UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DCD.C. 20549

FORM 10-Q

~~[X]~~ ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR ~~15(D)~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2020~~2021

orOR

~~[ ]~~ ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR ~~15(D)~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ~~____________~~_______ to ~~____________~~_______

Commission File Number: 001-37776

SHINECO, INC.

(Exact name of registrant as specified in its charter)

Delaware

52-2175898

(State or other jurisdiction of

~~(I.R.S. Employer~~

incorporation or organization)

(I.R.S. Employer

Identification No.)

Room ~~1001, Building T5, DaZu Square,~~3310, North Tower, Zhengda Center,

~~Daxing~~No. 20, Jinhe East Road, Chaoyang District ~~Beijing~~

Beijing, People’s Republic of China ~~100176~~

(Address of ~~Principal Executive Offices)~~principal executive offices) (Zip Code)

(+86) 10-87227366

(Registrant’s telephone number, including area code)

~~N/A~~Securities registered pursuant to Section 12(b) of the Act:

~~(Former name, former address and former fiscal year, if changed since last report)~~

Title of each Class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		SISI		The NasdaqStock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ~~[X]~~☒ No ~~[ ]~~☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T ~~(Sec.~~ (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ~~[X]~~☒ No ~~[ ]~~☐

Indicate by check mark whether the ~~Registrant~~registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”,~~filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ~~[ ]~~	☐	Accelerated filer ~~[ ]~~	☐

Non-accelerated filer ~~[ ]~~	☒	Smaller reporting company ~~[X]~~	☒

	Emerging growth company ~~[X]~~	☐

If an emerging growth company, indicate by check mark if the ~~Registrant~~registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section ~~17(a)(2)(B)~~13(a) of the ~~Securities~~Exchange Act. ~~[ ]~~☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ~~[ ]~~ ☐ No ~~[X]~~☒

As of November ~~13, 2020, the registrant had 3,039,943~~15, 2021, there were 9,087,277 shares of common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS

		Page Number

PART I. FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Condensed Consolidated Balance Sheets (unaudited)	1

	Condensed Consolidated Statements of Income and Comprehensive Income (unaudited)	2

	Condensed Consolidated Statements of Changes in Equity (unaudited)	3

	Condensed Consolidated Statements of Cash Flows (unaudited)	4

	Notes to the Condensed Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3137

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4551

Item 4.	Controls and Procedures	4551

PART II. OTHER INFORMATION		46
	��
Item 1.	Legal Proceedings	4652

Item 1A.	Risk Factors	4652

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4652

Item 3.	Defaults Upon Senior Securities	4652

Item 4.	Mine Safety Disclosures	4652

Item 5.	Other Information	4652

Item 6.	Exhibits	4652

SIGNATURES		53

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SHINECO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			June 30,			September 30,			June 30,
	2020			2020			2021			2021
	(Unaudited)						(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	23,130,106		$	32,371,372		$	18,230,073		$	16,342,911
Accounts receivable, net		12,257,280			11,008,485			2,350,757			2,686,671
Due from related parties		125,713			120,939			240,788			132,398
Inventories, net		3,843,944			1,799,876			20,355,820			1,323,391
Advances to suppliers, net		20,083,865			13,313,946			1,446,349			7,790,126
Other current assets		3,723,229			905,380			16,899,799			1,343,338
Current assets held for discontinued operations								-			19,659,742
TOTAL CURRENT ASSETS		63,164,137			59,519,998			59,523,586			49,278,577

Property and equipment, net		9,709,334			9,489,484			2,370,313			2,253,944
Land use right, net of accumulated amortization		1,234,806			1,195,943
Investments		4,708,898			4,515,124			637,352			-
Distribution rights		1,085,092			1,043,887			-			1,142,794
Long-term deposit and other noncurrent assets		98,964			96,280			13,373			14,550
Right of use assets		3,204,393			3,227,895			5,716,533			3,585,703
Non-current assets held for discontinued operations								-			5,043,031
TOTAL ASSETS	$	83,205,624		$	79,088,611		$	68,261,157		$	61,318,599

LIABILITIES AND EQUITY

CURRENT LIABILITIES:
Short-term loans	$	2,426,019		$	2,333,894
Accounts payable		159,665			148,209		$	14,643		$	76,584
Advances from customers		6,930			6,324			7,416			7,468
Due to related parties		1,383,813			1,355,919			4,355,733			1,159,407
Other payables and accrued expenses		6,308,263			4,018,684			5,997,274			4,109,208
Operating lease liabilities - current		92,909			97,633			1,083,902			434,411
Convertible note payable								16,352,339			2,933,030
Taxes payable		3,438,773			3,386,662			1,197,541			1,208,348
Current liabilities held for discontinued operations								-			4,866,934
TOTAL CURRENT LIABILITIES		13,816,372			11,347,325			29,008,848			14,795,390

Income tax payable - noncurrent portion		566,022			566,022			506,441			506,441
Operating lease liabilities - non-current		424,605			401,891			1,811,273			352,863
Deferred tax liability		271,273			260,972			285,692			285,699
TOTAL LIABILITIES		15,078,272			12,576,210			31,612,254			15,940,393

Commitments and contingencies		-			-			-			-

EQUITY:
Common stock; par value $0.001, 100,000,000 shares authorized;
3,039,943 and 3,039,943 shares issued and outstanding at September 30, 2020 and June 30, 2020*		3,040			3,040
Common stock; par value $0.001, 100,000,000 shares authorized; 8,856,231 and 7,881,482 shares issued and outstanding at September 30, 2021 and June 30, 2021								8,856			7,881
Additional paid-in capital		27,302,051			27,302,051			45,316,083			41,105,806
Subscription receivable								(6,160,203	)		(8,535,203	)
Statutory reserve		4,199,964			4,198,107			4,198,107			4,198,107
Retained earnings		39,047,151			40,106,518
Retained earnings (accumulated deficit)								(5,577,261	)		8,661,071
Accumulated other comprehensive loss		(3,662,816	)		(6,283,835	)		(752,440	)		(731,805	)
Total Stockholders’ equity of Shineco, Inc.		66,889,390			65,325,881			37,033,142			44,705,857
Non-controlling interest		1,237,962			1,186,520			(384,239	)		672,349
TOTAL EQUITY		68,127,352			66,512,401			36,648,903			45,378,206

TOTAL LIABILITIES AND EQUITY	$	83,205,624		$	79,088,611		$	68,261,157		$	61,318,599

* Retrospectively restated for effect of stock split on August 14, 2020

The accompanying notes are an integral part of these ~~unaudited condensed~~ consolidated financial statements

SHINECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~LOSS AND COMPREHENSIVE INCOME (LOSS)

~~(UNAUDITED)~~(Unaudited)


	For the Three Months Ended September 30,						For the Three Months Ended September 30,
	2020			2019			2021			2020

REVENUE	$	4,143,383		$	7,046,781		$	629,758		$	1,007,977

COST OF REVENUE
Cost of product and services		3,222,611			5,394,423			865,061			741,290
Stock written off due to natural disaster								492,987			-
Business and sales related tax		12,191			12,463			1,255			1,049
Total cost of revenue		3,234,802			5,406,886			1,359,303			742,339

GROSS PROFIT		908,581			1,639,895
GROSS PROFIT (LOSS)								(729,545	)		265,638

OPERATING EXPENSES
General and administrative expenses		1,820,732			3,354,643			8,573,656			1,423,310
Selling expenses		33,635			121,886			8,342			12,646
Impairment loss of distribution rights								1,140,551			-
Total operating expenses		1,854,367			3,476,529			9,722,549			1,435,956

LOSS FROM OPERATIONS		(945,786	)		(1,836,634	)		(10,452,094	)		(1,170,318	)

OTHER INCOME (EXPENSE)
Income from equity method investments		15,287			69,899
Other income (expense)		2,788			(9,754	)
Interest expense, net		(19,972	)		(3,126	)
Total other income (expense)		(1,897	)		57,019
Loss from equity method investment								(27,920	)		-
Other income, net								970			2,788
Amortization of debt issuance costs								(458,978	)		-
Interest income (expenses), net								(170,199	)		4,225
Total other income (loss)								(656,127	)		7,013

LOSS BEFORE PROVISION FOR INCOME TAXES		(947,683	)		(1,779,615	)
LOSS BEFORE PROVISION FOR INCOME TAXES FROM CONTINUING OPERATIONS								(11,108,221	)		(1,163,305	)

PROVISION (BENEFIT) FOR INCOME TAXES		105,297			(4,783	)
PROVISION FOR INCOME TAXES								-			-

NET LOSS FROM CONTINUING OPERATIONS								(11,108,221	)		(1,163,305	)

DISCONTINUED OPERATIONS:
Income from discontinued operations, net of taxes								-			110,325
Loss on disposal of discontinued operations								(3,135,237	)		-
Net income (loss) from discontinued operations								(3,135,237	)		110,325

NET LOSS		(1,052,980	)		(1,774,832	)		(14,243,458	)		(1,052,980	)

Net income attributable to non-controlling interest		4,530			17,805
Net income (loss) attributable to non-controlling interest								(5,126	)		4,530

NET LOSS ATTRIBUTABLE TO SHINECO, INC.	$	(1,057,510	)	$	(1,792,637	)	$	(14,238,332	)	$	(1,057,510	)

COMPREHENSIVE LOSS
COMPREHENSIVE INCOME (LOSS)
Net loss	$	(1,052,980	)	$	(1,774,832	)	$	(14,243,458	)	$	(1,052,980	)
Other comprehensive income (loss): foreign currency translation income (loss)		2,667,931			(2,858,537	)
Other comprehensive income: foreign currency translation income								570			2,667,931
Total comprehensive income (loss)		1,614,951			(4,633,369	)		(14,242,888	)		1,614,951
Less: comprehensive income (loss) attributable to non-controlling interest		51,442			(24,360	)
Less: comprehensive income attributable to non-controlling interest								16,079			51,442

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SHINECO, INC.	$	1,563,509		$	(4,609,009	)	$	(14,258,967	)	$	1,563,509

Weighted average number of shares basic and diluted*		3,037,048			2,687,433			8,314,996			3,039,943

Basic and diluted loss per common share	$	(0.35	)	$	(0.67	)	$	(1.71	)	$	(0.35	)

Earnings (loss) per common share
Continuing operations - Basic and Diluted								(1.71	)		(0.38	)
Discontinued operations - Basic and Diluted								-			0.03
Net loss per common share - basic and diluted								(1.71	)		(0.35	)

*	Retrospectively restated for effect of stock split on August 14, 2020

The accompanying notes are an integral part of these ~~unaudited condensed~~ consolidated financial statements

SHINECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, ~~2020~~2021 AND ~~2019~~2020

(UNAUDITED)

COMMON STOCK ADDITIONAL PAID-IN STATUTORY RETAINED ACCUMULATED OTHER COMPREHENSIVE NON- CONTROLLING TOTAL
SHARES AMOUNT CAPITAL RESERVE EARNINGS LOSS INTEREST EQUITY
Balance at June 30, 2019 2,541,308 (*) $ 2,541 $ 24,779,687 $ 4,198,107 $ 46,735,190 $ (4,184,024 ) $ 1,100,613 72,632,114

Stock issuance 495,740 (*) 496 2,522,367 - - - - 2,522,863
Net income (loss) for the year - - - - (1,792,637 ) - 17,805 (1,774,832 )
Foreign currency translation loss - - - - - (2,816,372 ) (42,165 ) (2,858,537 )
Balance at September 30, 2019 3,037,048 (*) $ 3,037 $ 27,302,054 $ 4,198,107 $ 44,942,553 $ (7,000,396 ) $ 1,076,253 $ 70,521,608

Balance at June 30, 2020 3,039,943 (*) $ 3,040 $ 27,302,051 $ 4,198,107 $ 40,106,518 $ (6,283,835 ) $ 1,186,520 $ 66,512,401

Net income (loss) for the year - - - 1,857 (1,059,367 ) - 4,530 (1,052,980 )
Foreign currency translation gain - - - - - 2,621,019 46,912 2,667,931
Balance at September 30, 2020 3,039,943 (*) $ 3,040 $ 27,302,051 $ 4,199,964 $ 39,047,151 $ (3,662,816 ) $ 1,237,962 $ 68,127,352
RETAINED ACCUMULATED
ADDITIONAL EARNINGS OTHER NON-
COMMON STOCK SUBSCRIPTION PAID-IN STATUTORY (ACCUMULATED COMPREHENSIVE CONTROLLING TOTAL
SHARES* AMOUNT RECEIVABLE CAPITAL RESERVE DEFICIT) LOSS INTEREST EQUITY
Balance at June 30, 2020 3,039,943 $ 3,040 $ - $ 27,302,051 $ 4,198,107 $ 40,106,518 $ (6,283,835 ) $ 1,186,520 $ 66,512,401

Stock issuance
Issuance of common shares for convertible notes redemption
Issuance of common shares for convertible notes redemption, shares
Disposal of Ankang
Beneficial conversion feature associated with convertible notes
Net income (loss) for the period - - - - 1,857 (1,059,367 ) - 4,530 (1,052,980 )
Foreign currency translation gain - - - - - - 2,621,019 46,912 2,667,931
Balance at September 30, 2020 3,039,943 $ 3,040 $ - $ 27,302,051 $ 4,199,964 $ 39,047,151 $ (3,662,816 ) $ 1,237,962 $ 68,127,352

Balance at June 30, 2021 7,881,482 $ 7,881 $ (8,535,203 ) $ 41,105,806 $ 4,198,107 $ 8,661,071 $ (731,805 ) $ 672,349 $ 45,378,206

Stock issuance - - 2,375,000 - - - - - 2,375,000
Issuance of common shares for convertible notes redemption 974,749 975 - 3,849,025 - - - - 3,850,000
Beneficial conversion feature associated with convertible notes - - - 361,252 - - - - 361,252
Disposal of Ankang - - - - - - - (1,072,667 ) (1,072,667 )
Net loss for the period - - - - - (14,238,332 ) - (5,126 ) (14,243,458 )
Foreign currency translation gain (loss) - - - - - - (20,635 ) 21,205 570
Balance at September 30, 2021 8,856,231 $ 8,856 $ (6,160,203 ) $ 45,316,083 $ 4,198,107 $ (5,577,261 ) $ (752,440 ) $ (384,239 ) $ 36,648,903
* Retrospectively restated for effect of stock split on August 14, 2020.
* Retrospectively restated for effect of stock split on August 14, 2020
The accompanying notes are an integral part of these ~~unaudited condensed~~ consolidated financial statements
3
SHINECO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

For the Three Months Ended September 30, For the Three Months Ended September 30,
2020 2019 2021 2020

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,052,980 ) $ (1,774,832 ) $ (14,243,458 ) $ (1,052,980 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net income (loss) from discontinued operations, net of tax (3,135,237 ) 110,325
Net loss from continuing operations (11,108,221 ) (1,163,305 )

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 204,786 187,429 129,027 97,003
Loss from disposal of property and equipment - 61,098
Provision for doubtful accounts 1,049,672 1,334,666 7,354,134 771,231
Provision for inventory reserve 13,831 177,197 134,104 13,831
Deferred tax benefit - (145,624 )
Stock written off due to natural disaster 492,987 -
Loss from equity method investments (15,287 ) (69,899 ) 27,920 -
Amortization of right of use assets 111,215 - 258,416 111,215
Restricted shares issued for management - 1,022,661
Impairment loss on distribution rights 1,140,551 -
Amortization of debt issuance costs 458,978 -
Accrued interest expense for convertible notes 171,584 -

Changes in operating assets and liabilities:
Accounts receivable (1,413,046 ) (539,538 ) (625,735 ) (906,078 )
Advances to suppliers (6,557,896 ) 2,974,205 515,218 (4,739,886 )
Inventories (1,953,484 ) (32,176 ) (203,336 ) (2,026,713 )
Other receivables (1,741,772 ) (891,900 )
Prepaid expense and other assets (557 ) 245,005
Due from related parties - 59,550
Right of use assets - (2,858,396 )
Prepaid leases - 2,796,461
Other current assets (3,206,324 ) (422,989 )
Accounts payable 5,511 37,914 (61,818 ) (2,433 )
Advances from customers 350 (367,577 ) (51 ) 350
Other payables 2,332,197 (50,311 ) (521,064 ) 1,013,492
Operating lease liabilities (7,931 ) - (210,376 ) (7,931 )
Taxes payable (74,637 ) (20,058 ) (10,775 ) 7,380
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (9,100,028 ) 2,145,875
Net cash used in operating activities from continuing operations (5,264,781 ) (7,254,833 )
Net cash used in operating activities from discontinued operations - (1,845,195 )
Net cash used in operating activities (5,264,781 ) (9,100,028 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment - (1,497 ) (196,693 ) -
Proceeds from disposal of property and equipment - 79,387
Payment for construction in progress - (2,118 )
Advances of loans to third parties (1,228,630 ) (56,992 )
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (1,228,630 ) 18,780
Investment in unconsolidated entity (500,000 ) -
Loan receivables additions (12,700,008 ) -
Acquisition of a VIE - Guangyuan, net of cash 112,070 -
Disposal of a VIE - Ankang, net of cash (12,669,913 ) -
Net cash used in investing activities from continuing operations (25,954,544 ) -
Net cash used in investing activities from discontinued operations - (1,228,630 )
Net cash used in investing activities (25,954,544 ) (1,228,630 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans 289,089 285,051
Repayment of short-term loans (289,089 ) (285,051 )
Repayment of other short-term loans - (7,126 )
Proceeds from issuance of common stock - 1,500,203 2,375,000 -
Proceeds from (repayments of) advances from related parties (11,429 ) 62,554 1,061,888 (11,429 )
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (11,429 ) 1,555,631
Proceeds from issuance of convertible notes 17,000,000 -
Net cash provided by (used in) financing activities from continuing operations 20,436,888 (11,429 )
Net cash used in financing activities from discontinued operations - -
Net cash provided by (used in) financing activities 20,436,888 (11,429 )

EFFECT OF EXCHANGE RATE CHANGE ON CASH 1,098,821 (1,438,380 ) (11,884 ) 1,098,821

NET INCREASE (DECREASE) IN CASH (9,241,266 ) 2,281,906
NET DECREASE IN CASH (10,794,321 ) (9,241,266 )

CASH - Beginning of the Period 32,371,372 35,330,676 29,024,394 32,371,372

CASH - End of the Period $ 23,130,106 $ 37,612,582
CASH - End of the period 18,230,073 23,130,106

Less: cash of discontinued operations - Ended of the Period - 7,629,477

Cash of continuing operations - Ended of the Period $ 18,230,073 $ 15,500,629

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income taxes $ 469,853 $ - $ - $ 469,853
Cash paid for interest $ 29,622 $ 30,277 $ - $ 29,622

SUPPLEMENTAL NON-CASH OPERATING ACTIVITY:
Issuance of common shares for convertible notes redemption $ 3,850,000 $ -
Right-of-use assets obtained in exchange for operating lease obligations $ - $ 413,810 $ 1,267,817 $ -
The accompanying notes are an integral part of these ~~unaudited condensed~~ consolidated financial statements
4
NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

Shineco, Inc. (“Shineco” or the “Company”) was incorporated in the State of Delaware on August 20, 1997. The Company is a holding company whose primary purpose is to develop business opportunities in the People’s Republic of China ~~(“PRC”~~(the “PRC” or “China”).
On December 30, 2004, the Company acquired all of the issued and outstanding shares of Beijing Tenet-Jove Technological Development Co., Ltd. (“Tenet-Jove”), a PRC company, in exchange for restricted shares of the Company’s common stock, and the sole operating business of the Company became that of its subsidiary, Tenet-Jove. Tenet-Jove was incorporated on December 15, 2003 under the laws of China. Consequently, Tenet-Jove became a ~~100%~~100% owned subsidiary of Shineco and was officially granted the status of a ~~Wholly Foreign-Owned Entity (“WFOE”)~~wholly foreign-owned entity by Chinese authorities on July 14, 2006. This transaction was accounted for as a recapitalization. Tenet-Jove owns ~~90%~~90% interest of Tianjin Tenet Huatai Technological Development Co., Ltd. (“Tenet Huatai”).
On December 31, 2008, June 11, 2011, and May 24, 2012, Tenet-Jove entered into a series of contractual agreements including an Executive Business Cooperation Agreement, a Timely Reporting Agreement, an Equity Interest Pledge Agreement, and an Executive Option Agreement (collectively, the “VIE Agreements”), with each one of the following entities, Ankang Longevity Pharmaceutical (Group) Co., Ltd. (“Ankang Longevity Group”), Yantai Zhisheng International Freight Forwarding Co., Ltd. (“Zhisheng Freight”), Yantai Zhisheng International Trade Co., Ltd. (“Zhisheng Trade”), Yantai Mouping District Zhisheng Agricultural Produce Cooperative (“Zhisheng Agricultural”), and Qingdao Zhihesheng Agricultural Produce Services., Ltd. (“Qingdao Zhihesheng”). On February 24, 2014, Tenet-Jove entered into the same series of contractual agreements with Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. (“Zhisheng Bio-Tech”), which was incorporated in 2014. Zhisheng Bio-Tech, Zhisheng Freight, Zhisheng Trade, Zhisheng Agricultural, and Qingdao Zhihesheng are collectively referred to herein as the “Zhisheng ~~Group”.~~VIEs.”
Pursuant to the VIE Agreements, Tenet-Jove has the exclusive right to provide to the Zhisheng ~~Group~~VIEs and Ankang Longevity Group consulting services related to their business operations and management. All the above contractual agreements obligate Tenet-Jove to absorb a majority of the risk of loss from the Zhisheng ~~Group~~VIEs and Ankang Longevity Group’s activities and entitle Tenet-Jove to receive a majority of their residual returns. In essence, Tenet-Jove has gained effective control over the Zhisheng ~~Group~~VIEs and Ankang Longevity Group. Therefore, the Zhisheng ~~Group~~VIEs and Ankang Longevity Group are treated as ~~Variable Interest Entities~~variable interest entities (“VIEs”) under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 ~~“Consolidation”.~~“Consolidation.” Accordingly, the accounts of these entities are consolidated with those of Tenet-Jove.
Since Shineco is effectively controlled by the majority shareholders of the Zhisheng ~~Group~~VIEs and Ankang Longevity Group, Shineco owns 100% of Tenet-Jove. Accordingly, Shineco, Tenet-Jove, and its VIEs, the Zhisheng ~~Group~~VIEs and Ankang Longevity Group are effectively controlled by the same majority shareholders. Therefore, Shineco, Tenet-Jove, and ~~its~~the VIEs of Tenet-Jove are considered under common control. The consolidation of Tenet-Jove and its VIEs into Shineco was accounted for at historical cost and prepared on the basis as if the aforementioned exclusive contractual agreements between Tenet-Jove and its VIEs had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements.
On April 19, 2017, Tenet-Jove established Xinjiang Tiankunrunze Biological Engineering Co., Ltd. (“Tiankunrunze”) with registered capital of RMB 50.0 million (US$ 7,262,000) and owns 65% interest of Tiankunrunze. On April 28, 2017, Tiankunrunze established Xinjiang Tianzhuo Technology Development Co., Ltd. (“Tianzhuo”) with registered capital of RMB 10.0 million (US$ 1,450,233). On May 22, 2017, Tiankunrunze established Xinjiang Tianhuihechuang Agriculture Development Co., Ltd. (“Tianhuihechuang”) with registered capital of RMB 10.0 million (US$ 1,452,294). On May 23, 2017, Tiankunrunze established Xinjiang Tianxintongye Biotechnology Development Co., Ltd. (“Tianxintongye”) with registered capital of RMB 10.0 million (US$ 1,451,615). Therefore, Tenet-Jove controls Tiankunrunze and its wholly owned subsidiaries.
On May 2, 2017, the Company entered into a Strategic Cooperation Agreement with Beijing Zhongke Biorefinery Engineering Technology Co., Ltd. (“Biorefinery”), a leading high-tech biomass refining company financially backed by the Chinese Academy of Sciences Institute of Process Engineering, to establish the Institute of Chinese Apocynum Industrial Technology Research (“ICAITR”). Pursuant to the Strategic Cooperation Agreement, the two parties agreed to establish the ICAITR, with the Company and Biorefinery ~~own~~owning 80% and 20% of the equity interests of ICAITR, respectively. Shineco invested RMB5.0 million (US$ ~~737,745)~~737,745) as the registered capital, and Biorefinery ~~will~~would invest a technology patent named “Steam Explosion ~~Degumming”.~~Degumming.”
5
On September 30, 2017, Tenet-Jove established Xinjiang Shineco Taihe Agriculture Technology Ltd. (“Xinjiang Taihe”) with registered capital of RMB10.0 million (US$ ~~1,502,650)~~1,502,650). On September 30, 2017, Tenet-Jove established Xinjiang Tianyi Runze Bioengineering Co., Ltd. (“Runze”) with registered capital of RMB10.0 million (US$ ~~1,502,650)~~1,502,650). Xinjiang Taihe and Runze became wholly-owned subsidiaries of Tenet-Jove.
On December 10, 2016, Tenet-Jove entered into a purchase agreement with Tianjin Tajite E-Commerce Co., Ltd. (“Tianjin Tajite”), an online e-commerce company based in Tianjin, China, specializing in distributing Luobuma related products and branded products of Daiso 100-yen shops, pursuant to which Tenet-Jove would acquire a ~~51%~~51% equity interest in Tianjin Tajite for cash consideration of RMB14,000,000 (approximately US$2.1 million). On December 25, 2016, the Company paid the full amount as the deposit to secure the deal. In May, 2017, the Company amended the agreement ~~that~~and required Tianjin Tajite to satisfy certain preconditions related to product introductions into China. On October 26, 2017, the Company completed the acquisition for 51% of the shares in Tianjin Tajite.
On October 27, 2017, the Company, through its subsidiary Tianjin Tajite, ~~E-Commerce Co., Ltd. (“Tianjin Tajite”),~~ obtained contractual rights to distribute branded products of Daiso Industries Co., Ltd. (“Daiso”), a large franchise of 100-yen shops founded in Japan, via JD.com, ~~(“JD”),~~ one of the largest e-commerce companies and one of the largest retailers in China. On November 3, 2017, the Company further developed the cooperation with Daiso by entering into a supply and purchase agreement (the “Daiso Agreement”) for the purpose of establishing a continuous supply and sale of Daiso’s products in China. Pursuant to the Daiso Agreement, the Company planned to purchase Daiso Products in the amount of approximately ~~RMB 20~~RMB20 million by August 2018 and add orders as circumstance requires. The term of the Daiso Agreement is for one year, and it renews for an additional one-year at the end of each term unless terminated by written notice by either Tianjin Tajite or Daiso. Due to the policy of China Customs, many of the bestselling products of Daiso are not allowed to be imported through the general form of trade model, but only through cross-border e-commence business model. As a result, the Company and Daiso agreed to suspend the cooperation temporarily and wait for the opening of the China-Japan-South Korea Free Trade Zone.
On November 1, 2017, the Company established an Apocynum Industrial Park in Xinjiang, China. The industrial park is focusing on planting and purchasing Bluish Dogbane and processing and distributing Bluish Dogbane preliminary products.
On March 13, 2019, Tenet-Jove established Beijing Tenjove Newhemp Biotechnology Co., Ltd. (“TNB”) with registered capital of RMB10.0 million (US$ ~~1,502,650)~~1,502,650). TNB became a wholly-owned subsidiary of Tenet-Jove.
~~The business operation of Tiankunrunze and its wholly owned subsidiaries was ceased in July 2019.~~
On August 22, 2019, Tenet-Jove established Shineco Zhong Hemp Group Co., Ltd. (“Zhong Hemp”) with registered capital of RMB200.0 million (US$ ~~28,237,022)~~28,237,022) and owns ~~60%~~60% interest of Zhong Hemp.
WeThe Company ceased the business operation of Xinjiang Taihe and Runze in September 2020 and October 2020, respectively.
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 Yushe County Guangyuan Forest Development Co., Ltd. (“Guangyuan”)’s Shareholders in exchange for the control of 100% of equity interests in Guangyuan, which composes of one group of similar identifiable assets; (ii) Tenet-Jove entered a Termination Agreement with Ankang Longevity and the Ankang Shareholders; (iii) as a consideration to the Restructuring Agreement and based on a valuation report on the equity interests of Guangyuan issued by an independent third party, Tenet-Jove relinquished all of its rights and interests in Ankang Longevity and transferred those rights and interests to the Guangyuan Shareholders; and (iv) Guangyuan and the Guangyuan Shareholders entered into a series of variable interest entity agreements with Tenet-Jove. After signing of the Restructuring Agreement, the Company and the shareholders of Ankang and Guangyuan actively carried out the transferring of rights and interests in Ankang and Guangyuan, and the transferring was completed subsequently on July 5, 2021. Afterwards, with the completion of all other follow-ups works, on August 16, 2021, the Company, through its subsidiary Tenet-Jove, completed the previously announced acquisition pursuant to the Restructuring Agreement dated June 8, 2021.
6
The Company, its subsidiaries, its VIEs, and its VIEs’ subsidiaries (collectively the “Group”) operate three main business segments: 1) Tenet-Jove is engaged in manufacturing and selling of Bluish Dogbane and related products, also known in Chinese as ~~“Luobuma”,~~“Luobuma,” including therapeutic clothing and textile products made from Luobuma; 2) the Zhisheng ~~Group is~~VIEs and Guanyuan are engaged in ~~the business of~~ planting, processing, and distributing of green agricultural produce, ~~as well as~~and the Zhisheng VIEs is also providing domestic and international logistic services for agricultural products and (“Agricultural Products”); and, 3) Ankang Longevity Group, which is reclassified as discontinued operations, manufactures traditional Chinese medicinal herbal products as well as other retail pharmaceutical products. These different business activities and products can potentially be integrated and benefit from one another.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information pursuant to the rules of the SEC and have been consistently applied. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, ~~2020,~~2021, which was filed on September ~~28, 2020.~~30, 2021.
The unaudited condensed consolidated financial statements of the Company reflect the principal activities of the Company, its subsidiaries, its VIEs and its VIEs’ subsidiaries. The non-controlling interest represents the minority shareholders’ interest in the Company’s majority owned subsidiaries and VIEs. All intercompany accounts and transactions have been eliminated in consolidation.
Consolidation of Variable Interest Entities
VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision-making ability. All VIEs and their subsidiaries with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.
The total carrying amount of the VIEs and their subsidiaries’ consolidated assets and liabilities and income information were as follows:
SCHEDULE OF CONSOLIDATED ASSETS AND LIABILITIES AND INCOME INFORMATION

