (ii) 使用權益（「ROU」）資產，即代表承租人在租賃期內使用或控制使用指定資產的權益。
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根據未來最低租賃支付的現值在起始日確認營運租賃ROU資產和營運租賃負債。由於大部分公司的租賃合同未規定隱含利率，因此公司根據起始日可獲得的信息使用其增量借貸利率確定未來支付的現值。營運租賃ROU資產還包括已支付的租金，不包括租賃激勵，包括已發生的初始直接成本。公司的租賃條款可能包括延期或終止租賃的期權，當公司有充分理由行使該期權時。 最低租賃支付的租賃費用按租賃期限的直線基礎分攤。所有營運租賃ROU資產每年進行減值審計。截至2024年9月30日和2023年，公司未確認其ROU資產任何減值。
出租方 會計
公司將辦公室出租給第三方，根據第842號準則，這被分類爲租賃經營。來自租賃經營的營業收入以直線方式在未經審計的簡化合並利潤表和綜合收益表中的其他收入中確認，在租賃期內按照直線法分期確認。
物業 和設備，淨值
物業和設備以成本計價，減去累計折舊和攤銷。對新增、重大更新和改善的支出進行資本化，而對維護和修理的支出則按發生時計入費用。折舊採用直線法計算，減去預計的殘值（如有），並依據資產的預估使用壽命進行計算。農田租賃改善的攤銷期限以租賃期限或基礎資產的估計使用壽命中較短者爲準。公司的物業和設備的預估使用壽命如下：
| 預計使用壽命 | ||
| 建築物 | ||
| 機械和設備 | ||
| 汽車 | ||
| 辦公設備 | ||
| 農田租賃權益改善 | ||
| 固定裝置和傢俱 |
在建工程包括生產或自用目的建設中的物業和設備。在建工程按成本減少已認可的減值損失計量。在建工程在完成並準備好供預期使用時劃分類到適當的物業和設備類別。這些資產的折舊按照其他資產的相同基礎在資產準備好供預期使用時開始計提。
土地使用權，淨
根據中國有關土地使用權的法律法規，城市地區的土地屬於國家所有，而農村和郊區的土地，除非國家另有規定，通常由被國家指定爲農村居民的個體集體擁有。根據土地所有權與使用權分離的法律原則，政府賦予個人和公司在特定時間內使用土地的權利。土地使用權通常是預付的，按成本減去累計攤銷列示。攤銷是根據土地使用權的使用壽命，通過直線法提供的。使用壽命是
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開多 資產
有限壽命資產和無形資產在需要時進行減值測試。爲評估資產的回收性而進行的，當未打折的未來現金流量無法足以收回資產賬面金額時，資產的價值被寫下至公允價值。公司的長期資產主要包括房地產和設備、土地使用權、租賃資產和投資。截至2024年9月30日和2023年，公司沒有認定長期資產減值。
衍生金融資產
衍生金融資產按公允價值計量，並在未經審核的簡明合併資產負債表中作爲資產或負債確認，具體歸類爲其他流動資產或非流動資產，或其他流動負債或非流動負債，這取決於到期日和承諾。衍生品公允價值的變化要麼定期在未經審核的簡明合併綜合收益表中確認，要麼在其他綜合收益中確認，這取決於衍生品的使用情況及其是否符合對沖會計的要求。
公司選擇性地使用金融工具來管理與原材料價格波動相關的市場風險，以應對絲綢產品的風險。這些金融敞口作爲公司風險管理程序的一個組成部分進行監控和管理。 公司不參與投機或交易目的的衍生工具。公司的衍生金融資產不符合對沖會計的要求。因此，公允價值的變動在未經審計的簡明合併損益表和綜合收益表中被確認爲「衍生金融資產的投資收益」。衍生金融資產的現金流與受經濟對沖關係影響項目的現金流歸類於同一類別。 衍生品的估計公允價值是基於相關市場信息確定的。
衍生財務資產作爲淨額列示，前提是滿足以下所有條件： (a) 雙方各自欠對方可確定金額； (b) 報告方具有償還所欠金額和對方所欠金額的權利； (c) 報告方有意進行抵消； 和 (d) 抵銷權在法律上是可執行的。
截至2024年9月30日和2024年6月30日，未結衍生金融資產爲US$
金融工具的公允價值
本公司遵循ASC 820「公允價值計量和披露」的規定。ASC 820澄清了公允價值的定義，規定了公允價值的計量方法，並建立了公允價值層次結構，以對用於計量公允價值的輸入進行分類，如下所示：
層次1適用於有活躍市場中的相同資產或負債的報價價值。
第2級適用於那些資產或負債，其輸入不同於第一級報價的價格，但能夠被觀察到，例如在活躍市場中類似資產或負債的報價；在成交量不足或交易不頻繁的市場中，完全相同的資產或負債的報價（活躍度較低的市場）；或模型導出的估值，其中顯著的輸入可被觀察到或可以主要通過可觀察的市場數據推導或證實。
第3級適用於資產或負債，其估值方法中存在對資產或負債的公允價值測量具有重要意義但不可觀察輸入。
由於這些工具的短期性質，目前資產和負債中包含的金融工具的賬面價值與其公允價值接近。
所得稅
