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, 20202021

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)

Delaware52-2175898

(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,

DaxingNo. 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/ASecurities 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 ClassTrading 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 Registrantregistrant 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 Registrantregistrant 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 SecuritiesExchange 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 3,039,94315, 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 INFORMATION1
Item 1.Financial Statements1
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 Operations3137
Item 3.Quantitative and Qualitative Disclosures About Market Risk4551
Item 4.Controls and Procedures4551
PART II. OTHER INFORMATION46
��
Item 1.Legal Proceedings4652
Item 1A.Risk Factors4652
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds4652
Item 3.Defaults Upon Senior Securities4652
Item 4.Mine Safety Disclosures4652
Item 5.Other Information4652
Item 6.Exhibits4652
SIGNATURES53

i
 

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

1

SHINECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOMELOSS 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

2

SHINECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 20202021 AND 20192020

(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 GroupVIEs 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 GroupVIEs 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 GroupVIEs and Ankang Longevity Group. Therefore, the Zhisheng GroupVIEs and Ankang Longevity Group are treated as Variable Interest Entitiesvariable 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 GroupVIEs and Ankang Longevity Group, Shineco owns 100% of Tenet-Jove. Accordingly, Shineco, Tenet-Jove, and its VIEs, the Zhisheng GroupVIEs and Ankang Longevity Group are effectively controlled by the same majority shareholders. Therefore, Shineco, Tenet-Jove, and itsthe 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 ownowning 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 willwould 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 thatand 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 20RMB20 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 isVIEs and Guanyuan are engaged in the business of planting, processing, and distributing of green agricultural produce, as well asand 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)

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The carrying amount of the VIEs and their subsidiaries’ consolidated assets and liabilities;liabilities and income information areheld 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 situationsfactors and believes that it is in compliance with existing laws and regulations, changes could affectthere is no guarantee that the Company’s interest in these entities and its operationsCompany 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 CompanyWe 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 CompanyWe 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’sour collection of such fees was reasonably assured. These criteria, as related to the Company’sour 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 renderingprovision 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.

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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 partythird-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, 20202021 and June 30, 20202021, 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, netNet

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, 20202021 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, netNet

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, 20202021 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 twelve12 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 ourits 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

Buildings20-5020-50 years
Machinery equipment5-105-10 years
Motor vehicles5-105-10 years
Office equipment5-105-10 years
Farmland leasehold improvements12-1812-18 years
Leasehold improvementLesser 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, 20202021 and 2019,2020, the Company did not0t 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.

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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 notdid 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 nothad 0t provided deferred taxes for undistributed earnings of non-U.S. subsidiaries from the continuing operations and the discontinued operations at JuneSeptember 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, 20142016 through December 31, 20192020 for the Company’s People’s Republic of China (“PRC”)PRC subsidiaries remainremained 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 bewas 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’sits 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 theThe Act. In accordance with SAB 118, additional work is necessary to do a more detailed analysis of theThe 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 AddedValue-Added Tax

Sales revenue represents the invoiced value of goods, net of a Value-Added Taxvalue-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, 20202021 and June 30, 20202021 were translated at 1 RMB to 0.14700.1548 USD and at 1 RMB to 0.14140.1549 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 0.14450.1545 USD and at 1 RMB to 0.14250.1445 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 LossIncome (Loss)

Comprehensive lossincome (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 lossincome (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 Boardboard of Directors,directors, voting rights, and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate.

LossEarnings (Loss) per Share

The Company computes lossearnings (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, 20202021 and 2019.2020.

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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 UpdateASU 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 thatadopted this ASU on July 1, 2020 and the adoption of this ASU willdid 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 BoardFASB 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 UpdateASU were submitted by stakeholders as part of the Simplification Initiative. For public business entities, the amendments in this UpdateASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company expects thatadopted this ASU on July 1, 2021 and the adoption of this ASU willdid 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.