September 30,
2021

June 30,
2021

Current assets $ 37,788,522 $ 44,631,744
Plant and equipment, net 948,396 4,698,184
Other non-current assets 4,657,465 4,894,445
Total assets 43,394,383 54,224,373
Total liabilities (8,494,849 ) (7,377,886 )
Net assets $ 34,899,534 $ 46,846,487
2021 2020

For the three months ended
September 30,

2021 2020
Net sales $ 616,250 $ 4,118,768
Gross profit (loss) $ (601,215 ) $ 912,428
Loss from operations $ (7,751,663 ) $ (294,564 )
Net loss $ (7,743,264 ) $ (400,077 )
7
The carrying amount of the VIEs and their subsidiaries’ consolidated assets and ~~liabilities;~~liabilities and income information ~~are~~held for discontinued operations were as follows:
September 30,
2020 June 30,
2020
September 30,
2021

June 30,
2021

Current assets $ 61,596,986 $ 58,350,565 $ - $ 19,659,742
Plant and equipment, net 8,350,796 8,168,594 - 3,683,525
Other non-current assets 9,223,659 11,054,954 - 1,359,506
Total assets 79,171,441 77,574,113 - 24,702,773
Total liabilities (7,496,725 ) (6,189,172 ) - (4,866,934 )
Net assets $ 71,674,716 $ 71,384,941 $ - $ 19,835,839
2021 2020

For the three months ended
September 30,

2021 2020
Net sales $ - $ 3,135,406
Gross profit $ - $ 642,943
Income from operations $ - $ 224,532
Net income $ - $ 99,561
For the three months ended
September 30,
2020 2019

Net sales $ 4,122,691 $ 7,011,877
Gross profit $ 912,427 $ 1,805,879
Income (loss) from operations $ (294,564 ) $ 522,355
Net income (loss) $ (400,077 ) $ 569,490
The carrying amount of the VIEs and their subsidiaries’ consolidated assets and liabilities and income information held for continued operations were as follows:

September 30,
2021

June 30,
2021

Current assets $ 37,788,522 $ 24,972,002
Plant and equipment, net 948,396 1,014,659
Other non-current assets 4,657,465 3,534,939
Total assets 43,394,383 29,521,600
Total liabilities (8,494,849 ) (2,510,952 )
Net assets $ 34,899,534 $ 27,010,648
2021 2020

For the three months ended
September 30,

2021 2020
Net sales $ 616,250 $ 983,362
Gross profit (loss) $ (601,215 ) $ 269,485
Loss from operations $ (7,751,663 ) $ (519,096 )
Net loss $ (7,743,264 ) $ (499,638 )
Non-controlling Interests
USU.S. GAAP requires that non-controlling interests in subsidiaries and affiliates be reported in the equity section of a company’s balance sheet. In addition, the amounts attributable to the non-controlling interests in the net income of these entities are reported separately in the unaudited condensed consolidated statements of ~~income (loss)~~loss and comprehensive ~~loss.~~income (loss).
78

Risks and Uncertainties
The operations of the Company are located in the ~~PRC. Accordingly, the Company’s business, financial condition,~~PRC and ~~results of operations may be influenced by the political, economic, and legal environment in the PRC, as well as by the general state of the PRC economy. The Company’s operations in the PRC~~ are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among ~~other factors,~~others, the political, economic, and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political, regulatory, and social conditions in the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things. Although the Company has not experienced losses from these ~~situations~~factors and believes that it is in compliance with existing laws and regulations, ~~changes could affect~~there is no guarantee that the ~~Company’s interest in these entities and its operations~~Company will continue to do so in the ~~PRC.~~future.
Members of the current management team own controlling interests in the Company and are also the owners of the VIEs in the PRC. The Company only controls the VIEs through contractual arrangements, which obligate it to absorb the risk of loss and to receive the residual expected returns. As such, the controlling shareholders of the Company and the VIEs could cancel these agreements or permit them to expire at the end of the agreement terms, as a result of which the Company would not retain control of the VIEs. In addition, should these agreements be challenged or litigated, they would also be subject to the laws and courts of the PRC legal system, which could make enforcing the Company’s rights difficult.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with USU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting periods. Significant estimates required to be made by management include, but are not limited to, useful lives of property, plant, and equipment, and intangible assets, the recoverability of long-lived assets, and the valuation of accounts receivable, deferred taxes, and inventory reserves. Actual results could differ from those estimates.
Revenue Recognition
~~The Company~~We previously recognized revenue from sales of Luobuma products, Chinese medicinal herbal products, and agricultural products, as well as providing logistic services and other processing services to external customers. ~~The Company~~We recognized revenue when all of the following have occurred: (i) there was persuasive evidence of an arrangement with a customer; (ii) delivery had occurred or services had been rendered; (iii) the sales price was fixed or determinable; and (iv) ~~the Company’s~~our collection of such fees was reasonably assured. These criteria, as related to ~~the Company’s~~our revenue, were considered to have been met as follows:
Sales of products: The Company recognized revenue from the sale of products 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 the ~~rendering~~provision of services: Revenue from international freight forwarding, domestic air, and overland freight forwarding services was recognized 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.
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 adopted the new revenue standard beginning July 1, 2018, and adopted a modified retrospective approach upon adoption. The Company believes that its previous revenue recognition policies are generally consistent with the new revenue recognition standards set forth in ASC 606. Potential adjustments to input measures are not expected to be pervasive to the majority of the Company’s contracts. There is no significant impact upon adoption of the new guidance.
9
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, cash on deposit, and other highly liquid investments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased. The Company maintains cash with various financial institutions mainly in the PRC. As of September 30, 2021 and June 30, ~~2020 and 2019,~~2021, the Company had no0 cash equivalents.
Under PRC law, it is generally required that a commercial bank in the PRC that holds ~~third party~~third-party cash deposits protect the depositors’ rights over and interests in their deposited money. PRC banks are subject to a series of risk control regulatory standards, and PRC bank regulatory authorities are empowered to take over the operation and management of any PRC bank that faces a material credit crisis. The Company monitors the banks utilized and has not experienced any problems.
Accounts Receivable, Net
Accounts receivable are recorded at net realizable value, consisting of the carrying amount less an allowance for uncollectible accounts, as necessary. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customers’ historical payment history, their current credit-worthiness, and current economic trends. The fair value of long-term receivables is determined using a present value technique by discounting the future expected contractual cash flows using current rates at which similar instruments would be issued at the measurement date. As of September 30, ~~2020~~2021 and June 30, ~~2020~~2021, the allowance for doubtful accounts from the continuing operations was US$6,922,563 and US$5,959,887, respectively. As of September 30, 2021 and June 30, 2021, the allowance for doubtful accounts from the discontinued operations was US$ ~~6,065,185~~ nil and US$ ~~5,235,436,~~3,675,619, respectively. Accounts are written off against the allowance after efforts at collection prove unsuccessful.
Inventories, ~~net~~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 the Company’s products. Cost is determined using the first in first out (“FIFO”) method. Agricultural products that the Company farms are recorded at cost, which includes direct costs such as seed selection, fertilizer, labor cost and contract fees that are spent in growing agricultural products on the leased farmland, and indirect costs which include amortization of prepayments of farmland leases and farmland development costs. All the costs are accumulated until the time of harvest and then allocated to the harvested crops costs when they are sold. The Company periodically evaluates its 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, ~~2020~~2021 and June 30, ~~2020,~~2021, the inventory reserve from the continuing operations was US$ ~~1,179,743~~ 1,363,496 and US$ ~~1,121,408,~~ 1,229,158, respectively. As of September 30, 2021 and June 30, 2021, the inventory reserve from the discontinued operations were both US$ nil.
Advances to Suppliers, ~~net~~Net
Advances to suppliers consist of payments to suppliers for materials that have not been received. Advances to suppliers are reviewed periodically to determine whether their carrying value has become impaired. As of September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, the Company had an allowance for uncollectible advances to suppliers from the continuing operations of US$14,938,755 and US$9,111,566, respectively. As of September 30, 2021 and June 30, 2021, the Company had an allowance for uncollectible advances to suppliers from the discontinued operations of US$ ~~3,900,865~~ nil and US$ ~~3,342,590,~~1,773,698, respectively.
910

Business Acquisitions
Business acquisitions are accounted for under the acquisition method. The acquisition method requires the reporting entity to identify the acquirer, determine the acquisition date, recognize and measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquired entity, and recognize and measure goodwill or a bargain gain from the purchase. The acquiree’s results are included in the Company’s consolidated financial statements from the date of acquisition. Assets acquired and liabilities assumed are recorded at their fair values on the date acquired and the excess of the purchase price over the amounts assigned is recorded as goodwill, or if the fair value of the net assets acquired exceeds the purchase price consideration, a bargain purchase gain is recorded. Adjustments to fair value assessments are generally recorded to goodwill over the measurement period (not longer than ~~twelve~~12 months). The acquisition method also requires that acquisition-related transaction and post-acquisition restructuring costs be charged to expense as committed, and requires the Company to recognize and measure certain assets and liabilities, including those arising from contingencies and contingent consideration in a business combination.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of assets acquired. The goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit would be considered impaired. To measure the amount of the impairment loss, the implied fair value of a reporting unit’s goodwill is compared to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. For each of these tests, the fair value of each of the Company’s reporting units is determined using a combination of valuation techniques, including a discounted cash flow methodology. To corroborate the discounted cash flow analysis performed at each reporting unit, a market approach is utilized using observable market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available).
Leases
The Company adopted ASU 2016-02, “Leases” on July 1, 2019 and used the alternative transition approach, which permits the effects of adoption to be applied at the effective date. The new standard provides a number of optional practical expedients in transition. The Company elected the ~~‘package~~“package of practical ~~expedients’,~~expedients,” which permits usit not to reassess under the new standard ~~our~~its prior conclusions about lease identification, lease classification, and initial direct costs. The Company also elected the short-term lease exemption and combining the lease and non-lease components practical expedients. The most significant impact upon adoption relates to the recognition of new Right-of-use (“ROU”) assets and lease liabilities on the Company’s balance sheet for office space operating leases. Upon adoption, the Company recognized additional operating liabilities of approximately US$0.5 million, with corresponding ROU assets of US$3.6 million based on the present value of the remaining rental payments under current leasing standards for existing operating leases. There was no cumulative effect of adopting the standard.
1011

Property and Equipment, Net
Property and equipment are stated at cost, less accumulated depreciation and amortization. Expenditures for additions, major renewals, and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided on a straight-line basis, less estimated residual value, if any, over an asset’s estimated useful life. Farmland leasehold improvements are amortized over the shorter of lease term or estimated useful lives of the underlying assets. The estimated useful lives of the Company’s property and equipment are as follows:
SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT
Estimated
useful lives
Buildings ~~20-50~~20-50 years
Machinery equipment ~~5-10~~5-10 years
Motor vehicles ~~5-10~~5-10 years
Office equipment ~~5-10~~5-10 years
Farmland leasehold improvements ~~12-18~~12-18 years
Leasehold improvement Lesser of useful life and lease term
Land Use Rights, Net
According to Chinese laws and regulations regarding land use rights, land in urban districts is owned by the ~~State,~~state, while land in the rural areas and suburban areas, except otherwise provided for by the ~~State,~~state, is collectively owned by individuals designated as resident farmers by the ~~State.~~state. In accordance with the legal principle that land ownership is separate from the right to the use of the land, the government grants individuals and companies the rights to use parcels of land for a specified period of time. Land use rights, which are usually prepaid, are stated at cost less accumulated amortization. Amortization is provided over the life of the land use rights, using the straight-line method. The useful life is 50 years, based on the term of the land use rights.
Long-lived Assets
Finite-lived assets and intangibles are reviewed for impairment testing when circumstances require. For purposes of evaluating the recoverability of long-lived assets, when undiscounted future cash flows will not be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value. The long-lived assets of the Company that are subject to evaluation consist primarily of property, plant and equipment, land use rights, investments, and long-term prepaid leases. For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the Company did ~~not~~0t recognize any impairment of its long-lived ~~assets.~~assets from the continuing operations and the discontinued operations.
Fair Value of Financial Instruments
The Company follows 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.
12
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the unaudited condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for unaudited condensed consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This ASC also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company ~~does not~~did 0t have any uncertain tax positions from the continuing operations and the discontinued operations at September 30, 2021 and June 30, ~~2020 and 2019.~~2021. The Company ~~has not~~had 0t provided deferred taxes for undistributed earnings of non-U.S. subsidiaries from the continuing operations and the discontinued operations at ~~June~~September 30, ~~2020,~~2021, as it is the Company’s policy to indefinitely reinvest these earnings in non-U.S. operations. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings is not practicable.
The statute of limitations for the Company’s U.S. federal income tax returns and certain state income tax returns remains open for tax year 2017 and thereafter. As of September 30, ~~2020,~~2021, the tax years ended December 31, ~~2014~~2016 through December 31, ~~2019~~2020 for the Company’s ~~People’s Republic of China (“PRC”)~~PRC subsidiaries ~~remain~~remained open for statutory examination by PRC tax authorities.
On December 22, 2017, the “Tax Cuts and Jobs Act” (“The Act”) was enacted. Under the provisions of The Act, the U.S. corporate tax rate decreased from ~~35%~~35% to ~~21%~~21%. As the Company has a June 30 fiscal year end, the lower corporate income tax rate ~~will be~~was phased in, resulting in a U.S. statutory federal rate of approximately ~~28%~~28% for our fiscal year ended June 30, 2018, and ~~21%~~21% for subsequent fiscal years. Additionally, 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 usthe Company to re-measure ~~the Company’s~~its income tax liability and record an estimated income tax expense of US$744,766 for the year ended June 30, 2018. On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of USU.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of ~~the~~The Act. In accordance with SAB 118, additional work is necessary to do a more detailed analysis of ~~the~~The Act as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in fiscal 2019 when the analysis is complete. The Company elects to pay the transition tax over an eight-year period using specified percentages (eight percent per year for the first five years, 15 percent in year six, 20 percent in year seven, and 25 percent in year eight).
~~Value Added~~Value-Added Tax
Sales revenue represents the invoiced value of goods, net of a ~~Value-Added Tax~~value-added tax (“VAT”). Before May 1, 2018, all of the Company’s products that were sold in the PRC were subject to a Chinese value-added tax at a rate of 17% of the gross sales price. After May 1, 2018, the Company was subject a tax rate of 16%, and after April 1, 2019, the tax rate was further reduced to 13% based on the new Chinese tax law. This VAT may be offset by VAT paid by the Company is on raw materials and other materials included in the cost of producing finished products or acquiring finished products. The Company records a VAT payable or VAT receivable in the accompanying unaudited condensed consolidated financial statements.
1213

Foreign Currency Translation
The Company uses the United States dollar (“U.S. ~~dollars”, “USD”~~dollars,” “USD,” or “US$”) for financial reporting purposes. The Company’s subsidiaries and VIEs maintain their books and records in their functional currency of Renminbi (“RMB”), the currency of the PRC.
In general, for consolidation purposes, the Company translates the assets and liabilities of its subsidiaries and VIEs into U.S. dollars using the applicable exchange rates prevailing at the balance sheet date, and the statements of income and cash flows are translated at average exchange rates during the reporting periods. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the financial statements of the subsidiaries and VIEs are recorded as accumulated other comprehensive loss.
The balance sheet amounts, with the exception of equity, at September 30, ~~2020~~2021 and June 30, ~~2020~~2021 were translated at 1 RMB to ~~0.1470~~0.1548 USD and at 1 RMB to ~~0.1414~~0.1549 USD, respectively. The average translation rates applied to the income and cash flow statement amounts for the three months ended September 30, 2021 and 2020 ~~and 2019~~ were at 1 RMB to ~~0.1445~~0.1545 USD and at 1 RMB to ~~0.1425~~0.1445 USD, respectively.
Convertible Notes Payable
In accordance with ASC 470 Debt with conversion and other option, an embedded beneficial conversion feature present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. Issuance costs should be allocated proportionally to the debt host and conversion feature. Deferred financing costs will be discounted and amortized subsequently, and the fair value of the convertible notes will be assessed by an independent appraiser.
Comprehensive ~~Loss~~Income (Loss)
Comprehensive ~~loss~~income (loss) consists of two components, net ~~income (loss)~~loss and other comprehensive ~~loss.~~income (loss). The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to USD is reported in other comprehensive ~~loss~~income (loss) in the unaudited condensed consolidated statements of ~~income (loss)~~loss and comprehensive ~~loss.~~income (loss).
Equity Investment
An investment in which the Company has the ability to exercise significant influence, but does not have a controlling interest, is accounted for using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock between ~~20%~~20% and ~~50%~~50%, and other factors, such as representation on the ~~Board~~board of ~~Directors,~~directors, voting rights, and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate.
~~Loss~~Earnings (Loss) per Share
The Company computes ~~loss~~earnings (loss) per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net loss divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., outstanding convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There is no0 anti-dilutive effect for the three months ended September 30, ~~2020~~2021 and ~~2019.~~2020.
14
The following table presents a reconciliation of basic and diluted earnings (loss) per share for the three months ended September 30, 2021 and 2020:
SCHEDULE OF RECONCILIATION OF BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
2021 2020

For the three months ended
September 30,

2021 2020
Net loss from continuing operations attributable to Shineco $ (14,238,332 ) $ (1,157,071 )
Net income from discontinued operations attributable to Shineco - 99,561
Net loss attributable to Shineco (14,238,332 ) (1,057,510 )
　　
Weighted average shares outstanding - basic and diluted* 8,314,996 3,039,943
　　
Net loss from continuing operations per share of common share Basic and diluted $ (1.71 ) $ (0.38 )
　　
Net income from discontinued operations per share of common share Basic and diluted $ - $ 0.03
　　
Net loss per share of common share Basic and diluted $ (1.71 ) (0.35 )
Reclassifications
Certain prior year balances were reclassified to conform to the current year’s presentation with consideration of reflecting the Company’s Ankang Longevity Group as discontinued operations. None of these reclassifications had an impact on reported financial position or cash flows for any of the periods presented.
New Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” to improve the effectiveness of disclosures in the notes to financial statements related to recurring or nonrecurring fair value measurements by removing amounts and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, policies for timing of transfers between different levels for fair value measurements, and the valuation processes for Level 3 fair value measurements. The new standard requires disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.
In August 2018, the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” (ASU 2018-15), to align the requirements for capitalizing implementation costs in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs relating to internal-use software. The update requires entities in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset and which costs to expense. ASU 2018-15 is effective for the Corporation on January 1, 2020 and may be applied using either the retrospective or prospective approach. Early adoption is permitted. The Company expects that the adoption of this ASU will have a material impact on its financial statements.
In October 2018, the FASB issued ASU No. 2018-17, “Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities”. The new standard changes how entities evaluate decision-making fees under the variable interest entity guidance. The new standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance. The standard should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.
In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Accounting Standard Codification (“ASC”) 842, Leases. The Company expects that the adoption of this ASU will not have a material impact on its financial statements.
In November 2019, the FASB issued ASU No. 2019-08, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). The guidance identifies, evaluates, and improves areas of GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided. The amendments in that ~~Update~~ASU expanded the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. For entities that have adopted the amendments in Update 2018-07, the updated guidance is effective for annual periods beginning after December 15, 2019, and is applicable to the Company in fiscal 2021. Early adoption is permitted. The Company ~~expects that~~adopted this ASU on July 1, 2020 and the adoption of this ASU ~~will~~did not have a material impact on its financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The ~~Board~~FASB is issuing this Update as part of its initiative to reduce complexity in accounting standards (the ~~Simplification Initiative)~~“Simplification Initiative”). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The specific areas of potential simplification in this ~~Update~~ASU were submitted by stakeholders as part of the Simplification Initiative. For public business entities, the amendments in this ~~Update~~ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company ~~expects that~~adopted this ASU on July 1, 2021 and the adoption of this ASU ~~will~~did not have a material impact on its financial statements.
15
In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments, (“ASU 2020-03”). ASU 2020-03 improves various financial instruments topics, including the CECL Standard. ASU 2020-03 includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments related to Issue 1, Issue 2, Issue 4, and Issue 5 were effective upon issuance of ASU 2020-03. The amendments related to Issue 3, Issue 6, and Issue 7 were effective for the Company beginning on January 1, 2020. The Company adopted this ASU on July 1, 2020 and the adoption of this ASU did not have a material impact on its financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform. The amendments in this standard can be applied anytime between the first quarter of 2020 and the fourth quarter of 2022. The Company is currently in the process of evaluating the impact of adoption of the new rules on the Company’s financial condition, results of operations, cash flows, and disclosures.
The Company believes that other recent accounting pronouncement updates will not have a material effect on the Company’s unaudited condensed consolidated financial statements.
14
NOTE 3 – ACCOUNTS RECEIVABLE, NET
The accounts receivable, net consisted of the following:
SCHEDULE OF ACCOUNTS RECEIVABLE

