Bit Origin Limited (BTOG) 20-F 2020 FY Annual report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2021

OR

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

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                        to

Commission file number: 001-38857

China Xiangtai Food Co., Ltd.

(Exact name of Registrant as specified in its charter)

Cayman Islands

(Jurisdiction of incorporation or organization)

Xinganxian Plaza, Building B, Suite 21-1

Lianglukou, Yuzhong District

Chongqing, People’s Republic of China 400800

(Address of principal executive offices)

Zeshu Dai, Chief Executive Officer

+86 (023) 86330158

ir@cqplinfood.com

Xinganxian Plaza, Building B, Suite 21-1

Lianglukou, Yuzhong District

Chongqing, People’s Republic of China 400800

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Ordinary shares, par value $0.01 per share	PLIN	The NASDAQ Stock Market LLC

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 40,716,642 ordinary shares issued and outstanding as of June 30, 2021.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐  Yes  ☒  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

☐  Yes  ☒  No

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  ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒  Yes   ☐  No

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

Large accelerated filer  ☐	Accelerated filer  ☐	Non-accelerated filer  ☒
		Emerging growth company  ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. / /

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☒	International Financial Reporting Standards as issued	Other  ☐
	by the International Accounting Standards Board ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐  Item 17   ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

☐  Yes  ☒  No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

☐  Yes   ☐  No

Table of Contents

		Page
PART I
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	6
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	6
ITEM 3.	KEY INFORMATION	6
ITEM 4.	INFORMATION ON THE COMPANY	44
ITEM 4A.	UNRESOLVED STAFF COMMENTS	67
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	67
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	92
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	99
ITEM 8.	FINANCIAL INFORMATION	101
ITEM 9.	THE OFFER AND LISTING	102
ITEM 10.	ADDITIONAL INFORMATION	103
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	117
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	117
PART II
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	118
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	118
ITEM 15.	CONTROLS AND PROCEDURES	119
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	119
ITEM 16B.	CODE OF ETHICS	120
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	120
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	120
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	121
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	121
ITEM 16G.	CORPORATE GOVERNANCE	122
ITEM 16H.	MINE SAFETY DISCLOSURE	122
PART III
ITEM 17.	FINANCIAL STATEMENTS	123
ITEM 18.	FINANCIAL STATEMENTS	123
ITEM 19.	EXHIBITS	123

2

Conventions Used in this Annual Report

Except where the context otherwise requires and for purposes of this annual report on Form 20-F only, “we”, “us”, “our company”, “Company” and “our” refer to:

● Beijing Gangyixing Technology Ltd. (also known as “北京港亿星科技有限公司”) (“Gangyixing WFOE” when individually referenced), a PRC wholly foreign-owned enterprise and a wholly owned subsidiary of Haochuangge HK;

● China Silanchi Holding Limited (“China Silanchi” when individually referenced), a British Virgin Islands company;

● China Xiangtai Food Co., Ltd. (“Xiangtai Cayman” when individually referenced), a Cayman Islands exempted company;

● Chongqing Jinghuangtai Business Management Consulting Co., Ltd. (also known as “重庆精煌泰企业管理咨询有限公司”) (“Xiangtai WFOE” when individually referenced), a PRC wholly foreign-owned enterprise and a wholly owned subsidiary of Xiangtai HK;

● Chongqing Pengmei Supermarket Co., Ltd. (also known as “重庆鹏美超市有限公司”) (“CQ Pengmei” when individually referenced), a PRC company and a wholly owned subsidiary of Xiangtai WFOE;

● CVS Limited (“Xiangtai HK” when individually referenced), a Hong Kong company that is a wholly-owned subsidiary of Xiangtai BVI;

● Guangan Yongpeng Food Co., Ltd. (also known as “广安勇鹏食品有限公司”) (“GA Yongpeng” when individually referenced), a PRC company and a wholly owned subsidiary of Xiangtai WFOE.

● Haochuangge Limited (“Haochuangge HK” when individually referenced), a Hong Kong company that is a wholly-owned subsidiary of China Silanchi;

● WVM Inc. (“Xiangtai BVI” when individually referenced), a British Virgin Islands company;

and, in the context of describing the operations and consolidated financial information of the consolidated variable interest entities (each a “VIE”) in China:

● Beijing Fu Tong Ge Technology Co., Ltd. (also known as “北京福通格科技有限公司”) (“Fu Tong Ge” when individually referenced), a PRC company and a VIE contractually controlled by Gangyixing WFOE;

● Chongqing Ji Mao Cang Feed Co., Ltd. (also known as “重庆集茂仓饲料有限公司”) (“JMC” when individually referenced), a PRC company and a VIE contractually controlled by Xiangtai WFOE; and

● Chongqing Penglin Food Co., Ltd. (also known as “重庆鹏霖食品有限公司”) (“CQ Penglin” when individually referenced), a PRC company and a VIE contractually controlled by Xiangtai WFOE.

Xiangtai WFOE, Gangyixing WFOE, CQ Penglin, GA Yongpeng, CQ Pengmei, Fu Tong Ge and JMC are collected referred to as the “PRC entities” hereafter.

3

This annual report on 20-F contains translations of certain RMB amounts into U.S. dollar amounts at specified rates solely for the convenience of the reader. The relevant exchange rates are listed below:

	For the Year Ended	For the Year Ended	For the Year
	June 30, 2021	June 30, 2020	Ended June 30, 2019
Period Ended RMB: USD exchange rate	6.46	7.07	6.87
Period Average RMB: USD exchange rate	6.62	7.03	6.83

We have relied on statistics provided by a variety of publicly-available sources regarding China’s expectations of growth. We did not, directly or indirectly, sponsor or participate in the publication of such materials, and these materials are not incorporated in this prospectus other than to the extent specifically cited in this prospectus. We have sought to provide current information in this prospectus and believe that the statistics provided in this prospectus remain up-to-date and reliable, and these materials are not incorporated in this prospectus other than to the extent specifically cited in this prospectus. Except where otherwise stated, all ordinary share accounts provided herein are on a pre-share-increase basis.

4

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this report may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” and similar expressions are intended to identify such forward-looking statements. Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation, those discussed under “Item 3—Key Information—Risk Factors,” “Item 4—Information on the Company,” “Item 5—Operating and Financial Review and Prospects,” and elsewhere in this report, as well as factors which may be identified from time to time in our other filings with the Securities and Exchange Commission (the “SEC”) or in the documents where such forward-looking statements appear. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements.

The forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is signed. Except as required by law, we assume no responsibility for updating any forward-looking statements.

5

PART I

ITEM 1.     IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable for annual reports on Form 20-F.

ITEM 2.     OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable for annual reports on Form 20-F.

ITEM 3.      KEY INFORMATION

A. Selected Financial Data

The following table presents the selected consolidated financial information for our company. The selected consolidated statements of income and comprehensive income data for the years ended June 30, 2021, 2020 and 2019 and the selected consolidated balance sheets data as of June 30, 2021 and 2020 have been derived from our audited consolidated financial statements, which are included in this annual report beginning on page F-1. The selected consolidated statements of income and comprehensive income data for the years ended June 30, 2018 and 2017 and the selected consolidated balance sheets data as of June 30, 2019, 2018 and 2017 are derived from our audited consolidated financial statements include in our annual report (File Number 001-38857) filed with the SEC on November 6, 2019. Our historical results do not necessarily indicate results expected for any future periods. The selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” below. Our audited consolidated financial statements are prepared and presented in accordance with U.S. GAAP.

6

The following table presents our summary consolidated statements of income and comprehensive income data:

	For the Years Ended June 30,
	2021		2020		2019		2018		2017
Supermarket and grocery store revenues	$	—	$	—	$	—	$	3,750,904	$	4,451,149
Farmers’ market revenues		—		—		—		97,353,320		58,825,330
Feed raw material		80,498,435		24,248,765		—		—		—
Total revenues		80,498,435		24,248,765		—		101,104,224		63,276,479
Cost of supermarket and grocery store revenues		—		—		—		3,193,830		3,011,400
Cost of farmers’ market revenues		—		—		—		88,258,923		55,198,004
Cost of feed raw material		77,501,417		22,219,528		—		—		—
Total cost of revenues		77,501,417		22,219,528		—		91,452,753		58,209,404
Gross profit		2,997,018		2,029,237		—		9,651,471		5,067,075
Selling expenses		(238,624)		(63,863)		—		(708,531)		(854,643)
General and administrative expenses		(2,007,609)		(2,978,213)		(511,211)		(981,347)		(515,596)
Provision for doubtful accounts		(6,324,020)		(666,690)		—		(918,940)		(175,317)
Stock compensation expense		(1,889,173)		(930,223)		—		—		—
Impairment of goodwill		(5,533,507)		—		—		—		—
(Loss) income from operations		(12,995,915)		(2,609,752)		(511,211)		7,042,653		3,521,519
Other (expense) income, net		(304,166)		(533,315)		840		(2,560,168)		(190,908)
Benefit of (provision for) income taxes		1,002,346		(223,173)		—		(714,376)		(875,737)
Net (loss) income from continuing operations		(12,297,735)		(3,366,240)		(510,371)		3,768,109		2,454,874
Net (loss) income from discontinued operations		(34,785,232)		(1,033,293)		4,873,962		—		—
Net (loss) income		(47,082,967)		(4,399,533)		4,363,591		3,768,109		2,454,874
Less: Net (loss) income attributable to non-controlling interest from continuing operations		(1,473,448)		477,409		—		—		—
Net (loss) income attributable to China Xiangtai Food Co., Ltd.	$	(45,609,519)	$	(4,876,942)	$	4,363,591	$	3,768,109	$	2,454,874
(Loss) earnings per share, basic and diluted – continuing operations	$	(0.33)	$	(0.16)	$	(0.03)	$	0.19	$	0.12
(Loss) earnings per share, basic and diluted – discontinued operations	$	(1.05)	$	(0.06)	$	0.24	$	—	$	—
Weighted average Ordinary Shares outstanding - Basic		33,194,383		22,417,524		20,319,723		20,000,000		20,000,000
Weighted average Ordinary Shares outstanding - Diluted		33,194,383		22,417,524		20,944,951		20,083,151		20,000,000

7

The following table presents our summary consolidated balance sheet data:

	As of June 30,
	2021		2020		2019		2018		2017
Cash and cash equivalents and restricted cash	$	7,603	$	1,071,564	$	3,916,990	$	319,093	$	21,530
Accounts receivables, net (including related party)		11,142,558		9,833,936		39,522,737		24,421,074		13,163,236
Other current assets of continuing operations		2,280,939		1,099,110		2,804,721		4,304,568		8,942,015
Other current assets of discontinued operations		19,090,614		38,271,324		174,467		—		—
Plant and equipment, net		4,395		10,121		3,335,229		3,962,455		4,293,063
Other long-term assets of continuing operations		2,331,145		5,834,634		472,335		722,503		596,104
Other long-term assets of discontinued operations		6,018,574		7,228,745		1,844,838		—		—
Total assets	$	40,875,828	$	63,349,434	$	52,071,317	$	33,729,693	$	27,015,948
Total liabilities	$	42,495,816	$	36,522,598	$	26,826,103	$	17,896,158	$	16,884,075
Total mezzanine equity	$	—	$	—	$	—	$	1,800,000	$	—
Total shareholders’ equity	$	(1,619,988)	$	26,826,836	$	25,245,214	$	14,033,535	$	10,131,873

Exchange Rate Information

Our financial information is presented in U.S. dollars. Our functional currency is Renminbi (“RMB”), the currency of the PRC. Transactions which are denominated in currencies other than RMB are translated into RMB at the exchange rate quoted by the People’s Bank of China at the dates of the transactions. Exchange gains and losses resulting from transactions denominated in a currency other than the RMB are included in statements of operations as foreign currency transaction gains or losses. Our financial statements have been translated into U.S. dollars in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 52, “Foreign Currency Translation”, which was subsequently codified within Accounting Standards Codification (“ASC”) 830, “Foreign Currency Matters”. The financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income (loss) in shareholders’ equity.

Translation adjustments included in accumulated other comprehensive loss amounted to $1,120,774 and $(856,218) as of June 30, 2021 and 2020, respectively. The balance sheet amounts, with the exception of shareholders’ equity at June 30, 2021 and 2020 were translated at 6.46 RMB and 7.07 RMB to $1.00, respectively. The shareholders’ equity accounts were stated at their historical rate. The average translation rates applied to the statement of income accounts for the years ended June 30, 2021, 2020 and 2019 were 6.62 RMB, 7.03 RMB and 6.83 RMB to $1.00, respectively. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. We do not currently engage in currency hedging transactions.

3.B. Capitalization and Indebtedness

Not applicable for annual reports on Form 20-F.

8

3.C. Reasons for the Offer and Use of Proceeds

Not applicable for annual reports on Form 20-F.

3.D. Risk Factors

Risks Related to Our Business and Industry

Our financial and operating performance may be adversely affected by epidemics, natural disasters and other catastrophes.

Our business could be materially and adversely affected by the outbreak of epidemics including but not limited to the 2019 novel coronavirus (COVID-19), swine influenza, avian influenza, middle east respiratory syndrome (MERS-CoV) and severe acute respiratory syndrome (SARS-CoV). Our financial and operating performance may be adversely affected by such epidemics, natural disasters and other catastrophes. As a result of the on-going novel coronavirus, we expect our operation to experience slowdown or temporary suspension in production. Our business could be materially and adversely affected in the event that the slowdown or suspension carries for a long period of time. During such epidemic outbreak, China may adopt certain hygiene measures, including quarantining visitors from places where any of the contagious diseases were rampant. Those restrictive measures adversely affected and slowed down the national economic development during that period. Any prolonged restrictive measures in order to control the contagious disease or other adverse public health developments in China or our targeted markets may have a material and adverse effect on our business operations.

Similarly, natural disasters, wars (including the potential of war), terrorist activity (including threats of terrorist activity), social unrest and heightened travel security measures instituted in response, and travel-related accidents, as well as geopolitical uncertainty and international conflict, will affect travel volume and may in turn have a material adverse effect on our business and results of operations. In addition, we may not be adequately prepared in contingency planning or recovery capability in relation to a major incident or crisis, and as a result, our operational continuity may be adversely and materially affected, which in turn may harm our reputation.

Our business could be materially harmed by the ongoing coronavirus (COVID-19) pandemic.

The COVID-19 epidemic has resulted in quarantines, travel restrictions, and the temporary closure of stores and business facilities in China. Because substantially all of our business operations and our workforce are concentrated in China, there is a substantial risk that our business, results of operations, and financial condition will be adversely affected. Potential impact to our results of operations will also depend on future developments and new information that may emerge regarding the duration and severity of the COVID-19 and the actions taken by government authorities and other entities to contain the COVID-19 or mitigate its impact, almost all of which are beyond our control.

The impacts of COVID-19 on our business, financial condition, and results of operations include, but are not limited to, the following:

● Our management and the employees who worked in the supermarket sector of our business resumed work on February 11, 2020, shortly after the Chinese Lunar New Year holiday. The employees who worked in the slaughtering and processing sector of our business resumed work by the end of February 2020. Our grocery store, as an essential business, had remained open during the pandemic. We experienced significant increase in supermarket sales in February and March 2020 as compared to the same period during 2019. However, we experienced a decrease in distribution sales during February and March 2020 as some of our customers, such as farmers’ markets, restaurants, hotels, and school cafeterias were required to temporarily close their businesses to adhere to local policy. These affected customers slowly resumed business during April 2020. Overall, our revenue and income has been negatively impacted for the fiscal year ended June 30, 2020 and 2021. We discontinued the grocery store operations in February 2020 and the slaughtering and processing sector of our business in April 2021.

9

● The situation may worsen if the COVID-19 outbreak continues. We will continue to closely monitor the development throughout 2021.

● The global stock markets have experienced, and may continue to experience, significant decline from the COVID-19 outbreak. It is possible that the price of our ordinary shares will decline significantly after the consummation of this offering, in which case you may lose your investment.

Because of the uncertainty surrounding the COVID-19 outbreak, the business disruption and the related financial impact related to the outbreak of and response to the coronavirus cannot be reasonably estimated at this time.

We might require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our existing solutions, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our ordinary shares. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional financing on terms favorable to us, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired.

Changes in consumer preferences could adversely affect our business.

The feed industry, in general, is subject to changing consumer trends, demands and preferences. Trends within the feed industry change, and our failure to anticipate, identify or react to changes in these trends could lead to reduced demand and prices for our products, among other concerns, and could have a material adverse effect on our business, financial condition and results of operations.

We operated in a highly competitive industry and faced increased competition.

We operated in the feed industry in China and face strong competition in terms of distribution, brand recognition, quality, price, availability, and product positioning. The market is highly fragmented, particularly in China, and the resources of our competitors may increase due to mergers, consolidations or alliances, and we may face new competitors in the future. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, resources, standards or customer requirements. Competitors may use cost advantages from greater size to compete aggressively with us on price. Certain customers are also current or prospective competitors and as a result, assistance that we provide to them as customers may ultimately result in increased competitive pressure against us. The challenges we face from larger competitors will become even greater if consolidation or collaboration between or among our competitors occurs in our industry. For these reasons, we may not be able to compete successfully against our current or future competitors, and if we do not compete effectively, our ability to increase our net sales may be impaired.