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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 34INVENTORIES, 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$ 152,10781,473 and US$ 178,21576,990 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 consistconsisted 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 Rightland 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 expenseexpenses from the discontinued operations of US$ 9,300nil 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$1.0 million) for a 49%49% equity interest in a pharmacy retail company called Shaanxi Pharmaceutical Sunsimiao Drugstores Ankang Retail Chain Co., Ltd. (“Sunsimiao Drugstores”), and a 49%49% equity interest in a pharmaceutical wholesale distribution company named Shaanxi Pharmaceutical Holding Group Longevity Pharmacy Co., Ltd. (“Shaanxi Longevity Pharmacy”). These two equity investmentsentities were formed as new business entitiesincorporated to collaborate with Shaanxi Pharmaceutical Group to expand sales to regional hospitals and clinics and to establish the presence of retail pharmacies under the Brandbrand name “Sunsimiao”.“Sunsimiao.” The investments arewere accounted for using the equity method because Ankang Longevity Group has significant influence, but no control of these two entities. The Company’s discontinued operations, Ankang Longevity Group recorded US$ nil and an income of US$15,287 and US$ 69,899 for the three months ended September 30, 20202021 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 (seeloss. (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, no0 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’sit unlikely to obtain any investment income in the future, and decided the make a fullyfull 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 madeChinese pharmaceutical enterprise to invest a paymenttotal 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 rightthree 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 sharescomplete 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 commonentity. 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 anyrecorded a loss of US$ 23,734 for the three months ended September 30, 2021 from the investment, incomewhich 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 periodprior-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 GroupVIEs 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 useROU assets and lease liabilities. Lease expenseexpenses for lease payment isare recognized on a straight-line basis over the lease term. Leases with initial termterms 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 discountdiscounts 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. 202030, 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 expenseexpenses totaled US$113,115230,548 and US$ 92,325113,115 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 consistconsisted 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 shareholderstockholder 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.
*^TheUpon the original maturity date of February 27, 2021, the Company repaidsigned a loan extension agreement with Agricultural Bank of China to extend the loan in full onrepayment 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 ofInterest expenses from continuing operations were both US$ 29,622 and US$ 30,277nil 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 ofinterests 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 PARTIESDue from Related Parties

The Company had previouslyhas made temporary advances to certain shareholdersstockholders of the Company and to other entities that are either owned by family members of those shareholdersstockholders or to other entities that the Company has investments in. Those advances are due on demand and non-interest bearing.

As of September 30, 20202021 and June 30, 2020,2021, the outstanding amounts due from related parties consistconsisted 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 Companycompany 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 PARTIESDue to Related Parties

As of September 30, 20202021 and June 30, 2020,2021, the Company had related party payables of US$ 1,355,9194,355,733 and US$ 1,355,919,1,159,407, respectively, mainly due to the principal shareholdersstockholders or certain relatives of the shareholdersstockholders 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 

SALESSCHEDULE 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, theno 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, 20202021 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 - TAXESCONVERTIBLE 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 entitiesVIEs 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’sits 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 theThe 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 yeareight-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) areexpenses 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 AddedValue-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, 20202021 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 PayableNOTE 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 Boardboard of Directors.directors. As of September 30, 2021 and June 30, 2020 and 2019,2021, the balance of the required statutory reserves was US$ 4,199,9644,198,107 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 ofgranted 184,763 restricted shares of common stock. As considerationstock to its employees as compensation cost for IFG Fund to enter into the Purchase Agreement, the Company agreed to issue 22,222 sharesawards. 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 withrestricted shares was US$1,022,660 based on the terms and conditions ofclosing 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 selectedselect investors whereby the Company agreed to sell, and the investors agreed to purchase, up to 181,967310,977 shares of common stock at a purchase price of US$ 94.68 per share, for gross proceeds to theShare. The Company of approximately US$ 1,637,700 (the “2018 Offering”). After deducting the offering cost, thereceived net proceeds the Company received wasof US$ 1,589,892.1,500,203. The 2018 Offering closed on September 28, 2018. The 2018 Offeringoffering 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 shareholdersstockholders 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 thea 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 combinecombined and convertconverted 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 bewere issued to any shareholdersstockholders in connection with the Reverse Stock Split. Each shareholder will bestockholder 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 remainsremained at 100,000,000 shares, and the par value of the common stock following the Reverse Stock Split shall remainremained 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 thisthe Reverse Stock Split, the Company’s shares and per share data as reflected in the unaudited condensed consolidated financial statements has beenwere 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.