September 30,
2021

June 30,
2021

Accounts receivable $ 9,273,320 $ 15,795,234
Less: allowance for doubtful accounts (6,922,563 ) (9,635,506 )
Accounts receivable, net 2,350,757 6,159,728
Less: accounts receivable, net, held for discontinued operations - 3,473,057
Accounts receivable, net, held for continuing operations $ 2,350,757 $ 2,686,671
Movement of allowance for doubtful accounts is as follows:
SCHEDULE OF MOVEMENT OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

September 30,
2021

June 30,
2021

Beginning balance $ 9,635,506 $ 5,235,436
Charge to expense 960,937 7,556,516
Less: cessation of subsidiaries and disposal of VIE (3,668,403 ) (3,749,735 )
Foreign currency translation adjustments (5,477 ) 593,289
Ending balance $ 6,922,563 $ 9,635,506
NOTE 34 – INVENTORIES, NET
The inventories, net consisted of the following:
SCHEDULE OF INVENTORIES, NET
September 30,
2020 June 30,
2020
September 30,
2021

June 30,
2021

Raw materials $ 702,649 $ 958,206 $ 82,988 $ 208,253
Work-in-process 2,621,429 529,655 20,401,719 1,232,787
Finished goods 1,699,609 1,433,423 1,234,609 1,392,754
Less: inventory reserve (1,179,743 ) (1,121,408 )
(1,363,496
) (1,229,158 )
Total inventories, net $ 3,843,944 $ 1,799,876 20,355,820 1,604,636
Less: inventories, net, held for discontinued operations - 281,245
Inventories, net, held for continuing operations $ 20,355,820 $ 1,323,391
Work-in-process includes direct costs such as seed selection, fertilizer, labor cost, and subcontractor fees that are spent in growing agricultural products on the leased farmland, and indirect costs which include amortization of the prepayment of the farmland lease fees and farmland development costs. All the costs are accumulated until the time of harvest and then allocated to harvested crop costs when they are sold.
The Company wrote off inventory amounted to US$ 492,987 during the three months ended September 30, 2021, due to flood disaster caused by severe typhoon weather in autumn, which resulted in the damage and death of a large number of yew trees.
16
NOTE 5 – ADVANCES TO SUPPLIERS, NET
The advances to suppliers, net consisted of the following:
SCHEDULE OF ADVANCES TO SUPPLIERS

September 30,
2021

June 30,
2021

Advances to suppliers $ 16,385,104 $ 19,375,738
Less: allowance for doubtful accounts (14,938,755 ) (10,885,264 )
Advance to supplier, net 1,446,349 8,490,474
Less: advance to supplier, net, held for discontinued operations - 700,348
Advance to supplier, net, held for continuing operations $ 1,446,349 $ 7,790,126
Advances to suppliers consist of mainly payments to suppliers for yew trees that have not been received.
Movement of allowance for doubtful accounts is as follows:
SCHEDULE OF MOVEMENT OF ALLOWANCE FOR DOUBTFUL ACCOUNTS ON ADVANCES TO SUPPLIERS

September 30,
2021

June 30,
2021

Beginning balance $ 10,885,264 $ 3,342,590
Charge to expense 5,816,074 9,420,385
Less: cessation of subsidiaries and disposal of VIE (1,770,216 ) (2,374,394 )
Foreign currency translation adjustments 7,633 496,683
Ending balance $ 14,938,755 $ 10,885,264
NOTE 6 – OTHER CURRENT ASSETS
Other current assets include loans to third parties, deposits, advances to employees, prepaid expenses and others. During the three months ended September 30, 2021, the Company entered into a series of short-term loan agreements with the Company’s external business partners in an amount of US$12,703,315 for their working capital for six months to one year, with a maturity date of February 3, 2022, March 14, 2022 and September 18, 2022, respectively. The loans bore a fixed annual interest rate of 6.0% and 10.0%. The Company periodically reviewed the loans to third parties as to whether their carrying values remain realizable. The Company believes that the risk associated with the above loans are relatively low based on the evaluation of the creditworthiness of these third-party debtors and the relationships with them.
17
Movement of allowance for doubtful accounts is as follows:
SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
September 30,
2021 June 30,
2021

Beginning balance $ 635,502 $ 452,471
Charge to expense 577,123 158,335
Less: cessation of subsidiaries and disposal of VIE - -
Foreign currency translation adjustments 22,488 24,696
Ending balance $ 1,235,113 $ 635,502
NOTE 47 - PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
September 30,
2020 June 30,
2020
September 30,
2021

June 30,
2021

Buildings $ 11,980,396 $ 11,525,458 $ 3,399,755 $ 8,242,357
Machinery and equipment 894,580 860,610 28,366 688,979
Motor vehicles 59,905 57,630 63,089 63,090
Office equipment 240,300 231,174 174,160 243,543
Leasehold improvement 184,888 -
Farmland leasehold improvements 3,091,919 2,974,508 3,256,268 3,256,339
16,267,100 15,649,380
Property and equipment, gross 7,106,526 12,494,308
Less: accumulated depreciation and amortization (6,557,766 ) (6,159,896 ) (4,736,213 ) (6,556,839 )
Total property and equipment, net $ 9,709,334 $ 9,489,484 2,370,313 5,937,469
Less: property and equipment, net, held for discontinued operations - 3,683,525
Property and equipment, net held for continuing operations $ 2,370,313 $ 2,253,944
Depreciation and amortization expense charged to the continuing operations was US$ ~~152,107~~81,473 and US$ ~~178,215~~76,990 for the three months ended September 30, 2021 and 2020, respectively. Depreciation and ~~2019,~~amortization expense charged to the discontinued operations was US$ NaN and US$75,117 for the three months ended September 30, 2021 and 2020, respectively.
Farmland leasehold improvements ~~consist~~consisted of following:
SCHEDULE OF LEASEHOLD IMPROVEMENTS
September 30,
2020 June 30,
2020

Blueberry farmland leasehold improvements $ 2,375,350 $ 2,285,149
Yew tree planting base reconstruction 266,127 256,021
Greenhouse renovation 450,442 433,338
Total farmland leasehold improvements $ 3,091,919 $ 2,974,508
15

September 30,
2021

June 30,
2021

Blueberry farmland leasehold improvements $ 2,501,609 $ 2,501,664
Yew tree planting base reconstruction 280,273 280,279
Greenhouse renovation 474,386 474,396
Total farmland leasehold improvements 3,256,268 3,256,339
Less: farmland leasehold improvement, held for discontinued operations - -
Total farmland leasehold improvement, held for continuing operations $ 3,256,268 $ 3,256,339
NOTE 58 - 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,~~state, while land in the rural areas and suburban areas, except otherwise provided for by the ~~State,~~state, is collectively owned by individuals designated as resident farmers by the ~~State.~~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” ~~(the “Right”)~~ to use the land. The Company has the ~~Right~~land use right to use the land for 50 years and amortizes the rights on a straight-line basis over the period of 50 ~~years.~~years.
SCHEDULE OF LAND USE RIGHTS
September 30,
2020 June 30,
2020
September 30,
2021

June 30,
2021

Land use rights $ 1,635,428 $ 1,573,325 $ - $ 1,722,396
Less: accumulated amortization (400,622 ) (377,382 ) - (448,134 )
Total land use rights, net $ 1,234,806 $ 1,195,943 - 1,274,262
Less: land use rights, net, held for discontinued operations - 1,274,262
Land use rights, net, held for continuing operations $ - $ -
18
For the three months ended September 30, 2021 and 2020, amortization expenses from the continuing operations were both US$ nil. For the three months ended September 30, 2021 and ~~2019,~~2020, the Company recognized amortization ~~expense~~expenses from the discontinued operations of US$ ~~9,300~~nil and US$ ~~9,214,~~9,300, respectively.
~~The estimated future amortization expenses are as follows:~~
Twelve months ending September 30:

2021 $ 32,709
2022 32,709
2023 32,709
2024 32,709
2025 32,709
Thereafter 1,071,261
Total $ 1,234,806
NOTE 69 - DISTRIBUTION RIGHTS
The Company acquired distribution rights to distribute branded products of Daiso 100-yen shops through the acquisition of Tianjin Tajite. As this distribution right is difficult to acquire and will contribute significant revenue to Tianjin Tajite, such distribution rights were identified and valued as an intangible asset in the acquisition of Tianjin Tajite. The distribution rights, which have no expiration date, have been determined to have an indefinite life. Since the distribution rights have an indefinite life, the Company will evaluate them for impairment at least annually or earlier if determined necessary. AsDuring the three months ended September 30, 2021, the management performed evaluation on the impairment of ~~June 30, 2020,~~distribution rights. Due to the lower than expected revenue and profit, and unfavorable business environment, the management fully recorded an impairment loss on distribution rights ~~were evaluated at RMB 7,380,000 (US$ 1,085,092).~~of Tianjin Tajite.
16
NOTE 710 - INVESTMENTS
In 2013, Ankang Longevity Group entered into two equity investment agreements with Shaanxi Pharmaceutical Group Pai’ang Medicine Co. Ltd. (“Shaanxi Pharmaceutical Group”), a Chinese state-owned pharmaceutical enterprise, to invest a total of RMB6.8 million (approximately US$1.0 million) for a ~~49%~~49% equity interest in a pharmacy retail company called Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Retail Chain Co., Ltd. (“Sunsimiao Drugstores”), and a ~~49%~~49% equity interest in a pharmaceutical wholesale distribution company named Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (“Shaanxi Longevity Pharmacy”). These two ~~equity investments~~entities were ~~formed as new business entities~~incorporated to collaborate with Shaanxi Pharmaceutical Group to expand sales to regional hospitals and clinics and to establish the presence of retail pharmacies under the ~~Brand~~brand name ~~“Sunsimiao”.~~“Sunsimiao.” The investments ~~are~~were accounted for using the equity method because Ankang Longevity Group has significant influence, but no control of these two entities. The Company’s discontinued operations, Ankang Longevity Group recorded US$ nil and an income of US$15,287 ~~and US$ 69,899~~ for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively, from the investments, which was included in “Income (loss) from ~~equity method investments”~~discontinued operations, net of taxes” in the unaudited condensed consolidated statements of ~~income (loss)~~loss and comprehensive ~~loss (see~~loss. (See Note ~~11).~~14) On March 5, 2021, Ankang Longevity Group entered into two equity investment transfer agreements with a third-party company to sell all of its 49% equity interest in Sunsimiao Drugstores and its 49% equity interest in Shaanxi Longevity Pharmacy for a total consideration of RMB6.86 million (approximately US$1.0 million), and the full amount had been received by March 31, 2021.
In 2013, Ankang Longevity Group entered into a supplemental agreement with Shaanxi Pharmaceutical Group. According to the supplemental agreement, new 49% equity investment companies established by Shaanxi Pharmaceutical Group and Ankang Longevity Group are required to exclusively purchase certain raw materials and drug products from Shaanxi Pharmaceutical Group. In return, Shaanxi Pharmaceutical Group has agreed to compensate Ankang Longevity Group with a purchase rebate of 7%7% of the total purchases made from Shaanxi Pharmaceutical Group. For the three months ended September 30, 2021 and 2020, ~~and 2019, no~~0 income was recognized by Ankang Longevity Group from this supplemental agreement in addition to its 49% share of the income from the equity investment ~~companies, respectively.~~companies.
On October 21, 2013, the Company, through its controlled subsidiaries, Zhisheng Freight and Zhisheng Agricultural, entered into an agreement with an unrelated third party, Zhejiang Zhen’Ai Network Warehousing Services Co., Ltd. (“Zhen’Ai Network”), and invested RMB14.5 million (approximately US$ 2.2 million) into Tiancang Systematic Warehousing project (“Tiancang Project”) operated by Zhen’Ai Network. The Tiancang Project is an online platform established to provide comprehensive warehousing and logistic solutions to companies involved in E-commerce. The Company is entitled to ~~29%~~29% of Tiancang Project’s after-tax net income annually, less ~~30%~~30% statutory reserve and a 10 % employee welfare fund contribution. When the amount of the accumulated statutory reserve reaches ~~30%~~30% of the total investment for the Tiancang Project, no additional appropriation to the statutory reserve is required. The Company considered ~~it’s~~it unlikely to obtain any investment income in the future, and decided the make a ~~fully~~full impairment on this investment during the year ended June 30, 2020.
19
~~On November 21, 2016, the Company (the “Investor”)~~Guangyuan entered into an equity investment agreement with ~~Original Lab Inc.~~Shanxi Pharmaceutical Group Yushe Pharmaceutical Development Co., Ltd. (“Yushe Pharmaceutical”), a ~~California corporation (the “Investee”), and made~~Chinese pharmaceutical enterprise to invest a ~~payment~~total of RMB 2.0 million (approximately US$ 0.3 million) for a 20% equity interest in Yushe Pharmaceutical. The investment is accounted for using the equity method because Guangyuan has significant influence, but no control of the entity. The Company recorded a loss of US$ ~~200,000 in exchange~~ 4,186 for the ~~right~~three months ended September 30, 2021 from the investment, which was included in “Loss from equity method investment” in the unaudited condensed consolidated statements of loss and comprehensive income (loss).
On August 31, 2021, the Company entered into a capital injection agreement with the other shareholders of Shanghai Gaojing Private Fund Management (“Gaojing Private Fund”), a Chinese private fund management company, to ~~acquire certain shares~~complete the injection of a total RMB 4.8 million (approximately US$ 0.74 million) for its 32% equity interest in Gaojing Private Fund. The investment is accounted for using the equity method because the Company has significant influence, but no control of the ~~Investee’s common~~entity. As September 30, 2021, a total of US$ 0.5 million was injected by the Company and ~~preferred stock.~~the remaining capital contribution was injected in October 2021. The Company ~~considered it’s unlikely to obtain any~~recorded a loss of US$ 23,734 for the three months ended September 30, 2021 from the investment, ~~income~~which was included in “Loss from equity method investment” in the ~~future,~~unaudited condensed consolidated statements of loss and ~~decided the make a fully impairment on this investment during the year ended June 30, 2019.~~comprehensive income (loss).
The Company’s investments in unconsolidated entities consist of the following:
SCHEDULE OF INVESTMENTS IN UNCONSOLIDATED ENTITIES
September 30,
2020 June 30,
2020

Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (Ankang Longevity Pharmacy) $ 3,853,750 $ 3,690,419
Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Chain Co., Ltd. 855,148 824,705
Total investment $ 4,708,898 $ 4,515,124

September 30,
2021

June 30,
2021

Yushe Pharmaceutical $ 161,086 $ -
Gaojing Private Fund 476,266 -
Total investment 637,352 -
Less: investment, held for discontinued operations - -
Investment, held for continuing operations $ 637,352 $ -
Summarized financial information of unconsolidated entities from continued operations is as follows:
SCHEDULE OF FINANCIAL INFORMATION OF UNCONSOLIDATED ENTITIES
September 30,
2020 June 30,
2020
September 30,
2021

June 30,
2021

Current assets $ 39,876,243 $ 38,546,879 $ 8,745,788 $ -
Noncurrent assets 385,893 324,725 441,246 -
Current liabilities 30,667,280 29,671,104 8,488,590 -
For the three months ended
September 30,
2020 2019

Net sales $ 7,890,100 $ 7,540,520
Gross profit 554,304 764,612
Income from operations 24,327 138,891
Net income 31,198 144,590
2021 2020

For the three months ended
September 30,

2021 2020

Loss from operations $ (63 ) $ -
Loss from operations (94,726 ) -
Net loss (95,098 ) -
20
Summarized financial information of unconsolidated entities from discontinued operations is as follows:
SCHEDULE OF FINANCIAL INFORMATION OF UNCONSOLIDATED ENTITIES
2021 2020

For the three months ended
September 30,

2021 2020

Net sales $ - $ 7,890,100
Gross profit - 554,304
Income from operations - 24,327
Net income - 31,198
NOTE 811 - LEASES
Effective July 1, 2019, the Company adopted the new lease accounting standard using the optional transition method, which allowed usit to continue to apply the guidance under the lease standard in effect at the time in the comparative periods presented. In addition, the Company elected the package of practical expedients, which allowed usit to not reassess whether any existing contracts contain a lease, to not reassess historical lease classification as operating or finance leases, and to not reassess initial direct costs. The Company has not elected the practical expedient to use hindsight to determine the lease term for its leases at transition. The Company has also elected the practical expedient, allowing usit to not separate the lease and non-lease components for all classes of underlying assets. Adoption of this standard resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities of ~~$3,587,788~~$3,587,788 and ~~$450,123,~~$450,123, respectively, as of July 1, 2019 with no impact on accumulated deficit. Financial position for reporting periods beginning on or after July 1, 2019, are presented under the new guidance, while ~~prior period~~prior-period amounts are not adjusted and continue to be reported in accordance with previous guidance.
The Company leases offices space under non-cancelable operating leases, with terms ranging from one to six years. In addition, ~~one of~~ the ~~Company’s controlled subsidiaries,~~ Zhisheng ~~Group~~VIEs and Guangyuan entered into several farmland lease contracts with farmer cooperatives to lease farmland in order to plant and grow organic vegetables, fruit, and Chinese yew trees, fast-growing bamboo willows and scenic greening trees. The lease terms vary from 5 years to 24 years. The Company considers those renewal or termination options that are reasonably certain to be exercised in the determination of the lease term and initial measurement of ~~right of use~~ROU assets and lease liabilities. Lease ~~expense~~expenses for lease payment isare recognized on a straight-line basis over the lease term. Leases with initial ~~term~~terms of 12 months or less are not recorded on the balance sheet.
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 ~~discount~~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.
21
The table below presents the operating lease related assets and liabilities from the continuing operations recorded on the balance sheets. No operating lease related assets and liabilities from the discontinued operations.
SCHEDULE OF OPERATING LEASE RELATED ASSETS AND LIABILITIES
September 30,
2020 June 30,
2020
September 30,
2021

June 30,
2021

Rights of use lease assets $ 3,204,393 $ 3,227,895
ROU lease assets $ 5,716,533 $ 3,585,703

Operating lease liabilities – current 92,909 97,633 1,083,902 434,411
Operating lease liabilities – non-current 424,605 401,891 1,811,273 352,863
Total operating lease liabilities $ 517,514 $ 499,524 $ 2,895,175 $ 787,274
The weighted average remaining lease terms and discount rates for all of operating leases were as follows as of September ~~30. 2020~~30, 2021 and June 30, ~~2020:~~2021:
SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERMS AND DISCOUNT RATES FOR OPERATING LEASES
September 30,
2020 June 30,
2020
September 30,
2021

June 30,
2021

Remaining lease term and discount rate:
Weighted average remaining lease term (years) 9.23 9.26 5.78 7.25
Weighted average discount rate 5.0 5.0 5.20 % 5.00 %
Rent ~~expense~~expenses totaled US$~~113,115~~230,548 and US$ ~~92,325~~113,115 from the continuing operations for the three months ended September 30, 2021 and 2020, respectively. Rent expenses were both US$ nil from the discontinued operations for the three months ended September 30, 2021 and ~~2019,~~2020, respectively.
The following is a schedule, by years, of maturities of lease liabilities as of September 30, ~~2020:~~2021:
SCHEDULE OF MATURITIES OF LEASE LIABILITIES
2021 $ 300,401

2022 277,157 $ 1,156,574
2023 328,920 1,108,222
2024 328,920 1,099,017
2025 319,213 600,502
2026 271,413
Thereafter 1,720,775 1,307,577
Total lease payments 3,275,386 5,543,305
Less: imputed interest (70,991 ) (264,546 )
Less: prepayments (2,686,881 ) (2,383,584 )
Present value of lease liabilities $ 517,514 $ 2,895,175
1922

NOTE 912 - SHORT-TERM LOANS
No short-terms loan was outstanding as of September 30, 2021, as the Company disposed Ankang Group on July 5, 2021.
Short-term loans ~~consist~~consisted of the following:
SCHEDULE OF SHORT-TERM LOANS
Lender September 30,
2020 Maturity
Date Int.
Rate/Year
Agricultural Bank of China-a $ 661,642 2020/12/31 4.65 %
Agricultural Bank of China-a 1,470,314 2021/2/27 5.66 %
Agricultural Bank of China-b 294,063 2021/9/1 5.66 %
Total short-term loans $ 2,426,019
Lender
June 30,
2021

Maturity
Date

Int.
Rate/Year

Agricultural Bank of China-a^ 1,548,502 2022/2/27 5.66 %
Agricultural Bank of China-b# 309,700 2022/9/1 5.66 %
Total short-term loans 1,858,202
Less: short-term loans, held for discontinued operations 1,858,202
Short-term loans, held for continuing operations $ -
Lender June 30,
2020 Maturity
Date Int.
Rate/Year
Agricultural Bank of China-b* $ 282,896 2020-8-22 5.60 %
Agricultural Bank of China-a 636,517 2020-12-23 4.65 %
Agricultural Bank of China-a 1,414,481 2021-2-24 5.66 %
Total short-term loans $ 2,333,894
The loans outstanding were guaranteed by the following properties, entities or individuals:
a. Guaranteed by a commercial credit guaranty company unrelated to the Company and also by Jiping Chen, a ~~shareholder~~stockholder of the Company.
b. Collateralized by the building owned by Xiaoyan Chen and Jing Chen, who are both related parties of the Company. Xiaoyan Chen is one of the shareholders of Ankang Longevity Group. Jing Chen is the sister of ~~the~~ Xiaoyan Chen but not a shareholder of Ankang Longevity Group.
*^{^} ~~The~~Upon the original maturity date of February 27, 2021, the Company ~~repaid~~signed a loan extension agreement with Agricultural Bank of China to extend the loan ~~in full on~~repayment date to February 27, 2022 with the same interest rate of 5.66% per annum.
# Upon the original maturity ~~date.~~date of September 1, 2021, the Company signed a loan extension agreement with Agricultural Bank of China to extend the loan repayment date to September 1, 2022 with the same interest rate of 5.66% per annum.
~~The Company recorded interest expense of~~Interest expenses from continuing operations were both US$ ~~29,622 and US$ 30,277~~nil for the three months ended September 30, 2021 and 2020, respectively. The Company recorded interest expenses from discontinued operations of US$ niland ~~2019,~~US$29,622 for the three months ended September 30, 2021 and 2020, respectively. The annual weighted average interest rates ~~are 5.31%~~from discontinued operations were nil and ~~5.31%~~5.31% for the three months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively.
2023

NOTE 1013 - ACQUISITION
Acquisition of Tianjin Taijite
On December 12, 2016, the Company entered into a merger and acquisition agreement with Tianjin Tajite, ~~E-Commerce Co., Ltd. (“Tianjin Tajite”),~~ a professional e-commerce company distributing Luobuma fabric commodities and branded products of Daiso 100-yen shops, based in Tianjin, China, to acquire a 51 % equity ~~interest of~~interests in Tianjin Tajite.
Pursuant to the agreement, the Company made a payment of RMB14,000,000 (approximately US$2.1 million) at the end of December 2016 as the total consideration for the acquisition of Tianjin Tajite.
On October 26, 2017, the Company completed the acquisition of Tianjin Tajite. The acquisition provides a unique opportunity for the Company to enter the market of Luobuma fabric commodities and branded products of Daiso 100-yen shops.
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 represents 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 Noncontrolling 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 RMB14,010,195 (approximately US$2.1 million). The results of operations of Tianjin Tajite have been included in the consolidated statements of operations from the date of acquisition.
In June 2018, the management performed evaluation on the impairment of goodwill. Due to the lower than expected revenue and profit, and unfavorable business environment, the management fully recorded an impairment loss on goodwill of Tianjin Tajite.
The fair value of distribution rights and its estimated useful lives from continuing operations are as follows:
SCHEDULE OF ESTIMATED USEFUL LIVES

Preliminary
Fair Value

Weighted Average
Useful Life
(in Years)
Distribution rights $ 1,140,551 -(a)
(a) The distribution rights with no expiration date has been determined to have an indefinite life.
During the three months ended September 30, 2021, the management performed evaluation on the impairment of distribution rights. Due to the lower than expected revenue and profit, and unfavorable business environment, the management fully recorded an impairment loss on distribution rights of Tianjin Tajite.
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 US$ nil in the three months ended September 30, 2021.
24
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 Yushe County Guangyuan Forest Development Co., Ltd. (“Guangyuan”)’s Shareholders in exchange for the control of 100% of equity interests in Guangyuan, which composes of one group of similar identifiable assets; (ii) Tenet-Jove entered a Termination Agreement with Ankang Longevity and the Ankang Shareholders; (iii) as a consideration to the Restructuring Agreement and based on a valuation report on the equity interests of Guangyuan issued by an independent third party, Tenet-Jove relinquished all of its rights and interests in Ankang Longevity and transferred those rights and interests to the Guangyuan Shareholders; and (iv) Guangyuan and the Guangyuan Shareholders entered into a series of variable interest entity agreements with Tenet-Jove. After signing of the Restructuring Agreement, the Company and the shareholders of Ankang and Guangyuan actively carried out the transferring of rights and interests in Ankang and Guangyuan, and the transferring was completed subsequently on July 5, 2021. Afterwards, with the completion of all other follow-ups works, on August 16, 2021, the Company, through its subsidiary Tenet-Jove, completed the previously announced acquisition pursuant to the Restructuring Agreement dated June 8, 2021.
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 Noncontrolling 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 following table summarizes the allocation of estimated fair values of net assets acquired and liabilities assumed:
SUMMARIZES THE ALLOCATION OF ESTIMATED FAIR VALUES
Accounts receivable, net 27,288
Inventory 58,679
Other current assets 186,519
Distribution rights 1,085,092
Property, plant and equipment 14,205
Advance from customers (79,017 )
Tax payable (17,056 )
Deferred tax liabilities (271,273 )
Salary payable (25,362 )
Accrued liabilities and other current liabilities (1,004,308 )
Non-controlling interest 1,440
Goodwill 2,059,939
Total purchase price for acquisition, net of US$ 22,294 of cash $ 2,036,146