We faced risks relating to fluctuations in the prices of alternative products.

Fluctuations in the market prices of substitutes to our products, especially decreases in the prices of alternative animal feed products, affect the prices of feed. As a result of decreases in the prices of alternative feed, consumers may purchase less pork. Even where we were able to adjust our selling prices in relation to decreases in the prices of alternative products, our profit margin experienced contraction, which in turn had a material adverse impact on our business, financial condition, results of operations and prospects.

10

Any perceived or real health risks related to the feed industry could adversely affect our ability to sell our products. If our products become contaminated, we may be subject to product liability claims and product recalls.

We are subject to risks affecting the food industry generally, including risks posed by the following:

● contamination;

● consumer product liability claims;

● product tampering;

● product labeling errors;

● the possible unavailability and expense of product liability insurance; and

● the potential cost and disruption of a product recall.

Our products may be exposed to contamination by organisms that may produce food borne illnesses, such as E. coli, listeria monocytogenes and salmonella. These organisms are generally found in the environment and, as a result, there is a risk that they could be present in our products. These pathogens can also be introduced to our products through tampering or as a result of improper handling. Once contaminated products have been shipped for distribution, illness or death may result if the products are not properly prepared prior to consumption or if the pathogens are not eliminated in further processing.

We may be subject to significant liability in the jurisdictions in which our products are sold if the consumption of any of our products causes injury, illness or death. Such liability may result from proceedings filed by the government’s attorney’s office, consumer agencies and individual consumers. We may have to pay significant damages to consumers or to the government and such liability may be in excess of applicable liability insurance policy limits. Adverse publicity concerning any perceived or real health risk associated with our products could also cause customers to lose confidence in the safety and quality of our feed products, which could adversely affect our ability to sell our products. We could also be adversely affected by perceived or real health risks associated with similar products produced by others to the extent such risks cause customers to lose confidence in the safety and quality of such products generally.

Environmental regulation and related litigation and commitments could have a material adverse effect on us.

Our past and present business operations and properties are subject to extensive and increasingly stringent laws and regulations in the countries in which we have operations pertaining to protection of the environment, including among others:

● the treatment and discharge of materials into the environment;

● the emission of greenhouse gases.

Failure to comply with these laws and regulations may result in significant consequences to us, including administrative, civil and criminal penalties, liability for damages and negative publicity. Some requirements applicable to us may also be enforced by citizen groups or other third parties. Natural disasters, such as flooding and hurricanes, can cause the discharge of effluents or other waste into the environment, potentially resulting in our being subject to further liability claims and governmental regulation, as has occurred in the past. See the section headed “Item 4. Information on the Company — Environment” for further discussion of our regulatory compliance as it relates to environmental risk. We have incurred, and will continue to incur, significant capital and operating expenditures to comply with these laws and regulations.

11

In addition, new environmental issues could arise that could cause currently unanticipated investigations, assessments, costs or expenditures. We may be subject to higher compliance costs if environmental protection laws become more stringent. Environmental claims or failure to comply with any present or future environmental protection laws may require us to spend additional funds and may adversely affect our results of operations.

Our growth (organic and inorganic) may require substantial capital and long-term investments.

Our competitiveness and growth depend on our ability to fund our capital expenditures. We cannot assure you that we will be able to fund our capital expenditures at reasonable costs due to adverse macroeconomic conditions, our performance or other external factors.

We may pursue additional opportunities to acquire complementary businesses, which could further increase leverage and debt service requirements and could adversely affect our financial situation if we fail to successfully integrate the acquired business.

We intend to continue to pursue selective acquisitions of complementary businesses in the future. Inherent in any future acquisitions are certain risks such as increasing leverage and debt service requirements and combining company cultures and facilities, which could have a material adverse effect on our operating results, particularly during the period immediately following such acquisitions. Additional debt or equity capital may be required to complete future acquisitions, and there can be no assurance that we will be able to raise the required capital. Furthermore, acquisitions involve a number of risks and challenges, including:

● diversion of management’s attention;

● potential loss of key employees and customers of the acquired companies;

● an increase in our expenses and working capital requirements;

● failure of the acquired entities to achieve expected results;

● our failure to successfully integrate any acquired entities into our business; and

● our inability to achieve expected synergies and/or economies of scale.

These opportunities may also expose us to successor liability relating to actions involving any acquired entities, their respective management or contingent liabilities incurred prior to our involvement and will expose us to liabilities associated with ongoing operations, in particular to the extent we are unable to adequately and safely manage such acquired operations. These transactions may also be structured in such a manner that would result in our assumption of obligations or liabilities not identified during our pre-acquisition due diligence.

Any of these and other factors could adversely affect our ability to achieve anticipated cash flows at acquired operations or realize other anticipated benefits of acquisitions, which could adversely affect our reputation and have a material adverse effect on us.

We rely substantially on external suppliers for soybean meal and soybean oil.

We are a distributor of feed raw material consisting of soybean meal and soybean oil. We purchase those products from the manufacturers. For the year ended June 30, 2021, one vendor accounted for 77.5% of the Company’s total purchases. For the year ended June 30, 2020, two vendors accounted for 75.6% and 11.5% of the Company’s total purchases. We expect to continue to rely on external manufacturers for our distribution business. We have established long-term strategic alliances with Sinograin, a state-owned grain and oil company in China, and has obtained general distributorship of “Fu Dou Lai” brand soybean meal in Chongqing, Sichuan, and neighboring area in China. There can be no assurance that we will continue to be able to source the products that meet our requirements on reasonable prices or

12

terms or at all. In the event that our supply of soybean meal and soybean oil is interrupted for whatever reason, our business, financial condition, results of operations and prospects may be materially and adversely affected.

The loss of one or more of our facilities could adversely affect our business, financial condition, and results of operation.

We are dependent on our facilities to achieve the requisite manufacturing capacity to meet our anticipated market demands. If there is a disruption or suspension of our facilities, our operations and manufacturing capabilities may be significantly impaired. Disruption or suspension of our facilities may also adversely affect our brands, reputation and/or customer preference for our products and distract our management from other tasks. On March 5, 2021, CQ Penglin suspended its operation within its facilities located in Fulin pursuant to a court order in connection with certain legal claim filed by Chongqing Puluosi Small Mortgage Co., Ltd. against CQ Penglin and lien attached to assets of CQ Penglin. The facility has a processing area of 4,000 square meters, 7 large refrigeration houses of 2,200 square meters, offices and dormitories of 3,000 square meters, and boiler rooms of 200 square meters. The facility was used to produce the Company’s processed meat products, including sausage, bacon, spam, cured pork, and soy sauce braised meats. In connection with the same legal dispute with Chongqing Puluosi Small Mortgage Co., Ltd., the court also attached a lien against a facility of GA Yongpeng located in Linshui County, Sichuan Province, pursuant to which the facility cannot be sold, transferred or otherwise disposed without approval of the court. The company has suspended operation in the facility of GA Yongpeng located in Linshui County, Sichuan Province in March 2021. As a result, the company discontinued its meat processing business in April 2021.

Our operations are subject to the general risks of litigation.

We are involved in an ongoing basis in litigation arising in the ordinary course of business or otherwise. Trends in litigation may include class actions involving consumers, shareholders, employees or injured persons, and claims related to commercial, labor, employment, antitrust, securities or environmental matters. Moreover, the process of litigating cases, even if we are successful, may be costly, and may approximate the cost of damages sought. These actions could also expose us to adverse publicity, which might adversely affect our brands, reputation and/or customer preference for our products and distract our management from other tasks. Litigation trends and expenses and the outcome of litigation cannot be predicted with certainty and adverse litigation trends, expenses and outcomes could adversely affect our financial results. Please see the section headed “Item 4. Information on the Company — Legal Proceedings” for details of our material litigation and proceedings.

The consolidation of our customers could adversely affect our business.

Our customers, such as supermarkets and farmers’ markets, have consolidated in recent years, and consolidation is expected to continue. These consolidations have produced large, sophisticated customers with increased buying power who are more capable of operating with reduced inventories, opposing price increases, and demanding lower pricing, increased promotional programs and specifically tailored products. These customers also may use shelf space currently used for our products for their own private label products. If we fail to respond to these trends, our volume growth could slow or we may need to lower prices or increase promotional spending for our products, any of which would adversely affect our financial results.

Macroeconomic conditions could have a material adverse effect on our business, results of operations, financial condition and stock price.

Key macroeconomic conditions are likely to affect our business, results of operations and financial condition. Consumer confidence, energy price, labor cost, prices, unemployment are among the factors that often impact the borrowing behavior of our customers. Poor economic conditions reduce the demand for consumption of pork and pork products.

While certain economic conditions in China have shown signs of improvement following the recent global economic crisis, economic growth has been slow and uneven as consumers continue to face domestic concerns, as well as economic and political conditions in the global markets. A prolonged period of slow economic growth or a significant

13

deterioration in economic conditions would likely affect our customers’ activity levels and the ability and willingness of customers to obtain financing from us or to pay amounts already owed to us, and could have a material adverse effect on our business, results of operations and financial condition.

If we are not able to continue to innovate or if we fail to adapt to changes in our industry, our business, financial condition and results of operations would be materially and adversely affected.

Although evolving industry standards, new service and product introductions and changing customer demands in the feed industry have changed the way we and our competitors do business over the years. Furthermore, our competitors are constantly developing innovations in online marketing, communications, social networking and other services to expand the basis of suppliers and customers. We continue to invest significant resources in our infrastructure, research and development and other areas in order to enhance our quality control, information technology, and our existing products and services. The changes and developments taking place in our industry may also require us to re-evaluate our business model and adopt significant changes to our long-term strategies and business plan. Our failure to innovate and adapt to these changes would have a material adverse effect on our business, financial condition and results of operations.

If we fail to promote and maintain our brand in an effective and cost-efficient way, our business and results of operations may be harmed.

We believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing customers. Successful promotion of our brand and our ability to attract customers depend largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our services. It is likely that our future marketing efforts will require us to incur significant additional expenses. These efforts may not result in increased revenues in the immediate future or at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business.

New lines of business or new products and services may subject us to additional risks.

From time to time, we may implement new lines of business or offer new products and services within existing lines of business. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new services could have a material adverse effect on our business, results of operations and financial condition.

We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.

We regard our trademarks, copyrights, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality, invention assignment and non-compete agreements with our employees and others to protect our proprietary rights. We own certain intellectual properties. See “Item 4. Information on the Company —Description of Property — Intellectual Property.” Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages. In addition, because of the rapid pace of technological change in our industry, parts of our business rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms, or at all.

14

It is often difficult to register, maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Preventing any unauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. To the extent that our employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related know-how and inventions. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.

We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in China, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits.

Additionally, the application and interpretation of China’s intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure you that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations may be materially and adversely affected.

Our business depends on the continued efforts of our senior management. If one or more of our key executives were unable or unwilling to continue in their present positions, our business may be severely disrupted.

Our business operations depend on the continued services of our senior management, particularly the executive officers named in this prospectus. While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services. If one or more of our key executives were unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, our future growth may be constrained, our business may be severely disrupted and our financial condition and results of operations may be materially and adversely affected, and we may incur additional expenses to recruit, train and retain qualified personnel. In addition, although we have entered into confidentiality and non-competition agreements with our management, there is no assurance that any member of our management team will not join our competitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all.

Increases in labor costs in the PRC may adversely affect our business and results of operations.

The economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees.

15

The relevant government agencies may examine whether an employer has made adequate payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. We expect that our labor costs, including wages and employee benefits, will continue to increase. The number of our employees have surged due to the fast expansion of our business. Unless we are able to control our labor costs or pass on these increased labor costs to our users by increasing the fees of our services, our financial condition and results of operations may be adversely affected.

Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.

We believe our success depends on the efforts and talent of our employees, including risk management, software engineering, financial and marketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees. Competition for highly skilled technical, risk management and financial personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.

In addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our services and our ability to serve our clients could diminish, resulting in a material adverse effect to our business.

A lack of insurance could expose us to significant costs and business disruption.

We have not yet purchased insurance to cover our assets and property of our business, which could leave our business inadequately protected from loss. If we were to incur substantial losses or liabilities due to fire, explosions, floods, other natural disasters or accidents or business interruption, our results of operations could be materially and adversely affected. Furthermore, Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies. Currently, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs.

We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.

We are vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide products.

Our business could also be adversely affected by the effects of epidemics, since it could require our employees to be quarantined and/or our offices to be disinfected. In addition, our results of operations could be adversely affected to the extent that any of these epidemics harms the Chinese economy in general.

We may incur financial obligation by serving as guarantor for loan borrowed by a related entity.

On December 26, 2017, Chongqing Mingwen Food Co., Ltd, (“CQ Mingwen”), whose president is the daughter-in-law of our CEO, entered into a one-year loan agreement with a bank to borrow RMB 9 million (approximately $1.4 million) for working capital needs, which has been extended for an additional 12 months. The loan bears variable interest rate based on the prevailing interest rates set by the People’s Bank of China at the time of borrowing, plus 98 basis points. The effective rate is 8.613% per annum. In connection with CQ Mingwen’s bank borrowing, the Company’s CEO, her husband and a son, CQ Penglin, CQ Mingwen’s legal representative and an unrelated third party, Chongqing Education Guaranty Co., Ltd. each served as a guarantor of the loan. Chongqing Education Guaranty Co. Ltd. was also required to

16

deposit RMB 450,000 (approximately $69,000) as restricted cash with the bank to secure the loan. In addition, GA Yongpeng pledged a land use right recorded at RMB 10,198,100 (approximately $1.5 million) and building property recorded at RMB 12,268,800 (approximately $1.8 million) as collateral to further safeguard this loan. If CQ Mingwen is unable to repay the loan upon maturity date, assets by GA Yongpeng may be liquidated to pay back the loan. CQ Penglin and our CEO will also incur obligation to repay the loan as guarantors. CQ Mingwen’s inability to repay the loan may therefore have a material adverse impact on the operation and financial results of our company.

Crop disease, severe weather, natural disasters and other conditions affecting the environment, including the effects of climate change, could result in decline in supply and weaken our financial condition.

Crop disease, severe weather conditions, such as floods, droughts, windstorms and hurricanes, and natural disasters, may adversely affect the supply of our products, reduce our sales volumes, prevent or impair our ability to ship products as planned. Production volume declines of our suppliers due to production interruptions or other factors could result in increases in material costs, which could result in substantial losses and weaken our financial condition.

Severe weather conditions may occur with higher frequency or may be less predictable in the future due to the effects of climate change. An occurrence of such an event might result in material disruptions to our operations, to the operations of our customers or suppliers, resulting in a decline in the agriculture industry. There can be no assurance that our facilities or products will not be affected by any such occurrence in the future, which occurrence may lead to adverse conditions to our operations and financial results.

Prices of agricultural products and feed raw materials are subject to supply and demand, a market condition which is not predictable.

We purchase agricultural products and feed raw materials based on soybean meal and soybean oil, and we are not able to predict with certainty what price we will receive for our products. Additionally, the growth cycle of soybean in many instances dictates when such products must be marketed to achieve the maximum profitability. Excessive supply of soybean tend to cause severe price competition and lower prices for soybean and soybean based-products. Conversely, shortages may drive the prices higher. Shortages often result from adverse growing conditions which can reduce the availability of the agricultural products and feed raw materials affected. Since multiple variables can affect supply and demand, we cannot accurately predict or control from year to year what prices, either favorable or unfavorable, we will receive from the market.

In addition, general public perceptions regarding the quality, safety or health risks associated with soybean based feed raw material could reduce demand and prices for our soybean feed raw products. To the extent that consumer preferences evolve away from our products, and we are unable to modify our products selection to satisfy new consumer preferences, there will be a decreased demand. However, even if market prices are unfavorable, our feed raw materials must be brought to market promptly. A decrease in the selling price received for our products due to the factors described above could have a material adverse effect on our business, results of operations and financial condition.

Our internal computer systems, or those of our vendors, collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs, compromise sensitive information related to our business or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely affecting our business.

Our internal computer systems and those of our current and any future third-party vendors, collaborators and other contractors or consultants are vulnerable to damage, interruption or data theft from computer viruses, computer hackers, malicious code, employee theft or misuse, ransomware, social engineering (including phishing attacks), denial-of-service attacks, sophisticated nation-state and nation-state-supported actors, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Cybersecurity incidents, which may not be immediately or ever detected, are increasing in frequency and evolving in nature.

While we seek to protect our information technology systems from system failure, accidents and\or security breaches, if any such an event were to occur and cause an interruption in our operations, it could result in a disruption of

17

our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other disruptions. If we were to experience a significant cybersecurity breach of our information systems or data, the costs associated with the investigation, remediation and potential notification of the breach to counterparties and data subjects could be material. In addition, our remediation efforts may not be successful. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology and cybersecurity infrastructure, we could suffer significant business disruption, including transaction errors, supply chain or manufacturing interruptions, processing inefficiencies, data loss or the loss of or damage to intellectual property or other proprietary information.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our or our third-party vendors’, collaborators’ or other contractors’ or consultants’ data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, including litigation exposure, penalties and fines, we could become the subject of regulatory actions or investigations, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed. Any of the above could have a material adverse effect on our business, financial condition, results of operations or prospects.