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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$ 23,113,63818,226,128 and US$ 32,358,25216,333,102 as of September 30, 20202021 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, five2021, 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 vendorscustomers 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 vendors2020, 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 CONTIGENCIESCONTINGENCIES

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 allegesalleged 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 allegesalleged that the Company breached the Agreement and seeksseek money damages up to US$6 million. AsIn March 2021, the dateCompany 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. TheUS$47,500 as settlement payment, and upon acceptance of the settlement payment from the Company, believes that these claims are without meritthe 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 three3 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, isVIEs, 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 hasVIEs 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.

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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 

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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 segmentmanagement 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 AssetsThe 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 STATEMENTSITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Forward-Looking Statements

This documentQuarterly 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 Statementfor 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 reserveswe 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 discussioninformation included in this Management’s Discussion and analysisAnalysis of the resultsFinancial Condition and Results of our operations and financial condition for the three months ended September 30, 2020 and 2019Operations 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 theaudited 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 StatementsGeneral 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 statementsChinese regulatory authorities could disallow our structure, which could result in this discussion thata 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 factsonly 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” withinheated 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 27Aterms of the Securities ActRestructuring 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 21Ebased 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 ActRestructuring Agreement, the Company and the shareholders of 1934, as amended,Ankang and are subjectGuangyuan 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 sectionsRestructuring 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.

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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 materiallybyproducts derived from those contained in these forward looking statements due to many factors, including those discussedan indigenous Chinese plant Apocynum Venetum, grown in the “Forward-Looking Statements” set forth elsewhereXinjiang region of China, and known in this quarterly reportChinese 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 resultcenturies-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 inEastern 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 ofLuobuma 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 ofsubsidiary 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.

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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 wherebypursuant to which the Company agreedissued an unsecured convertible promissory note with a one-year maturity term to sell up to 181,967an institutional accredited investor, Streeterville Capital, LLC (“Investor”). The note has an original principal amount of common stockUS$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$20,000. Interest accrues on the outstanding balance of the note at a purchase price of US$ 96% 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 thegeneral 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 toprincipal 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 wherebypursuant to which the Company agreedissued 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 sharesInvestor 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$200,000. Interest accrues on the outstanding balance of the Notes at a purchase price of US$ 4.686% per Share.annum. The net proceeds thatCompany received principal in full from the Investor.

On August 19, 2021, the Company received was US$ 1,500,203. The offering is being madeentered into another securities purchase agreement pursuant to which the Company’s effective registration statementCompany 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.

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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 addedvalue-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.

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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 beenslowed down and most provinces and cities have resumed business activities under relative control. While the disruption is currently expectedguidance 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, therea 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.

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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.

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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 reviewsWe 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 considerswe 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, 20202021 and June 30, 20202021, the allowance for doubtful accounts from the continuing operations was US$6,922,563 and US$5,959,887, respectively. As of September 30, 2021 and June 30, 2021, the allowance for doubtful accounts from the discontinued operations was US$ 6,065,185nil 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’sour products. Cost is determined using the first in first out (“FIFO”) method. Agricultural products that the Company farmswe 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 includesuch 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 CompanyWe periodically evaluates itsevaluate 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, 20202021 and June 30, 2020,2021, the inventory reserve from the continuing operations was US$ 1,179,7431,363,496 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.

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Revenue Recognition

The CompanyWe 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 CompanyWe 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’sour collection of such fees was reasonably assured. These criteria, as related to the Company’sour revenue, were considered to have been met as follows:

Sales of products: The CompanyWe 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 renderingprovision 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 CompanyWe adopted the new revenue standard beginning July 1, 2018, and adopted a modified retrospective approach upon adoption. The Company believesWe believe that itsour 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’sour contracts. There is no significant impact upon adoption of the new guidance.

Fair Value of Financial Instruments

The Company followsWe follow the provisions of ASC 820, “Fair Value Measurements and Disclosures.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs, other than quoted prices in level, that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the asset or liability.

The carrying value of financial instruments included in current assets and liabilities approximate their fair values because of the short-term nature of these instruments.

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Results of Operations for the Three Months Ended September 30, 20202021 and 20192020

Overview

The following table summarizes our results of operations for the three months ended September 30, 20202021 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)%

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Revenue

Currently, we, through our PRC subsidiaries and VIEs, have threetwo revenue streams derived from our threetwo 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, processingsubsidiaries, which was disposed and distributing green and organic agricultural producewe 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 threethe 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)%

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For the three months ended September 30, 20202021 and 2019,2020, revenue from sales of Luobuma products was US$ 24,61513,508 and US$ 65,519,24,615, respectively, which represented a decrease of US$ 40,90411,107, 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, weWe 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, asvolume. As a result, our overall sales decreased during the three months ended September 30, 20202021 as compared to the same period in 2019.2020.