Due from related party 108,296
Inventory 19,439,711
Other current assets 224,522
Right of use assets 1,164,976
Long-term investments and other non-current assets 166,107
Other payables and other current assets (4,534,328 )
Operating lease liabilities (1,047,486 )
Total purchase price for acquisition, net of US$ 112,070 of cash $ 15,521,798
The excess of the purchase price over the aggregate fair value of assets acquired was allocated to goodwill. The results of operations of Tianjin Tajite have been included in the consolidated statements of operations from the date of acquisition.
In June 2018, the management performed evaluation on the impairment of goodwill. Due to the lower than expected revenue and profit, and unfavorable business environment, the management fully recorded an impairment loss on goodwill of Tianjin Tajite.
~~The fair value of distribution rights and its estimated useful lives is as follows:~~
Preliminary
Fair Value Weighted Average Useful Life
(in Years)
Distribution rights $ 1,085,092 (a)
~~(a) The distribution rights with no expiration date has been determined to have an indefinite life.~~
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 nil in the three months ended September 30, ~~2020.~~2021.
The Company has included the operating results of Guangyuan in its unaudited condensed consolidated financial statements since the Acquisition Date. US$ nil in net sales and US$ 319,905 in net loss of Tianjin Guangyuan were included in the unaudited condensed consolidated financial statements for the three months ended September 30, 2021.
25
NOTE 1114 - RELATED PARTY TRANSACTIONS
~~DUE FROM RELATED PARTIES~~Due from Related Parties
The Company ~~had previously~~has made temporary advances to certain ~~shareholders~~stockholders of the Company and to other entities that are either owned by family members of those ~~shareholders~~stockholders or to other entities that the Company has investments in. Those advances are due on demand and non-interest bearing.
As of September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, the outstanding amounts due from related parties ~~consist~~consisted of the following:
SCHEDULE OF OUTSTANDING AMOUNTS DUE FROM RELATED PARTIES
September 30,
2020 June 30,
2020
September 30,
2021

June 30,
2021

Yang Bin $ 44,109 $ 42,434 $ 46,454 $ 46,454
Beijing Huiyinansheng Asset Management Co., Ltd (a.) 22,055 21,217 23,227 23,228
Lin Baolin 108,393 -
Wang Qiwei 59,549 57,288 62,714 62,716
Total due from related parties $ 125,713 $ 120,939 240,788 132,398
Less: due from related parties, held for discontinued operations - -
Due from related parties, held for continuing operations $ 240,788 $ 132,398
a. This ~~Company~~company is wholly owned by one of the Company’s senior ~~management.~~
b. ~~This Company is wholly owned by one of the Company’s shareholders.~~managements.
22
~~DUE TO RELATED PARTIES~~Due to Related Parties
As of September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, the Company had related party payables of US$ ~~1,355,919~~4,355,733 and US$ ~~1,355,919,~~1,159,407, respectively, mainly due to the principal ~~shareholders~~stockholders or certain relatives of the ~~shareholders~~stockholders of the Company who lend funds for the Company’s operations. The payables are unsecured, non-interest bearing, and due on demand.
September 30,
2020 June 30,
2020

Wu Yang $ 94,174 $ 90,598
Wang Sai 90,964 90,629
Chen Jiping 3,024 3,024
Zhou Guocong 799,548 648,308
Li Baolin 220,546 353,619
Zhao Min 175,557 169,741
Total due to related parties $ 1,383,813 $ 1,355,919
~~SALES~~SCHEDULE OF DUE TO RELATED PARTIES

September 30,
2021

June 30,
2021

Wu Yang $ 99,179 $ 99,183
Wang Sai 91,433 91,433
Zhou Guocong 533,656 551,314
Li Baolin 232,270 232,275
Zhao Min 217,093 185,202
Zhou Shunfang 3,182,102 -
Total due to related parties 4,355,733 1,159,407
Less: due to related parties, held for discontinued operations - -
Due to related parties, held for continuing operations $ 4,355,733 $ 1,159,407
Sales to Related Parties
For the three months ended September 30, 2021 and 2020, ~~and 2019, the~~no sales to related parties or balance of accounts receivables were from continuing operations. The Company recorded sales to Shaanxi Pharmaceutical Group from the discontinued operations, a related party (see Note 7)10), of US$~~759,366~~ nil and US$ ~~795,548,~~759,366, respectively. As of September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, the balance of accounts receivable due from Shaanxi Pharmaceutical Group from discontinued operations was US$ ~~1,722,124~~ nil and US$ ~~1,567,160,~~551,237, respectively.
26
NOTE 1215 - ~~TAXES~~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 one-year maturity (“the Note”) to an institutional accredited investor Streeterville Capital, LLC (“Investor”). The 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.
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 one-year maturity term (the “Notes”) to the same Investor. The first convertible promissory note (“Note #1”) has an original principal amount of US$3,170,000.00 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 (“Note #2”) has an original principal amount of US$4,200,000.00 and Investor gave consideration of US$4.0 million, reflecting original issue discount of US$200,000.
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 one-year maturity term (the “Note”) to the same Investor. The Note has an original principal amount of US$10,520,000.00 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.
For the above-mentioned convertible promissory notes issued, interest accrues on the outstanding balance of these notes at 6% per annum. The Investor may redeem all or any part of the outstanding balance of the note, at any time after six months from the issue date upon three trading days’ notice, in cash or converting into shares of the Company’s common stock at a price equal to 80% multiplied by the lowest daily volume weighted average price (“VWAP”) during the fifteen trading days immediately preceding the applicable redemption conversion, subject to certain adjustments and ownership limitations specified in the note. Following the receipt of a redemption notice, the Company may either ratify Investor’s proposed allocation in the applicable redemption notice or elect to change the allocation by written notice to Investor within twenty-four (24) hours of its receipt of such redemption notice, so long as the sum of the cash payments and the amount of redemption conversions equal the applicable redemption amount. As the date of this report, the Company received principal in full from the Investor. The Company anticipates using the proceeds for general working capital purposes.
As of September 30, 2021, the Company received principal in full from the Investor. For the three months ended September 30, 2021, a total of $458,978in amortization of the debt discounts was recorded on the unaudited condensed consolidated statements of loss and comprehensive income (loss). As of September 30, 2021, shares of the Company’s common stock totaling 974,749 were issued by the Company to the Investor equaling principal and interests amounted to $3,850,000, and the Notes balance was $16,352,339, with a carrying value of $17,381,584, net of deferred financing costs of $1,029,245 was recorded in the accompanying unaudited condensed consolidated balance sheets.
27
NOTE 16 - 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. Tenet-Jove and its VIEs ~~entities~~ are governed by the Income Tax Laws of the PRC, and are currently subject to tax at a statutory rate of ~~25%~~25% on taxable income. Two ~~VIE entities~~VIEs and Xinjiang Taihe receive a full income tax exemption from the local tax authority of the PRC as agricultural enterprises as long as the favorable tax policy remains unchanged.
On December 22, 2017, ~~the “Tax Cuts and Jobs Act” (“~~The ~~Act”)~~Act was ~~enacted,~~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 usthe Company to re-measure ~~the Company’s~~its income tax liability and record an estimated income tax expense of US$744,766 for the year ended June 30, 2018. In accordance with SAB 118, additional work is necessary to do a more detailed analysis of ~~the~~The Act as well as potential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to current tax expense in fiscal 2019 when the analysis is complete. The Company elects to pay the transition tax over an ~~eight year~~eight-year period using specified percentages (eight percent per year for the first five years, 15 percent in year six, 20 percent in year seven, and 25 percent in year eight).
23
i) The components of the income tax ~~expense (benefit) are~~expenses were as follows:
SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE (BENEFITS)
For the three months ended
September 30,
2020 2019
Current income tax provision $ 105,297 $ 140,841
Deferred income tax provision (benefit) - (145,624 )
Total income tax expense $ 105,297 $ (4,783 )
2021 2020

For the three months ended
September 30,

2021 2020
Current income tax provision $ - $ 105,297
Deferred income tax provision - -
Total income tax expenses - 105,297
Less: income tax expenses, held for discontinued operations - 105,297
Income tax expenses, held for continuing operations $ - $ -
September 30,
2020 June 30,
2020
Deferred tax assets:
Allowance for doubtful accounts $ 498,846 $ 428,879
Inventory reserve 265,487 252,022
Net operating loss carry-forwards 524,678 504,754
Total 1,289,011 1,185,655
Valuation allowance (1,289,011 ) (1,185,655 )
Total deferred tax assets - -
Deferred tax liability: 　　
Distribution rights (271,273 ) (260,972 )
Total deferred tax liability (271,273 ) (260,972 )
Deferred tax liability, net $ (271,273 ) $ (260,972
SCHEDULE OF FINANCIAL REPORTING BASIS AND TAX BASIS OF ASSETS AND LIABILITIES

September 30,
2021

June 30,
2021

Deferred tax assets:
Allowance for doubtful accounts $ 1,115,581 $ 951,136
Inventory reserve 339,892 306,308
Net operating loss carry-forwards 552,567 552,579
Total 2,008,040 1,810,023
Valuation allowance (2,008,040 ) (1,810,023 )
Total deferred tax assets - -
Deferred tax liability: 　　
Distribution rights (285,692 ) (285,699 )
Total deferred tax liability (285,692 ) (285,699 )
Deferred tax liability, net (285,692 ) (285,699 )
Less: deferred tax liability, net, held for discontinued operations - -
Deferred tax liability, net, held for continuing operations $ (285,692 ) $ (285,699 )
28
Movement of the valuation allowance:
SCHEDULE OF MOVEMENT OF VALUATION ALLOWANCE
September 30,
2020 June 30,
2020
September 30,
2021

June 30,
2021

Beginning balance $ 1,185,655 $ 519,671 $ 1,810,023 $ 1,185,655
Current year addition 56,555 680,901
Current year/period addition 198,057 512,028
Exchange difference (46,801 ) (14,917 ) (40 ) 112,340
Ending balance $ 1,289,011 $ 1,185,655 2,008,040 1,810,023
Less: valuation allowance, held for discontinued operations - (1,362,329 )
Valuation allowance, held for continuing operations $ 2,008,040 $ 447,693
(b) ~~Value Added~~Value-Added Tax
The Company is subject to a ~~value added tax (“VAT”)~~VAT for selling merchandise. The applicable VAT rate iswas 17% before May 1, 2018 for products sold in the PRC and decreased to 16% thereafter, and after April 1, 2019, the tax rate was further reduced to 13% based on the new Chinese tax law. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under commercial practice in the PRC, the Company pays VAT based on tax invoices issued. The tax invoices may be issued subsequent to the date on which revenue is recognized, and there may be a considerable delay between the date on which the revenue is recognized and the date on which the tax invoice is issued.
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 no0 assessed penalties during the three months ended September 30, ~~2020~~2021 and ~~2019.~~2020.
(c) Taxes Payable
Taxes payable consisted of the following:
SCHEDULE OF TAXES PAYABLE

September 30,
2021

June 30,
2021

Income tax payable $ 1,664,149 $ 3,376,499
Value added tax payable 33,395 73,390
Business tax and other taxes payable 6,438 8,573
Total tax payable 1,703,982 3,458,462
Less: tax payable, held for discontinued operations - (1,743,673 )
Tax payable, held for continuing operations $ 1,703,982 $ 1,714,789
　　
Income tax payable - current portion $ 1,197,541 $ 2,952,021
Less: income tax payable - current portion, held for discontinued operations - (1,743,673 )
Income tax payable - current portion, held for continuing operations $ 1,197,541 $ 1,208,348
　　
Income tax payable - noncurrent portion $ 506,441 $ 506,441
Less: income tax payable - noncurrent portion, held for discontinued operations - -
Income tax payable - noncurrent portion, held for continuing operations $ 506,441 $ 506,441
2429

~~(c) Taxes Payable~~NOTE 17 - STOCKHOLDERS’ EQUITY
~~Taxes payable consists of the following:~~
September 30,
2020 June 30,
2020

Income tax payable $ 3,457,740 $ 3,424,043
Value added tax payable 540,730 522,615
Business tax and other taxes payable 6,325 6,026
Total tax payable 4,004,795 3,952,684
Less: current portion 3,438,773 3,386,662
Income tax payable - noncurrent portion $ 566,022 $ 566,022
~~NOTE 13 - SHAREHOLDERS’ EQUITY~~
Initial Public Offering
On September 28, 2016, the Company completed its initial public offering of 190,354 shares of common stock at a price of US$ 40.50 per share for gross proceeds of US$ 7.7 million and net proceeds of approximately US$ 5.4 million. The Company’s common shares began trading on September 28, 2016 on the NASDAQ Capital Market under the symbol “TYHT.”
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 ~~10%~~10% of the after-tax net income determined in accordance with PRC GAAP until the reserve is equal to ~~50%~~50% of the entities’ registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of the ~~Board~~board of ~~Directors.~~directors. As of September 30, 2021 and June 30, ~~2020 and 2019,~~2021, the balance of the required statutory reserves was US$ ~~4,199,964~~4,198,107 and US$4,198,107, respectively.
On January 23, 2018, Shineco, Inc. entered into a Common Stock Purchase Agreement (“Purchase Agreement”) with IFG Opportunity Fund LLC (“IFG Fund”) whereby, upon the terms and subject to the conditions and limitations set forth therein,September 3, 2019, the Company ~~had the right, from time to time in its sole discretion during the 24-month term of the Purchase Agreement, to direct IFG Fund to purchase up to a total of US$ 15,000,000 worth of~~granted 184,763 restricted shares of common ~~stock. As consideration~~stock to its employees as compensation cost for ~~IFG Fund to enter into the Purchase Agreement, the Company agreed to issue 22,222 shares~~awards. The fair value of the ~~Company’s Common Stock (the “Commitment Shares”) to IFG Fund. The Purchase Shares are being offered in an indirect primary offering consisting of an equity line of credit, in accordance with~~restricted shares was US$1,022,660 based on the ~~terms and conditions of~~closing stock price US$5.54 at September 3, 2019. These restricted shares vested immediately on the Purchase Agreement. The total number of Purchase Shares shall not exceed 444,444. On January 23, 2018, the Company issued the Commitment Shares to IFG Fund. On July 3, 2018, the Company and IFG Fund entered into a termination agreement, dated July 3, 2018 (the “Termination Agreement”) effective as of July 3, 2018, to terminate the Purchase Agreement and the Registration Rights Agreement. IFG retained the 22,222 commitment shares which were valued at US$ 434,000 and written off during the nine months ended March 31, 2019.grant date.
On September ~~27, 2018,~~5, 2019, the Company entered into a securities purchase agreement with ~~selected~~select investors whereby the Company agreed to sell, and the investors agreed to purchase, up to ~~181,967~~310,977 shares of common stock at a purchase price of US$ 94.68 per ~~share, for gross proceeds to the~~Share. The Company ~~of approximately US$ 1,637,700 (the “2018 Offering”). After deducting the offering cost, the~~received net proceeds ~~the Company received was~~of US$ ~~1,589,892.~~1,500,203. The ~~2018 Offering closed on September 28, 2018. The 2018 Offering~~offering was made pursuant to the Company’s effective registration statement on Form S-3 (Registration Statement No. 333-221711) previously filed with the Securities and Exchange Commission and a prospectus supplement thereunder.
On May 8, 2019, TNB, filed with the United States Securities and Exchange Commission a Notice of Exempt Offering of Securities on Form D regarding an offering (“Offering”) of simple agreement for future tokens. Tenet-Jove intends to use the net proceeds from sales of the tokens to develop land and facilities for cultivating industrial hemp in China under a newly formed wholly owned subsidiary (the “Operations”). The minimum target amount in this private placement is $1,000,000. Once Shineco raises $1,000,000, investors will have the option to convert smart contracts that represent preferred stock into Shinceo’s common stock. For this, smart contracts that shall be convertible into common stock at the following ratio of 180:1. If Shineco raises $1,000,000 in this private placement, then up to 55,556 shares of common stock will be issued pursuant to the following calculation if the smart contract holders choose to convert their smart contracts that represent preferred stock into Shinceo’s common stock:
~~1. Each smart contract is $ 0.1;~~
~~2. $1,000,000 can get 10,000,000 smart contracts. ($1,000,000 divided by 0.1 equals to 10,000,000 smart contracts.)~~
~~3. The conversion ratio of smart contracts to common stock is 180:1~~
~~4. Therefore,-10,000,000-smart-contracts-divided by 180 -equals-55,556-common stock.~~
~~Shineco plans to issue no more than 444,444 shares in connection with this transaction, specifically for the exchange of smart contracts.~~
On September 3, 2019, the Company granted 184,763 restricted shares to its employees as compensation cost for awards. The fair value of the restricted shares was US$ 1,022,660 based on the closing stock price US$ 5.54 at September 3, 2019. These restricted shares were vested immediately from the grant date.
On September 5, 2019, the Company entered into a securities purchase agreement with select investors whereby the Company agreed to sell, and the investors agreed to purchase, up to 310,977 shares of common stock (the “Shares”) at a purchase price of US$ 4.68 per Share. The net proceeds that the Company received was US$ 1,500,203. The offering is being made pursuant to the Company’s effective registration statement on Form S-3 (Registration Statement No. 333-221711) previously filed with the Securities and Exchange Commission and a prospectus supplement thereunder.
On July 10, 2020, the Company’s ~~shareholders~~stockholders approved ~~to effect~~ a 1-for-9 reverse stock split ~~of the shares (the “Reverse Stock Split”)~~ of the Company’s common stock, par value ~~$0.001~~$0.001 per share, with ~~the~~a market effective date of August 14, ~~2020.~~2020 (the “Reverse Stock Split”). As a result of the Reverse Stock Split, each nine pre-split shares of common stock outstanding ~~will~~ automatically ~~combine~~combined and ~~convert~~converted to one issued and outstanding share of common stock without any action on the part of ~~the stockholder.~~stockholders. No fractional shares of common stock ~~will be~~were issued to any ~~shareholders~~stockholders in connection with the Reverse Stock Split. Each ~~shareholder will be~~stockholder was entitled to receive one share of common stock in lieu of the fractional share that would have resulted from the Reverse Stock Split. The number of the Company’s authorized common stock ~~remains~~remained at 100,000,000 shares, and the par value of the common stock following the Reverse Stock Split ~~shall remain~~remained at ~~$0.001~~$0.001 per share. As of August 14, 2020 (immediately prior to the effective date), there were 27,333,428 shares of common stock outstanding, and the number of common stock outstanding after the Reverse Stock Split is was 3,037,048, taking into account of the effect of rounding fractional shares into whole shares. As a result of ~~this~~the Reverse Stock Split, the Company’s shares and per share data as reflected in the unaudited condensed consolidated financial statements ~~has been~~were retroactively restated as if the transaction occurred at the beginning of the periods presented.
On December 10, 2020, the Company entered into a securities purchase agreement with select investors whereby the Company agreed to sell, and the investors agreed to purchase, up to 604,900 shares of common stock at a purchase price of US$2.73 per share. The Company received net proceeds of US$1,643,087. The offering was made pursuant to the Company’s effective registration statement on Form S-3 (Registration Statement No. 333-221711) previously filed with the Securities and Exchange Commission and a prospectus supplement thereunder.
On January 27, 2021, the Company issued 364,445 shares of common stock to three investors at a price of US$3.0 per share. The Company received net proceeds of US$1,093,355.
On April 10, 2021, the Company issued 3,872,194 shares of common stock to selected investors at a price of US$3.2 per share. The Company received net proceeds of US$4,845,001 and US$6,160,203 was outstanding as of September 30, 2021.
30
NOTE 1418 - CONCENTRATIONS AND RISKS
The Company maintains principally all bank accounts in the PRC. The cash balance held in the PRC bank accounts from the continuing operations was US$ ~~23,113,638~~18,226,128 and US$ ~~32,358,252~~16,333,102 as of September 30, ~~2020~~2021 and June 30, ~~2020,~~2021, respectively. The cash balance held in the PRC bank accounts from the discontinued operations was US$ nil and US$12,676,416 as of September 30, 2021 and June 30, 2021, respectively.
During the three months ended September 30, 2021 and 2020, ~~and 2019,~~ almost ~~100%~~100% of the Company’s assets were located in the PRC and ~~100%~~100% of the Company’s revenues were derived from its subsidiaries and VIEs located in the PRC.
For the three months ended September 30, ~~2020,~~2021, four customers accounted for approximately ~~18%~~23%, ~~15%~~23%, ~~14%~~19% and ~~10%~~11% of the Company’s total sales from the continuing operations, respectively. At September 30, ~~2020, five~~2021, four customers accounted for approximately ~~64%~~70% of the Company’s accounts ~~receivable.~~receivable from the continuing operations.
~~For the three months ended September 30, 2019, five customers accounted for approximately 14%, 12%, 11%, 10% and 10% of the Company’s total sales, respectively.~~
For the three months ended September 30, 2020, three ~~vendors~~customers accounted for approximately ~~51%~~29%, ~~13%~~24% and ~~10%~~22% of the Company’s total ~~purchases,~~sales from the continuing operations, respectively. For the three months ended September 30, ~~2019, three vendors~~2020, six customers accounted for approximately ~~36%~~24%, ~~16%~~20%, 19%, 13%, 12% and ~~12%~~12% of the Company’s total sales from the discontinued operations, respectively.
For the three months ended September 30, 2021, one vendor accounted for approximately 94% of the Company’s total purchases from the continuing operations, respectively.
For the three months ended September 30, 2020, one vendor accounted for approximately 98% of the Company’s total purchases from the continuing operations, respectively. For the three months ended September 30, 2020, six vendors accounted for approximately 26%, 20%, 16%, 14%, 13% and 11% of the Company’s total purchases from the discontinued operations, respectively.
NOTE 1519 - COMMITMENTS AND ~~CONTIGENCIES~~CONTINGENCIES
Legal Contingencies
On May 16, 2017, Bonwick Capital Partners, LLC ~~(“Plaintiff”~~(the “Plaintiff”) commenced a lawsuit (Case No. 1:17-cv-03681-PGG) against the Company in the United States District Court for the Southern District of New York. Plaintiff ~~alleges~~alleged that the Company entered into an agreement with the Plaintiff, ~~(the “Agreement”),~~ pursuant to which the Plaintiff was to provide the Company with financial advisory services in connection with the Company’s initial public offering in the United States. The Plaintiff ~~alleges~~alleged that the Company breached the Agreement and ~~seeks~~seek money damages up to US$6 million. AsIn March 2021, the ~~date~~Company entered into a Settlement Agreement and Release with the Plaintiff, pursuant to which the Company paid the Plaintiff a total sum of ~~this report, there is no progress in this lawsuit. The~~US$47,500 as settlement payment, and upon acceptance of the settlement payment from the Company, ~~believes that these claims are without merit~~the Plaintiff waived, released, and ~~intends to vigorously defend its position.~~forever discharged the Company from all past and future claims.
2731

NOTE 1620 - SEGMENT REPORTING
ASC 280, “Segment ~~Reporting”,~~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 ~~three~~3 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):
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 City.~~Xinjiang.
● Processing and distributing of traditional Chinese medicinal herbal products as well as other pharmaceutical products (“Herbal products”):
The operating companies of this segment, namely AnKang Longevity Group and its subsidiaries, which are reclassified as discontinued operations, process more than 600 kinds of Chinese medicinal herbal products with an established domestic sales and distribution network.
Ankang Longevity Group is also engaged in the retail pharmacy business and the operating revenue, which is not material, is also included in this segment.
● Planting, processing, and distributing of green and organic agricultural produce as well as growing and cultivating of Chinese Yew trees (“Other agricultural products”):
The operating companies of this segment, the Zhisheng ~~Group, is~~VIEs, are engaged in the business of growing and distributing green and organic vegetables and fruits as well as providing logistics services for distributing agricultural products. 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 this segment are located in the East and North regions of Mainland China, mostly carried out in Shandong Province and in Beijing, where the Zhisheng ~~Group has~~VIEs have newly developed over 100 acres of modern greenhouses for cultivating yew trees and other plants.
The other operating companies 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 this segment 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.
32
The following table presents summarized information by segment for the three months ended September 30, 2021:
SCHEDULE OF INFORMATION BY SEGMENT
For the three months ended September 30, 2021
Continuing Operations Discontinued Operations
Luobuma Other agricultural Herbal
products products Total products Total
Segment revenue $ 13,508 $ 616,250 $ 629,758 $ - $ 629,758
Cost of revenue and related business and sales tax 141,838 1,217,465 1,359,303 - 1,359,303
Gross loss (128,330 ) (601,215 ) (729,545 ) - (729,545 )
Gross loss % (950.0 )% (97.6 )% (115.8 )% - (115.8 )%
The following table presents summarized information by segment for the three months ended September 30, 2020:
For the three months ended September 30, 2020
For the three months ended September 30, 2020 Continuing Operations Discontinued Operations
Luobuma Herbal Other agricultural Luobuma Other agricultural Herbal
products products products Total products products Total products Total
Segment revenue $ 24,615 $ 3,135,406 $ 983,362 $ 4,143,383 $ 24,615 $ 983,362 $ 1,007,977 $ 3,135,406 $ 4,143,383
Cost of revenue and related business and sales tax 28,462 2,492,463 713,877 3,234,802 28,462 713,877 742,339 2,492,463 3,234,802
Gross profit (loss) (3,847 ) 642,943 269,485 908,581 (3,847 ) 269,485 265,638 642,943 908,581
Gross profit (loss) % (16 )% 20.5 % 27.4 % 21.9 % (15.6 )% 27.4 % 26.4 % 20.5 % 21.9 %
Total assets as of September 30, 2021 and June 30, 2021 were as follows:

September 30,
2021

June 30,
2021

Luobuma products $ 5,343,652 $ 3,849,675
Other agricultural products 62,917,505 32,766,151
Herbal products - 24,702,773
Total assets 68,261,157 61,318,599
Less: total assets held for discontinued operations - (24,702,773 )
Total assets, held for continuing operations $ 68,261,157 $ 36,615,826
33
NOTE 21 - DISCONTINUED OPERATIONS
On June 8, 2021, Tenet-Jove entered into a Restructuring Agreement (the “Restructuring Agreement”) with the following parties:
● Ankang Longevity, a company incorporated under the laws of the People’s Republic of China (the “PRC”);
● Mr. Jiping Chen, who is a minority shareholder of the Company and holds 68.7% of the equity interests in Ankang Longevity, and Ms. Xiaoyan Chen, who holds 31.3% of the equity interests in Ankang Longevity (collectively, the “Ankang Shareholders”);
● Yushe County Guangyuan Forest Development Co., Ltd., a company incorporated under the laws of the PRC (“Guangyuan”); and
● Mr. Baolin Li, who is a minority shareholder of the Company and holds 90% of the equity interests in Guangyuan, and Ms. Yufeng Zhang, who holds 10% of the equity interests in Guangyuan (collectively, the “Guangyuan Shareholders”).
Pursuant to the terms of the Restructuring Agreement, (i) the Company transferred all of its rights and interests in Ankang Longevity to the Guangyuan Shareholders in exchange for the control of 100% of equity interests in Guangyuan, which composes of one group of similar identifiable assets; (ii) Tenet-Jove entered a Termination Agreement with Ankang Longevity and the Ankang Shareholders; (iii) as a consideration to the Restructuring Agreement and based on a valuation report on the equity interests of Guangyuan issued by an independent third party, Tenet-Jove relinquished all of its rights and interests in Ankang Longevity and transferred those rights and interests to the Guangyuan Shareholders; and (iv) Guangyuan and the Guangyuan Shareholders entered into a series of variable interest entity agreements with Tenet-Jove.
After signing of the Restructuring Agreement, the Company and the shareholders of Ankang and Guangyuan actively carried out the transferring of rights and interests in Ankang and Guangyuan, and the transferring was completed subsequently on July 5, 2021. Afterwards, with the completion of all other follow-ups works, on August 16, 2021, the Company, through its subsidiary Tenet-Jove, completed the previously announced acquisition pursuant to the Restructuring Agreement dated June 8, 2021. The ~~following table presents summarized information by segment~~management determined that July 5, 2021 was the disposal date of Ankang.
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 noncurrent 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 income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45. The assets and liabilities of the entities of Ankang Longevity have been reclassified as “assets of discontinued operations” and “liabilities of discontinued operations” within current and non-current assets and liabilities, respectively, on the unaudited condensed consolidated balance sheets as of September 30, 2021 and June 30, 2021. The results of operations of Ankang Longevity have been reclassified to “net income (loss) from discontinued operations” in the unaudited condensed consolidated statements of loss and comprehensive loss for the three months ended September 30, ~~2019:~~2021 and 2020.
For the three months ended September 30, 2019
Luobuma Herbal Other agricultural
products products products Total
Segment revenue $ 65,519 $ 3,300,321 $ 3,680,941 $ 7,046,781
Cost of revenue and related business and sales tax 231,504 2,599,404 2,575,978 5,406,886
Gross profit (165,985 ) 700,917 1,104,963 1,639,895
Gross profit % (253.3 )% 21.2 % 30.0 % 23.3 %
34
~~Total Assets~~The carrying amount of the major classes of assets and liabilities of discontinued operations as of September 30, 2021 and June 30, 2021 consist of the following:
SCHEDULE OF DISCONTINUED OPERATIONS
September 30,
2020 June 30,
2020

Luobuma products $ 3,265,271 $ 2,836,450
Herbal products 45,107,523 43,855,815
Other agricultural products 34,832,830 32,396,346
Total assets $ 83,205,624 $ 79,088,611

September,
2021

June 30,
2021

Assets of discontinued operation:
Current assets:
Cash $ - $ 12,681,483
Accounts receivables - 3,473,057
Inventories, net - 281,245
Advances to suppliers, net - 700,348
Other current assets - 2,523,609
Total current assets of discontinued operation - 19,659,742

Property and equipment, net - 3,683,525
Land use right, net of accumulated amortization - 1,274,262
Investments - -
Long-term deposit and other noncurrent assets - 85,244
Total assets of discontinued operation $ - $ 24,702,773

Liabilities of discontinued operation:
Current liabilities:
Short-term loans $ - $ 1,858,202
Accounts payable - 46,948
Other payables and accrued expenses - 1,218,111
Taxes payable - 1,743,673
Total liabilities of discontinued operation $ - $ 4,866,934
35
The summarized operating result of discontinued operations included in the Company’s consolidated statements of operations consist of the following:
2021 2020

For the three months ended
September 30,

2021 2020

REVENUE $ - $ 3,135,406

COST OF REVENUE
Cost of product and services - 2,481,321
Business and sales related tax - 11,142
Total cost of revenue - 2,492,463
　　
GROSS PROFIT - 642,943

OPERATING EXPENSES
General and administrative expenses - 397,422
Selling expenses - 20,989
Total operating expenses - 418,411

INCOME FROM OPERATIONS - 224,532

OTHER INCOME (EXPENSE)
Income from equity method investments - 15,287
Interest expense, net - (24,197 )
Total other loss - (8,910 )

INCOME BEFORE PROVISION FOR INCOME TAXES FROM DISCONTINUED OPERATIONS - 215,622

PROVISION FOR INCOME TAXES FROM DISCONTINUED OPERATIONS - 105,297

NET INCOME FROM DISCONTINUED OPERATIONS - 110,325

Net income attributable to non-controlling interest - 10,764

NET INCOME FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO SHINECO, INC. - 99,561
NOTE 1722 - SUBSEQUENT EVENTS
These unaudited condensed consolidated financial statements were approved by management and available for issuance on November ~~16, 2020,~~15, 2021, 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.
36
~~SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Forward-Looking Statements
This ~~document~~Quarterly Report on Form 10-Q contains ~~certain~~“forward-looking statements.” All statements other than statements of ~~a forward-looking nature.~~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,” ~~“we believe,~~“believe,” ~~“we intend,~~“intend,” “may,” “should,” “will,” ~~“could”~~“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 Luobuma and herbal medicines price fluctuations;
● statements of our plans and objectives, including those that relate to our proposed expansions and the effect such expansions may have on our ~~revenues;~~revenue;
● statements regarding the capabilities of our business operations;
● statements of expected future economic performance;
● the impact of the COVID-19 outbreak;
● 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. We discuss our known material risks under the heading “Risk Factors” in our annual report on Form 10-K ~~and Registration Statement~~for the fiscal year ended June 30, 2021 filed with the SEC on ~~Form S-1.~~September 30, 2021 (the “Annal Report”). 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, ~~the Company reserves~~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.
~~ITEM 2.~~ ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS~~
The ~~following discussion~~information included in this Management’s Discussion and ~~analysis~~Analysis of ~~the results~~Financial Condition and Results of ~~our operations and financial condition for the three months ended September 30, 2020 and 2019~~Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes ~~to those unaudited condensed consolidated financial statements that are~~ included ~~elsewhere~~ in this Quarterly Report, and ~~our annual report on Form 10-K for~~ the ~~twelve months ended June 30, 2020 and 2019, including the~~audited consolidated financial statements and notes ~~thereto.~~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.
37
~~Forward-Looking Statements~~General Overview
Shineco, Inc. is a holding company incorporated in Delaware. As a holding company with no material operations of our own, we conduct a substantial majority of our operations through our operating entities established in the People’s Republic of China, or the PRC, primarily our variable interest entities (the “VIEs”). We do not have any equity ownership of our VIEs, instead we control and receive the economic benefits of our 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 that maintains service agreements with the associated operating companies. The ~~statements~~Chinese regulatory authorities could disallow our structure, which could result in ~~this discussion that~~a material change in our operations and the value of our securities could decline or become worthless.
We use our subsidiaries’ and VIEs’ vertically and horizontally integrated production, distribution, and sales channels to provide health and well-being focused plant-based products. Our products are ~~not historical facts~~only sold domestically in China. We utilize modern engineering technologies and biotechnologies to produce, among other products, Chinese herbal medicines, organic agricultural produce, and specialized textiles. Our health and well-being focused plant-based products business is divided into three major segments:
Processing and distributing traditional Chinese herbal medicine products as well as other pharmaceutical products - This segment is conducted through our VIE, Ankang Longevity Pharmaceutical (Group) Co., Ltd. (“Ankang Longevity Group”), which operates 66 cooperative retail pharmacies throughout Ankang, a city in southern Shaanxi province, China, through which we sell directly to individual customers traditional Chinese medicinal products produced by us as well as by third parties. Ankang Longevity Group also owns a factory specializing in decoction, which is the process by which solid materials are ~~“forward-looking statements” within~~heated or boiled in order to extract liquids, and distributes decoction products to wholesalers and pharmaceutical companies around China.
On June 8, 2021, Tenet-Jove entered into a Restructuring Agreement with various parties. Pursuant to the ~~meaning of Section 27A~~terms of the ~~Securities Act~~Restructuring Agreement, (i) the Company transferred all of ~~1933,~~its rights and interests in Ankang Longevity to Yushe County Guangyuan Forest Development Co., Ltd. (“Guangyuan”)’s Shareholders in exchange for the control of 100% of equity interests in Guangyuan, which composes of one group of similar identifiable assets; (ii) Tenet-Jove entered a Termination Agreement with Ankang Longevity and the Ankang Shareholders; (iii) as ~~amended,~~a consideration to the Restructuring Agreement and ~~Section 21E~~based on a valuation report on the equity interests of Guangyuan issued by an independent third party, Tenet-Jove relinquished all of its rights and interests in Ankang Longevity and transferred those rights and interests to the Guangyuan Shareholders; and (iv) Guangyuan and the Guangyuan Shareholders entered into a series of variable interest entity agreements with Tenet-Jove. After signing of the ~~Securities Exchange Act~~Restructuring Agreement, the Company and the shareholders of ~~1934, as amended,~~Ankang and ~~are subject~~Guangyuan actively carried out the transferring of rights and interests in Ankang and Guangyuan, and the transferring was completed subsequently on July 5, 2021. Afterwards, with the completion of all other follow-ups works, on August 16, 2021, the Company, through its subsidiary Tenet-Jove, completed the previously announced acquisition pursuant to the ~~“safe harbor” created by those sections~~Restructuring Agreement dated June 8, 2021. The ~~words “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “continue,”~~management determined that July 5, 2021 was the ~~negative forms thereof,~~disposal date of Ankang. The assets and liabilities of the entities of Ankang Longevity have been reclassified as “assets of discontinued operations” and “liabilities of discontinued operations” within current and non-current assets and liabilities, respectively, on the unaudited condensed consolidated balance sheets as of September 30, 2021 and June 30, 2021. The results of operations of Ankang Longevity have been reclassified to “net income (loss) from discontinued operations” in the unaudited condensed consolidated statements of loss and comprehensive loss for the three months ended September 30, 2021 and 2020.
Processing and distributing green and organic agricultural produce as well as growing and cultivating yew trees (taxus media) - We currently cultivate and sell yew mainly to group and corporate customers, but do not currently process yew into Chinese or ~~similar expressions,~~Western medicines. This segment is conducted through our VIEs: Shineco Zhisheng (Beijing) Bio-Technology Co. (“Zhisheng Bio-Tech”), Yantai Zhisheng International Freight Forwarding Co., Ltd (“Zhisheng Freight”), Yantai Zhisheng International Trade Co., Ltd (“Zhisheng Trade”), and Qingdao Zhihesheng Agricultural Produce Services, Ltd (“Qingdao Zhihesheng”) (collectively, the “Zhisheng VIEs”). Meanwhile, we entered the market of planting fast-growing bamboo willows and scenic greening trees through we newly acquired VIE, Yushe County Guangyuan Forest Development Co., Ltd. (“Guangyuan”). The operations of this segment are intended to identify forward-looking statements, although not all forward-looking statements are identified by those words or expressions. Forward-looking statements by their nature involve substantial riskslocated in the North regions of Mainland China, mostly carried out in Shanxi Province.
38
Developing and uncertainties, certain of which are beyond our control. Actual results, performance or achievements may differ materially from those expressed or implied by forward-looking statements depending on a variety of important factors, including, but not limited to, weather, local, regional, national and global Luobuma and herbal medicines price fluctuations, availability of financing and interest rates, competition, changes in, or failure to comply with, government regulations, costs, uncertaintiesdistributing specialized fabrics, textiles, and other ~~effects of legal and other administrative proceedings, and other risks and uncertainties. Actual results and the timing of the events may differ materially~~byproducts derived from ~~those contained in these forward looking statements due to many factors, including those discussed~~an indigenous Chinese plant Apocynum Venetum, grown in the ~~“Forward-Looking Statements” set forth elsewhere~~Xinjiang region of China, and known in ~~this quarterly report~~Chinese as “Luobuma” or “bluish dogbane” - Our Luobuma products are specialized textile and health supplement products designed to incorporate traditional Eastern medicines with modern scientific methods. These products are predicated on ~~Form 10-Q. We are not undertaking to update or revise any forward-looking statement, whether as a result~~centuries-old traditions of ~~new information, future events or circumstances or otherwise.~~
~~Business Overview and Corporate Structure~~
~~Shineco, Inc. (the “Company”, “we”, “us” and “our”) was incorporated in~~Eastern herbal remedies derived from the ~~State of Delaware on August 20, 1997. On December 30, 2004, the Company acquired all of the issued and outstanding shares of~~Luobuma raw material. This segment is channeled through our directly-owned subsidiary, Beijing Tenet-Jove Technological Development Co., Ltd. (“Tenet-Jove”), ~~a PRC company, in exchange for our restricted shares of common stock. Consequently, Tenet-Jove became our 100% owned subsidiary~~ and its operating business became that of the Company. Tenet-Jove was incorporated on December 15, 2003 under the laws of China and was officially granted the status of a Wholly Foreign-Owned Entity (“WFOE”) by Chinese authorities on July 14, 2006. This transaction was accounted for as a recapitalization. Tenet-Jove owns a 90% ~~interest of~~subsidiary Tianjin Tenet Huatai Technological Development Co., Ltd. (“Tenet Huatai”).
On December 31, 2008, June 11, 2011 and May 24, 2012, Tenet-Jove entered into a series of contractual agreements including an Executive Business Cooperation Agreement, a Timely Reporting Agreement, an Equity Interest Pledge Agreement and Executive Option Agreement (collectively, the “VIE Agreements”), with each one of the following entities, Ankang Longevity Pharmaceutical (Group) Co., Ltd. (“Ankang Longevity Group”), Yantai Zhisheng International Freight Forwarding Co., Ltd. (“Zhisheng Freight”), Yantai Zhisheng International Trade Co., Ltd. (“Zhisheng Trade”), Yantai Mouping District Zhisheng Agricultural Produce Cooperative (“Zhisheng Agricultural”) and Qingdao Zhihesheng Agricultural Produce Services., Ltd. (“Qingdao Zhihesheng”). On February 24, 2014, Tenet-Jove entered into the same series of contractual agreements with Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. (“Zhisheng Bio-Tech”), which was incorporated in 2014. Zhisheng Bio-Tech, Zhisheng Freight, Zhisheng Trade, Zhisheng Agricultural, and Qingdao Zhihesheng are collectively referred to herein as the “Zhisheng Group.” Zhisheng Agricultural has not had any significant business activities and thus we have deregistered it in 2017. We have transferred all assets, rights and liabilities to an affiliated entity, Zhisheng Freight.
Pursuant to the VIE Agreements, Tenet-Jove has the exclusive right to provide to each of the Zhisheng Group entities and Ankang Longevity Group consulting services related to their business operations and management. All these contractual agreements obligate Tenet-Jove to absorb a majority of the risk of loss from each of the Zhisheng Group entities and Ankang Longevity Group’s activities and entitle Tenet-Jove to receive a majority of their residual returns. In essence, Tenet-Jove has gained effective control over each of the Zhisheng Group and Ankang Longevity Group. Based on these contractual arrangements, the Zhisheng Group and Ankang Longevity Group are treated as Variable Interest Entities (“VIEs”) under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 “Consolidation”. Accordingly, the accounts of each of the Zhisheng Group entities and Ankang Longevity Group are consolidated with those of Tenet-Jove. Ankang Longevity Group has several subsidiaries. We carry out all of our business in China through our PRC subsidiaries, our VIEs and their subsidiaries.
On April 19, 2017, Tenet-Jove established Xinjiang Tiankunrunze Biological Engineering Co., Ltd. (“Tiankunrunze”) with registered capital of RMB 50.0 million (US$ 7,262,000) and owns 65% interest of Tiankunrunze. On April 28, 2017, Tiankunrunze established Xinjiang Tianzhuo Technology Development Co., Ltd. (“Tianzhuo”) with registered capital of RMB 10.0 million (US$ 1,450,233). On May 22, 2017, Tiankunrunze established Xinjiang Tianhuihechuang Agriculture Development Co., Ltd. (“Tianhuihechuang”) with registered capital of RMB 10.0 million (US$ 1,452,294). On May 23, 2017, Tiankunrunze established Xinjiang Tianxintongye Biotechnology Development Co., Ltd. (“Tianxintongye”) with registered capital of RMB 10.0 million (US$ 1,451,615). Therefore, Tenet-Jove controls Tiankunrunze and its wholly owned subsidiaries.
On May 2, 2017, the Company entered into a Strategic Cooperation Agreement with Beijing Zhongke Biorefinery Engineering Technology Co., Ltd. (“Biorefinery”), a leading high-tech biomass refining company financially backed by the Chinese Academy of Sciences Institute of Process Engineering, to establish the Institute of Chinese Apocynum Industrial Technology Research (“ICAITR”). Pursuant to the Strategic Cooperation Agreement the two parties agreed to establish the ICAITR, the Company and Biorefinery own 80% and 20% of the equity interests of ICAITR, respectively. Shineco invested RMB 5.0 million (US$ 737,745) as the registered capital, and Biorefinery will invest a technology patent for “Steam Explosion Degumming”.
On September 21, 2017, the Company, through its wholly owned subsidiary Tenet-Jove, entered into a Strategic Cooperation Agreement (the “Agreement”) with Mr. Jianjun Wang, who is experienced in apocynum planting, manufacturing and knowledgeable in apocynum market and administration procedures with relevant authorities in apocynum industry in China, to establish an Apocynum Industrial Park in Xinjiang, China. Pursuant to the Agreement entered into on September 21, 2017, both parties have agreed to establish a new company, namely, Xinjiang Shineco Taihe Agriculture Technology Ltd. to hold and operate the Apocynum Industrial Park, with a total investment of RMB 50 million (approximately US$ 7.57 million), of which the Company will invest RMB 47.5 million and Mr. Wang will invest RMB 2.5 million. Upon the closing of the Agreement, Shineco owns 95% of the equity interest of Xinjiang Taihe.
On September 30, 2017, Tenet-Jove established Xinjiang Shineco Taihe Agriculture Technology Ltd. (“Xinjiang Taihe”) with registered capital of RMB 10.0 million (US$ 1,502,650). On September 30, 2017, Tenet-Jove established Xinjiang Tianyi Runze Bioengineering Co., Ltd. (“Runze”) with registered capital of RMB 10.0 million (US$ 1,502,650). Xinjiang Taihe and Runze became wholly-owned subsidiaries of Tenet-Jove.
On December 10, 2016, Tenet-Jove entered into a purchase agreement with Tianjin Tajite, an online e-commerce company based in Tianjin, China, specializing in distributing Luobuma related products and branded products of Daiso 100-yen shops, pursuant to which Tenet-Jove would acquire a 51% equity interest in Tianjin Tajite E-Commerce Co., Ltd. (“Tianjin Tajite”), a professional e-commerce company distributing Luobuma fabric commodities and branded products of Daiso 100-yen shops, based in Tianjin, China, for cash consideration of RMB 14,000,000 (approximately US$ 2.1 million). On December 25, 2016, the Company paid the full amount as the deposit to secure the deal. In May, 2017, the Company amended the agreement that required Tianjin Tajite to satisfy certain preconditions related to product introductions into China. On October 26, 2017, the Company completed the acquisition for 51% of the equity interest in Tianjin Tajite.
On October 27, 2017, the Company, through its subsidiary Tianjin Tajite E-Commerce Co., Ltd. (“Tianjin Tajite”), obtained contractual rights to distribute branded products of Daiso Industries Co., Ltd. (“Daiso”), a large franchise of 100-yen shops founded in Japan, via JD.com (“JD”), one of the largest e-commerce companies and one of the largest retailers in China. On November 3, 2017, the Company further developed the cooperation with Daiso by entering into a supply and purchase agreement (the “Daiso Agreement”) for the purpose of establishing a continuous supply and sale of Daiso’s products in China. Pursuant to the Daiso Agreement, the Company planned to purchase Daiso Products in the amount of approximately RMB 20 million by August, 2018 and add orders as circumstance requires. The term of the Daiso Agreement is for one year, and it renews for an additional one-year at the end of each term unless terminated by written notice by either Tianjin Tajite or Daiso. Due to the policy of China Customs, many of the bestselling products of Daiso are not allowed to be imported through the general form of trade model, but only through cross-border e-commence business model. As a result, the Company and Daiso agreed to suspend the cooperation temporarily and waits for the opening of the China-Japan-South Korea Free Trade Zone.
~~On November 1, 2017, the Company established the Apocynum Industrial Park in Xinjiang, China.~~
~~We ceased the business operation of Tenet-Jove Xuzhou branch in November 2017.~~
On March 13, 2019, Tenet-Jove established Beijing Tenjove Newhemp Biotechnology Co., Ltd. (“TNB”) with registered capital of RMB 10.0 million (US$ 1,502,650). TNB became wholly-owned subsidiaries of the Company.
~~We ceased the business operation of Tiankunrunze and its wholly owned subsidiaries in July 2019.~~
~~On August 22, 2019, Tenet-Jove established Shineco Zhong Hemp Group Co., Ltd. (“Zhong Hemp”) with registered capital of RMB 200.0 million (US$ 28,237,022) and owns 60% interest of Zhong Hemp.~~
The Company, through its subsidiary, Xinjiang Taihe has entered into a definitive Share Exchange and Acquisition Agreement (the “Xinjiang Tiansheng Agreement”) with Western Xinjiang Tiansheng Agricultural Development Co., Ltd (“Xinjiang Tiansheng”). Pursuant to the Xinjiang Tiansheng Agreement, Xinjiang Taihe will receive 51% equity ownership in Xinjiang Tiansheng for further investment in apocynum business expansion in Xinjiang, China, in exchange for a combination of 14% equity ownership in Xinjiang Taihe and cash payments in three separate installments (the “Acquisition Consideration”). The first installment in the amount of RMB 810,000 (approximately US$ 117,933) was paid to Xinjiang Tiansheng (the “Xinjiang Tiansheng Deposit”). The Acquisition Consideration in the aggregate is valued at RMB 23.8 million (approximately US$ 3.5 million) contingent upon certain milestones in the next years. The Company and Xinjiang Tiansheng terminated the Xinjiang Tiansheng Agreement on July 10, 2018 and Xinjiang Tiansheng returned the full Xinjiang Tiansheng Deposit following such termination by the end of July 2018.
~~We ceased the business operation of Xinjiang Taihe and Runze in September 2020 and October 2020, respectively.~~
Currently, we have three main business segments: (i) Tenet-Jove is engaged in developing, manufacturing and selling of Bluish Dogbane and related products, also known in Chinese as “Luobuma,” including therapeutic clothing and textile products made from Luobuma, as well as purchasing Luoboma raw materials processing; (ii) Zhisheng Group is engaged in the business of planting, processing and distributing of green agricultural produce as well as providing domestic and international logistic services for agricultural products (“Agricultural Products”); and, (iii) Ankang Longevity manufactures traditional Chinese medicinal herbal products as well as other retail pharmaceutical products. These different business activities and products can potentially be integrated and benefit from one another.
33
Financing Activities
On January 23, 2018, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with IFG OPPORTUNITY FUND LLC (“IFG Fund”) whereby, the Company had the right, from time to time in its sole discretion during the 24-month term of the Purchase Agreement, to direct IFG Fund to purchase up to a total of US$ 15,000,000 of shares of Common Stock and an additional 22,222 shares of Common Stock (the “Commitment Shares”) as consideration for IFG to enter into the Purchase Agreement. The Company and IFG Fund, on January 23, 2018, entered into a Registration Rights Agreement for certain registration rights in connection with the Purchase Agreement (the “Registration Rights Agreement”). The IFG Fund offering was made pursuant to a prospectus supplement dated and filed with the Securities and Exchange Commission (“SEC”) on January 26, 2018 and an accompanying prospectus dated November 21, 2017, under the Company’s shelf registration statement on Form S-3 declared effective by the SEC on December 19, 2017 (File No. 333-221711). On January 23, 2018, the Company issued the Commitment Shares to IFG Fund. On July 3, 2018, the Company and IFG Fund entered into a termination agreement, dated July 3, 2018 effective as of July 3, 2018, to terminate the Purchase Agreement and the Registration Rights Agreement. IFG retained the 22,222 commitment shares which were valued at US$ 434,000 and written off during the year ended June ~~30, 2019.~~
~~On September 27, 2018,~~16, 2021, the Company entered into a securities purchase agreement ~~with selected investors whereby~~pursuant to which the Company ~~agreed~~issued an unsecured convertible promissory note with a one-year maturity term to ~~sell up to 181,967~~an institutional accredited investor, Streeterville Capital, LLC (“Investor”). The note has an original principal amount of ~~common stock~~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$20,000. Interest accrues on the outstanding balance of the note at ~~a purchase price of US$ 9~~6% per ~~share,~~annum. The Company anticipates using the proceeds for ~~gross proceeds to the Company of approximately US$ 1,637,700 (the “2018 Offering”). After deducting the offering cost, the net proceeds the~~general working capital purposes. The Company received ~~was US$ 1,589,892. The 2018 Offering closed on September 28, 2018. The 2018 Offering was made pursuant to~~principal in full from the ~~Company’s effective registration statement on Form S-3 (Registration Statement No. 333-221711) previously filed with the SEC and a prospectus supplement thereunder.~~Investor.
On May 8, 2019, TNB, filed with the United States Securities and Exchange Commission a Notice of Exempt Offering of Securities on Form D regarding an offering (“Offering”) of simple agreement for future tokens. Tenet-Jove intends to use the net proceeds from sales of the tokens to develop land and facilities for cultivating industrial hemp in China under a newly formed wholly owned subsidiary (the “Operations”). The minimum target amount in this private placement is $1,000,000. Once Shineco raises $1,000,000, investors will have the option to convert smart contracts that represent preferred stock into Shinceo’s common stock. For this, smart contracts that shall be convertible into common stock at the following ratio of 180:1. If Shineco raises $1,000,000 in this private placement, then up to 55,556 shares of common stock will be issued pursuant to the following calculation if the smart contract holders choose to convert their smart contracts that represent preferred stock into Shinceo’s common stock:
~~1. Each smart contract is $ 0.1;~~
~~2. $1,000,000 can get 10,000,000 smart contracts. ($1,000,000 divided by 0.1 equals to 10,000,000 smart contracts.)~~
~~3. The conversion ratio of smart contracts to common stock is 180:1~~
~~4. Therefore, -10,000,000-smart-contracts-divided by 180 -equals-55,556-common stock.~~
~~Shineco plans to issue no more than 444,444 shares in connection with this transaction, specifically for the exchange of smart contracts.~~
~~On September 5, 2019,~~July 16, 2021, the Company entered into aanother securities purchase agreement ~~with select investors whereby~~pursuant to which the Company ~~agreed~~issued two unsecured convertible promissory notes with a one-year maturity term to ~~sell,~~the same Investor. The first convertible promissory note has an original principal amount of US$3,170,000 and the ~~investors agreed to purchase, up to 310,977 shares~~Investor gave consideration of ~~common stock (the “Shares”)~~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$200,000. Interest accrues on the outstanding balance of the Notes at ~~a purchase price of US$ 4.68~~6% per ~~Share.~~annum. The ~~net proceeds that~~Company received principal in full from the Investor.
On August 19, 2021, the Company ~~received was US$ 1,500,203. The offering is being made~~entered into another securities purchase agreement pursuant to which the ~~Company’s effective registration statement~~Company issued an unsecured convertible promissory note with a one-year maturity term to the same Investor. 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 ~~Form S-3 (Registration Statement No. 333-221711) previously filed with~~ the ~~Securities and Exchange Commission and a prospectus supplement thereunder.~~outstanding balance of the note at 6% per annum. The Company received principal in full from the Investor. The Company anticipates using the proceeds for general working capital purposes.
3439