We may be liable for improper use or appropriation of personal information provided by our customers.

We may become subject to a variety of laws and regulations in the PRC where we operate regarding privacy, data security, cybersecurity, and data protection. These laws and regulations are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws. In particular, there are numerous laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal information and other user data. Such laws and regulations often vary in scope, may be subject to differing interpretations, and may be inconsistent among different jurisdictions.

We expect to obtain information about various aspects of our operations as well as regarding our employees and third parties. We also maintain information about various aspects of our operations as well as regarding our employees. The integrity and protection of our customer, employee and company data is critical to our business. Our customers and employees expect that we will adequately protect their personal information. We are required by applicable laws to keep strictly confidential the personal information that we collect, and to take adequate security measures to safeguard such information.

The PRC Criminal Law, as amended by its Amendment 7 (effective on February 28, 2009) and Amendment 9 (effective on November 1, 2015), prohibits institutions, companies and their employees from selling or otherwise illegally disclosing a citizen’s personal information obtained during the course of performing duties or providing services or obtaining such information through theft or other illegal ways. On November 7, 2016, the Standing Committee of the PRC National People’s Congress issued the Cyber Security Law of the PRC, or Cyber Security Law, which became effective on June 1, 2017.

Pursuant to the Cyber Security Law, network operators must not, without users’ consent, collect their personal information, and may only collect users’ personal information necessary to provide their services. Providers are also obliged to provide security maintenance for their products and services and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws and regulations.

The Civil Code of the PRC (issued by the PRC National People’s Congress on May 28, 2020 and effective from January 1, 2021) provides main legal basis for privacy and personal information infringement claims under the Chinese civil laws. PRC regulators, including the Cyberspace Administration of China, Ministry of Industry and Technology, and the Ministry of Public Security have been increasingly focused on regulation in the areas of data security and data protection.

The PRC regulatory requirements regarding cybersecurity are constantly evolving. For instance, various regulatory bodies in China, including the Cyberspace Administration of China, the Ministry of Public Security and the State Administration for Market Regulation, have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations. In April 2020, the Chinese government promulgated Cybersecurity Review

18

Measures, which came into effect on June 1, 2020. According to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security.

In November 2016, the Standing Committee of China’s National People’s Congress passed China’s first Cybersecurity Law (“CSL”), which became effective in June 2017. The CSL is the first PRC law that systematically lays out the regulatory requirements on cybersecurity and data protection, subjecting many previously under-regulated or unregulated activities in cyberspace to government scrutiny. The legal consequences of violation of the CSL include penalties of warning, confiscation of illegal income, suspension of related business, winding up for rectification, shutting down the websites, and revocation of business license or relevant permits. In April 2020, the Cyberspace Administration of China and certain other PRC regulatory authorities promulgated the Cybersecurity Review Measures, which became effective in June 2020. Pursuant to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security. On July 10, 2021, the Cyberspace Administration of China issued a revised draft of the Measures for Cybersecurity Review for public comments (“Draft Measures”), which required that, in addition to any “operator of critical information infrastructure,” and any “data processor” carrying out data processing activities that affect or may affect national security should also be subject to cybersecurity review, and further elaborated the factors to be considered when assessing the national security risks of the relevant activities, including, among others, (i) the risk of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exiting the country; and (ii) the risk of critical information infrastructure, core data, important data or a large amount of personal information being affected, controlled, or maliciously used by foreign governments after listing abroad. The Cyberspace Administration of China has said that under the proposed rules companies holding data on more than 1,000,000 users must now apply for cybersecurity approval when seeking listings in other nations, because of the risk that such data and personal information could be “affected, controlled, and maliciously exploited by foreign governments.” The cybersecurity review will also investigate the potential national security risks from overseas IPOs. We do not know what regulations will be adopted or how such regulations will affect us and our listing on Nasdaq. In the event that the Cyberspace Administration of China determines that we are subject to these regulations, we may be required to delist from Nasdaq and we may be subject to fines and penalties. On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, which will take effect on September 1, 2021. The Data Security Law also sets forth the data security protection obligations for entities and individuals handling personal data, including the requirement that no entity or individual may acquire such data by stealing or other illegal means, and the collection and use of such data should not exceed the necessary limits. The costs of compliance with, and other burdens imposed by, CSL and any other cybersecurity and related laws may limit the use and adoption of our products and services and could have an adverse impact on our business. Further, if the enacted version of the Measures for Cybersecurity Review mandates clearance of cybersecurity review and other specific actions to be completed by companies like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.

If the new PRC Data Security Law is enacted in September, we do not expect to be subject to the cybersecurity review by the CAC for this offering, given that: (i) individual consumers but through our distributors ; (ii) we do not possess a large amount of personal information in our business operations; and (iii) data processed in our business does not have a bearing on national security and thus may not be classified as core or important data by the authorities. However, there remains uncertainty as to how the Draft Measures will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related to the Draft Measures. If any such new laws, regulations, rules, or implementation and interpretation come into effect, we expect to take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us. We cannot assure you that PRC regulatory agencies, including the CAC, would take the same view as we do, and there is no assurance that we can fully or timely comply with such laws. In the event that we are subject to any mandatory cybersecurity review and other specific actions required by the CAC, we face uncertainty as to whether any clearance or other required actions can be timely completed, or at all. Given such uncertainty, we may be further required to suspend our relevant business, shut down our website, or face other penalties, which could materially and adversely affect our business, financial condition, and results of operations.

We cannot assure you that PRC regulatory agencies, including the CAC, would take the same view as we do, and there is no assurance that we can fully or timely comply with such laws. In the event that we are subject to any mandatory

19

cybersecurity review and other specific actions required by the CAC, we face uncertainty as to whether any clearance or other required actions can be timely completed, or at all. Given such uncertainty, we may be further required to suspend our relevant business, shut down our website, or face other penalties, which could materially and adversely affect our business, financial condition, and results of operations.

Risks Related to Our Corporate Structure and Operation

Substantial uncertainties exist with respect to the interpretation and implementation of PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.

On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020 and replaced three existing laws on foreign investments in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law and the Wholly Foreign-owned Enterprise Law, together with their implementation rules and ancillary regulations. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic invested enterprises in China. The Foreign Investment Law establishes the basic framework for the access to, and the promotion, protection and administration of foreign investments in view of investment protection and fair competition.

According to the Foreign Investment Law, “foreign investment” refers to investment activities directly or indirectly conducted by one or more natural persons, business entities, or otherwise organizations of a foreign country (collectively referred to as “foreign investor”) within China, and the investment activities include the following situations: (i) a foreign investor, individually or collectively with other investors, establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively with other investors, invests in a new project within China; and (iv) investments in other means as provided by laws, administrative regulations, or the State Council.

According to the Foreign Investment Law, the State Council will publish or approve to publish the “negative list” for special administrative measures concerning foreign investment. The Foreign Investment Law grants national treatment to foreign-invested entities, or FIEs, except for those FIEs that operate in industries deemed to be either “restricted” or “prohibited” in the “negative list”. Because the “negative list” has yet to be published, it is unclear whether it will differ from the current Special Administrative Measures for Market Access of Foreign Investment (Negative List). The Foreign Investment Law provides that FIEs operating in foreign restricted or prohibited industries will require market entry clearance and other approvals from relevant PRC governmental authorities. If a foreign investor is found to invest in any prohibited industry in the “negative list”, such foreign investor may be required to, among other aspects, cease its investment activities, dispose of its equity interests or assets within a prescribed time limit and have its income confiscated. If the investment activity of a foreign investor is in breach of any special administrative measure for restrictive access provided for in the “negative list”, the relevant competent department shall order the foreign investor to make corrections and take necessary measures to meet the requirements of the special administrative measure for restrictive access.

The VIE structure has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. Under the Foreign Investment Law, variable interest entities that are controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors. Therefore, for any companies with a VIE structure in an industry category that is included in the “negative list” as a restricted industry, the VIE structure may be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality (either PRC companies or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as FIEs and any operation in the industry category on the “negative list” without market entry clearance may be considered to be illegal.

The PRC government will establish a foreign investment information reporting system, according to which foreign investors or foreign-invested enterprises shall submit investment information to the competent department for commerce concerned through the enterprise registration system and the enterprise credit information publicity system, and a security review system under which the security review shall be conducted for foreign investment affecting or likely affecting the state security.

20

Furthermore, the Foreign Investment Law provides that foreign invested enterprises established according to the existing laws regulating foreign investment may maintain their structure and corporate governance within five years after the implementing of the Foreign Investment Law.

In addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others, that a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions, profits, capital gains, income from disposition of assets, royalties of intellectual property rights,

The Chinese government exerts substantial influence over the manner in which we must conduct our business activities. We are currently not required to obtain approval from Chinese authorities to list on U.S exchanges, however, if the VIEs or the holding company were required to obtain approval in the future and were denied permission from Chinese authorities to list on U.S. exchanges, we will not be able to continue listing on any U.S. exchange, which would materially affect the interest of the investors.

The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.

For example, the Chinese cybersecurity regulator announced on July 2, 2021, that it had begun an investigation of Didi Global Inc. (NYSE: DIDI) and two days later ordered that the company’s app be removed from smartphone app stores.

As such, the Company’s business segments may be subject to various government and regulatory interference in the provinces in which they operate. The Company could be subject to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. The Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply.

Furthermore, it is uncertain when and whether the Company will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. Although the Company is currently not required to obtain permission from the PRC federal government or any local government to obtain such permission and has not received any denial to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to our business or industry. Such risk could result in significant depreciation of the value of our ordinary shares, or a complete hinderance of our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless.

If the PRC government deems that the contractual arrangements in relation to CQ Penglin and JMC, our consolidated variable interest entities, do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

We are a Cayman Islands exempted company and our PRC subsidiaries are considered foreign-invested enterprises. To comply with PRC laws and regulations, we conduct our operations in China through a series of contractual arrangements entered into among Xiangtai WFOE and CQ Penglin and its shareholders and among Xiangtai WFOE and JMC and its shareholders. As a result of these contractual arrangements, we exercise control over CQ Penglin and JMC and consolidate their respective operating results in our financial statements under U.S. GAAP. For a detailed description of these contractual arrangements, see “Corporate History and Structure.”

21

In the opinion of our PRC counsel, our current ownership structure, the ownership structure of Xiangtai WFOE, our PRC subsidiary, and CQ Penglin and JMC, our consolidated variable interest entities, the contractual arrangements between Xiangtai WFOE and CQ Penglin and JMC are not in violation of existing PRC laws, rules and regulations; and these contractual arrangements are valid, binding and enforceable in accordance with their terms and applicable PRC laws and regulations currently in effect. However, our PRC counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations and there can be no assurance that the PRC government will ultimately take a view that is consistent with the opinion of our PRC counsel.

It is uncertain whether any new PRC laws, rules or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. In particular, in January 2015, the Ministry of Commerce, or MOC, published a discussion draft of the proposed Foreign Investment Law for public review and comments. Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. Under the draft Foreign Investment Law, variable interest entities would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors, and be subject to restrictions on foreign investments. However, the draft law has not taken a position on what actions will be taken with respect to the existing companies with the “variable interest entity” structure, whether or not these companies are controlled by Chinese parties. It is uncertain when the draft would be signed into law and whether the final version would have any substantial changes from the draft. See “— Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations” below. If the ownership structure, contractual arrangements and business of our company, Xiangtai WFOE, CQ Penglin or JMC are found to be in violation of any existing or future PRC laws or regulations, or we fail to obtain or maintain any of the required permits or approvals, the relevant governmental authorities would have broad discretion in dealing with such violation, including levying fines, confiscating our income or the income of Xiangtai WFOE, CQ Penglin and JMC, revoking the business licenses or operating licenses of Xiangtai WFOE, CQ Penglin or JMC, discontinuing or placing restrictions or onerous conditions on our operations, requiring us to undergo a costly and disruptive restructuring, restricting or prohibiting our use of proceeds from our initial public offering to finance our business and operations in China, and taking other regulatory or enforcement actions that could be harmful to our business. Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of CQ Penglin and JMC, and/or our failure to receive economic benefits from CQ Penglin and JMC, we may not be able to consolidate their results into our consolidated financial statements in accordance with U.S. GAAP.

We rely on contractual arrangements with CQ Penglin, JMC and Fu Tong Ge, the consolidated variable interest entities, for a portion of our business operations, which may not be as effective as direct ownership in providing operational control.

We have relied, and expect to continue to rely, on contractual arrangements with CQ Penglin, JMC and Fu Tong Ge and their respective shareholders to operate our business. For a description of these contractual arrangements, see our Corporate History and Structure. These contractual arrangements may not be as effective as direct ownership in providing us with control over the consolidated variable interest entities. For example, CQ Penglin, JMC and Fu Tong Ge and their respective shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations, including maintaining our website and using the domain names and trademarks, in an acceptable manner or taking other actions that are detrimental to our interests.

If we had direct ownership of CQ Penglin, JMC and Fu Tong Ge, we would be able to exercise our rights as a shareholder to effect changes in the respective board of directors of CQ Penglin, JMC and Fu Tong Ge, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by CQ Penglin, JMC and Fu Tong Ge, and their respective shareholders of their obligations under the contracts. The shareholders of CQ Penglin, JMC and Fu Tong Ge may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate our business through the contractual arrangements with CQ Penglin, JMC and Fu Tong Ge. Although we have the right to replace any shareholder of CQ Penglin and JMC under their respective contractual arrangements, if any shareholder of CQ Penglin, JMC or Fu Tong Ge is uncooperative or any dispute

22

relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of PRC laws and arbitration, litigation and other legal proceedings and therefore will be subject to uncertainties in the PRC legal system. Therefore, our contractual arrangements with CQ Penglin, JMC and Fu Tong Ge, the consolidated variable interest entities, may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.

Any failure by CQ Penglin, JMC or Fu Tong Ge, the consolidated variable interest entities, or their respective shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.

If CQ Penglin, JMC or Fu Tong Ge, the consolidated variable interest entities, or their respective shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective under PRC laws. For example, if the shareholders of CQ Penglin, JMC or Fu Tong Ge were to refuse to transfer their respective equity interests in CQ Penglin, JMC or Fu Tong Ge to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations.

All the agreements under our contractual arrangements are governed by PRC laws and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a consolidated variable interest entity should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings by arbitrators are final and parties cannot appeal arbitration results in court unless such rulings are revoked or determined unenforceable by a competent court. If the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective control over the consolidated variable interest entities, and our ability to conduct our business may be negatively affected, our securities may decline in value or become worthless.

The respective shareholders of CQ Penglin, JMC and Fu Tong Ge, the consolidated variable interest entities, may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

The interests of respective shareholders of CQ Penglin, JMC or Fu Tong Ge may differ from the interests of our company as a whole. These shareholders may breach, or cause CQ Penglin, JMC or Fu Tong Ge to breach, the existing contractual arrangements we have with them and CQ Penglin, JMC or Fu Tong Ge, which would have a material adverse effect on our ability to effectively control CQ Penglin, JMC or Fu Tong Ge, as applicable, and receive economic benefits from such entity. For example, the shareholders may be able to cause an agreement with CQ Penglin, JMC or Fu Tong Ge to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor.

Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that we could exercise our purchase option under the exclusive option agreement with these shareholders to request them to transfer all of their equity interests in any of CQ Penglin, JMC or Fu Tong Ge to a PRC entity or individual designated by us, to the extent permitted by PRC laws. If we cannot resolve any conflict of interest or dispute between us and the shareholders of any of CQ Penglin, JMC or Fu Tong Ge, we would have to rely on legal proceedings, which could result in the disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings. Additionally, our securities may decline in value or become worthless if we are unable to

23

assert our contractual control rights over the assets of any of the consolidated variable interest entities that conduct a significant portion of our operations.

Contractual arrangements in relation to CQ Penglin, JMC and Fu Tong Ge, the consolidated variable interest entities, may be subject to scrutiny by the PRC tax authorities and they may determine that we or CQ Penglin, JMC or Fu Tong Ge owe additional taxes, which could negatively affect our financial condition and the value of your investment.

Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. The PRC Enterprise Income Tax Law requires every enterprise in China to submit its annual enterprise income tax return together with a report on transactions with its related parties to the relevant tax authorities. The tax authorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistent with arm’s length principles. We may face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements between Xiangtai WFOE and Gangyixing WFOE, our wholly-owned subsidiaries in China, CQ Penglin, JMC and Fu Tong Ge, the consolidated variable interest entities in China, and the respective shareholders of CQ Penglin, JMC and Fu Tong Ge, were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust Xiangtai WFOE’s or Gangyixing WFOE’s income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by CQ Penglin, JMC and Fu Tong Ge for PRC tax purposes, which could in turn increase its tax liabilities without reducing Xiangtai WFOE’s or Gangyixing WFOE’s tax expenses. In addition, if Xiangtai WFOE or Gangyixing WFOE request the shareholders of CQ Penglin, JMC or Fu Tong Ge, as the case may be, to transfer their equity interests in CQ Penglin, JMC or Fu Tong Ge, as the case may be, at nominal or no value pursuant to these contractual arrangements, such transfer could be viewed as a gift and subject Xiangtai WFOE or Gangyixing WFOE to PRC income tax. Furthermore, the PRC tax authorities may impose late payment fees and other penalties on CQ Penglin, JMC and\or Fu Tong Ge for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially and adversely affected if the consolidated variable interest entities’ tax liabilities increase or if they are required to pay late payment fees and other penalties.