For the three months ended September 30, 20202021 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$ 983,362616,250 and US$ 3,680,941,983,362, respectively, representing a decrease of US$ 2,697,579367,112, 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, 20202021 as compared to the same period in 2019. Our2020. As our sales of yew trees were adversely affected by the COVID-19 outbreak, which resultedwe modified our operating strategies in less orders from our customers during the three months ended September 30, 2020 as comparedresponse 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 extractedextract Taxol, a more valuable chemical substance which is used experimentally as a drug in the treatment of cancer, in the future.cancer.

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Cost of Revenue and related taxRelated Tax

The following table sets forth the breakdown of the Company’s cost of revenue for each of our threetwo segments from the continuing operations, for the three months ended September 30, 20202021 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, 20202021 and 2019,2020, cost of revenue from sales of our Luobuma products was US$ 28,462141,838 and US$ 231,381,28,462, respectively, representing a decreasean increase of US$ 202,919113,376, or 87.70%398.34%. The decreaseincrease 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 decreasedincreased 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, 20202021 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$ 712,8281,216,210 and US$ 2,573,112,712,828, respectively, representing a decreasean increase of US$ 1,860,284503,382, or 72.30%70.62%. The decreaseincrease was mainly due to less yew trees we soldstock written off during the three months ended September 30, 2020 as compared2021. Due to flood disaster caused by severe typhoon weather in autumn, which resulted in the same period in 2019 as mentioned above. The percentagedamage and death of decrease in costa large number of revenue was proportionalyew 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.

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Gross Profit (Loss)

The following table sets forth the breakdown of the Company’s gross profit (loss) for each of our threetwo segments from the continuing operations, for the three months ended September 30, 20202021 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 reducedincreased by US$ 162,138124,483, or 97.68%3235.85%, for the three months ended September 30, 20202021 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 was128,330, mainly due to clearancethe 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, asLuobuma 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$ 835,478870,700, or 75.61%323.10%, for the three months ended September 30, 20202021 as compared to the same period in 2019. As mentioned above,2020. During the decreasethree 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, 20202021 as mentioned above. The percentage of the variance in gross profitdecrease was proportional to the percentage of the variance in revenuealso due to the stable gross marginreduced 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 decreasean increase of US$ 1,533,911 for three months ended September 307,150,346, or 45.73%502.37%, as compared to the same period in 2019.2020. The decrease in general and administrative expensesincrease 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 decreasean increase in bad debt expenseexpenses of US$ 284,9946,582,903 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.

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Selling ExpensesImpairment Loss of Distribution Rights

For the three months ended September 30, 2020,2021, our sellingimpairment 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 decreasean increase of US$ 88,251, or 72.40%100.00%, as compared to the same period in 2019.2020. The decreaseincrease in was mainly dueattributable to the decrease in promotion expense, commission expenses for our online shopsamortization of Tenet-Jove which was in line with the decrease in our salesdebt issuance costs during the three months ended September 30, 2020. The decrease was also due to2021 on the decrease in salary related expenses as a result of reduced number of staff duringconvertible 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 by2021, our net interest expenses was US$ 108,987 or 2,278.63% to US$ 104,204 for the three months ended September 30, 2020 from170,199, representing an income tax benefitincrease of US$ 4,783 for174,424, 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 taxesinterest expense was mainly dueattributable to the decreased deferred income tax benefits arisen frominterest expense incurred for the allowance for doubtful accounts and inventory reserve duringconvertible 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$ 1,052,98011,108,221 for three months ended September 30, 2020, a decrease2021, an increase of US$ 721,8529,944,916, or 40.67%854.88%, from net loss from continuing operations of US$ 1,774,8321,163,305 for three months ended September 30, 2019.2020. The decreaseincrease in net loss was primarily a result of the decrease in decreasegross profit, the increase in general and administrative expenses, whichimpairment 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 bycompleted 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.