Factors Affecting Financial Performance
We believe that the following factors will affect our financial performance:
Increasing demand for our products - The increasing demand for our agricultural 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 continuous growth. As of the date of this Annual 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.
~~Expansion of our sources of supply, production capacity and sales network~~ - To meet the increasing demand for our products, we need to expand our sources of supply and production capacity. We plan to make capital improvements in our existing production facilities which would improve both their efficiency and capacity. In the short-run, we intend to increase our investment in our reliable supply network, personnel training, information technology applications and logistic system upgrades. We also participate in two non-equity investment opportunities through a VIE, both of which we expect to provide us with new networks and platforms.
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. Moreover, we will step up our efforts in higher ~~value added~~value-added products of Luobuma by using an exclusive and patented technology, to optimize quality management, procurement processes and cost control, and give full play to the strong production capacity and trustworthy sales teams to maximize our profit and bring better long-term return for our ~~shareholders.~~stockholders.
Economic and Political Risks
Our operations are conducted primarily in the ~~PRC. Accordingly, our business, financial conditions and results may be influenced by the political, economic and legal environment in the~~ PRC and ~~by the general state of the PRC economy.~~
~~Our operations in the PRC are~~ subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks with, among others, the political, economic and legal environment and foreign currency exchange. Our ~~Company’s~~ 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.
35
COVID-19 Impact
~~In December 2019, a novel strain of coronavirus was reported in Wuhan, China. On March 11, 2020, the World Health Organization categorized it as a pandemic.~~ The COVID-19 outbreak has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans, intended to control the spread of the virus. In accordance with the epidemic control measures imposed by the local governments related to COVID-19, our offices and retail stores remained closed or had limited business operations after the Chinese New Year holiday until early April 2020. In addition, COVID-19 had caused severe disruptions in transportation, limited access to our facilities and limited support from workforce employed in our operations, and as a result, we experienced delays or the inability to delivery our products to customers on a timely basis. Further, some of our customers or suppliers experienced financial distress, delayed or defaults on payment, sharp diminishing of business, or suffer disruptions in their business due to the outbreak. Any decreased collectability of accounts receivable, delayed raw materials supply, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations. Wider-spread COVID-19 in China and globally could prolong the deterioration in economic conditions and could cause decreases in or delays in spending and reduce and/or negatively impact our short-term ability to grow our revenues. Although we have taken all possible measures to overcome the adverse impact derived from the COVID-19 outbreak and have resumed our normal business activities in early May 2020. Our management believes the outbreak had a negative impact on our operation result during the three months ended September 30, 2020. Our revenue for the three months ended September 30, 2020 were approximately US$ 4.1 million, a decrease of approximately US$ 2.9 million or 41.2% from approximately US$ 7.0 million for the same period in 2019. revenue.
As of the date of this report, the spread of COVID-19 ~~outbreak~~ in China appears to have ~~been~~slowed down and most provinces and cities have resumed business activities under ~~relative control. While~~ the ~~disruption is currently expected~~guidance and support of the local government. Although we resumed our operations in early April 2020 and the COVID-19 impact on our operating results and financial performance for the three months ended September 30, 2021 and 2020 seems to be temporary, ~~there~~a COVID-19 resurgence could negatively affect the execution of our sales contract and fulfillment of customer orders and the collection of the payments from customers on a timely manner. We will continue to monitor and modify the operating strategies in response to the COVID-19. The extent of the future impact of COVID-19 is ~~uncertainty around the duration. Therefore, while we expect this matter to negatively impact our business, results of operations,~~still highly uncertain and ~~financial position, the related financial impact~~ cannot be ~~reasonably estimated at this time.~~predicted as of the date our consolidated financial statements are released.
40
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 2 to our unaudited condensed consolidated financial statements included elsewhere in this Report.
Consolidation of Variable Interest Entities
VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision-making ability. All VIEs and their subsidiaries with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.
36
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenue and expenses during the reporting periods. Significant estimates required to be made by management include, but are not limited to, useful lives of property, plant, and equipment, and intangible assets, the recoverability of long-lived assets and the valuation of accounts receivable, deferred taxes and inventory reserves. Actual results could differ from those estimates.
Accounts Receivable, Net
Accounts receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as necessary. ~~The Company reviews~~We review the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, ~~the Company considers~~we consider many factors, including the age of the balance, the customers’ historical payment history, their current credit-worthiness and current economic trends. The fair value of long-term receivables is determined using a present value technique by discounting the future expected contractual cash flows using current rates at which similar instruments would be issued at the measurement date. As of September 30, ~~2020~~2021 and June 30, ~~2020~~2021, the allowance for doubtful accounts from the continuing operations was US$6,922,563 and US$5,959,887, respectively. As of September 30, 2021 and June 30, 2021, the allowance for doubtful accounts from the discontinued operations was US$ ~~6,065,185~~nil and US$ ~~5,235,436,~~3,675,619, respectively. Accounts are written off against the allowance after efforts at collection prove unsuccessful.
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 ~~the Company’s~~our products. Cost is determined using the first in first out ~~(“FIFO”)~~ method. Agricultural products that ~~the Company farms~~we farm are recorded at cost, which includes direct costs such as seed selection, fertilizer, labor cost, and contract fees that are spent in growing agricultural products on the leased farmland, and indirect costs ~~which include~~such as amortization of prepayments of farmland leases and farmland development costs. All the costs are accumulated until the time of harvest and then allocated to the harvested crops costs when they are sold. ~~The Company~~We periodically ~~evaluates its~~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, ~~2020~~2021 and June 30, ~~2020,~~2021, the inventory reserve from the continuing operations was US$ ~~1,179,743~~1,363,496 and US$ ~~1,121,408,~~1,229,158, respectively. As of September 30, 2021 and June 30, 2021, the inventory reserve from the discontinued operations were both US$ nil.
41
Revenue Recognition
~~The Company~~We previously recognized revenue from sales of Luobuma products, Chinese medicinal herbal products, and agricultural products, as well as providing logistic services and other processing services to external customers. ~~The Company~~We recognized revenue when all of the following have occurred: (i) there was persuasive evidence of an arrangement with a customer; (ii) delivery had occurred or services had been rendered; (iii) the sales price was fixed or determinable; and (iv) ~~the Company’s~~our collection of such fees was reasonably assured. These criteria, as related to ~~the Company’s~~our revenue, were considered to have been met as follows:
Sales of products: ~~The Company~~We recognized revenue from the sale of products 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 ~~the rendering~~provision of services: Revenue from international freight forwarding, domestic air, and overland freight forwarding services was recognized 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.
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~~We adopted the new revenue standard beginning July 1, 2018, and adopted a modified retrospective approach upon adoption. ~~The Company believes~~We believe that ~~its~~our previous revenue recognition policies are generally consistent with the new revenue recognition standards set forth in ASC 606. Potential adjustments to input measures are not expected to be pervasive to the majority of ~~the Company’s~~our contracts. There is no significant impact upon adoption of the new guidance.
Fair Value of Financial Instruments
~~The Company follows~~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.
42
Results of Operations for the Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020
Overview
The following table summarizes our results of operations for the three months ended September 30, ~~2020~~2021 and ~~2019:~~2020:
Three Months Ended
September 30, Variance Three Months Ended
September 30, Variance
2020 2019 Amount % 2021 2020 Amount %
Revenue $ 4,143,383 $ 7,046,781 $ (2,903,398 ) (41.20 )% $ 629,758 $ 1,007,977 $ (378,219 ) (37.52 )%
Cost of revenue 3,234,802 5,406,886 (2,172,084 ) (40.17 )% 1,359,303 742,339 616,964 83.11 %
Gross profit 908,581 1,639,895 (731,314 ) (44.60 )%
Gross profit (loss) (729,545 ) 265,638 (995,183 ) (374.64 )%
General and administrative expenses 1,820,732 3,354,643 (1,533,911 ) (45.73 )% 8,573,656 1,423,310 7,150,346 502.37 %
Selling expenses 33,635 121,886 (88,251 ) (72.40 )% 8,342 12,646 (4,304 ) (34.03 )%
Impairment loss of distribution rights 1,140,551 - 1,140,551 100.00 %
Loss from operations (945,786 ) (1,836,634 ) 890,848 (48.50 )% (10,452,094 ) (1,170,318 ) (9,281,776 ) 793.10 %
Income from equity method investments 15,287 69,899 (54,612 ) (78.13 )%
Other income (expense) 2,788 (9,754 ) 12,542 (128.58 )%
Interest expense, net (19,972 ) (3,126 ) (16,846 ) 538.90 %
Loss before income tax provision (947,683 ) (1,779,615 ) 831,932 (46.75 )%
Provision (benefit) for income taxes 105,297 (4,783 ) 110,080 (2,301.48 )%
Loss from equity method investment (27,920 ) - (27,920 ) 100.00 %
Other income 970 2,788 (1,818 ) (65.21 )%
Amortization of debt issuance costs (458,978 ) - (458,978 ) 100.00 %
Interest income (expenses), net (170,199 ) 4,225 (174,424 ) (4,128.38 )%
Loss before income tax provision from continuing operations (11,108,221 ) (1,163,305 ) (9,944,916 ) 854.88 %
Provision for income taxes - - - -
Net loss from continuing operations (11,108,221 ) (1,163,305 ) (9,944,916 ) 854.88 %
Net income (loss) from discontinued operations (3,135,237 ) 110,325 (3,245,562 ) (2,941.82 )%
Net loss $ (1,052,980 ) $ (1,774,832 ) $ 721,852 (40.67 )% $ (14,243,458 ) $ (1,052,980 ) $ (13,190,478 ) 1,252.68 %
Comprehensive income (loss) attributable to Shineco Inc. $ 1,563,509 $ (4,609,009 ) $ 6,172,518 (133.92 )% $ (14,258,967 ) $ 1,563,509 $ (15,822,476 ) (1,011.98 )%
38
Revenue
Currently, we, through our PRC subsidiaries and VIEs, have ~~three~~two revenue streams derived from our ~~three~~two major business ~~segments.~~segments from continuing operations. 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”,~~Dogbane,” as well as Luoboma raw materials ~~processing,~~processing; this segment is channeled 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 the Zhisheng VIEs and Guangyuan. For the business segment, that processing and distributing traditional Chinese medicinal herbal products as well as other pharmaceutical products; this segment is conducted via our VIE, Ankang Longevity Group and its ~~subsidiaries. Third, planting, processing~~subsidiaries, which was disposed and ~~distributing green and organic agricultural produce~~we have reclassified it as ~~well as growing and cultivation of yew trees; this segment is conducted through our VIEs, the Zhisheng Group.~~discontinued operations.
The following table sets forth the breakdown of our revenue for each of ~~our three~~the two segments from the continuing operations, for the three months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively:
Three Months Ended September 30, Variance Three Months Ended
September 30, Variance
2020 % 2019 % Amount % 2021 % 2020 % Amount %
Luobuma products $ 24,615 0.60 % $ 65,519 2.12 % $ (40,904 ) (62.43 )% $ 13,508 2.14 % $ 24,615 2.44 % $ (11,107 ) (45.12 )%
Chinese medicinal herbal products 3,135,406 75.67 % 3,300,321 43.91 % (164,915 ) (5.00 )%
Other agricultural products 983,362 23.73 % 3,680,941 53.97 % (2,697,579 ) (73.29 )% 616,250 97.86 % 983,362 97.56 % (367,112 ) (37.33 )%
Total Amount $ 4,143,383 100.00 % $ 7,046,781 100.00 % $ (2,903,398 ) (41.20 )% $ 629,758 100.00 % $ 1,007,977 100.00 % $ (378,219 ) (37.52 )%
43
For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, revenue from sales of Luobuma products was US$ ~~24,615~~13,508 and US$ ~~65,519,~~24,615, respectively, which represented a decrease of US$ ~~40,904~~11,107, or ~~62.43%~~45.12%. The decrease of revenue from this segment was mainly due to the decrease in revenue from Tenet-Jove and Tenet Huatai. ~~Since last year, we~~We did not launch any new products and we mainly focused on clearing off our remaining old stocks. ~~In addition,~~Meanwhile, we reduced our resources and investments in our E-commerce distribution channel, which also resulted in a decrease in our online sales ~~of Luobuma products were affected by the COVID-19 outbreak, as~~volume. As a result, our overall sales decreased during the three months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019.~~2020.
For the three months ended September 30, ~~2020~~2021 and 2019, revenue from sales of Chinese medicinal herbal products was US$ 3,135,406 and US$ 3,300,321, respectively, representing a slight decrease of US$ 164,915 or 5.00%. Due to the COVID-19 outbreak, people become more health conscious and wear masks at public area, which resulted in a reduction of the incidence of other illness, hence, our sales of Chinese medicinal herbal products decreased during the three months ended September 30, 2020, ~~as compared to the same period in 2019.~~
~~For the three months ended September 30, 2020 and 2019,~~ revenue from sales of other agricultural products was US$ ~~983,362~~616,250 and US$ ~~3,680,941,~~983,362, respectively, representing a decrease of US$ ~~2,697,579~~367,112, or ~~73.29%~~37.33%. The decrease was mainly due to the decline of sales volume of yew trees during the three months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019. Our~~2020. As our sales of yew trees were adversely affected by the COVID-19 outbreak, ~~which resulted~~we modified our operating strategies in ~~less orders from our customers during the three months ended September 30, 2020 as compared~~response to the ~~same period in 2019. In addition, the decrease was also due to a shift in our business strategy as our yet trees business is adversely affected by the COVID-19.~~pandemic. Instead of selling more unmatured yew trees, we are now cultivating more matured yew trees, which can be used to ~~extracted~~extract Taxol, a more valuable chemical substance which is used experimentally as a drug in the treatment of ~~cancer, in the future.~~cancer.
39
Cost of Revenue and ~~related tax~~Related Tax
The following table sets forth the breakdown of the ~~Company’s~~ cost of revenue for each of our ~~three~~two segments from the continuing operations, for the three months ended September 30, ~~2020~~2021 and ~~2019, respectively:~~2020:
Three Months Ended September 30, Variance Three Months Ended
September 30, Variance
2020 % 2019 % Amount % 2021 % 2020 % Amount %
Luobuma products $ 28,462 0.87 % $ 231,381 4.28 % $ (202,919 ) (87.70 )% $ 141,838 10.44 % $ 28,462 3.84 % $ 113,376 398.34 %
Chinese medicinal herbal products 2,481,321 76.71 % 2,589,930 47.90 % (108,609 ) (4.19 )%
Other agricultural products 712,828 22.04 % 2,573,112 47.59 % (1,860,284 ) (72.30 )% 1,216,210 89.47 % 712,828 96.02 % 503,382 70.62 %
Business and sales related tax 12,191 0.38 % 12,463 0.23 % (272 ) (2.18 )% 1,255 0.09 % 1,049 0.14 % 206 19.64 %
Total Amount $ 3,234,802 100.00 % $ 5,406,886 100.00 % $ (2,172,084 ) (40.17 )% $ 1,359,303 100.00 % $ 742,339 100.00 % $ 616,964 83.11 %
For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, cost of revenue from sales of our Luobuma products was US$ ~~28,462~~141,838 and US$ ~~231,381,~~28,462, respectively, representing ~~a decrease~~an increase of US$ ~~202,919~~113,376, or ~~87.70%~~398.34%. The ~~decrease~~increase was mainly due to the ~~decrease in cost of revenue as we sold less products, which was in line with the decrease in sales, the decrease was also due to the decreased~~increased allowance we accrued for our slow-moving inventories amounted to US$ 120,273 on our remaining old stocks during the three months ended September 30, ~~2020.~~2021.
For the three months ended September 30, ~~2020~~2021 and 2019, cost of revenue from sales of Chinese medicinal herbal products was US$ 2,481,321 and US$ 2,589,930, respectively, representing a decrease of US$ 108,609 or 4.19%. The percentage of decrease in cost of revenue was proportional to the percentage of the decrease in sales.
~~For the three months ended September 30,~~ 2020, ~~and 2019,~~ cost of revenue from sales of other agricultural products was US$ ~~712,828~~1,216,210 and US$ ~~2,573,112,~~712,828, respectively, representing ~~a decrease~~an increase of US$ ~~1,860,284~~503,382, or ~~72.30%~~70.62%. The ~~decrease~~increase was mainly due to ~~less yew trees we sold~~stock written off during the three months ended September 30, ~~2020 as compared~~2021. Due to flood disaster caused by severe typhoon weather in autumn, which resulted in the ~~same period in 2019 as mentioned above. The percentage~~damage and death of ~~decrease in cost~~a large number of ~~revenue was proportional~~yew trees, we wrote off our inventory amounted to US$ 492,987 during the ~~percentage of the decrease in sales.~~three months ended September 30, 2021.
44
Gross Profit (Loss)
The following table sets forth the breakdown of the ~~Company’s~~ gross profit (loss) for each of our ~~three~~two segments from the continuing operations, for the three months ended September 30, ~~2020~~2021 and ~~2019, respectively:~~2020:
Three Months Ended
September 30, Variance
2021 % 2020 % Amount %
Luobuma products $ (128,330 ) 17.59 % $ (3,847 ) (1.45 )% $ (124,483 ) 3235.85 %
Other agricultural products (601,215 ) 82.41 % 269,485 101.45 % (870,700 ) (323.10 )%
Total Amount $ (729,545 ) 100.00 % $ 265,638 100.00 % $ (995,183 ) (374.64 )%
Three Months Ended September 30, Variance
2020 % 2019 % Amount %
Luobuma products $ (3,847 ) (0.42 )% $ (165,985 ) (10.12 )% $ 162,138 (97.68 )%
Chinese medicinal herbal products 642,943 70.76 % 700,917 42.74 % (57,974 ) (8.27 )%
Other agricultural products 269,485 29.66 % 1,104,963 67.38 % (835,478 ) (75.61 )%
Total Amount $ 908,581 100.00 % $ 1,639,895 100.00 % $ (731,314 ) (44.60 )%
Gross loss from Luobuma product sales ~~reduced~~increased by US$ ~~162,138~~124,483, or ~~97.68%~~3235.85%, for the three months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019.~~2020. During the three months ended September 30, ~~2020,~~2021, our gross loss ~~or negative gross profit~~ was US$ ~~3,847, it was~~128,330, mainly due to ~~clearance~~the allowance we accrued for our slow-moving inventories amounting to US$ 120,273. The gross loss was also due to the reduced selling prices of our ~~old stocks, as~~Luobuma products and we sold some of our products below their original costs, as we gave more promotion and price discounts in order to attract more customers and clear our remaining old stocks during the three months ended September 30, 2020. Hence, resulted in a negative gross profit during the year ended June 30, 2020. However, our negative gross profit decreased which was mainly due to less allowance we accrued for our slow-moving inventories amounted to US$ 163,366 during the three months ended September 30, 2020 as compared to the same period in 2019.2021.
Gross profit from sales of Chinese medicinal herbal products decreased by US$ 57,974 or 8.27% for the three months ended September 30, 2020 as compared to the same period in 2019. The percentage of the variance in gross profit was proportional to the percentage of the variance in revenue due to the stable gross margin of our products.
Gross profit from sales of other agricultural products decreased by US$ ~~835,478~~870,700, or ~~75.61%~~323.10%, for the three months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019. As mentioned above,~~2020. During the ~~decrease~~three months ended September 30, 2021, our gross loss was US$ 601,215, mainly due to less yew trees we sold as well as a stock written off during the three months ended September 30, ~~2020~~2021 as mentioned above. The ~~percentage of the variance in gross profit~~decrease was ~~proportional to the percentage of the variance in revenue~~also due to ~~the stable gross margin~~reduced selling prices of our ~~products.~~products, as we gave more price discounts in order to get more customer orders during the three months ended September 30, 2021.
Expenses
The following table sets forth the breakdown of our operating expenses for the three months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively:
Three Months Ended September 30, Variance Three Months Ended
September 30, Variance
2020 % 2019 % Amount % 2021 % 2020 % Amount %
General and administrative expenses $ 1,820,732 98.19 % $ 3,354,643 96.49 % $ (1,533,911 ) (45.73 )% $ 8,573,656 88.18 % $ 1,423,310 99.12 % $ 7,150,346 502.37 %
Selling expenses 33,635 1.81 % 121,886 3.51 % (88,251 ) (72.40 )% 8,342 0.09 % 12,646 0.88 % (4,304 ) (34.03 )%
Impairment loss of distribution rights 1,140,551 11.73 % - - 1,140,551 100.00 %
Total Amount $ 1,854,367 100.00 % $ 3,476,529 100.00 % $ (1,622,162 (46.66 )% $ 9,722,549 100.00 % $ 1,435,956 100.00 % $ 8,286,593 577.08 %
General and Administrative Expenses
For the three months ended September 30, ~~2020,~~2021, our general and administrative expenses were US$ ~~1,820,732,~~8,573,656, representing ~~a decrease~~an increase of US$ ~~1,533,911 for three months ended September 30~~7,150,346, or ~~45.73%~~502.37%, as compared to the same period in ~~2019.~~2020. The ~~decrease in general and administrative expenses~~increase was mainly due to ~~a decrease in staff salary expenses as we issued restricted shares to the management as compensation of US$ 1,022,661 last year, as well as a decrease~~an increase in bad debt ~~expense~~expenses of US$ ~~284,994~~6,582,903 during the three months ended September 30, ~~2020.~~2021. Due to the COVID-19 outbreak in China, many of our customers’ businesses were adversely affected during this period, which resulted in slow collection of our receivables and utilization of our advances to customers, and we recorded allowance according to our accounting policy based on our best estimates. Management will continue putting effort in collection of overdue accounts receivable and utilize our advances to our customers. Meanwhile, the increase was also due to the increased general and administrative expenses from our newly acquired VIE, Guangyuan during the three months ended September 30, 2021.
45
~~Selling Expenses~~Impairment Loss of Distribution Rights
For the three months ended September 30, ~~2020,~~2021, our ~~selling~~impairment loss of distribution right were US$ 1,140,551. We acquired distribution rights to distribute branded products of Daiso 100-yen shops through the acquisition of Tianjin Tajite. During the three months ended September 30, 2021, the management performed evaluation on the impairment of distribution rights. Due to the lower than expected revenue and profit, and unfavorable business environment, the management fully recorded an impairment loss on distribution rights of Tianjin Tajite.
Loss from Equity Method Investments
Our newly acquired VIE, Guangyuan has a 20% equity interest in Shanxi Pharmaceutical Group Yushe Pharmaceutical Development Co., Ltd. (“Yushe Pharmaceutical”). We recorded a loss of US$ 4,186 for the three months ended September 30, 2021 from this investment.
On August 31, 2021, we entered into a capital injection agreement with the other shareholders of Shanghai Gaojing Private Fund Management (“Gaojing Private Fund”), a Chinese private fund management company, to complete the injection of a total RMB 4.8 million (approximately US$ 0.74 million) for its 32% equity interest in Gaojing Private Fund. We recorded a loss of US$ 23,734 for the three months ended September 30, 2021 from this investment.
Amortization of Debt Issuance Costs
For the three months ended September 30, 2021, our amortization of debt issuance costs expenses were US$ ~~33,635,~~458,978, representing ~~a decrease~~an increase of ~~US$ 88,251, or 72.40%~~100.00%, as compared to the same period in ~~2019.~~2020. The ~~decrease~~increase in was ~~mainly due~~attributable to the ~~decrease in promotion expense, commission expenses for our online shops~~amortization of ~~Tenet-Jove which was in line with the decrease in our sales~~debt issuance costs during the three months ended September 30, ~~2020. The decrease was also due to~~2021 on the ~~decrease in salary related expenses as a result of reduced number of staff during~~convertible notes issued by the ~~three months ended September 30, 2020.~~Company.
Interest Income ~~from Equity Method Investments~~(Expenses), Net
We are 49% owners in two equity investment companies with Shaanxi Pharmaceutical Group Pai’ang Medicine Co. Ltd. (“Shaanxi Pharmaceutical Group”): Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Retail Chain Co., Ltd. (“Sunsimiao Drugstores”), and Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (“Shaanxi Longevity Pharmacy”). We recorded net income of US$ 15,287 and US$ 69,899 from these equity method investments for the for the three months ended September 30, 2020 and 2019, respectively. The decrease in net income was primarily due to lower net profit in the two 49% equity investment companies in the current period.
41