We may lose the ability to use and benefit from assets held by CQ Penglin, JMC and Fu Tong Ge, the consolidated variable interest entities, that are material to the operation of our business if the entity goes bankrupt or becomes subject to a dissolution or liquidation proceeding.

CQ Penglin, JMC and Fu Tong Ge, the consolidated variable interest entities, holds certain assets that are material to the operation of our business, including domain names and an ICP license. Under the contractual arrangements, the consolidated variable interest entities may not and their respective shareholders may not cause it to, in any manner, sell, transfer, mortgage or dispose of its assets or its legal or beneficial interests in the business without our prior consent. However, in the event any of CQ Penglin’s, JMC’s or Fu Tong Ge’s shareholders breach these contractual arrangements and voluntarily liquidate CQ Penglin, JMC or Fu Tong Ge, or CQ Penglin, JMC or Fu Tong Ge declares bankruptcy, and all or part of any such entity’s assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If any of CQ Penglin, JMC or Fu Tong Ge undergoes a voluntary or involuntary liquidation proceeding, independent third-party creditors may claim rights to some or all of such entity’s  assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

If the chops of Xiangtai WFOE, Gangyixing WFOE, GA Yongpeng and CQ Pengmei, our PRC subsidiaries, CQ Penglin, JMC and Fu Tong Ge, the consolidated variable interest entities, are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised.

In China, a company chop or seal serves as the legal representation of the company towards third parties, even when unaccompanied by a signature. Each legally registered company in China is required to maintain a company chop, which must be registered with the local Public Security Bureau. In addition to this mandatory company chop, companies may have several other chops which can be used for specific purposes. The chops of Xiangtai WFOE, Gangyixing WFOE,

24

GA Yongpeng and CQ Pengmei, our PRC subsidiaries, and CQ Penglin, JMC and Fu Tong Ge, the consolidated variable interest entities, are generally held securely by personnel designated or approved by us in accordance with our internal control procedures. To the extent those chops are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate entities may be bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite power and authority to do so. In addition, if the chops are misused by unauthorized persons, we could experience disruption to our normal business operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve while distracting management from our operations.

The laws of the Cayman Islands may not provide our shareholders with benefits comparable to those provided to shareholders of corporations incorporated in the United States.

We are a Cayman Islands exempted company with limited liability. Our corporate affairs are governed by our Articles of Association (as may be amended and restated from time to time) and by the laws of the Cayman Islands. The rights of shareholders and the responsibilities of members of our board of directors may be different from the rights of shareholders and responsibilities of directors in companies governed by the laws of U.S. jurisdictions. In particular, as a matter of Cayman Islands law, directors of a Cayman Islands company owe fiduciary duties to the company and separately a duty of care, diligence and skill to the company. Under Cayman Islands law, directors and officers owe the following fiduciary duties: (i) a duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole; (ii) a duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; (iii) directors should not improperly fetter the exercise of future discretion; (iv) a duty to exercise powers fairly as between different classes of shareholders; (v) a duty to exercise independent judgment; and (vi) a duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests. Our Articles of Association have modified this last obligation by providing that a director shall be at liberty to vote in respect of any contact or transaction in which the director is so interested provided that the nature of the interest of any director in such transaction shall be disclosed by the director at or prior to its consideration and any vote thereon. Conversely, under Delaware corporate law, a director has a fiduciary duty to the corporation and its stockholders (made up of two components) and the director’s duties prohibit self-dealing by a director and mandate that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. See “Description of Share Capital —Differences in Corporate Law.”

The economic substance legislation of the Cayman Islands may adversely impact us or our operations.

The Cayman Islands, together with several other non-European Union jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Act, (2021 Revision) (the “Substance Act”) came into force in the Cayman Islands introducing certain economic substance requirements for in-scope Cayman Islands entities which are engaged in certain “relevant activities,” which, in the case of exempted companies incorporated before January 1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards. As we are a Cayman Islands company, compliance obligations include filing annual notifications for the Company, which needs to state whether we are carrying out any relevant activities and if so, whether we have satisfied economic substance tests to the extent required under the Substance Act. As it is a new regime, it is anticipated that the Substance Act will evolve and be subject to further clarification and amendments. We may need to allocate additional resources to keep updated with these developments, and may have to make changes to our operations in order to comply with all requirements under the Substance Act. Failure to satisfy these requirements may subject us to penalties under the Substance Act.

We are a holding company and may rely on dividends paid by our subsidiaries for our cash needs. Any limitation on the ability of our subsidiaries to make dividend payments to us, or any tax implications of making dividend payments to us, could limit our ability to pay our parent company expenses or pay dividends to holders of our ordinary shares.

We are a holding company and the investors will have ownership in a holding company that does not directly own all of its operation in China. We rely on our PRC subsidiaries and VIEs for our operations in the PRC. We may rely

25

on dividends to be paid by our PRC subsidiaries to fund our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. If either of our PRC subsidiaries or VIEs incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends pursuant to its respective policy or make other distributions to us.

Under PRC laws and regulations, our PRC subsidiaries, each of which is a wholly foreign-owned enterprise in China, may pay dividends only out of its respective accumulated profits, as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital.

Our PRC subsidiaries generate primarily all of their revenue in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of either of our PRC subsidiaries to use its Renminbi revenues to pay dividends to us. The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be implemented by State Administration of Foreign Exchange (the “SAFE”) for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Risks Related to Doing Business in the People’s Republic of China

Changes in political, social and economic policies in any of China, the U.S. or Europe may materially and adversely affect our business, financial condition, results of operations and prospects.

Our business operations are primarily conducted in China. Accordingly, we are affected by the economic, political and legal environment in China.

In particular, China’s economy differs from the economies of most developed countries in many respects, including the fact that it:

● has a high level of government involvement;

● is in the early stages of development of a market-oriented economy;

● has experienced rapid growth; and

● has a tightly controlled foreign exchange policy.

China’s economy has been transitioning from a planned economy towards a more market-oriented economy. However, a substantial portion of productive assets in China remain state-owned and the PRC government exercises a high degree of control over these assets. In addition, the PRC government continues to play a significant role in regulating industrial development by imposing industrial policies. For the past three decades, the PRC government has implemented economic reform measures to emphasize the utilization of market forces in economic development.

26

China’s economy has grown significantly in recent years; however, there can be no assurance that such growth will continue. The PRC government exercises control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Some of these measures benefit the overall economy of China, but may also have a negative effect on our business. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us. As such, our future success is, to some extent, dependent on the economic conditions in China, and any significant downturn in market conditions may materially and adversely affect our business prospects, financial condition, results of operations and prospects.

China’s legal system is evolving and has inherent uncertainties that could limit the legal protection available to you.

We have all of our operations in China. The legal system of China is a civil law system based on written statutes. Unlike common law systems, it is a system in which prior court decisions have limited value as precedents. Since 1979, the PRC government has promulgated laws and regulations governing economic matters in general, such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, China has not developed a fully integrated legal system. Recently-enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published cases and their non-binding nature, interpretation and enforcement of these newer laws and regulations involve greater uncertainties than those in jurisdictions available to you. In addition, China’s legal system is based in part on government policies and administrative rules and many have retroactive effects. We cannot predict the effect of future developments in China’s legal system, including the promulgation of new laws, changes to existing laws, or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws.

Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to us.

The PRC legal system is based on written statutes and prior court decisions have limited value as precedents. Since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves uncertainties.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and adversely affect our business and impede our ability to continue our operations.

Any actions by Chinese government, including any decision to intervene or influence our operations or to exert control over any offering of securities conducted overseas and/or foreign investment in China-based issuers, may cause us to make material changes to our operations, may limit or completely hinder our ability to offer or continue to offer securities to investors, and may cause the value of such securities to significantly decline or be worthless.

The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be impaired by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, foreign investment limitations and other matters. The central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. As such, the Company’s business segments may be subject to various government and regulatory interference in the provinces in which they operate. The Company could be subject

27

to regulation by various political and regulatory entities, including various local and municipal agencies and government sub-divisions. The Company may incur increased costs necessary to comply with existing and newly adopted laws and regulations or penalties for any failure to comply.

Furthermore, it is uncertain when and whether the Company will be required to obtain permission from the PRC government to list on U.S. exchanges in the future, and even when such permission is obtained, whether it will be denied or rescinded. Although the Company believes it is currently not required to obtain permission from any of the PRC central or local government and has not received any notice of denial of permission to list on the U.S. exchange, our operations could be adversely affected, directly or indirectly, by existing or future laws and regulations relating to its business or industry, particularly in the event permission to list on U.S. exchanges may be later required, or withheld or rescinded once given.

On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a document announcing the intent to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. Since this initiative is relatively new, uncertainties still exist in relation to how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on our future business combination with a company with major operations in China.

The China Securities Regulatory Commission and other Chinese government agencies may exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers. Additional compliance procedures may be required in connection with this offering and our business combination process, and, if required, we cannot predict whether we will be able to comply with such procedures. As a result, both you and we face uncertainty about future actions by the PRC government that could significantly affect our ability to offer or continue to offer securities to investors and any such future actions may cause the value of our securities to significantly decline or be worthless.

We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.

We are a holding company incorporated in the Cayman Islands, and we rely on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. In addition, the PRC tax authorities may require a WFOE to adjust its taxable income under the contractual arrangements currently in place with the consolidated variable interest entities in a manner that would materially and adversely affect their ability to pay dividends and other distributions to us. Contractual arrangements in relation to CQ Penglin, JMC and Fu Tong Ge, the consolidated variable interest entities, may be subject to scrutiny by the PRC tax authorities and such PRC tax authorities may determine that we, or the consolidated variable interest entities, owe additional taxes, which could negatively affect our financial condition and the value of your investment.”

Under PRC laws and regulations, our PRC subsidiaries, as wholly foreign-owned enterprises in China, may pay dividends only out of their respective accumulated after-tax profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends.

28

Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business. If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.

Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our ordinary shares.

Substantially all of our revenues and expenditures are denominated in RMB, whereas our reporting currency is the U.S. dollar. As a result, fluctuations in the exchange rate between the U.S. dollar and RMB will affect the relative purchasing power in RMB terms of our U.S. dollar assets. Our reporting currency is the U.S. dollar while the functional currency for our PRC subsidiaries and consolidated variable interest entities is RMB. Gains and losses from the remeasurement of assets and liabilities that are receivable or payable in RMB are included in our consolidated statements of operations. The remeasurement has caused the U.S. dollar value of our results of operations to vary with exchange rate fluctuations, and the U.S. dollar value of our results of operations will continue to vary with exchange rate fluctuations. A fluctuation in the value of RMB relative to the U.S. dollar could reduce our profits from operations and the translated value of our net assets when reported in U.S. dollars in our financial statements. This could have a negative impact on our business, financial condition or results of operations as reported in U.S. dollars. If we decide to convert our RMB into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us. In addition, fluctuations in currencies relative to the periods in which the earnings are generated may make it more difficult to perform period-to-period comparisons of our reported results of operations.

The value of the RMB against the U.S. dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following three years. However, the PBOC regularly intervenes in the foreign exchange market to limit fluctuations in RMB exchange rates and achieve policy goals. During the period between July 2008 and June 2010, the exchange rate between the RMB and the U.S. dollar had been stable and traded within a narrow range. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably. Since October 1, 2016, Renminbi has joined the International Monetary Fund (IMF)’s basket of currencies that make up the Special Drawing Right (SDR), along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2019, the RMB has depreciated significantly in the backdrop of the trade war between the U.S. and China and of the weak performance of Chinese stock market as compared with U.S. indexes. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the exchange rate system and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.

There remains significant international pressure on the PRC government to adopt a flexible currency policy. Any significant appreciation or depreciation of the RMB may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our ordinary shares in U.S. dollars.

Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on the price of our ordinary shares.

29

Governmental control of currency conversion may limit our ability to utilize our net revenues effectively and affect the value of your investment.

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our net revenues in RMB. Under our current corporate structure, our company in the Cayman Islands relies on dividend payments from our PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by the beneficial owners of our company who are PRC residents. But approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies.

In light of the flood of capital outflows of China in 2016 due to the weakening RMB, the PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny of major outbound capital movement. More restrictions and substantial vetting process are put in place by SAFE to regulate cross-border transactions falling under the capital account. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.

Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.

We are required under PRC laws and regulations to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations.

Currently, we are making contributions to the plans based on the minimum standards although the PRC laws required such contributions to be based on the actual employee salaries up to a maximum amount specified by the local government. Therefore, in our consolidated financial statements, we have made an estimate and accrued a provision in relation to the potential make-up of our contributions for these plans as well as to pay late contribution fees and fines. If we are subject to late contribution fees or fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.

The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in August 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex, including requirements in some instances that the MOC be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. Moreover, the Anti-Monopoly Law requires that the MOC shall be notified in advance of any concentration of undertaking if certain thresholds are triggered. In addition, the security review rules issued by the MOC that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the MOC, and the

30

rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the MOC or its local counterparts may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.

SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, in July 2014 that requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. SAFE Circular 37 is issued to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75. SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015. This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

If our shareholders who are PRC residents or entities do not complete their registration as required, our PRC subsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiaries. Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.

Ms. Zeshu Dai entered into an entrustment agreement with Magic Pace Limited, who is currently the sole shareholder of China Meitai Food Co., Ltd. According to the Entrustment Agreement, Magic Pace Limited entrusted its voting power, personnel appointment power and other power related to operating and managing of China Meitai Food Co., Ltd., and therefore effectively the control of our company, to Ms. Dai to the extent permitted by the laws of the British Virgin Islands.

Ms. Dai also entered into a call option agreement with Magic Pace Limited. Pursuant to the call option agreement, Magic Pace Limited granted Ms. Dai an option to acquire 97.74% of the shares of China Meitai Food Co., Ltd. exercisable from the closing date of the initial public offering of the Company. In September 2020, Ms. Dai exercise the option. Therefore, Ms. Dai is deemed the beneficial owner of all the ordinary shares held by China Meitai Food Co., Ltd. In additional, Ms. Dai directly owns 290,000 ordinary shares. As a result, Ms. Dai beneficially owns 9,000,000 ordinary shares.

Because there are no guidelines or rulings in respect of the arrangements under the call option agreement and the entrustment agreement between Magic Pace Limited and Ms. Dai, our PRC lawyer suggested it may not be deemed as associated with the acquisition of the special purpose vehicle (“SPV”) and Ms. Dai has no liability to register the arrangements according to Circular 37 with a qualified local bank. However, if the local SAFE dissented our PRC counsel’s opinion on the arrangement Magic Pace Limited and Ms. Dai, Ms. Dai may be requested by local SAFE to register retrospectively pursuant to Circular 37 and may be subject to administrative punishment pursuant to the related law.

However, we may not be informed of the identities of all the PRC residents or entities holding a direct or indirect interest in our company, nor can we compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents or entities have

31

complied with, and will in the future make or obtain any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners to comply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiaries, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiaries’ ability to make distributions or pay dividends to us or affect our ownership structure, which could adversely affect our business and prospects.

If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.

We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. See “Item 10. Additional Information – E. Taxation – People’s Republic of China Taxation.” However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” As substantially all of our management members are based in China, it remains unclear how the tax residency rule will apply to our case. If the PRC tax authorities determine that China Xiangtai Food Co., Ltd. or any of our subsidiaries outside of China is a PRC resident enterprise for PRC enterprise income tax purposes, then China Xiangtai Food Co., Ltd. or such subsidiary could be subject to PRC tax at a rate of 25% on its world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, if the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, gains realized on the sale or other disposition of our ordinary shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on the investment in our ordinary shares.

We may not be able to obtain certain benefits under relevant tax treaty on dividends paid by our PRC subsidiaries to us through our Hong Kong subsidiaries.

We are an exempted company incorporated under the laws of the Cayman Islands and as such rely on dividends and other distributions on equity from our PRC subsidiaries to satisfy part of our liquidity requirements. Pursuant to the PRC Enterprise Income Tax Law, a withholding tax rate of 10% currently applies to dividends paid by a PRC “resident enterprise” to a foreign enterprise investor, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for preferential tax treatment. Pursuant to the Arrangement between the Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, such withholding tax rate may be lowered to 5% if a Hong Kong resident enterprise

32

owns no less than 25% of a PRC enterprise. Furthermore, the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Tax Treaties, which became effective in August 2015, require non-resident enterprises to determine whether they are qualified to enjoy the preferential tax treatment under the tax treaties and file relevant report and materials with the tax authorities. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. See “Item 10. Additional Information — E. Taxation — People’s Republic of China Taxation.” As of June 30, 2020 and 2019, we did not record any withholding tax on the retained earnings of our subsidiaries in the PRC as we intended to re-invest all earnings generated from our PRC subsidiaries for the operation and expansion of our business in China, and we intend to continue this practice in the foreseeable future. Should our tax policy change to allow for offshore distribution of our earnings, we would be subject to a significant withholding tax. We cannot assure you that our determination regarding our qualification to enjoy the preferential tax treatment will not be challenged by the relevant tax authority or we will be able to complete the necessary filings with the relevant tax authority and enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement with respect to dividends to be paid by our PRC subsidiaries to Keen Point and Fortunes Capital HK, our Hong Kong subsidiaries.

Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.

The PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of certain taxable assets, including, in particular, equity interests in a PRC resident enterprise, by a non-resident enterprise by promulgating and implementing SAT Circular 59 and Circular 698, which became effective in January 2008, and a Circular 7 in replacement of some of the existing rules in Circular 698, which became effective in February 2015.

Under Circular 698, where a non-resident enterprise conducts an “indirect transfer” by transferring the equity interests of a PRC “resident enterprise” indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may be subject to PRC enterprise income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial purposes. As a result, gains derived from such indirect transfer may be subject to PRC tax at a rate of up to 10%. Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

In February 2015, the SAT issued Circular 7 to replace the rules relating to indirect transfers in Circular 698. Circular 7 has introduced a new tax regime that is significantly different from that under Circular 698. Circular 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular 698 but also transactions involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company. In addition, Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. Circular 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise.

We face uncertainties on the reporting and consequences on future private equity financing transactions, share exchange or other transactions involving the transfer of shares in our company by investors that are non-PRC resident enterprises. The PRC tax authorities may pursue such non-resident enterprises with respect to a filing or the transferees with respect to withholding obligation, and request our PRC subsidiaries to assist in the filing. As a result, we and non-resident enterprises in such transactions may become at risk of being subject to filing obligations or being taxed, under Circular 59 or Circular 698 and Circular 7, and may be required to expend valuable resources to comply with Circular 59,

33

Circular 698 and Circular 7 or to establish that we and our non-resident enterprises should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.

The PRC tax authorities have the discretion under SAT Circular 59, Circular 698 and Circular 7 to make adjustments to the taxable capital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment. Although we currently have no plans to pursue any acquisitions in China or elsewhere in the world, we may pursue acquisitions in the future that may involve complex corporate structures. If we are considered a non-resident enterprise under the PRC Enterprise Income Tax Law and if the PRC tax authorities make adjustments to the taxable income of the transactions under SAT Circular 59 or Circular 698 and Circular 7, our income tax costs associated with such potential acquisitions will be increased, which may have an adverse effect on our financial condition and results of operations.

There are uncertainties under the PRC laws relating to the procedures for U.S. regulators to investigate and collect evidence from companies located in the PRC.

According to Article 177 of the newly amended PRC Securities Law which became effective in March 2020 (the “Article 177”), the securities regulatory authority of the PRC State Council may collaborate with securities regulatory authorities of other countries or regions in order to monitor and oversee cross border securities activities. Article 177 further provides that overseas securities regulatory authorities are not allowed to carry out investigation and evidence collection directly within the territory of the PRC, and that any Chinese entities and individuals are not allowed to provide documents or materials related to securities business activities to overseas agencies without prior consent of the securities regulatory authority of the PRC State Council and the competent departments of the PRC State Council.

Our PRC counsel has advised us of their understanding that (i) the Article 177 is applicable in the limited circumstances related to direct investigation or evidence collection conducted by overseas authorities within the territory of the PRC (in such case, the foregoing activities are required to be conducted through collaboration with, or by obtaining prior consent of, competent Chinese authorities); (ii) the Article 177 does not limit or prohibit the Company, as a company duly incorporated in Cayman Islands to be listed on Nasdaq, from providing the required documents or information to Nasdaq or the SEC pursuant to applicable Listing Rules and U.S. securities laws; and (iii) as the Article 177 is relatively new and there are presently no implementing rules or regulations which have been published regarding application of the Article 177, it remains unclear how the law will be interpreted, implemented or applied by the Chinese Securities Regulatory Commission or other relevant government authorities. As of the date hereof, we are not aware of any implementing rules or regulations which have been published regarding application of Article 177. However, we cannot assure you that relevant PRC government agencies, including the securities regulatory authority of the PRC State Council, would reach the same conclusion as we do. As such, there are uncertainties as to the procedures and time requirement for the U.S. regulators to bring about investigations and evidence collection within the territory of the PRC.

Our principal business operation is conducted in the PRC. In the event that the U.S. regulators carry out investigation on us and there is a need to conduct an investigation or collect evidence within the territory of the PRC, the U.S. regulators may not be able to carry out such investigation or evidence collection directly in the PRC under the PRC laws. The U.S. regulators may consider cross-border cooperation with securities regulatory authority of the PRC by way of judicial assistance, diplomatic channels or regulatory cooperation mechanism established with the securities regulatory authority of the PRC.

The recent joint statement by the SEC and the Public Company Accounting Oversight Board (United States), or the “PCAOB,” proposed rule changes submitted by Nasdaq and the Holding Foreign Companies Accountable Act all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our offering.

On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the risks associated with investing in companies based in or have substantial operations in emerging markets including China. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.

34

On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.

On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 2, 2020, the U.S. House of Representatives approved the Holding Foreign Companies Accountable Act. On December 18, 2020, the Holding Foreign Companies Accountable Act was signed into law.

On March 24, 2021, the SEC announced that it had adopted interim final amendments to implement congressionally mandated submission and disclosure requirements of the Act. The interim final amendments will apply to registrants that the SEC identifies as having filed an annual report on Forms 10-K, 20-F, 40-F or N-CSR with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. The SEC will implement a process for identifying such a registrant and any such identified registrant will be required to submit documentation to the SEC establishing that it is not owned or controlled by a governmental entity in that foreign jurisdiction, and will also require disclosure in the registrant’s annual report regarding the audit arrangements of, and governmental influence on, such a registrant.

On June 22, 2021, the U.S. Senate passed a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the Holding Foreign Companies Accountable Act from three years to two.

The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause existing and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

Our current and previous auditors, the independent registered public accounting firms that issue the audit reports included elsewhere in this prospectus, are registered with the PCAOB and are subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess our auditor’s compliance with the applicable professional standards. Each of our current and previous auditors is headquartered in the United States and is subject to inspection by the PCAOB on a regular basis.

However, the recent developments would add uncertainties to our offering and we cannot assure you whether Nasdaq or regulatory authorities would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach or experience as it relates to the audit of our financial statements. It remains unclear what the SEC’s implementation process related to the March 2021 interim final amendments will entail or what further actions the SEC, the PCAOB or Nasdaq will take to address these issues and what impact those actions will have on U.S. companies that have significant operations in the PRC and have securities listed on a U.S. stock exchange. In addition, the March 2021 interim final amendments and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could create some uncertainty for investors, the market price of our ordinary shares could be adversely affected. Trading of our securities may be prohibited and, as a result, we could be delisted. If we and our auditors are unable to meet the PCAOB inspection requirements or we are required to engage a new audit firm, any such determination would require significant expense and management time.

35

The approval of the China Securities Regulatory Commission may be required in connection with this offering, and, if required, we cannot predict whether we will be able to obtain such approval.

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange.

Our PRC counsel has advised us that, based on their understanding of the current PRC laws, rules and regulations, the CSRC’s approval is not required for the listing and trading of our ordinary shares on Nasdaq in the context of this offering, given that: (i) our PRC subsidiaries were incorporated as a wholly foreign-owned enterprise by means of direct investment rather than by merger or acquisition of equity interest or assets of a PRC domestic company owned by PRC companies or individuals, as defined under the M&A Rules, that are our beneficial owners; (ii) the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this prospectus are subject to the M&A Rules; and (iii) no provision in the M&A Rules clearly classifies contractual arrangements as a type of transaction subject to the M&A Rules.

However, our PRC counsel has further advised us that there remain some uncertainties as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC government agencies, including the CSRC, would reach the same conclusion as we do. If it is determined that CSRC approval is required for this offering, we may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek CSRC approval for this offering. These sanctions may include fines and penalties on our operations in the PRC, limitations on our operating privileges in the PRC, delays in or restrictions on the repatriation of the proceeds from this offering into the PRC, restrictions on, or prohibition of, the payments or remittance of dividends by our PRC subsidiary, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ordinary shares. Furthermore, the CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt this offering before the settlement and delivery of the ordinary shares that we are offering. Consequently, if you engage in market trading or other activities in anticipation of, and prior to the settlement and delivery of, the ordinary shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur.

PRC regulation of loans to and direct investment in PRC entities by offshore holding companies to PRC entities may delay or prevent us from making loans or additional capital contributions to our PRC operating subsidiaries.

As an offshore holding company of our PRC subsidiaries, we may make loans to our PRC subsidiaries and the VIEs and, or may make additional capital contributions to our PRC subsidiaries, subject to satisfaction of applicable governmental registration and approval requirements.

Any loans we extend to our PRC subsidiaries, which are treated as foreign-invested enterprises under PRC law, cannot exceed the statutory limit and must be registered with the local counterpart of the SAFE.

We may also decide to finance our PRC subsidiaries by means of capital contributions. According to the relevant PRC regulations on foreign-invested enterprises in China, these capital contributions are subject to registration with or approval by the  MOC or its local counterparts. In addition, the PRC government also restricts the convertibility of foreign currencies into Renminbi and the use of the proceeds therefrom. On March 30, 2015, SAFE promulgated Circular 19, which took effect and replaced certain previous SAFE regulations from June 1, 2015. SAFE further promulgated Circular 16, effective on June 9, 2016, which, among other things, amend certain provisions of Circular 19. According to SAFE Circular 19 and SAFE Circular 16, the flow and use of the Renminbi capital converted from foreign currency denominated registered capital of a foreign-invested company is regulated such that Renminbi capital may not be used for business beyond its business scope or to provide loans to persons other than affiliates unless otherwise permitted under its business scope. Violations of the applicable circulars and rules may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Regulations. If any of the VIEs requires financial support from us or our wholly-

36

owned subsidiaries in the future and we find it necessary to use foreign currency-denominated capital to provide such financial support, our ability to fund such VIE’s operations will be subject to statutory limits and restrictions, including those described above. These circulars may limit our ability to transfer the net proceeds from this offering to the VIEs and our PRC subsidiaries, and we may not be able to convert the net proceeds from this offering into Renminbi to invest in or acquire any other PRC companies in China. Despite the restrictions under these SAFE circulars, our PRC subsidiaries may use their income in Renminbi generated from their operations to finance the VIEs through entrustment loans to the VIEs or loans to a VIE’s shareholders for the purpose of making capital contributions to such VIE. In addition, our PRC subsidiaries can use Renminbi funds converted from foreign currency registered capital to carry out any activities within their normal course of business and business scope, including to purchase or lease servers and other relevant equipment and fund other operational needs in connection with their provision of services to the relevant VIE under the applicable exclusive technical support agreements.

In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiaries or the VIEs or future capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we expect to receive from this offering and to fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Risks Related to Our Ordinary Shares

Our Chief Executive Officer Zeshu Dai has significant influence over us, including control over decisions that require the approval of shareholders, which could limit your ability to influence the outcome of matters submitted to shareholders for a vote.

Zeshu Dai directly owns 290,000 ordinary shares and beneficially owns 8,710,000 ordinary shares through China Meitai Food Co., Ltd., a British Virgin Islands company. Zeshu Dai beneficially owns 9,000,000 ordinary shares, which is 21.78% of our issued and outstanding ordinary shares as of the date of this annual report.

As long as Zeshu Dai owns or control a significant amount of our outstanding voting power, she has the ability to exercise substantial control over all corporate actions requiring shareholder approval, irrespective of how our other shareholders may vote, including:

● the election and removal of directors and the size of our board of directors;

● any amendment of our memorandum or articles of association; or

● the approval of mergers, consolidations and other significant corporate transactions, including a sale of substantially all of our assets.

Moreover, beneficial ownership of our ordinary shares by Zeshu Dai may also adversely affect the trading price for our ordinary shares to the extent investors perceive disadvantages in owning shares of a company with a controlling shareholder.

We will incur additional costs as a result of becoming a public company, which could negatively impact our net income and liquidity.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, Sarbanes-Oxley and rules and regulations implemented by the SEC and the Nasdaq Capital Market require significantly heightened corporate governance practices for public companies. We expect that these rules and regulations will increase our legal, accounting and financial compliance costs and will make many corporate activities more time-consuming and costly.

37

We do not expect to incur materially greater costs as a result of becoming a public company than those incurred by similarly sized U.S. public companies. If we fail to comply with these rules and regulations, we could become the subject of a governmental enforcement action, investors may lose confidence in us and the market price of our ordinary shares could decline.

The obligation to disclose information publicly may put us at a disadvantage to competitors that are private companies.

As a publicly listed company, we are required to file periodic reports with the Securities and Exchange Commission upon the occurrence of matters that are material to our company and shareholders. In some cases, we will need to disclose material agreements or results of financial operations that we would not be required to disclose if we were a private company. Our competitors may have access to this information, which would otherwise be confidential. This may give them advantages in competing with our company. Similarly, as a U.S.-listed public company, we will be governed by U.S. laws that our competitors, which are mostly private Chinese companies, are not required to follow. To the extent compliance with U.S. laws increases our expenses or decreases our competitiveness against such companies, our public listing could affect our results of operations.

We are a “foreign private issuer,” and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects.

We are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime.

As a foreign private issuer, we will also be exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. However, we will still be subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private issuer differs from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies.

As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.

As a company listed on the Nasdaq Capital Market, we are subject to the Nasdaq corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. We have followed and intend to follow Cayman Islands corporate governance practices in lieu of the corporate governance requirements of the New York Stock Exchange that listed companies must obtain its shareholders’ approval of all equity compensation plans and any material amendments to such plans. As a result of our reliance on the “foreign private issuer” exemptions, our shareholders may be afforded less protection than they otherwise would enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.

38

We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our ordinary shares less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although we could lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three-year period, or if the market value of our ordinary shares held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following June 30. We cannot predict if investors will find our ordinary shares less attractive because we may rely on these exemptions. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our stock price may be more volatile.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail our company of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the Nasdaq, impose various requirements on the corporate governance practices of public companies. As a company with less than US$1.07 billion in net revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have elected to “opt out” of the provision that allow us to delay adopting new or revised accounting standards and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class

39

action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

The requirements of being a public company may strain our resources and divert management’s attention.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of the securities exchange on which we list, and other applicable securities rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will nonetheless increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results.

As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, brand and reputation and results of operations.

We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.

The market price of our ordinary shares may be volatile or may decline regardless of our operating performance.

The market price of our ordinary shares may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

● actual or anticipated fluctuations in our revenue and other operating results;

● the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

● actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

● announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

● price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

● lawsuits threatened or filed against us; and

● other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.

In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past,

40

stockholders have filed securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business.

Future issuances or sales, or perceived issuances or sales, of substantial amounts of Shares in the public market could materially and adversely affect the prevailing market price of the Shares and our ability to raise capital in the future.

The market price of our Shares could decline as a result of future sales of substantial amounts of Shares or other securities relating to the Shares in the public market, including by the Company’s substantial shareholders, or the issuance of new Shares by the Company, or the perception that such sales or issuances may occur. Future sales, or perceived sales, of substantial amounts of the Shares could also materially and adversely affect our ability to raise capital in the future at a time and at a price favorable to us, and our Shareholders will experience dilution in their holdings upon our issuance or sale of additional securities in the future.

Future financing may cause a dilution in your shareholding or place restrictions on our operations.

We may need to raise additional funds in the future to finance further expansion of our capacity and business relating to our existing operations, acquisitions or strategic partnerships. If additional funds are raised through the issuance of new equity or equity-linked securities of the Company other than on a pro rata basis to existing Shareholders, the percentage ownership of such Shareholders in the Company may be reduced, and such new securities may confer rights and privileges that take priority over those conferred by the Shares. Alternatively, if we meet such funding requirements by way of additional debt financing, we may have restrictions placed on us through such debt financing arrangements which may:

● further limit our ability to pay dividends or require us to seek consents for the payment of dividends;

● increase our vulnerability to general adverse economic and industry conditions;

● require us to dedicate a substantial portion of our cash flows from operations to service our debt, thereby reducing the availability of our cash flow to fund capital expenditure, working capital requirements and other general corporate needs; and

● limit our flexibility in planning for, or reacting to, changes in our business and our industry.

We do not intend to pay dividends for the foreseeable future.

We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return on your investment in our ordinary shares if the market price of our ordinary shares increases.

We have material weaknesses in our internal control over financial reporting. If any material weakness persists or if we fail to establish and maintain effective internal control over financial reporting, our ability to accurately report its financial results could be adversely affected.