遞延稅務資產和負債是由於未審計的簡化合並財務報表中現有資產和負債的賬面金額與各自的稅基之間的差異而產生的未來稅務後果的確認。遞延稅務資產和負債是使用預期適用於有稅收入的所得稅率進行計量的，這些差異預計將在相關年份內得到恢復或結算。稅率變化對遞延稅務資產和負債的影響在包括法案生效日期的期間內在經營結果中確認。當有必要時，會設立估值備抵，以將遞延稅務資產減少到預期可以實現的金額。
ASC 740-10-25「所得稅不確定性會計」的規定爲未審計的合併財務報表中所採取的（或預計將在稅務申報中採取的）稅務立場的確認和計量設定了一個更可能的閾值。本標準還提供了關於所得稅資產和負債的確認、當前和遞延所得稅資產和負債的分類、與稅務立場相關的利息和罰款的會計處理以及相關披露的指導。截止2024年9月30日和2024年6月30日，公司沒有任何不確定的稅務立場。截止2024年9月30日，公司沒有對非美國子公司的未分配盈利提供遞延稅款，因爲公司政策是將這些盈利無限期地再投資於非美國業務。與無限期再投資的盈利相關的遞延稅負債的量化是不可行的。
公司的美國聯邦所得稅申報和某些州所得稅申報的訴訟時效截止日期仍然爲2022年及以後。截至2024年9月30日，公司中國的子公司在2019年12月31日至2023年12月31日結束的稅務年度仍然需要中國稅務機構進行法定審查。
2017年12月22日，"減稅和就業法案"（"該法案"）出臺。根據該法案的規定，美國企業稅率從
增值稅
銷售營業收入代表貨物的開票價值，減去增值稅（VAT）
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外幣翻譯
公司在財務報告中使用美元指數（「美元」，「USD」或「US$」）。公司的子公司和VIE以人民幣 （「RMB」）作爲其功能貨幣保持賬目記錄，中國大陸的貨幣。
一般而言，爲了合併目的，公司將其子公司和VIE的資產和負債按照財務報表日適用的匯率轉換爲美元，而收入和現金流量表則按照報告期間的平均匯率進行轉換。因此，在現金流量表上報告的資產和負債金額未必與資產負債表上對應餘額的變化一致。股權帳戶按照歷史匯率轉換。由子公司和VIE財務報表翻譯導致的調整被記錄爲累計其他全面損失。
截至2024年9月30日和2024年6月30日的資產負債表金額，除權益外，分別按照美元指數翻譯爲
可轉換票據
根據ASC 470的規定 債務轉換和其他選擇權根據ASC 470要求，應當在發行時單獨確認轉換工具中存在的潛在有利轉換要素，通過將相當於該要素內在價值的部分收益分配給額外資本公積。發行成本應按比例分配給債務主體和轉換要素。後續應對推遲支付的融資成本進行貼現和攤銷，可轉換票據後續以攤銷成本計量。
研究與開發支出
研發成本與新過程的開發以及對現有過程的重大改進和完善有關，依據FASB ASC 730「研發」在發生時計入費用。這些研發成本主要包括員工費用、諮詢費用、材料和測試成本，以及用於研發活動的固定資產折舊和其他雜項費用。截止2024年和2023年9月30日的三個月內，來自持續運營的總研發費用爲美金
綜合收益（虧損）
全面收益（損失）由兩個元件組成，即淨利潤（損失）和其他全面收益。由於將基本報表表達爲美元指數而產生的外匯翻譯收益，報告在未經審計的簡明綜合收益（損失）和綜合收益（損失）合併報表中的其他全面收益中。
公司根據ASC 260「每股收益」（「ASC 260」）計算每股收益（虧損）。ASC 260要求具有複雜資本結構的公司提供基本和攤薄後的每股收益。基本每股收益是以淨收入（虧損）除以期間內的加權平均普通股份來衡量的。攤薄後每股收益類似於基本每股收益，但在每股股份的稀釋效應上呈現出潛在普通股份（例如，未行使轉換債券、期權和認股證書）按照期間開始時或者發行日期進行換股後的情況。對於增加每股收入或減少每股虧損的反稀釋效應的潛在普通股份被排除在攤薄每股收益的計算之外。截至2024年9月30日和2023年的三個月，沒有反稀釋效應。
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截至三個月結束 9月30日, | ||||||||
| 2024 | 2023 | |||||||
| 持續經營的淨虧損歸屬於尚高生命科學 | $ | ( | ) | $ | ( | ) | ||
| 已終止經營的淨利潤歸屬於尚高生命科學 | ||||||||
| 歸屬於尚高生命科學的淨利潤（虧損） | ( | ) | ||||||
| 加權平均普通股股份 - 基本和稀釋* | ||||||||
| 每股普通股的持續經營淨虧損 | ||||||||
| 基本和攤薄 | $ | ) | $ | ) | ||||
| 來自終止經營的每股淨收益 | ||||||||
| 基本和攤薄 | $ | $ | ||||||
| 每股淨收益（虧損） | ||||||||
| 基本和攤薄 | $ | ) | $ | |||||
| * |
新會計準則
在 2023年12月，FASB發佈了ASU第2023-09號，"所得稅（主題740）：所得稅披露的改進"。該 ASU要求提供額外的定量和定性所得稅披露，以幫助基本報表用戶更好地評估一個實體的運營及相關的稅務風險、稅收規劃和運營機會如何影響其稅率及未來現金流的前景。該ASU適用於2024年12月15日之後開始的年度報告期，允許提前採用，且可以按前瞻性或追溯性基準應用。公司計劃於2025年7月1日生效採用該指引，目前公司正在評估採用該ASU對其基本報表的影響。