~~Provision for Income Taxes~~
For the three months ended September 30, ~~2020 and 2019, the Company’s provision for income taxes increased by~~2021, our net interest expenses was US$ ~~108,987 or 2,278.63% to US$ 104,204 for the three months ended September 30, 2020 from~~170,199, representing an ~~income tax benefit~~increase of US$ ~~4,783 for~~174,424, or 4,128.38%, as compared to net interest income of US$ 4,225 in the ~~three months ended September 30, 2019.~~same period in 2020. The increase in ~~provision for income taxes~~interest expense was ~~mainly due~~attributable to the ~~decreased deferred income tax benefits arisen from~~interest expense incurred for the ~~allowance for doubtful accounts and inventory reserve during~~convertible notes issued by the ~~three months ended September 30, 2020 as compared to the same period of 2019.~~Company.
Net Loss from Continuing Operations
Our net loss from continuing operations was US$ ~~1,052,980~~11,108,221 for three months ended September 30, ~~2020, a decrease~~2021, an increase of US$ ~~721,852~~9,944,916, or ~~40.67%~~854.88%, from net loss from continuing operations of US$ ~~1,774,832~~1,163,305 for three months ended September 30, ~~2019.~~2020. The ~~decrease~~increase in net loss was primarily a result of the decrease in ~~decrease~~gross profit, the increase in general and administrative expenses, ~~which~~impairment loss of distribution rights and amortization of debt issuance costs.
Net Loss from Discontinued Operations
As mentioned above, after signing of the Restructuring Agreement on June 8, 2021, the Company and the shareholders of Ankang and Guangyuan actively carried out the transferring of rights and interests in Ankang and Guangyuan, and the transferring was ~~partially offset by~~completed subsequently on July 5, 2021, and the management determined that July 5, 2021 was the disposal date of Ankang. We had a total net loss from discontinued operations of US$ 3,135,237 for the three months ended September 30, 2021 as compared to a total net income from discontinued operations of US$ 110,325 for the same period in 2020.
46
The summarized operating results of our discontinued operations included in our consolidated statement of loss and comprehensive income (loss) is as follows:
Three Months Ended
September 30,
2021 2020
Revenues $ - $ 3,135,406
Cost of revenues - 2,492,463
Gross profit - 642,943
Operating expenses - 418,411
Other expenses, net - (8,910 )
Income before income tax - 215,622
Provision for income tax expense - 105,297
Net income from discontinued operations - 110,325
Loss from disposal (3,135,237 ) -
Total net income (loss) from discontinued operations $ (3,135,237 ) $ 110,325
Net Loss
Our net loss was US$ 14,243,458 for the three months ended September 30, 2021, an increase of US$ 13,190,478 or 1,252.68%, from a net loss of US$ 1,052,980 for the three months ended September 30, 2020. The increase in net loss was primarily a result of the decrease in gross ~~profit.~~profit, the increase in general and administrative expenses, impairment loss of distribution rights and amortization of debt issuance costs.
Comprehensive Income (Loss)
The comprehensive loss was US$ 14,242,888 for the three months ended September 30, 2021, an increase of US$ 15,857,839 from a comprehensive income ~~was~~of US$ 1,614,951 for the three months ended September 30, ~~2020, an increase~~2020. After deduction of ~~US$ 6,248,320 from~~non-controlling interest, the comprehensive loss ofattributable to us was US$ ~~4,633,369~~14,258,967 for the three months ended September 30, ~~2019. After deduction of non-controlling interest, the~~2021, compared to a comprehensive income attributable to us in the ~~Company was~~amount of US$ 1,563,509 for the three months ended September 30, ~~2020, compared to comprehensive loss attributable to the Company of US$ 4,609,009 for the three months ended September 30, 2019.~~2020. The ~~reason of the~~ significant increase of comprehensive ~~income~~loss was due to the increase in net loss as mentioned above, as well as a decrease in the recorded income of foreign currency translation where the financial statements denominated in RMB were translated to the USD denomination.
Treasury Policies
~~We have established treasury policies with the objectives of achieving effective control of treasury operations and~~ ~~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.
47
(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, ~~2020~~2021 and June 30, ~~2020,~~2021, except the above-mentioned convertible note, we dodid not engage in any foreign currency borrowings or loan contracts.
42
Liquidity and Capital Resources
We currently finance our business operations primarily through ~~cash flows from operations and~~ proceeds from our initial public offering, as well as from short-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.
On September 28, 2016, we completed the initial public offering of 190,354 shares of the Company’s common stock at a price of US$ 40.50 per share for gross proceeds of US$ 7.7 million and net proceeds of approximately US$ 5.4 million.
On September 27, 2018, we entered into a securities purchase agreement with selected investors whereby the Company agreed to sell up to 181,967 of common stock at a purchase price of US$ 9 per share, for gross proceeds of US$ 1.6 million and net proceeds of approximately US$ 1.6 million.
~~On September 5, 2019,~~December 10, 2020, we entered into a securities purchase agreement with select investors whereby ~~the Company~~we sold ~~310,977~~purchase, up to 604,900 shares of common stock at a purchase price of US$ ~~4.68~~2.73 per ~~share, for the~~share. The net proceeds that we received was US$ 1.6 million.
On January 27, 2021, we issued 364,445 shares of common stock to two investors at a price of US$ 3.0 per share. The net proceeds that we received was US$ 1.1 million.
On April 10, 2021, we issued 3,872,194 shares of common stock to selected investors at a price of US $3.2 per share. We received net proceeds of ~~approximately~~ US$ ~~1.5 million.~~4,845,001 and US$ 6,160,203 was outstanding as of September 30, 2021.
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 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$3,170,000.00 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$4,200,000.00 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$10,520,000.00 and Investor gave consideration of US$10.0 million, reflecting original issue discount of US$500,000 and Investor’s legal fee of US$20,000. We received principal in full from the Investor and we anticipate using the proceeds for general working capital purposes. As of September 30, ~~2020, we had US$ 2,426,019 bank loan outstanding. We expect that we will be able~~2019, a total of 974,749 shares of our common stock were issued by us to ~~renew our existing bank loan upon its maturity based on past experience~~the Investor equaling principal and ~~our good credit history.~~interests amounted to $3,850,000, and the convertible note balance was $16,352,339, with a carrying value of $17,381,584, net of deferred financing costs of $1,029,245.
Management believes that our current cash, cash flows from future operations, and access to loans will be sufficient to meet our working capital needs for at least the next 12 months. We intend to continue to carefully execute our growth plans and manage market risk.
48
Working Capital
The following table provides the information about our working capital at September 30, ~~2020~~2021 and June 30, ~~2020:~~2021:
September 30, 2020 June 30, 2020
September 30,
2021

June 30,
2021

Current Assets $ 63,164,137 $ 59,519,998 $ 59,523,586 $ 49,278,577
Current Liabilities 13,816,372 11,347,325 29,008,848 14,795,390
Working Capital $ 49,347,765 $ 48,172,673 $ 30,514,738 $ 34,483,187
The working capital ~~remained relatively stable with a slight increased~~decreased by US$ ~~1,175,092~~3,968,449, or ~~2.4%~~11.5%, as of September 30, ~~2020~~2021 from June 30, ~~2020,~~2021, primarily as a result of a decrease in current assets held for discontinued operations and advances to suppliers, and an increase in ~~advances to suppliers, inventories,~~ other ~~current assets~~payables and ~~account receivables, partially offset by a decrease in cash during the three months ended September 30, 2020. We believe that we currently have sufficient working capital to operate our business.~~
~~As of September 30, 2020~~accrued expenses, and ~~June 30, 2020, the other major component of our working capital is accounts receivable. The accounts receivable~~convertible note payable as of September 30, 2020 were US$ 12,257,280, an increase of approximately 11.3% from US$ 11,008,485 as of June 30, 2020. Due to the recent COVID-19 outbreak in China, many of our customers’ businesses were adversely affected during this period, which resulted in slow collection of our receivables. Management will continue putting effort in collection of overdue account receivables from the customers.2021.
43
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, ~~2020 from~~2021 and June 30, ~~2020,~~2021, we had no material capital commitments or contingent liabilities.
Off-Balance Sheet Commitments and Arrangements
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 consolidated financial statements.
Cash Flows
The following table provides detailed information about our net cash flows for the three months ended September 30, ~~2020~~2021 and ~~2019.~~2020.
For the three months ended
September30,
2020 2019

Net cash provided by (used in) operating activities $ (9,100,028 ) $ 2,145,875
Net cash provided by (used in) investing activities (1,228,630 ) 18,780
Net cash provided by (used in) financing activities (11,429 ) 1,555,631
Effect of exchange rate changes on cash 1,098,821 (1,438,380 )
Net increase (decrease) in cash (9,241,266 ) 2,281,906
Cash, beginning of period 32,371,372 35,330,676
Cash, end of period $ 23,130,106 $ 37,612,582
Three Months Ended September 30,
2021 2020

Net cash used in operating activities $ (5,264,781 ) $ (9,100,028 )
Net cash used in investing activities (25,954,544 ) (1,228,630 )
Net cash provided by (used in) financing activities 20,436,888 (11,429 )
Effect of exchange rate changes on cash (11,884 ) 1,098,821
Net decrease in cash (10,794,321 ) (9,241,266 )
Cash, beginning of the period 29,024,394 32,371,372
Cash, end of the period $ 18,230,073 $ 23,130,106
Less: cash of discontinued operations - ended of the period - 7,629,477
Cash of continuing operations - ended of the period 18,230,073 15,500,629
49
Operating Activities
Net cash used in operating activities during the three months ended September 30, 2021 was approximately US$ 5.3 million, consisting of net loss from continuing operations of US$ 11.1 million, bad debt expenses of US$ 7.4 million, impairment loss on distribution rights of US$ 1.1 million, and net changes in our operating assets and liabilities, which mainly included an increase in other current assets of US$ 3.2 million, partially offset by the decreased in advances to suppliers and increased in other payable. Net cash used in operating activities during the three months ended September 30, 2020 was approximately US$ 9.1 million, consisting of net loss from continuing operations of US$ ~~1.1~~1.2 million, bad debt expenses of US$ ~~1.0~~0.8 million, and net changes in our operating assets and liabilities, which mainly included an increase in advances to suppliers of US$ ~~6.6~~4.7 million and inventories of US$ 2.0 million, ~~other receivables of US$ 1.7 million~~ and ~~accounts receivables of US$ 1.4 million, partially offset by the increase in other payable of US$ 2.3 million. Net~~net cash provided by operating activities ~~during~~from discontinued operations of US$ 1.8 million.
Investing Activities
For the three months ended September 30, ~~2019~~2021, net cash used in investing activities was ~~approximately~~ US$ ~~2.1~~26.0 million, ~~consisting~~primarily due to the disposal of ~~net loss~~Ankang of US$ ~~1.8~~12.7 million, ~~bad debt expenses~~payment for other current assets of US$ ~~1.3~~12.7 million ~~restricted shares issued for management~~and investment in unconsolidated entity of US$ 1.0 million, and net changes in our operating assets and liabilities, which mainly included a decrease in advances to suppliers of US$ 3.0 million, partially offset by the increase in other receivables of US$ 0.90.5 million.
~~Investing Activities~~
For the three months ended September 30, 2020, net cash used in by investing activities was US$ 1.2 million ~~primarily~~ due to the ~~advances of loans to third parties of US$ 1.2 million during the three months ended September 30, 2020.~~ net cash used in investing activities from discontinued operations.
Financing Activities
For the three months ended September 30, ~~2019,~~2021, net cash provided ~~by investing~~financing activities ~~was~~amounted to approximately US$ ~~18,780,~~20.4 million, primarily due to the proceeds from ~~disposal~~issuance of ~~property and equipment~~common stock of US$ ~~79,387, partial offset by advances~~2.4 million, proceeds from issuance of ~~loans to third parties~~convertible note of US$ ~~56,992 during the three months ended September 30, 2019.~~
~~Financing Activities~~
17.0 million. For the three months ended September 30, 2020, net cash used in financing activities amounted to approximately US$ 11,429 ~~primarily~~ due to ~~the~~ repayment of advances from related parties of US$ 11,429. For the three months ended September 30, 2019, net cash provided by financing activities amounted to US$ 1.6 million, primarily due to the proceeds from issuance of common stock of US$ 1.5 million, and proceeds from short-term loans of US$ 0.3 million, partially offset by the repayment of short-term loans of US$ 0.3 million.parties.
50
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 ~~the Company’s~~our disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the period covered by this ~~report~~Quarterly Report due to following material weaknesses:
● ~~Lack~~a lack of full-time U.S. GAAP personnel in the accounting department to monitor the recording of the transactions; and
● ~~Lack~~
● 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 ~~plans to take~~has taken the following steps:
● ~~Recruiting~~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~~
● improving the communication between management, board of directors, and the Chief Financial Officer; and
● ~~Obtaining~~
● obtaining proper approval for other significant and non-routine transactions from the ~~Board~~board of ~~Directors.~~directors.
~~The Company believes the foregoing measures will remediate the identified material weaknesses in future periods. The Company is~~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 ~~have been~~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 ~~our first~~the fiscal quarter ofended September 30, 2021. 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.
51
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, ~~Bonwick Capital Partners, LLC (“Plaintiff”)~~the Plaintiff commenced a lawsuit (Case No. 1:17-cv-03681-PGG) against ~~the Company~~us in the United States District Court for the Southern District of New York. Plaintiff ~~alleges~~alleged that ~~the Company~~we entered into an agreement with the Plaintiff, ~~(the “Agreement”),~~ pursuant to which the Plaintiff was to provide ~~the Company~~us with financial advisory services in connection with ~~the Company’s~~our initial public offering in the United States. The Plaintiff ~~alleges~~alleged that ~~the Company~~we breached the Agreement and ~~seeks~~seek money damages up to $6US$6 million. ~~The Company believes that these claims are without merit~~In March 2021, we entered into a Settlement Agreement and ~~intends~~Release with the Plaintiff, pursuant to ~~vigorously defend itself.~~which we paid the Plaintiff a total sum of US$ 47,500 as settlement payment, and upon acceptance of the settlement payment from us, the Plaintiff waived, released and forever discharged us from all past and future claims.
ITEM 1A. RISK FACTORS.
As a smaller reporting company, we are not required to provide the information otherwise required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
See “Part I—Financial Information—Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Financing Activities.”
~~There have been no unregistered sale of equity securities during the three months ended September 30, 2020.~~
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS
Exhibit
Number ~~Exhibit~~Description
~~3.1†~~31.1 ~~Certificate of Incorporation of Shineco, Inc. (1)~~
~~3.2†~~ ~~Amended and Restated Bylaws of Shineco, Inc.(1)~~
~~4.1†~~ ~~Specimen Common Stock Share Certificate (3)~~
~~4.2†~~ ~~2016 Share Incentive Plan (2)~~
~~10.1†~~ ~~Exclusive Business Cooperation Agreement between Beijing Tenet-Jove Technological Development Co., Ltd. and Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. dated February 24, 2014. (1)~~
~~10.2†~~ ~~Timely Reporting Agreement between Shineco Inc. and Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. dated July 3, 2014. (1)~~
~~10.3†~~ Equity Interest Pledge Agreement among Beijing Tenet Jove Technological Development Co., Ltd., Wang Qiwei, Wang Sai, Yin Weixing, Liu Yu, Zhou Qi, Yang Chunhong, and Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. dated February 24, 2014. (1)
~~10.4†~~ Exclusive Option Agreement among Beijing Tenet Jove Technological Development Co., Ltd., Wang Qiwei, Wang Sai, Yin Weixing, Liu Yu, Zhou Qi, Yang Chunhong (Shareholders from Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd.), and Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. dated February 24, 2014. (1)
~~10.5†~~ Power of Attorney by and between Yang Chunhong and Beijing Tenet Jove Technological Development Co., Ltd. regarding shareholding of Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. dated February 24, 2014. (1)
~~Number~~ ~~Exhibit~~
~~10.6†~~ Power of Attorney by and between Yin Weixing and Beijing Tenet Jove Technological Development Co., Ltd. regarding shareholding of Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. dated February 24, 2014. (1)
~~10.7†~~ Power of Attorney by and between Liu Yu and Beijing Tenet Jove Technological Development Co., Ltd. regarding shareholding of Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. dated February 24, 2014. (1)
~~10.8†~~ Power of Attorney by and between Wang Qiwei and Beijing Tenet Jove Technological Development Co., Ltd. regarding shareholding of Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. dated February 24, 2014. (1)
~~10.9†~~ Power of Attorney by and between Wang Sai and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. dated February 24, 2014. (1)
~~10.10†~~ Power of Attorney by and between Zhou Qi and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Shineco Zhisheng (Beijing) Bio-Technology Co., Ltd. dated February 24, 2014. (1)
~~10.11†~~ ~~Exclusive Business Cooperation Agreement between Beijing Tenet-Jove Technological Development Co., Ltd. and Yantai Zhisheng International Freight Forwarding Co., Ltd. dated June 16, 2011. (1)~~
~~10.12†~~ ~~Timely Reporting Agreement between Shineco Inc. and Yantai Zhisheng International Freight Forwarding Co., Ltd. dated July 3, 2014. (1)~~
~~10.13†~~ Equity Interest Pledge Agreement among Beijing Tenet-Jove Technological Development Co., Ltd., Wang Qiwei, Wang Sai, Yin Weixing, Zhang Weisheng, Zhou Qi, Yang Chunhong, and Yantai Zhisheng International Freight Forwarding Co., Ltd. dated June 16, 2011. (1)
~~10.14†~~ Exclusive Option Agreement among Beijing Tenet-Jove Technological Development Co., Ltd., Wang Qiwei, Wang Sai, Yin Weixing, Zhang Weisheng, Zhou Qi, Yang Chunhong, and Yantai Zhisheng International Freight Forwarding Co., Ltd. dated June 16, 2011. (1)
~~10.15†~~ Power of Attorney by and between Zhou Qi and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Yantai Zhisheng International Freight Forwarding Co., Ltd. dated June 16, 2011. (1)
~~10.16†~~ Power of Attorney by and between Zhang Weisheng and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Yantai Zhisheng International Freight Forwarding Co., Ltd. dated June 16, 2011. (1)
~~10.17†~~ Power of Attorney by and between Yang Chunhong and Beijing Tenet Jove Technological Development Co., Ltd. regarding shareholding of Yantai Zhisheng International Freight Forwarding Co., Ltd. dated June 16, 2011. (1)
~~Number~~ ~~Exhibit~~
~~10.18†~~ Power of Attorney by and between Wang Qiwei and Beijing Tenet Jove Technological Development Co., Ltd. regarding shareholding of Yantai Zhisheng International Freight Forwarding Co., Ltd. dated June 16, 2011. (1)
~~10.19†~~ Power of Attorney by and between Wang Sai and Beijing Tenet Jove Technological Development Co., Ltd. regarding shareholding of Yantai Zhisheng International Freight Forwarding Co., Ltd. dated June 16, 2011. (1)
~~10.20†~~ Power of Attorney by and between Yin Weixing and Beijing Tenet Jove Technological Development Co., Ltd. regarding shareholding of Yantai Zhisheng International Freight Forwarding Co., Ltd. dated June 16, 2011. (1)
~~10.21†~~ ~~Exclusive Business Cooperation Agreement between Beijing Tenet Jove Technological Development Co., Ltd. and Yantai Zhisheng International Trade Co., Ltd. dated June 16, 2011. (1)~~
~~10.22†~~ ~~Timely Reporting Agreement between Shineco Inc. and Yantai Zhisheng International Trade Co., Ltd. dated July 3, 2014. (1)~~
~~10.23†~~ Equity Interest Pledge Agreement among Beijing Tenet Jove Technological Development Co., Ltd., Wang Qiwei, Wang Sai, Yin Weixing, Zhang Weisheng, Zhou Qi, Yang Chunhong, and Yantai Zhisheng International Trade Co., Ltd. dated June 16, 2011. (1)
~~10.24†~~ Exclusive Option Agreement among Beijing Tenet Jove Technological Development Co., Ltd., Wang Qiwei, Wang Sai, Yin Weixing, Zhang Weisheng, Zhou Qi, Yang Chunhong, and Yantai Zhisheng International Trade Co., Ltd. dated June 16, 2011. (1)
~~10.25†~~ Power of Attorney by and between Zhang Weisheng and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Yantai Zhisheng International Trade Co., Ltd. dated June 16, 2011. (1)
~~10.26†~~ ~~Power of Attorney by and between Zhou Qi and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Yantai Zhisheng International Trade Co., Ltd. dated June 16, 2011. (1)~~
~~10.27†~~ ~~Power of Attorney by and between Wang Qiwei and Beijing Tenet Jove Technological Development Co., Ltd. regarding shareholding of Yantai Zhisheng International Trade Co., Ltd. dated June 16, 2011. (1)~~
~~10.28†~~ ~~Power of Attorney by and between Yin Weixing and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Yantai Zhisheng International Trade Co., Ltd. dated June 16, 2011. (1)~~
~~10.29†~~ ~~Power of Attorney by and between Wang Sai and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Yantai Zhisheng International Trade Co., Ltd. dated June 16, 2011. (1)~~
~~10.30†~~ Power of Attorney by and between Yang Chunhong and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Yantai Zhisheng International Trade Co., Ltd. dated June 16, 2011. (1)
~~Number~~ ~~Exhibit~~
~~10.31†~~ ~~Exclusive Business Cooperation Agreement between Beijing Tenet-Jove Technological Development Co., Ltd. and Qingdao Zhihesheng Agricultural Produce Services, Co., Ltd. dated May 24, 2012. (1)~~
~~10.32†~~ ~~Timely Reporting Agreement between Shineco Inc. and Qingdao Zhihesheng Agricultural Produce Services, Co., Ltd. dated July 3, 2014. (1)~~ 
~~10.33†~~ Equity Interest Pledge Agreement among Beijing Tenet-Jove Technological Development Co., Ltd., Wang Qiwei, Wang Sai, Yin Weixing, Zhang Weisheng, Zhou Qi, Yang Chunhong, and Qingdao Zhihesheng Agricultural Produce Services, Co., Ltd. dated May 24, 2012. (1)
~~10.34†~~ Exclusive Option Agreement among Beijing Tenet-Jove Technological Development Co., Ltd., Wang Qiwei, Wang Sai, Yin Weixing, Zhang Weisheng, Zhou Qi, Yang Chunhong, and Qingdao Zhihesheng Agricultural Produce Services, Co., Ltd. dated May 24, 2012. (1)
~~10.35†~~ Power of Attorney by and between Wang Sai and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Qingdao Zhihesheng Agricultural Produce Services Co., Ltd. dated May 24, 2012. (1)
~~10.36†~~ Power of Attorney by and between Wang Qiwei and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Qingdao Zhihesheng Agricultural Produce Services Co., Ltd. dated May 24, 2012. (1)
~~10.37†~~ Power of Attorney by and between Yin Weixing and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Qingdao Zhihesheng Agricultural Produce Services, Co., Ltd. dated May 24, 2012. (1)
~~10.38†~~ Power of Attorney by and between Zhang Weisheng and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Qingdao Zhihesheng Agricultural Produce Services, Co., Ltd. dated May 24, 2012. (1)
~~10.39†~~ Power of Attorney by and between Zhou Qi and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Qingdao Zhihesheng Agricultural Produce Services, Co., Ltd. dated May 24, 2012. (1)
~~10.40†~~ Power of Attorney by and between Yang Chunhong and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Qingdao Zhihesheng Agricultural Produce Services, Co., Ltd. dated May 24, 2012. (1)
~~10.41†~~ ~~Exclusive Business Cooperation Agreement between Beijing Tenet-Jove Technological Development Co., Ltd. and Yantai Mouping District Zhisheng Agricultural Produce Cooperative dated June 16, 2011. (1)~~
~~10.42†~~ ~~Timely Reporting Agreement between Shineco Inc. and Yantai Mouping District Zhisheng Agricultural Produce Cooperative dated July 3, 2014. (1)~~
~~Number~~ ~~Exhibit~~
~~10.43†~~ ~~Guarantee Agreement among Beijing Tenet-Jove Technological Development Co., Ltd., Wang Qiwei, and Yantai Mouping District Zhisheng Agricultural Produce Cooperative dated June 16, 2011. (1)~~
~~10.44†~~ Power of Attorney by and between Zhang Weisheng and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Yantai Mouping District Zhisheng Agricultural Produce Cooperative dated June 16, 2011. (1)
~~10.45†~~ Power of Attorney by and between Yin Weixing and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Yantai Mouping District Zhisheng Agricultural Produce Cooperative dated June 16, 2011. (1)
~~10.46†~~ Power of Attorney by and between Wang Sai and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Yantai Mouping District Zhisheng Agricultural Produce Cooperative dated June 16, 2011. (1)
~~10.47†~~ Power of Attorney by and between Wang Qiwei and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Yantai Mouping District Zhisheng Agricultural Produce Cooperative dated June 16, 2011. (1)
~~10.48†~~ ~~Exclusive Business Cooperation Agreement between Beijing Tenet-Jove Technological Development Co., Ltd. and Ankang Longevity Pharmaceutical (Group) Co., Ltd. dated December 31, 2008. (1)~~
~~10.49†~~ ~~Timely Reporting Agreement between Shineco Inc. and Ankang Longevity Pharmaceutical (Group) Co., Ltd. dated July 3, 2014. (1)~~
~~10.50†~~ Equity Interest Pledge Agreement among Beijing Tenet-Jove Technological Development Co., Ltd., Chen Jiping, Chen Xiaoyan, and Ankang Longevity Pharmaceutical (Group) Co., Ltd. dated December 31, 2008. (1)
~~10.51†~~ ~~Exclusive Option Agreement among Beijing Tenet-Jove Technological Development Co., Ltd., Chen Jiping, Chen Xiaoyan, and Ankang Longevity Pharmaceutical (Group) Co., Ltd. dated December 31, 2008. (1)~~
~~10.52†~~ Power of Attorney by and between Chen Xiaoyan and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Ankang Longevity Pharmaceutical (Group) Co., Ltd. dated December 31, 2008. (1)
~~10.53†~~ Power of Attorney by and between Chen Jiping and Beijing Tenet-Jove Technological Development Co., Ltd. regarding shareholding of Ankang Longevity Pharmaceutical (Group) Co., Ltd. dated December 31, 2008. (1)
~~10.54†~~ ~~Summary translation of Cooperation Agreement between Shaanxi Pharmacy Sunsimiao Drugstore Chain Co., Ltd. and Ankang Longevity Pharmaceutical (Group) Co., Ltd. dated September 27, 2012. (1)~~
~~10.55†~~ ~~Summary translation of Cooperation Agreement between Shaanxi Pharmacy Holding Group Xi’an Pharmaceutical Co., Ltd. and Ankang Longevity Pharmaceutical (Group) Co., Ltd. dated September 27, 2012. (1)~~
~~Number~~ ~~Exhibit~~
~~10.56†~~ ~~Summary translation of Loan Contract between Beijing Tenet-Jove Technological Development Co., Ltd. and Beijing Rural Commercial Bank Co., Ltd. Tiantongyuan Branch dated December 31, 2009. (1)~~
~~10.57†~~ Summary translation of Project Shares Purchase Contract among Yantai Zhisheng International Freight Forwarding Co., Ltd., Yantai Mouping District Zhisheng Agricultural Produce Cooperative and Zhejiang Zhen’Ai Network Warehousing Services Co., Ltd. dated October 21, 2013. (1)
~~10.58†~~ ~~Summary translation of Contractual Management/Operation Agreement between Ankang Longevity Pharmaceutical Group Chain Co., Ltd. and Qiu Haiyin dated March 1, 2013. (1)~~
~~10.59†~~ ~~Summary translation of Supplementary Agreement between Ankang Longevity Pharmaceutical Group Chain Co., Ltd. and Qiu Haiyin dated February 28, 2014. (1)~~
~~10.60†~~ ~~Form of Independent Director Engagement Letter (2)~~
~~10.61†~~ ~~2016 Share Incentive Plan (included in Exhibit 4.2) (2)~~
~~10.62†~~ Translated Definitive Share Exchange and Acquisition Agreement between Xinjiang Taihe and Western Xinjiang Tiansheng Agricultural Development Co., Ltd., dated December 6, 2017 (Incorporated by reference to the Company’s Form 8-K filed with the SEC on December 11, 2017)
~~10.63†~~ ~~Common Stock Purchase Agreement between the Company and IFG Opportunity Fund LLC, dated January 23, 2018 (Incorporated by reference to the Company’s Form 8-K filed with the SEC on January 26, 2018)~~
~~10.64†~~ ~~Registration Rights Agreement between the Company and IFG Opportunity Fund LLC, dated January 23, 2018 (Incorporated by reference to the Company’s Form 8-K filed with the SEC on January 26, 2018)~~
~~10.65†~~ ~~Termination Agreement between the Company and IFG Opportunity Fund LLC, dated July 3, 2018 (Incorporated by reference to the Company’s Form 8-K filed with the SEC on July 5, 2018)~~
~~10.66†~~ Form of Securities Purchase Agreement among the Company and selected investors, dated September 27, 2018 (Incorporated by reference to the Company’s Form 8-K filed with the SEC on September 28, 2018)
31.1* Certification ~~Pursuant~~of Principal Executive Officer pursuant to Rule 13a-14(a) ~~and~~ /15d-14(a) ~~(4)~~under the Securities Exchange Act of ~~Chief Executive Officer~~1934
31.2
31.2* Certification ~~Pursuant~~of Principal Financial Officer pursuant to Rule 13a-14(a) ~~and~~ /15d-14(a) ~~(4)~~under the Securities Exchange Act of ~~Chief Financial Officer~~1934
32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to § 906 of the Sarbanes-Oxley Act of 2002
32.1**101.INS ~~Certification Pursuant to Section 1350 of Title 18 of the United States Code of Chief Executive Officer~~Inline XBRL Instance Document.
101.SCH
32.2** ~~Certification Pursuant to Section 1350 of Title 18 of the United States Code of Chief Financial Officer~~
101.INS* ~~XBRL Instance Document~~
101.SCH* Inline XBRL Taxonomy Extension Schema ~~Document~~Document.
101.CAL
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document~~Document.
101.DEF
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase ~~Document~~Document.
101.LAB
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase ~~Document~~Document.
101.PRE
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document~~Document.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* ~~Filed herewith.~~52