In connection with the preparation of the financial statement for the Company’s Annual Report on Form 20-F for the year ended June 30, 2020, our management evaluated the effectiveness of our internal control over financial reporting as of June 30, 2020 and determined they were not effective as described in Part II. Item 15. “Controls and Procedures” of this Annual Report. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

There can be no assurance that any of our efforts we are implementing, or our internal control over financial reporting generally, will remediate any material weakness or avoid future weaknesses or deficiencies. Any failure to

41

remediate the material weakness and any future weaknesses or deficiencies or any failure to implement required new or improved controls or difficulties encountered in their implementation could cause us to fail to meet its reporting obligations or result in material misstatements in its financial statements. If we are unable to remediate its material weaknesses, our management may not be able to conclude that its disclosure controls and procedures or internal control over financial reporting are effective, which could result in investors losing confidence in its reported financial information and may lead to a decline in the stock price.

Certain judgments obtained against us by our shareholders may not be enforceable.

We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, a majority of our directors and executive officers reside within China, and most of the assets of these persons are located within China. As a result, it may be difficult, impractical or impossible for you to effect service of process within the United States upon us or these individuals, or to bring an action against us or against these individuals in the United States in the event that you believe your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

Any judgment obtained in the federal or state courts of the United States will be recognized and enforced in the courts of the Cayman Islands at common law, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands (the “Grand Court”) if (a) the judgment was given by a foreign court of competent jurisdiction, (b) our company either submitted to the jurisdiction of the foreign court or was resident and carrying on business in the jurisdiction and was duly served with process, (c) the judgment was final and conclusive, (d) the judgment was not in respect of taxes, a fine or a penalty or similar fiscal or revenue obligations imposed on our company, and (e) the judgment was not obtained by fraud and is not of a kind the recognition and enforcement of which would be contrary to the principles of natural justice or public policy in the Cayman Islands. However, the Cayman Islands courts are unlikely to enforce a judgment obtained from the U.S. courts under civil liability provisions of the U.S. federal securities law if such judgment is determined by the courts of the Cayman Islands to give rise to obligations to make payments that are penal or punitive in nature. It is uncertain whether such civil liability judgments from U.S. courts would be enforceable in the Cayman Islands.

The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of reciprocity with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our director and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Law (2018 Revision) of the Cayman Islands (the “Cayman Islands Companies Law”) and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands (other than decisions of the Privy Council in appeals from the Cayman Islands courts). The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully

42

developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Our directors have discretion to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder resolution or to solicit proxies from other shareholders in connection with a proxy contest.

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.

There can be no assurance that we will not be passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which could subject United States investors in our ordinary shares to significant adverse United States income tax consequences.

We will be a “passive foreign investment company,” or “PFIC,” if, in any particular taxable year, either (a) 75% or more of our gross income for such year consists of certain types of “passive” income or (b) 50% or more of the average quarterly value of our assets (as determined on the basis of fair market value) during such year produce or are held for the production of passive income (the “asset test”). Although the law in this regard is unclear, we intend to treat CQ Penglin and JMC as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of these entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their results of operations in our consolidated financial statements. Assuming that we are the owner of CQ Penglin and JMC for United States federal income tax purposes, and based upon our income and assets, including goodwill, and the value of our ordinary shares, we do not believe that we were a PFIC for the taxable years ended June 30, 2020, 2019, and 2018 and do not anticipate becoming a PFIC in the foreseeable future.

While we do not expect to become a PFIC, because the value of our assets for purposes of the asset test may be determined by reference to the market price of our ordinary shares, fluctuations in the market price of our ordinary shares may cause us to become a PFIC for the current or subsequent taxable years. The determination of whether we will be or become a PFIC will also depend, in part, on the composition of our income and assets. If we determine not to deploy significant amounts of cash for active purposes or if it were determined that we do not own the stock of CQ Penglin and JMC for United States federal income tax purposes, our risk of being a PFIC may substantially increase. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination made annually after the close of each taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year.

If we are a PFIC in any taxable year, a U.S. holder (as defined in “Item 10. Additional Information — E. Taxation — United States Federal Income Tax Considerations”) may incur significantly increased United States income tax on gain recognized on the sale or other disposition of the ordinary shares and on the receipt of distributions on the ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under the United States federal income tax rules and such holder may be subject to burdensome reporting requirements. Further, if we are a PFIC for any year during which a U.S. holder holds our ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. holder holds our ordinary shares. For more information see “Item 10. Additional Information — E. Taxation — United States Federal Income Tax Considerations — Passive Foreign Investment Company Considerations.”

43

ITEM 4.       INFORMATION ON THE COMPANY

4.A. History and development of the company

Corporate History

We commenced operations in 2005 with the establishment of CQ Penglin. In 2008, we established GA Yongpeng, our wholly owned subsidiary.

In 2015 and 2017, we incorporated Xiangtai BVI, Xiangtai HK and Xiangtai WFOE, our wholly owned subsidiaries, under the laws of the British Virgin Islands, Hong Kong, SAR, and the PRC, respectively.

In October 2017, Xiangtai WFOE entered into a series of contractual agreements with CQ Penglion and shareholders of CQ Penglion, pursuant to which Xiangtai WFOE may exert control over CQ Penglion and consolidate CQ Penglion’s financial statements under U.S. GAAP.

In January 2018, we incorporated Xiangtai Cayman, the ultimate holding company under the laws of the Cayman Islands as part of the restructuring transactions in contemplation of our initial public offering.

In July 2018, we acquired CQ Pengmei. It became a wholly owned subsidiary of Xiangtai WFOE. CQ Pengmei was incorporated on July 27, 2017 in Chongqing under the laws of the People’s Republic of China.

In April 2020, Xiangtai WFOE entered into a series of contractual agreements with JMC and a shareholder of JMV, pursuant to which Xiangtai WFOE may exert control over JMC and consolidate JMC’s financial statements under U.S. GAAP. JMC was incorporated in Chongqing under the laws of the PRC in March 2012.

In December 2019, January 2020 and June 2020, we incorporated China Silanchi, Haochuange WFOE and Gangyixing WFOE, our wholly owned subsidiaries, under the laws of the British Virgin Islands, Hong Kong, SAR, and the PRC, respectively.

In June 2020, Gangyixing WFOE entered into a series of contractual agreements with Fu Tong Ge and shareholders of Fu Tong Ge, pursuant to which Gangyixing WFOE may exert control over Fu Tong Ge and consolidate Fu Tong Ge’s financial statements under U.S. GAAP. Fu Tong Ge was incorporated in November 2019 under the laws of the PRC.

We are a holding company and do not directly own any substantive business operations in the PRC. We currently focus our business operations within the PRC through our VIE, JMC. None of the other subsidiaries or VIEs has substantial operations as of the date of this annual report.

Corporate Information

Our principal executive offices are located at Xinganxian Plaza, Building B, Suite 21-1, Lianglukou, Yuzhong District, Chongqing, People’s Republic of China 400800. The telephone number of our principal executive offices is +86 (023) 86330158. Our registered agent in Cayman Islands is Offshore Business Consulting & Services Limited. Our registered office and our registered agent’s office in Cayman Islands are both at 3rd Floor, Harbour Centre, PO Box 613, Grand Cayman KYl-1107, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc. located at 10 E. 40th Street, 10th Floor, New York, NY 10016. Our corporate website is http://ir.plinfood.com/. The information contained in our website is not a part of this annual report.

The SEC maintains an internet site at http://www.sec.gov that contains reports, information statements, and other information regarding issuers that file electronically with the SEC.

44

4.B. Business overview

China Xiangtai Food Co., Ltd. is holding company established under the laws of the Cayman Islands. We engage in feed raw material (soybean meal and soybean oil) wholesale and retail in China through subsidiaries and consolidated variable interest entities in China. Prior to April 2021, we engaged in pork processing business and have operations across key sections of the industry value chain, including slaughtering, packing, distribution, wholesale, and retail of a variety of fresh pork meat and parts. Prior to February 2020, we operated a grocery store in Chongqing, China that sold our pork and meat products and other consumer goods. In February 2020, we discontinued the operation of our grocery store. In April 2021, we discontinued the meat processing business. See “Item 4. Information on the Company – Discontinued Operations.”

We started the feed raw material wholesale and retail business in April 2020, when Xiangtai Cayman and Xiangtai WFOE entered into a Share Purchase Agreement with JMC and the shareholders of JMC. Pursuant to the Share Purchase Agreement, the Company issued to the JMC shareholder, who owns 51% of JMC’s equity interest, a total of 2,000,000 duly authorized, fully paid and nonassessable ordinary shares of the Company, valued at a price of $3.71 per share, which was the closing price of the Company’s ordinary share on February 4, 2020, for an aggregate purchase price of $7,420,000, subject to the milestones as specified in the Share Purchase Agreement, in exchange for the JMC’s shareholders and JMC entering into certain VIE agreements with Xiangtai WFOE. These VIE agreements were entered into on April 3, 2020. Pursuant to the VIE agreements, Xiangtai WFOE has the right to control, manage and operate JMC in return for a service fee equal to 51% of JMC’s after-tax net income. For more detailed description of the VIE agreements, see “Item 4. Information on the Company – Corporate History and Structure – Contractual Arrangement with CQ Penglin, JMC and Fu Tong Ge – Contractual Arrangements between Xiangtai WFOE and JMC.” We anticipate an opportunity for growth in the feed industry, as the USDA Livestock and Products Annual report for China dated August 7, 2020 projects an increase in swine and feed production in 2021.

Our Products

Through JMC, our variable interest entity, we engage in feed raw material wholesale and retail in China. We purchase feed raw material from manufacturers and retail to animal husbandry businesses, feed solution manufacturers and trading companies. JMC has established long-term strategic alliances with Sinograin, a state-owned grain and oil company in China, and has obtained general distributorship of “Fu Dou Lai” brand soybean meal in Chongqing, Sichuan, and neighboring area in China. JMC does not process the soybean meal and soybean oil procured from the suppliers.

Customers and Suppliers

For the year ended June 30, 2021, no customer accounted for more than 10% of the Company’s total revenues. For the year ended June 30, 2020, one customer accounted for 18.7% of the Company’s total revenues.  For the year ended June 30, 2021, one vendor accounted for 77.5% of the Company’s total purchases. For the year ended June 30, 2020, two vendors accounted for 75.6% and 11.5% of the Company’s total purchases. For the year ended June 30, 2019, we did not start our feed raw material business.

Even though our purchases during the past three fiscal years have been mainly from four primary suppliers, we believe soybean meal and soybean oil with the same quality are widely available. If we were unable to purchase from our primary suppliers, we do not expect to face difficulties in locating another supplier at substantially the same price. We have secure and efficient access to all the raw materials necessary for the production of our products. We believe our relationships with the suppliers of these raw materials are strong. While the prices of such raw materials may vary greatly from time to time, we believe we could hedge such risk by adjusting our price, or absorb the higher cost at times if necessary. See “Risk Factors – Risk Related to Our Business and Industry – We rely substantially on external suppliers for soybean meal and soybean oil.”

45

Sales and Marketing

Our sales and marketing activities are conducted through our direct sales force. We maintain close contact with our customers, which allow us to monitor customer requirements and offer additional products or services to meet their needs.

Competition

The feed raw material wholesale and retail industry is highly competitive as the barrier to entry is relatively low. We compete with the manufacturers and other wholesalers and retailers, especially vendors similar to our size and specialize in soybean products. We believe our experience and connection in the industry are our competitive advantages. However, some of our competitors have longer operating histories and significantly greater resources, which could allow them to penetrate deeper in the market. In addition, it is possible that new competitors could emerge and acquire significant market share. See ““Item 3—Key Information—Risk factors - We operated in a highly competitive industry and faced increased competition.”

46

Industry Overview

As China recovers from the African Swine Flu outbreak in 2018 and demand rises from the growing poultry sector, domestic consumption of animal feed is estimated to increase. According to the USDA’s October 2, 2020, Grain and Feed Update Report, China’s 2020-2021 total demand for feed and residual use is projected to be 218.9 million tons, an increase of 6.8 million tons, or 3.2% over 2019-2020. ¹

FAS Beijing Feed and Residual Consumption Estimates and Forecast (MMT)
Grain	2018/19	2019/20	2020/21	Absolute Change
Corn	184	187	190	3
Sorghum	1.5	4.7	6.8	2.1
Barley	2.4	2.4	2.1	-0.3
Wheat	20	18	20	2
Total	207.9	212.1	218.9	6.8

Source: U.S. Department of Agriculture. Grain and Feed Update: People’s Republic of China. October 2020

According to China Animal Feed Market - Forecasts from 2020 to 2025, a research report published in 2020 by Knowledge Sourcing Intelligence, an India-based consulting firm, the Chinese domestic animal feed market is expected to grow at a compound annual growth rate of 4.06% from 2020-2025. ² In addition to increasing demand from the swine and poultry sector, a longer lifecycle of beef production is also expected to contribute the growth of the animal feed market. ³ According to the Knowledge Sourcing Intelligence’s report, government stimulus, relaxation of environmental standards, and higher profits are projected to increase domestic beef production to 7 million metric tons, and increase China’s cattle herd inventory by 2% to 91 million in 2020. ⁴ China’s sustained demand for beef may incentivize larger cattle operations to invest in expansion, which may also increase the consumption and production of animal feed. ⁵

Data from Chinese government agencies supports the expectation of an upward trajectory of domestic animal feed production. In February of 2021, the China Feed Industry Association (CFIA) published the Overview of the Development of the National Feed Industry in 2020. In the CFIA report, the total output value of China’s feed industry was 946.33 billion RMB, which represents an increase of 17.0% from the prior year. The total operating income of the feed industry was 907.28 billion RMB, an increase of 16.6% for the same period. ⁶ Additionally, the total output of commercial feed increased by 10.4% to 252.761 million metric tons, and the total output of feed additives increased by 16% to 13.908 tons. ⁷

¹  See footnote 7.

²  See footnote 8.

³  See footnote 9.

⁴  Id.

⁵  Id.

⁶  See footnote 12.

⁷  Id.

47

Intellectual Property

We rely on certain intellectual property to protect our domestic business interests and ensure our competitive position in our industry. As of June 30, 2021, we had 16 registered trademarks in China and 30 pending trademark applications in China. All of our registered trademarks are owned by, and most of the unregistered trademarks were developed by, CQ Penglin, a variable interest entity, and the other pending trademark applications were made by Xiangtai Cayman. We currently have trademark applications pending, any of which may be the subject of a governmental or third-party objection, which could prevent the registration of the same. See “Risk Factors – Risks Related to Our Business and Industry - We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position” and “- We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.”

Discontinued Operations

Operation of Grocery Store

In July 2018, we acquired CQ Pengmei and opened two grocery stores in Chongqing in November 2017 that offered a variety of consumer goods. One of the grocery stores were closed in August 2018 due to landlord’s failure to meet the fire safety requirements. We filed a lawsuit against the landlord for breach of the store operating lease. The lawsuit is still ongoing. In February 2020, due to the increase in inventory purchase cost and the quarantine restrictions as a result of the COVID-19 pandemic in China, we closed the other grocery store.

Meat Processing

We used to engage in the slaughtering, packing, distribution, wholesale, and retail of a variety of fresh pork meat and parts through CQ Penglin and GA Yongpeng. We used to sell fresh pork to distributors, who then sell to pork vendors in farmers’ market. Due to the African Swine fever started affecting China in October 2018, the supply of hogs had decreased. Also, starting from March 2019, the Chongqing government requires all local slaughtering houses to only purchase hogs from hog farms in Chongqing, which further limited the supply of hogs. The decrease in supply increased the price of hogs and increase our cost of per unit slaughtering and processing. Since January 2020, due to the COVID-19 pandemic and quarantine measures, our sales volume in farmers markets decreased. We were operating at losses during the fiscal year ended June 30, 2020 and 2021. In addition, in March 2021, we ceased operation of the slaughtering and food processing facilities as a result of a legal dispute between CQ Penglin and Chongqing Puluosi Small Mortgage Co., Ltd. The food processing facility was sealed by the court and is subject to a lien. The court ordered sale of this facility to enforce the court verdict against CQ Penglin. The slaughtering facility is subject to the same lien pursuant to the same court order, pursuant to which the facility cannot be sold, transferred or otherwise disposed without approval of the court. See “Item 4. Information on the Company – 4.B. Business Overview – Legal Proceedings – Chongqing Puluosi Small Mortgage Co., Ltd. v. Chongqing Penglin Food Co., Ltd.” As a result, in April 2021, we discontinued the meat processing business.

Legal Proceedings

Our subsidiaries and consolidated variable interest entities, CQ Penglin, CQ Pengmei, GA Yongpeng,  Xiangtai WFOE, JMC, Gangyixing WFOE and Fu Tong Ge are subject to various legal proceedings and claims, including contractual disputes and other commercial disputes, including as described below. Although it is not feasible to predict the outcome of these matters, we believes, unless otherwise indicated below, given the information currently available, that their ultimate resolution will not have a material adverse effect on our financial condition, results of operations and cash flows.

Chongqing Puluosi Small Mortgage Co., Ltd. v. Chongqing Penglin Food Co., Ltd.

On January 2, 2018, CQ Penglin and Chongqing Puluosi Small Mortgage Co., Ltd. (“PLS”) entered into a loan agreement (the “PLS Loan Agreement”), pursuant to which PLS agreed to loan CQ Penglin RMB 20,000,000 (the “PLS Loan”) for a term of one year with annual interest rate of 12% and penalty of 50% of the interest due.