2024年3月，FASB發佈了ASU 2024-01《薪酬-股票薪酬（主題718）範圍應用利潤權益及類似獎勵》。該標準澄清了利潤權益及類似獎勵是否屬於會計準則法規編碼主題718範圍之內。該標準自2024年12月15日之後開始生效。允許提前採納。公司計劃於2025年7月1日起採納此指引，目前正評估該ASU對其基本報表的影響。
在 2024年3月，FASb發佈了ASU第2024-02號，「編纂改進 - 刪除對概念聲明的引用的修訂」。 ASU 2024-02刪除了編纂中對各種FASb概念聲明的引用。ASU第2024-02號中的指導原則適用於2024年12月15日之後開始的財政年度，包括這些財政年度內的中期，並且可以在實體首次應用修訂的日期之後，對所有新交易進行前瞻性應用，或追溯應用於首次應用修訂的最早比較期間的開始。允許提前採用。公司計劃於2025年7月1日生效並採用該指導原則，當前正在評估採納此ASU對其財務報表的影響。
公司認爲其他最近的會計準則更新不會對公司的未經審計的簡明綜合財務報表產生重大影響。
| 16 |
註釋 4 – 帳戶應收款項，淨額
應收賬款淨額包括以下內容：
| 2024年9月30日 | 2024年6月30日 | |||||||
| 應收賬款 | $ | $ | ||||||
| 減：信貸損失準備 | ( | ) | ( | ) | ||||
| 應收賬款，淨額 | $ | $ | ||||||
資產減值準備的變動如下:
| 2024年9月30日 | 2024年6月30日 | |||||||
| 開始餘額 | $ | $ | ||||||
| 子公司收購 | ||||||||
| 計入準備金 | ||||||||
| 減少：處置VIE | ( | ) | ||||||
| 外幣轉化調整 | ||||||||
| 結束餘額 | $ | $ | ||||||
注意 5 – 存貨，淨額
淨存貨包括以下內容：
| 2024年9月30日 | 2024年6月30日 | |||||||
| 原材料 | $ | $ | ||||||
| 在製品 | ||||||||
| 成品 | ||||||||
| 減少：庫存準備金 | ( | ) | ||||||
| 總存貨，淨額 | $ | $ | ||||||
在製品主要包括直接成本，如seed選擇、肥料、人工成本和分包商費用，在租賃農田上種植農產品時支出的費用，以及包括對農田租金和農田開發成本的預付款攤銷在內的間接成本。所有成本都會累積，直到豐收時，然後根據銷售情況分配給已收割作物的成本。
注意 6-隨後事件淨供應商預付款
向供應商的預付款淨額包括以下內容:
| 2024年9月30日 | 2024年6月30日 | |||||||
| 預付款項 | $ | $ | ||||||
| 減：壞賬準備 | ( | ) | ( | ) | ||||
| 預付供應商賬款淨額 | $ | $ | ||||||
對供應商的預付款主要是付款給尚未收到原材料或產品的供應商。
| 17 |
應收賬款減值準備的變動如下：
| 2024年9月30日 | 2024年6月30日 | |||||||
| 開始餘額 | $ | $ | ||||||
| 子公司收購 | ||||||||
| 計入準備金 | ||||||||
| 減少：處置VIE | ( | ) | ||||||
| 外幣轉化調整 | ||||||||
| 結束餘額 | $ | $ | ||||||
注7 - 股東赤字其他流動資產淨額
其他 流動資產，淨額包括以下內容：
| 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
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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 | $ | $ | ||||||
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(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
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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$
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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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