** ~~Furnished but not filed.~~
† ~~Previously filed.~~
~~(1)~~ ~~Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on July 1, 2015 (Registration No. 333-202803).~~
~~(2)~~ ~~Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the SEC September 28, 2016.~~
~~(3)~~ ~~Incorporated by reference to the Company’s Registration Statement on Form S-1 filed with the SEC on January 27, 2016 (Registration No. 333-202803).~~
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 ~~16, 2020~~15, 2021 By: /s/ ~~Guocong Zhou~~Jennifer Zhan
~~Guocong Zhou~~Jennifer Zhan
Chief Executive Officer
(Principal Executive Officer)
Dated: November ~~16, 2020~~15, 2021 By: /s/ Sai (Sam) Wang
Sai (Sam) Wang
Chief Financial Officer
(Principal Financial and Accounting Officer)
53

	COMMON STOCK					ADDITIONAL PAID-IN		STATUTORY		RETAINED			ACCUMULATED OTHER COMPREHENSIVE			NON- CONTROLLING			TOTAL
	SHARES			AMOUNT		CAPITAL		RESERVE		EARNINGS			LOSS			INTEREST			EQUITY
Balance at June 30, 2019		2,541,308	(*)	$	2,541	$	24,779,687	$	4,198,107	$	46,735,190		$	(4,184,024	)	$	1,100,613			72,632,114

Stock issuance		495,740	(*)		496		2,522,367		-		-			-			-			2,522,863
Net income (loss) for the year		-			-		-		-		(1,792,637	)		-			17,805			(1,774,832	)
Foreign currency translation loss		-			-		-		-		-			(2,816,372	)		(42,165	)		(2,858,537	)
Balance at September 30, 2019		3,037,048	(*)	$	3,037	$	27,302,054	$	4,198,107	$	44,942,553		$	(7,000,396	)	$	1,076,253		$	70,521,608

Balance at June 30, 2020		3,039,943	(*)	$	3,040	$	27,302,051	$	4,198,107	$	40,106,518		$	(6,283,835	)	$	1,186,520		$	66,512,401

Net income (loss) for the year		-			-		-		1,857		(1,059,367	)		-			4,530			(1,052,980	)
Foreign currency translation gain		-			-		-		-		-			2,621,019			46,912			2,667,931
Balance at September 30, 2020		3,039,943	(*)	$	3,040	$	27,302,051	$	4,199,964	$	39,047,151		$	(3,662,816	)	$	1,237,962		$	68,127,352

												RETAINED			ACCUMULATED
								ADDITIONAL				EARNINGS			OTHER			NON-
	COMMON STOCK				SUBSCRIPTION			PAID-IN		STATUTORY		(ACCUMULATED			COMPREHENSIVE			CONTROLLING			TOTAL
	SHARES*		AMOUNT		RECEIVABLE			CAPITAL		RESERVE		DEFICIT)			LOSS			INTEREST			EQUITY
Balance at June 30, 2020		3,039,943	$	3,040	$	-		$	27,302,051	$	4,198,107	$	40,106,518		$	(6,283,835	)	$	1,186,520		$	66,512,401

Stock issuance
Issuance of common shares for convertible notes redemption
Issuance of common shares for convertible notes redemption, shares
Disposal of Ankang
Beneficial conversion feature associated with convertible notes
Net income (loss) for the period		-		-		-			-		1,857		(1,059,367	)		-			4,530			(1,052,980	)
Foreign currency translation gain		-		-		-			-		-		-			2,621,019			46,912			2,667,931
Balance at September 30, 2020		3,039,943	$	3,040	$	-		$	27,302,051	$	4,199,964	$	39,047,151		$	(3,662,816	)	$	1,237,962		$	68,127,352

Balance at June 30, 2021		7,881,482	$	7,881	$	(8,535,203	)	$	41,105,806	$	4,198,107	$	8,661,071		$	(731,805	)	$	672,349		$	45,378,206

Stock issuance		-		-		2,375,000			-		-		-			-			-			2,375,000
Issuance of common shares for convertible notes redemption		974,749		975		-			3,849,025		-		-			-			-			3,850,000
Beneficial conversion feature associated with convertible notes		-		-		-			361,252		-		-			-			-			361,252
Disposal of Ankang		-		-		-			-		-		-			-			(1,072,667	)		(1,072,667	)
Net loss for the period		-		-		-			-		-		(14,238,332	)		-			(5,126	)		(14,243,458	)
Foreign currency translation gain (loss)		-		-		-			-		-		-			(20,635	)		21,205			570
Balance at September 30, 2021		8,856,231	$	8,856	$	(6,160,203	)	$	45,316,083	$	4,198,107	$	(5,577,261	)	$	(752,440	)	$	(384,239	)	$	36,648,903

	September 30, 2021			June 30, 2021

Current assets	$	37,788,522		$	44,631,744
Plant and equipment, net		948,396			4,698,184
Other non-current assets		4,657,465			4,894,445
Total assets		43,394,383			54,224,373
Total liabilities		(8,494,849	)		(7,377,886	)
Net assets	$	34,899,534		$	46,846,487

	2021			2020
	For the three months ended September 30,
	2021			2020
Net sales	$	616,250		$	4,118,768
Gross profit (loss)	$	(601,215	)	$	912,428
Loss from operations	$	(7,751,663	)	$	(294,564	)
Net loss	$	(7,743,264	)	$	(400,077	)

	September 30, 2020			June 30, 2020			September 30, 2021		June 30, 2021

Current assets	$	61,596,986		$	58,350,565		$	-	$	19,659,742
Plant and equipment, net		8,350,796			8,168,594			-		3,683,525
Other non-current assets		9,223,659			11,054,954			-		1,359,506
Total assets		79,171,441			77,574,113			-		24,702,773
Total liabilities		(7,496,725	)		(6,189,172	)		-		(4,866,934	)
Net assets	$	71,674,716		$	71,384,941		$	-	$	19,835,839

		Estimated useful lives

Buildings		~~20-50~~20-50 years
Machinery equipment		~~5-10~~5-10 years
Motor vehicles		~~5-10~~5-10 years
Office equipment		~~5-10~~5-10 years
Farmland leasehold improvements		~~12-18~~12-18 years
Leasehold improvement		Lesser of useful life and lease term

	September 30, 2021			June 30, 2021

Accounts receivable	$	9,273,320		$	15,795,234
Less: allowance for doubtful accounts		(6,922,563	)		(9,635,506	)
Accounts receivable, net		2,350,757			6,159,728
Less: accounts receivable, net, held for discontinued operations		-			3,473,057
Accounts receivable, net, held for continuing operations	$	2,350,757		$	2,686,671

	September 30, 2021			June 30, 2021

Beginning balance	$	9,635,506		$	5,235,436
Charge to expense		960,937			7,556,516
Less: cessation of subsidiaries and disposal of VIE		(3,668,403	)		(3,749,735	)
Foreign currency translation adjustments		(5,477	)		593,289
Ending balance	$	6,922,563		$	9,635,506

	September 30, 2021			June 30, 2021

Advances to suppliers	$	16,385,104		$	19,375,738
Less: allowance for doubtful accounts		(14,938,755	)		(10,885,264	)
Advance to supplier, net		1,446,349			8,490,474
Less: advance to supplier, net, held for discontinued operations		-			700,348
Advance to supplier, net, held for continuing operations	$	1,446,349		$	7,790,126

	September 30, 2020		June 30, 2020

Blueberry farmland leasehold improvements	$	2,375,350	$	2,285,149
Yew tree planting base reconstruction		266,127		256,021
Greenhouse renovation		450,442		433,338
Total farmland leasehold improvements	$	3,091,919	$	2,974,508

Twelve months ending September 30:

2021	$	32,709
2022		32,709
2023		32,709
2024		32,709
2025		32,709
Thereafter		1,071,261
Total	$	1,234,806

	September 30, 2020		June 30, 2020

Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (Ankang Longevity Pharmacy)	$	3,853,750	$	3,690,419
Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Chain Co., Ltd.		855,148		824,705
Total investment	$	4,708,898	$	4,515,124

	September 30, 2021		June 30, 2021

Yushe Pharmaceutical	$	161,086	$	-
Gaojing Private Fund		476,266		-
Total investment		637,352		-
Less: investment, held for discontinued operations		-		-
Investment, held for continuing operations	$	637,352	$	-

2021	$	300,401

2022		277,157		$	1,156,574
2023		328,920			1,108,222
2024		328,920			1,099,017
2025		319,213			600,502
2026					271,413
Thereafter		1,720,775			1,307,577
Total lease payments		3,275,386			5,543,305
Less: imputed interest		(70,991	)		(264,546	)
Less: prepayments		(2,686,881	)		(2,383,584	)
Present value of lease liabilities	$	517,514		$	2,895,175

Lender	September 30, 2020		Maturity Date	Int. Rate/Year
Agricultural Bank of China-a	$	661,642	2020/12/31		4.65	%
Agricultural Bank of China-a		1,470,314	2021/2/27		5.66	%
Agricultural Bank of China-b		294,063	2021/9/1		5.66	%
Total short-term loans	$	2,426,019

Lender	June 30, 2021		Maturity Date	Int. Rate/Year
Agricultural Bank of China-a^		1,548,502	2022/2/27		5.66	%
Agricultural Bank of China-b#		309,700	2022/9/1		5.66	%
Total short-term loans		1,858,202
Less: short-term loans, held for discontinued operations		1,858,202
Short-term loans, held for continuing operations	$	-

a.	Guaranteed by a commercial credit guaranty company unrelated to the Company and also by Jiping Chen, a ~~shareholder~~stockholder of the Company.

b.	Collateralized by the building owned by Xiaoyan Chen and Jing Chen, who are both related parties of the Company. Xiaoyan Chen is one of the shareholders of Ankang Longevity Group. Jing Chen is the sister of ~~the~~ Xiaoyan Chen but not a shareholder of Ankang Longevity Group.

*^{^}	~~The~~Upon the original maturity date of February 27, 2021, the Company ~~repaid~~signed a loan extension agreement with Agricultural Bank of China to extend the loan ~~in full on~~repayment date to February 27, 2022 with the same interest rate of 5.66% per annum.

#	Upon the original maturity ~~date.~~date of September 1, 2021, the Company signed a loan extension agreement with Agricultural Bank of China to extend the loan repayment date to September 1, 2022 with the same interest rate of 5.66% per annum.

Accounts receivable, net		27,288
Inventory		58,679
Other current assets		186,519
Distribution rights		1,085,092
Property, plant and equipment		14,205
Advance from customers		(79,017	)
Tax payable		(17,056	)
Deferred tax liabilities		(271,273	)
Salary payable		(25,362	)
Accrued liabilities and other current liabilities		(1,004,308	)
Non-controlling interest		1,440
Goodwill		2,059,939
Total purchase price for acquisition, net of US$ 22,294 of cash	$	2,036,146


Due from related party		108,296
Inventory		19,439,711
Other current assets		224,522
Right of use assets		1,164,976
Long-term investments and other non-current assets		166,107
Other payables and other current assets		(4,534,328	)
Operating lease liabilities		(1,047,486	)
Total purchase price for acquisition, net of US$ 112,070 of cash	$	15,521,798

		Preliminary Fair Value				Weighted Average Useful Life (in Years)
Distribution rights		$	1,085,092			(a)

a.	This ~~Company~~company is wholly owned by one of the Company’s senior ~~management.~~

b.	~~This Company is wholly owned by one of the Company’s shareholders.~~managements.

	September 30, 2020		June 30, 2020

Wu Yang	$	94,174	$	90,598
Wang Sai		90,964		90,629
Chen Jiping		3,024		3,024
Zhou Guocong		799,548		648,308
Li Baolin		220,546		353,619
Zhao Min		175,557		169,741
Total due to related parties	$	1,383,813	$	1,355,919

	September 30, 2020			June 30, 2020
Deferred tax assets:
Allowance for doubtful accounts	$	498,846		$	428,879
Inventory reserve		265,487			252,022
Net operating loss carry-forwards		524,678			504,754
Total		1,289,011			1,185,655
Valuation allowance		(1,289,011	)		(1,185,655	)
Total deferred tax assets		-			-
Deferred tax liability:
Distribution rights		(271,273	)		(260,972	)
Total deferred tax liability		(271,273	)		(260,972	)
Deferred tax liability, net	$	(271,273	)	$	(260,972

	September 30, 2021		June 30, 2021

Income tax payable	$	1,664,149	$	3,376,499
Value added tax payable		33,395		73,390
Business tax and other taxes payable		6,438		8,573
Total tax payable		1,703,982		3,458,462
Less: tax payable, held for discontinued operations		-		(1,743,673	)
Tax payable, held for continuing operations	$	1,703,982	$	1,714,789

Income tax payable - current portion	$	1,197,541	$	2,952,021
Less: income tax payable - current portion, held for discontinued operations		-		(1,743,673	)
Income tax payable - current portion, held for continuing operations	$	1,197,541	$	1,208,348

Income tax payable - noncurrent portion	$	506,441	$	506,441
Less: income tax payable - noncurrent portion, held for discontinued operations		-		-
Income tax payable - noncurrent portion, held for continuing operations	$	506,441	$	506,441

	For the three months ended September 30, 2021
	Continuing Operations									Discontinued Operations
	Luobuma			Other agricultural						Herbal
	products			products			Total			products		Total
Segment revenue	$	13,508		$	616,250		$	629,758		$	-	$	629,758
Cost of revenue and related business and sales tax		141,838			1,217,465			1,359,303			-		1,359,303
Gross loss		(128,330	)		(601,215	)		(729,545	)		-		(729,545	)
Gross loss %		(950.0	)%		(97.6	)%		(115.8	)%		-		(115.8	)%

	September 30, 2021		June 30, 2021

Luobuma products	$	5,343,652	$	3,849,675
Other agricultural products		62,917,505		32,766,151
Herbal products		-		24,702,773
Total assets		68,261,157		61,318,599
Less: total assets held for discontinued operations		-		(24,702,773	)
Total assets, held for continuing operations	$	68,261,157	$	36,615,826

	●	Ankang Longevity, a company incorporated under the laws of the People’s Republic of China (the “PRC”);

	●	Mr. Jiping Chen, who is a minority shareholder of the Company and holds 68.7% of the equity interests in Ankang Longevity, and Ms. Xiaoyan Chen, who holds 31.3% of the equity interests in Ankang Longevity (collectively, the “Ankang Shareholders”);

	●	Yushe County Guangyuan Forest Development Co., Ltd., a company incorporated under the laws of the PRC (“Guangyuan”); and

	●	Mr. Baolin Li, who is a minority shareholder of the Company and holds 90% of the equity interests in Guangyuan, and Ms. Yufeng Zhang, who holds 10% of the equity interests in Guangyuan (collectively, the “Guangyuan Shareholders”).

	September, 2021		June 30, 2021
Assets of discontinued operation:
Current assets:
Cash	$	-	$	12,681,483
Accounts receivables		-		3,473,057
Inventories, net		-		281,245
Advances to suppliers, net		-		700,348
Other current assets		-		2,523,609
Total current assets of discontinued operation		-		19,659,742

Property and equipment, net		-		3,683,525
Land use right, net of accumulated amortization		-		1,274,262
Investments		-		-
Long-term deposit and other noncurrent assets		-		85,244
Total assets of discontinued operation	$	-	$	24,702,773

Liabilities of discontinued operation:
Current liabilities:
Short-term loans	$	-	$	1,858,202
Accounts payable		-		46,948
Other payables and accrued expenses		-		1,218,111
Taxes payable		-		1,743,673
Total liabilities of discontinued operation	$	-	$	4,866,934

	●	the timing of the development of future products;

	●	projections of revenue, earnings, capital structure, and other financial items;

	●	local, regional, national, and global Luobuma and herbal medicines price fluctuations;

	●	statements of our plans and objectives, including those that relate to our proposed expansions and the effect such expansions may have on our ~~revenues;~~revenue;

	●	statements regarding the capabilities of our business operations;

	●	statements of expected future economic performance;

	●	the impact of the COVID-19 outbreak;

	●	statements regarding competition in our market; and

	●	assumptions underlying statements regarding us or our business.

	Three Months Ended September 30,						Variance						Three Months Ended September 30,						Variance
	2020			2019			Amount			%			2021			2020			Amount			%
Revenue	$	4,143,383		$	7,046,781		$	(2,903,398	)		(41.20	)%	$	629,758		$	1,007,977		$	(378,219	)		(37.52	)%
Cost of revenue		3,234,802			5,406,886			(2,172,084	)		(40.17	)%		1,359,303			742,339			616,964			83.11	%
Gross profit		908,581			1,639,895			(731,314	)		(44.60	)%
Gross profit (loss)														(729,545	)		265,638			(995,183	)		(374.64	)%
General and administrative expenses		1,820,732			3,354,643			(1,533,911	)		(45.73	)%		8,573,656			1,423,310			7,150,346			502.37	%
Selling expenses		33,635			121,886			(88,251	)		(72.40	)%		8,342			12,646			(4,304	)		(34.03	)%
Impairment loss of distribution rights														1,140,551			-			1,140,551			100.00	%
Loss from operations		(945,786	)		(1,836,634	)		890,848			(48.50	)%		(10,452,094	)		(1,170,318	)		(9,281,776	)		793.10	%
Income from equity method investments		15,287			69,899			(54,612	)		(78.13	)%
Other income (expense)		2,788			(9,754	)		12,542			(128.58	)%
Interest expense, net		(19,972	)		(3,126	)		(16,846	)		538.90	%
Loss before income tax provision		(947,683	)		(1,779,615	)		831,932			(46.75	)%
Provision (benefit) for income taxes		105,297			(4,783	)		110,080			(2,301.48	)%
Loss from equity method investment														(27,920	)		-			(27,920	)		100.00	%
Other income														970			2,788			(1,818	)		(65.21	)%
Amortization of debt issuance costs														(458,978	)		-			(458,978	)		100.00	%
Interest income (expenses), net														(170,199	)		4,225			(174,424	)		(4,128.38	)%
Loss before income tax provision from continuing operations														(11,108,221	)		(1,163,305	)		(9,944,916	)		854.88	%
Provision for income taxes														-			-			-			-
Net loss from continuing operations														(11,108,221	)		(1,163,305	)		(9,944,916	)		854.88	%
Net income (loss) from discontinued operations														(3,135,237	)		110,325			(3,245,562	)		(2,941.82	)%
Net loss	$	(1,052,980	)	$	(1,774,832	)	$	721,852			(40.67	)%	$	(14,243,458	)	$	(1,052,980	)	$	(13,190,478	)		1,252.68	%
Comprehensive income (loss) attributable to Shineco Inc.	$	1,563,509		$	(4,609,009	)	$	6,172,518			(133.92	)%	$	(14,258,967	)	$	1,563,509		$	(15,822,476	)		(1,011.98	)%