48

On the same day, GA Yongpeng, Zeshu Dai, CEO and Chairwoman of the Company, and her husband, Mingwen Wang, signed a guarantee agreement with PLS, guaranteeing the PLS Loan.

On April 8, 2019, PLS filed a civil complaint at Chongqing Yubei District People’s Court (the “Yubei Court”) and claimed that CQ Penglin should repay principal in the amount of RMB 10,000,000 (the “First Debt”) with interest of RMB 183,333.33 and penalty since November 14, 2018 until the pay-off date.

CQ Penglin defended that action, pursuant to a supplemental agreement executed by PLS, CQ Penglin and other parties in May 2017 and a power of guarantee executed by GLP Finance Leasing (Shanghai) Co., Ltd. (“GLP”), an affiliate of PLS. The First Debt should have been escrowed in an account under the control of Chongqing Bentong Technology Co., Ltd. (“Chongqing Bentong”), designated by GLP, as a guarantee. When the PLS Loan expired, Chongqing Bentong should have wired back the First Debt to CQ Penglin, which should be used to repay PLS. However, CQ Penglin had not received the First Debt from Chongqing Bentong and therefore did not repay the First Debt to PLS.

The case was heard by the Yubei Court on June 19, 2019. On November 13, 2019, the Yubei Court issued a civil mediation letter. The Yubei Court confirmed that CQ Penglin owed PLS a principal of RMB 8,500,000 and interest of RMB 183,333.33, interest penalty (the interest penalty should be calculated based on RMB 8.5 million with 12% interest per year plus 50% interest penalty from November 14, 2018 to the pay-off date) and compound interest (from November 14, 2018 to the pay-off date, calculating based on outstanding interest and interest penalty with 12% interest per year plus 50% interest penalty). Accordingly, RMB 2 million of principal was due before December 31, 2019, RMB 2 million of principal was due before March 31, 2020, RMB 2 million of principal was due before May 31, 2020, RMB 2.5 million of principal, RMB 183,333.33 interest, constituting the total of outstanding interest penalty and compound interest, was due before August 31, 2020 by CQ Penglin to PLS and GA Yongpeng, Mingwen Wang and Zeshu Dai was to be jointly liable for the repayment of the First Debt. CQ Penglin was also required to pay PLS’s attorney’s fee of RMB 250,000, a property guarantee fee of RMB 13,800 and a court fee of RMB 43,900 to PLS before August 31, 2020.

In June 2019, CQ Penglin, GA Yongpeng and other defendants received another civil complaint from PLS, in which PLS complained that CQ Penglin should repay principal RMB 20,000,000 (the “Second Debt”) with interest and a penalty until the pay-off date.

On November 14, 2019, the Intermediate Court issued a civil mediation letter, according to which the Intermediate Court confirmed that CQ Penglin owed PLS principal of RMB 20,000,000, interest of RMB 893,333.33 as of January 2, 2019, compound interest RMB 22,400 within the loan period (the interest calculated based on RMB 20 million with 18% compound interest per year since January 3, 2019), PLS’s attorney’s fee of RMB 500,000, court fee of RMB 74,775 and a property guarantee fee of RMB 22,600. Accordingly, RMB 3 million of principal was due before December 31, 2019, RMB 3 million of principal was due before March 31, 2020, RMB 3 million of principal was due before May 31, 2020, and all of the remaining balance was due before August 31, 2020 by CQ Penglin to PLS and GA Yongpeng, Mingwen Wang, and Zeshu Dai was jointly liable for the repayment of the Second Debt.

On July 27, 2020, in connection with the First Debt and the Second Debt, the court imposed a high level consuming restriction letter on CQ Penglin and Zeshu Dai, the Chairwoman of the Board of Xiangtai Cayman and the legal representative of CQ Penglin.

On March 5, 2021, pursuant to a court order, CQ Penglin suspended its operation within its facilities located in Fulin, Chongqing. The court ordered the sale of CQ Penglin’s facilities to enforce the repayment of the Second Debt and liens attached to assets owned by CQ Penglin. The facility has a processing area of 4,000 square meters, 7 large refrigeration houses of 2,200 square meters, offices and dormitories of 3,000 square meters, and boiler rooms of 200 square meters. The facility was used to produce the Company’s processed meat products, including sausage, bacon, spam, cured pork, and soy sauce braised meats.

In connection with the same legal claim discussed above, the court also attached a lien against a facility of GA Yongpeng located in Linshui County, Sichuan Province, pursuant to which the facility cannot be sold, transferred or otherwise disposed without approval of the court. The facility has a processing area of 28,000 square meters, and is used for hog slaughtering by the company.

49

As of June 30, 2021, CQ Penglin has paid RMB 2,250,000 to PLS for the First Debt. RMB 7,750,000 of the First Debt was outstanding. For the Second Debt, Zeshu Dai has paid RMB 849,990.35 to PLS, Mingwen Wang has paid RMB 343,123.67 to PLS and the Intermediate Court has ordered the seizure of RMB 31,712.25 from CQ Penglin’s account as part of the Second Debt’s repayment. RMB 18,775,173.73 of the Second Debt was outstanding as of June 30, 2021.

Yong Li v. Chongqing Fu Yong Sheng Food Supermarket Co., Ltd. & Guang’an Yongpeng Food Co., Ltd.

On May 7, 2018, Chongqing Fu Yong Sheng Food Supermarket Co., Ltd. (“FYS Supermarket”), GA Yongpeng and Yong Li signed an agreement (the “Agreement”), according to which, FYS Supermarket agreed to buy supermarket equipment owned by Yong Li, for a total price of approximately RMB 1.8 million. FYS Supermarket paid Yong Li RMB 100,000 upon signing the Agreement and agreed to pay the remaining RMB 1.7 million before October 18, 2018, with interest at a rate of 1.5% per month for any balance paid thereafter. GA Yongpeng, an indirect subsidiary of the Company, served as the guarantor for FYS Supermarket in the Agreement.

After the Agreement was signed, Chongqing Yangshida Real Estate Development Co., Ltd. (“Yang Shi Da”) provided FYS Supermarket with a copy of a leasing agreement between itself and Yong Li dated July 4, 2017, claiming that it was the actual owner of the equipment and that Yong Li only had the right to use and not the legal titles to the equipment. Accordingly, Yang Shi Da advised FYS Supermarket to hold the payment to Yong Li. Yang Shi Da also agreed that FYS Supermarket could use the equipment for free.

After FYS Supermarket suspension of the payment, Yong Li filed for pretrial property preservation to the Chongqing Nan’an District People’s Court (the “Nan’an Court”) and Nan’an Court granted pretrial property preservation on November 6, 2018 to freeze GA Yongpeng’s bank account in the amount of RMB 42,920.92. Subsequently, Yong Li filed a lawsuit to the Nan’an Court, requesting FYS Supermarket to pay RMB 1,805,000 yuan, and GA Yongpeng to assume joint liability.

On March 18, 2019, FYS Supermarket and GA Yongpeng sued Yong Li to revoke the agreement on the grounds of Yong Li’s alleged fraudulent representation. On March 21, 2019, FYS Supermarket and GA Yongpeng applied to the Nan’an Court to suspend Yong Li’s lawsuit against them.

On June 11, 2020, Nan’an Court ruled to dismiss the FYS Supermarket and GA Yongpeng’s claim against Yong Li and ruled that FYS Supermarket shall pay Yong Li RMB1,700,000 and the monthly interests rate at 1.5% for the transfer fee and the losses, and Yong Li’s attorney fee in the amount of RMB 20,000. GA Yongpeng shall bear joint and several liability for the above repayment. FYS Supermarket and GA Yongpeng were also required to pay property guarantee fee in the amount of RMB 5,000 and court fee in the amount of RMB 21,045.

On July 14, 2021, Yong Li, FYS Supermarket, GA Yongpeng, Yushaung Yang, Yan Liao and Yong Wang entered into a settlement agreement, pursuant to which FYS Supermarket, GA Yongpeng, Yushaung Yang, Yan Liao and Yong Wang agreed to, jointly and severally, pay RMB 550,000 to Yong Li, RMB 200,000 shall be paid on or before July 30, 2021, RMB 200,000 shall be paid on or before August 30, 2021, and RMB 150,000 shall be paid on or before September 30, 2021. As of the date of this annual report, GA Yongpeng has not made any payment.

Yonghong Chen v. Chongqing Pengmei Supermarket Co., Ltd. v. Hong Zhou & Qingfu Liu

On January 2, 2019, Yonghong Chen sued CQ Pengmei regarding a lease dispute where CQ Pengmei was the lessor and Yonghong Chen was the lessee. In the complaint, Yonghong Chen sought damages in the amount of RMB110,000. CQ Pengmei added Hong Zhou and Qingfu Liu, who leased the property to CQ Pengmei, as third parties to this case.

On April 28, 2020, Chongqing City Beibei District People’s Court (“Beibei Court”) issued a judgement that CQ Pengmei shall return the Performance Bond of RMB 3,750 back to Yonghong Chen; CQ Pengmei shall return the rent of RMB 2,022.22 back to Yonghong Chen; CQ Pengmei shall compensate Yonghong Chen for the loss of RMB 13,882.86 in commodity extrusion, RMB 5,408 in decoration and decoration advertising expenses, and RMB 16,500 for the loss of

50

work, which totals RMB 35,790.86; and CQ Pengmei shall also be responsible for RMB 840 out of RMB 1,250 of the litigation costs.

On May 19, 2020, CQ Pengmei has appealed the case to the Intermediate Court. On July 8, 2020, the Intermediate Court made a judgement that CQ Pengmei shall return the Performance Bond of RMB 3,750 back to Yonghong Chen; CQ Pengmei shall return the rent of RMB 2,022.22 back to Yonghong Chen; CQ Pengmei shall compensate Yonghong Chen for the loss of RMB 13,882.86 in commodity extrusion, RMB 5,408 in decoration and decoration advertising expenses, which totals RMB 19,290.86.

On August 3, 2020, the Beibei Court implemented an excessive spending restriction order on CQ Pengmei.

On December 27, 2018, Hong Zhou and Qingfu Liu sued CQ Pengmei regarding a lease dispute and sought damages in the amount of RMB 797,440 with interests and RMB 10,000 the use of a transformer. Hong Zhou and Qingfu Liu was the lessor and CQ Pengmei was the lessee. On June 18, 2019, CQ Pengmei counterclaimed Hong Zhou and Qingfu Liu for breach of the lease agreement and asked for a total compensation of RMB 2,106,813. On August 28, 2020, Beibei Court ruled to dismiss CQ Pengmei’s counterclaim against Hong Zhou and Qingfu Liu and made the judgement that the lease agreement between CQ Pengmei and Hong Zhou and Qingfu Liu should have terminated on December 31, 2018; CQ Pengmei shall pay the rent of RMB 233,536 to Hong Zhou and Qingfu Liu; CQ Pengmei shall pay occupancy expenses of RMB 11,392 to Hong Zhou and Qingfu Liu; CQ Pengmei shall pay liquidated damages to Hong Zhou and Qingfu Liu, which shall be calculated with RMB 233,536 as the principal and 15% annual interest rate starting from January 2, 2019 until the rent is paid off.

On September 22, 2020, CQ Pengmei has appealed the case to the Intermediate Court. As of the date of this annual report, the Intermediate Court has not scheduled a trial.

Chongqing Beibei Chouzhou Town Bank Co. Ltd. v. Penglin Wang, Mingwen Wang, Chongqing Pengmei Supermarket Co., Ltd., Chongqing Penglin Food Co., Ltd., and Chongqing Education Financing Guarantee Co. Ltd.

On June 4, 2020, Chongqing Beibei Chouzhou Town Bank Co. Ltd.(“Chouzhou Town Bank”) sued CQ Pengmei to repay the loan of Chouzhou Town Bank RMB2,395,058.92 in principal and RMB 20,142.45 in interest.

On September 25, 2020, the Beibei Court issued a civil mediation letter, according to which CQ Pengmei shall repay Chouzhou Town Bank the principal of RMB 2,380,064.92 and RMB 20,142.45 in interest. Accordingly, RMB110,000 of principal and RMB93,446.25 of the interest will be due before October 21, 2020, all the remaining balance shall be repaid for at least RMB100,000 at 21th of each month since November 2020, the repayment shall be completed no later than May 21, 2022. Since November 2020 to May 2022, the interest rate of CQ Pengmei shall pay to Chouzhou Town Bank rises by 50%, which shall be paid before 21th of each month. Penglin Wang, Mingwen Wang, Zeshu Dai, Chongqing Education Financing Guarantee Co. Ltd. and CQ Penglin shall bear joint and several liability for the above repayment.

As of February 18, 2021, CQ Pengmei has paid off all of the debt in the amount of RMB2,398,125.72 to Chouzhou Town Bank and the case has been closed.

Chongqing Dadukou Rongxing Town Bank Co. Ltd. v. Penglin Wang, Mingwen Wang, Chongqing Mingwen Food Co., Ltd., Chongqing Penglin Food Co., Ltd., Yong Wang, Chongqing Fu Yong Sheng Food Supermarket Co., Ltd., Guang’an Yongpeng Food Co., Ltd., Zeshu Dai, and Chongqing Pengmei Supermarket Co., Ltd.

On August 12, 2020, Chongqing Dadukou Rongxing Town Bank Co. Ltd. (“Dadukou Rongxing”) sued CQ Penglin at the Chongqing Dadukou District People’s Court (the “Dadukou Court”) in connection with a loan agreement dated September 20, 2018 between Dadukou Rongxing and CQ Penglin. In the complaint, Dadukou Rongxin requested CQ Penglin to repay the loan of Dadukou Rongxing in the amount of RMB6, 629,447.34, which consists of RMB5,493,839.49 of principal and RMB1,135,607.85 of interest. Penglin Wang, a director of the Company, Mingwen

51

Wang, Chongqing Mingwen Food Co., Ltd., FYS Supermarket, GA Yongpeng, Zeshu Dai, and CQ Pengmei shall bear joint and several liability for the above repayment.

On April 28, 2021, the court ruled in favor of the plaintiff. CQ Penglin shall pay an aggregate of RMB 6,663,550.34 in principal, interest and interest penalty. As of the date of this annual report, CQ Penglin has not made any payment.

Chongqing Puluosi Small Mortgage Co., Ltd. v. Zili Zhang and Chongqing Pengmei Supermarket Co., Ltd.

On August 4, 2020, PLS sued Zili Zhang in connection with a loan agreement between PLS and Zili Zhang dated December 21, 2017. In the complaint, PLS requested Zili Zhang to repay the principal of RMB2,550,000 and the interest of RMB703,870 and CQ Pengmei to bear joint and several liability for the above repayment. On May 17, 2021, the court heard the case. As of the date of this annual report, the court has not issued the verdict.

Chongqing Haobangshou E-Commerce Co., Ltd. v. Chongqing Jinghuangtai Business Management Consulting Co., Ltd., Chongqing Penglin Food Co., Ltd., Guang’an Yongpeng Food Co., Ltd., Chongqing Jinghuangtai Business Management Consulting Co., Ltd. Penglin Wang, Mingwen Wang, and Zeshu Dai

On October 10, 2019, Chongqing Haobangshou E-Commerce Co., Ltd. (“Haobangshou”) entered into a partnership agreement, as supplemented on October 20, 2019 with CQ Penglin, pursuant to which Haobangshou agreed to provide funds to CQ Penglin for purchase of live hogs and CQ Penglin agreed to provide facilities for slaughtering. The parties will share profits of pork sales. On June 28, 2020, CQ Penglin and Haobangshou decided to terminate cooperation. During the term of the agreement, Haobangshoud provided funds in the total amount of RMB 13,140,000 to CQ Penglin. It was agreed that CQ Penglin will pay off the loan within three months from June 28, 2020. On September 25, 2020, CQ Penglin, Zeshu Dai and Mingwen Wang issued a guarantee letter to Haobangshou in connection with repayment of the principal and interest. On June 30, 2021, the court ruled in favor of the Haobangshou. CQ Penglin was ordered to repay RMB 13,140,000 and interest at 12% per annum. Zeshu Dai, Mingwen Wang and Penglin Wang shall bear joint and several liability for the above repayment. As of the date of this annual report, CQ Penglin has not made any payment.

Xiaolong Lai v. Chongqing Penglin Food Co., Ltd., Mingwen Wang, Zeshu Dai

On May 31, 2018, Mr. Xiaolong Lai waired RMB1,000,000 (approximately $154,800) to a third party, Mr. Yifan Pu. On July 5, 2018, Mr. Xiaolong Lai and CQ Penglin entered into a funding agreement, pursuant to which Mr. Lai agreed to loan RMB1,000,000 to CQ Penglin with an interest in 50% of the principal amount. On the same day, CQ Penglin, Ms. Zeshu Dai and Mr. Mingwen Wang issued a receipt of RMB1,000,000 to Mr. Lai. On September 17, 2019, CQ Penglin issued a note to Mr. Lai stating that CQ Penglin owed Mr. Lai RMB1,500,000, of which RMB1,000,000 was the principal and RMB500,000 was the interest, and that the loan shall extend until November 14, 2019. On the same day, Mr. Wang signed a personal guaranty letter to Mr. Lai stating that Mr. Wang would personally guarantee the repayment of principal and interest. On December 10, 2019, Ms. Zeshu Dai paid RMB200,000 to Mr. Lai.