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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 wasof US$ 1,614,951 for the three months ended September 30, 2020, an increase2020. After deduction of US$ 6,248,320 fromnon-controlling interest, the comprehensive loss ofattributable to us was US$ 4,633,36914,258,967 for the three months ended September 30, 2019. After deduction of non-controlling interest, the2021, compared to a comprehensive income attributable to us in the Company wasamount 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 incomeloss 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, 20202021 and June 30, 2020,2021, except the above-mentioned convertible note, we dodid not engage in any foreign currency borrowings or loan contracts.

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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 Companywe sold 310,977purchase, up to 604,900 shares of common stock at a purchase price of US$ 4.682.73 per share, for theshare. 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 able2019, 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 experiencethe 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.

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Working Capital

The following table provides the information about our working capital at September 30, 20202021 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 increaseddecreased by US$ 1,175,0923,968,449, or 2.4%11.5%, as of September 30, 20202021 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 assetspayables 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, 2020accrued expenses, and June 30, 2020, the other major component of our working capital is accounts receivable. The accounts receivableconvertible 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 from2021 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, 20202021 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$ 1.11.2 million, bad debt expenses of US$ 1.00.8 million, and net changes in our operating assets and liabilities, which mainly included an increase in advances to suppliers of US$ 6.64.7 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. Netnet cash provided by operating activities duringfrom discontinued operations of US$ 1.8 million.

Investing Activities

For the three months ended September 30, 20192021, net cash used in investing activities was approximately US$ 2.126.0 million, consistingprimarily due to the disposal of net lossAnkang of US$ 1.812.7 million, bad debt expensespayment for other current assets of US$ 1.312.7 million restricted shares issued for managementand 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 investingfinancing activities wasamounted to approximately US$ 18,780,20.4 million, primarily due to the proceeds from disposalissuance of property and equipmentcommon stock of US$ 79,387, partial offset by advances2.4 million, proceeds from issuance of loans to third partiesconvertible 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’sour disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the period covered by this reportQuarterly Report due to following material weaknesses:

Lacka 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 takehas taken the following steps:

Recruitingrecruiting 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 Boardboard of Directors.directors.

The Company believes the foregoing measures will remediate the identified material weaknesses in future periods. The Company isWe 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 beenwere 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 firstthe 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.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Other than ordinary routine litigation (of which we are not currently involved), we know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation, and there are no proceedings in which any of our directors, officers, or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our company except as set forth below:

On May 16, 2017, Bonwick Capital Partners, LLC (“Plaintiff”)the Plaintiff commenced a lawsuit (Case No. 1:17-cv-03681-PGG) against the Companyus in the United States District Court for the Southern District of New York. Plaintiff allegesalleged that the Companywe entered into an agreement with the Plaintiff, (the “Agreement”), pursuant to which the Plaintiff was to provide the Companyus with financial advisory services in connection with the Company’sour initial public offering in the United States. The Plaintiff allegesalleged that the Companywe breached the Agreement and seeksseek money damages up to $6US$6 million. The Company believes that these claims are without meritIn March 2021, we entered into a Settlement Agreement and intendsRelease with the Plaintiff, pursuant to vigorously defend itself.which we paid the Plaintiff a total sum of US$ 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
ExhibitDescription
3.1†31.1Certificate 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)
NumberExhibit
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)
NumberExhibit
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)
NumberExhibit
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)
NumberExhibit
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)
NumberExhibit
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 Pursuantof Principal Executive Officer pursuant to Rule 13a-14(a) and /15d-14(a) (4)under the Securities Exchange Act of Chief Executive Officer1934
31.2
31.2*Certification Pursuantof Principal Financial Officer pursuant to Rule 13a-14(a) and /15d-14(a) (4)under the Securities Exchange Act of Chief Financial Officer1934
32.1Certification 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.INSCertification Pursuant to Section 1350 of Title 18 of the United States Code of Chief Executive OfficerInline 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 DocumentDocument.
101.CAL
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase DocumentDocument.
101.DEF
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase DocumentDocument.
101.LAB
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase DocumentDocument.
101.PRE
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase DocumentDocument.
104Cover 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, 202015, 2021By:/s/ Guocong ZhouJennifer Zhan
Guocong ZhouJennifer Zhan
Chief Executive Officer
(Principal Executive Officer)
Dated: November 16, 202015, 2021By:/s/ Sai (Sam) Wang
Sai (Sam) Wang
Chief Financial Officer
(Principal Financial and Accounting Officer)

53