On January 7, 2021, Mr. Lai sued CQ Penglin, Ms. Dai and Mr. Wang. CQ Penglin claimed that it paid Mr. Yifan Pu RMB12,000,000 deposit in connection with another transaction, of which Mr. Pu has only returned RMB7,570,000. CQ Penglin issued the receipt, the note and the guaranty letter because it misunderstood RMB1,000,000 of the amount returned by Mr. Pu was the loan from Mr. Lai. The trial court ruled in favor of Mr. Lai on July 2, 2021. CQ Penglin, Ms. Dai and Mr. Wang appealed on July 12, 2021. On October 8. 2021, the appellate court upheld the trial court’s verdict and ordered CQ Penglin, Ms. Dai and Mr. Wang to pay the principal in the amount of RMB1,000,000 and interest in the rate of 2% per month from January 26, 2019 to August 19, 2020 and four times the LPR in China thereafter. As of the date of this annual report, CQ Penglin has not made any payment.

Regulation

This section sets forth a summary of the most significant rules and regulations that affect our business activities in China.

52

Laws and Regulations Relating to Hog Production and Slaughtering

Animal Epidemic Prevention Requirement

According to the Animal Epidemic Prevention Law of the PRC, which were promulgated by the Standing Committee on July 3, 1997, amended on August 30, 2007 and June 29, 2013, and became effective on January 1, 2008, and Censoring Measures on Conditions for Animal Epidemic Prevention, building an animal breeding farm (small breeding plot) or isolation place, animal slaughtering and processing house, or a place where animals and animal products are given innocuous treatment requires the Certificate of Conformity to the Conditions for Animal Epidemic Prevention from the administrative department for veterinary medicine. Before slaughtering, selling or transporting animals, or selling or transporting animal products, the owner shall submit an application to the local animal health supervision institution for quarantine. Quarantine Certificates will be issued for and quarantine marks will be attached to the animals and animal products that have passed the quarantine. Measures for the Administration of Animal Quarantine, which were promulgated by the MOA on January 21, 2010 and became effective on March 1, 2010, further provide that an examination must be conducted by local authorities on animal-related products, and an Animal Quarantine Certificate must be obtained before distributing such products.

Veterinary Drugs Supervision

According to Regulations on Administration of Veterinary Drugs, which were promulgated by the State Council on April 9, 2004 and became effective on November 1, 2004, it is prohibited to add in animal feedstuffs or drinking water any hormonal drug or other prohibited drugs specified by the administrative department for veterinary medicine under the State Council, administer human medicine to animals, or to sell animal food products that contain illicit drugs or in which the residual amount of veterinary drugs exceeds the limits. The drugs prohibited to be added in animal feedstuffs or drinking water are listed in detail in the List of Drugs Forbidden to be Used in Feeds or Drinking Water of Animals co-promulgated by the MOA, the Ministry of Health, and the State Food and Drug Administration (formerly known as “State Drug Administration”) on March 21, 2002.

Hog Slaughtering Requirement

According to Regulations on Administration of Hog Slaughtering, which were promulgated, amended by the State Council on December 19, 1997 and December 19, 2007, respectively, and became effective on August 1, 2008, and Implementing Measures for Regulations on Administration of Hog Slaughtering, the PRC government implements a system that requires hogs to be slaughtered by designated hog slaughtering plants (houses) and quarantined in a centralized manner. The governments of prefecture-level cities are responsible for issuing the permits and signboards of designated hog slaughtering plants (houses) to the designated plants. A designated hog slaughtering plant (house) is required to:

(1) have a source of water supply that is commensurate with the operation scale of the slaughter and meet the standards for water quality set by the national government authorities;

(2) have stand-by slaughter rooms, slaughter rooms, emergency slaughter rooms, hog slaughter equipment and means of transportation which conform to the requirements prescribed by the national government authorities;

(3) have the technical staff for hog slaughter who have obtained health certificates;

(4) have qualified meat product quality inspectors;

(5) have inspection equipment and sterilization facilities that conform to the requirements prescribed by the government, and the facilities for pollution prevention and control that conform to the environmental protection requirements;

(6) have the facilities for innocuous disposal of diseased hogs and hog products derived therefrom; and

(7) obtain a qualification certificate of animal epidemic prevention.

53

A designated hog slaughtering plant (house) is required to establish a stringent inspection system controlling meat product quality. Inspection of meat product quality must be carried out simultaneously with hog slaughtering, and the inspection results must be recorded truthfully. The records of inspection results must be retained for at least two years. Hog products of a designated hog slaughtering plant (house) shall not leave the plant (house) before they have undergone the inspection process or if they fail such inspection.

Under the above-mentioned laws and regulations, livestock and poultry labels and codes for breeding farms for livestock and poultry and permits and signboards for designated hog slaughtering plants (houses) for hog slaughtering plants (houses) as well as a Certificate of Conformity to the Conditions for Animal Epidemic Prevention are required. Operators are also required to abide by the relevant requirements with respect to the operation of breeding farms and designated hog slaughtering plants. Violation of these requirements or failure to obtain relevant permits would lead to a series of penalties, including confiscation of the products, instruments and earnings, imposition of fines, revocation of the permits, and/or even criminal liabilities.

Laws and Regulations Relating to the Food Industry in General

Food Safety in General

According to the Food Safety Law of the PRC (the “Food Safety Law”), which was promulgated by the Standing Committee on February 28, 2009 and became effective on June 1, 2009, and the Implementing Regulations for the Food Safety Law of the PRC, which were promulgated by the State Council on July 20, 2009 and became effective on the same day, the quality supervision authorities and the industry and commerce administration authorities under the State Council are responsible for supervising and administering food production and distribution, respectively. The public health authority under the State Council is responsible for the formulation and publication of national food-safety standards. The Food Safety Law and its implementing regulations require:

(1) food producers and distributors to apply for the food production licenses and food distribution licenses, respectively, provided that a food producer who has obtained a food production licenses does not need to obtain a food distribution license for selling the food produced by it at its production facilities;

(2) food production and operation to comply with food-safety standards and certain other requirements. Food producers shall not purchase or use raw food materials, food additives or food related products which do not meet food-safety standards;

(3) each food producer or trader to establish and implement a personnel health management system. Each worker who engages in food production or trading worker is required to take a physical examination each year and obtain health certificate prior to working;

(4) food producers to check the licenses and food eligibility certification documents of their suppliers before purchasing raw food materials, food additives and food-related products from them. Each food production enterprise shall establish a procurement check record system and a food ex-factory check record system and ensure the records are authentic and retained for at least two years; and

(5) the packages of pre-packed food to bear labels. The labels shall state matters including the name, specifications, net content, date of production, list of ingredients or components, producer’s name, address and contact information, shelf life, product standard code, storage conditions, the general name of the food additives used in the national standards, category number of the food production license, and other content acquired by laws, regulations or food safety standards.

The PRC has established a food recall system. When a food producer finds that the food produced by it does not comply with food safety standards, it shall immediately stop production, recall the food on the market, notify the relevant producers, traders and consumers, and record the recall and notification. When a food trader finds that the food traded by it does not comply with food safety standards, it shall immediately stop trading such food, notify the relevant producers, traders and consumers, and record the cessation of trading and the notification. The food producers shall take measures to

54

safely recall and destroy the affected food, and report the recall and treatment of the recalled food to the quality supervision authority at or above the county level. Where the food producers or traders fail to recall or stop producing or trading the food which are not in compliance with food safety standards under Article 53 of the Food Safety Law, the quality supervision, administration for industry and commerce, food and drug supervision and administration authorities at or above the county level shall order them to recall or stop production or trading.

In the event of any breach of the Food Safety Law, relevant authorities may confiscate any illegal gains and food products, issue warnings and impose rectification orders and monetary penalties ranging from two to ten times the value of the illegal products, as well as revoke the food safety certificate and impose criminal liability in severe cases.

Food Production License

In accordance with Measures for the Administration of Food Production Licensing, which were issued by General Administration of Quality Supervision, Inspection and Quarantine of the PRC (the “GAQSIQ”) on April 7, 2010 and became effective on June 1, 2010, no enterprise shall engage in food production activities without a Food Production License or engage in any food production activities outside the scope set forth in the Food Production License, and no foods can be sold without bearing the serial number or mark of the Food Production License.

The Implemental Rules on the Supervision and Administration of the Quality Safety of Food Production and Processing Enterprises (Provisional), which were issued by the GAQSIQ on September 1, 2005 and became effective on the same day, adopts a market admittance system relating to food quality and safety. Enterprises that produce or process food shall maintain necessary production conditions to guarantee the food quality and safety, and obtain the Production Licenses for Industrial Products in accordance with relevant procedures. No food products may be distributed into the market without passing the inspection and being stamped with the market admittance symbols.

According to the Regulations on the Administration of Production Licenses for Industrial Products of the PRC, which were promulgated by the State Council on July 9, 2005 and became effective on September 1, 2005, and the Implementing Measures for Regulations on the Administration of Production Licenses for Industrial Products of the PRC, which were issued by the GAQSIQ on September 15, 2005, became effective on November 1, 2005 and were amended on April 21, 2010, the PRC implements a production license system in respect of the manufacturing of important industrial products, including meat, beverage, rice, wine and other food directly affecting human health.

Food Distribution Permits

According to the Measures for the Supervision and Administration of Food Safety in the Distribution Sector and the Administrative Measures for Food Distribution Permits both issued by State Administration for Industry and Commerce (the “SAIC”), the administrative authority for industry and commerce is responsible for supervising and administering food safety in the distribution sector. Operators that engage in the food distribution business are required to acquire Food Distribution Permits before applying for business licenses. A Food Distribution Permit is valid for three years and may be renewed by filing an application within 30 days prior to the expiration date.

Under the above-mentioned laws and regulations relating to food production and food distribution, a Food Production License is required for operating a food production business and a Food Distribution Permit is required for operating a food distribution business. In addition, the laws and regulations require that operations comply with various requirements relating to food safety. Non-compliance may lead to a series of penalties, including warnings, monetary penalties, confiscation of illegal gains, revocation of the certificates, and/or even criminal liabilities.

Laws and Regulations Relating to Product Quality

The Product Quality Law of the PRC

Pursuant to the Product Quality Law of the PRC, which was promulgated on February 22, 1993, became effective on September 1, 1993, and was subsequently amended on July 8, 2000, producers are liable for the quality of the products they produce. Where anyone produces or sells products that do not comply with the relevant national or industrial standards

55

safeguarding the health and safety of the persons and property, the relevant authority will order such person to suspend the production or sales, confiscate the products, impose a fine of an amount higher than the value of the products and less than three times of the value of the products, confiscate illegal gains (if any) as well as revoke the business license in severe cases. Where the activities constitute a crime, the offender will be prosecuted.

The Agricultural Products Safety Law of the PRC

According to the Agricultural Products Quality Safety Law of the PRC, which was promulgated by the State Council on April 29, 2006 and became effective on November 1, 2006, producers of agricultural products shall use chemical products reasonably and avoid contaminating agricultural production sites. Agricultural producers shall also ensure that the preservatives, additives and other chemicals used in the process of the packaging, preservation, storage and transportation of agricultural products shall conform with the relevant mandatory technical specifications set by the State.

Product Liabilities

Manufacturers and distributors of defective products in the PRC may incur liability for losses and injuries caused by such products. Under the General Principles of the Civil Laws of the PRC, which became effective on 1 January 1987, and the Law on the Protection of Consumer Rights and Interests of the PRC, which was promulgated on October 31, 1993, became effective on January 1, 1994 and was amended on August 27, 1999 and October 25, 2013, the manufacturers and distributors will be held liable for losses and damages suffered by consumers caused by the defective products manufactured or distributed by them.

Under the above-mentioned laws and regulations, we are required to ensure that products which we produce and sell meet the requirements for safeguarding human health and ensuring human and property safety. Failing to do so will lead to a series of penalties, including the suspension of production and sale, confiscation of the products and earnings, imposition of fines, revocation of business licenses, and/or even criminal liabilities. In addition, if the products cause personal injuries or other form of torts, the manufacturers and distributors of the products may be subject to tort liability.

Laws and Regulations Relating to Transportation

According to Regulations on Road Transportation of the PRC, which were promulgated by the State Council on April 30, 2004 and became effective on July 1, 2004, an enterprise that engages in freight transportation business is required to, among other things:

(1) have vehicles that are commensurate with its operations and have passed relevant tests;

(2) have drivers who meet the requirements specified in Article 23 of these Regulations; and

(3) maintain a sound work safety management system.

Enterprises that engage in the freight transportation business are required to obtain road transportation operator licenses before operating transportation business. Enterprises that engage in the freight transportation business are also required to maintain good condition of and inspect the transporting vehicles regularly. Violation of these rules or failure to obtain road transportation operator licenses before commencing operations will lead to a series of penalties, including confiscation of earnings, imposition of fines or even revocation of the licenses.

Laws and Regulations Relating to Environmental Protection and Water-Drawing

Environmental Protection

According to the Environmental Protection Law of the PRC, which was promulgated and became effective on December 26, 1989, entities that cause environmental pollution and other public hazards must incorporate environmental protection work into their plans, establish an environmental protection responsibility system, and adopt effective measures to prevent and control pollution and other environmental harms caused to the environment by waste gases, wastewater,

56

waste residues, dust, malodorous gases, radioactive substances, noise, vibration and electromagnetic radiation generated in the course of the production, construction or other activities. In addition, entities that discharge pollutants must register with the relevant environmental protection authorities.

On November 29, 1998, the State Council promulgated the Regulations on the Administration of Environmental Protection of Construction Project. On October 28, 2002, the Standing Committee approved the Law on Appraising of Environment Impact of the PRC which became effective on September 1, 2003. According to the aforesaid laws, the construction units responsible for the construction projects must submit corresponding environmental impact appraisal documents to the relevant administrative departments of environmental protection for examination and approval and obtain approvals from such administrative departments of environmental protection before they commence construction. Environmental protection facilities shall be designed, built and commissioned together with the whole construction project. No permission shall be given for a construction project to be commissioned until its environmental protection facilities have been examined and assessed and determined to be up to standard by the relevant department of the environmental protection administration that is responsible for examining and approving the environmental impact statement of the applicant.

Pursuant to the requirements under the amended Law on Prevention of Water Pollution of the PRC, which became effective as of June 1, 2008, the amended Law on Prevention of Air Pollution of the PRC, which became effective as of September 1, 2000, and Administrative Regulations on Levy and Utilization of Sewage Charge, which became effective as of July 1, 2003, enterprises which discharge water or air pollutants must pay discharge fees based on the types and volumes of the pollutants discharged. The discharge fees are calculated by the local environmental protection authority, which will review and verify the types and volumes of pollutants discharged. In addition, the Law on Prevention and Control of Environmental Noise Pollution of the PRC, which was promulgated on October 29, 1996, regulates the prevention and control of noise pollution. Under the amended Law on Prevention of Environmental Pollution Caused by Solid Waste of the PRC, which became effective as of April 1, 2005 and was amended on June 29, 2013, entities and individuals that collect, store, transport, utilize or dispose of solid waste must take precautions against the spread, loss and leakage of such solid waste and adopt other measures to prevent solid waste from polluting the environment.

The Administrative Measures on the Prevention and Cure of Pollution Caused by Breeding of Livestock and Poultry set out the requirements for the prevention and ratification of pollution caused by or contaminants emitted during the breeding of livestock and poultry. In the event of violation of such administrative measures, the relevant authorities of environment protection can impose orders to stop by production and to rectify the violation.

Under the above-mentioned laws and regulations, we are required to abide by various provisions regarding the environmental protection and prevention of pollution. We are required to complete the environmental impact evaluation process prior to commencing a construction project. We are also required to obtain discharge permits and pay discharge fees for the discharge of pollutants. Failing to comply with environmental protection laws and regulations would subject us to a range of penalties varying from warnings, fines and suspension of the production or operation to other administrative sanctions, depending on the degree of damage or adverse consequences. The responsible person of the breaching entity may be subject to criminal liabilities for serious breaches which result in significant damages to private or public property or personal injury or death.

Water-drawing Laws and Regulations

According to the amended Water Law of the PRC, which was promulgated by the Standing Committee on January 21, 1988, amended on August 29, 2002 and became effective on October 1, 2002, any entities and individuals that draw water directly from rivers, lakes or underground shall apply to the water administrative departments or the drainage management departments for a Water-Drawing Permit and pay water resource fees in order to obtain water-drawing rights in accordance with the national water-drawing permit system and the water resource fee system. Failure to comply with these provisions would result in the fines or even revocation of the Water-Drawing Permits.

57

Laws and Regulations Relating to Property

The Land Administration Law of the PRC was promulgated by the Standing Committee on June 25, 1986, became effective on January 1, 1987 and was amended on December 29, 1988, August 29, 1998 and August 28, 2004. The Regulations for the Implementation of the Land Administration Law of the PRC were promulgated by the State Council on December 27, 1998 and became effective on January 1, 1999 (collectively, the “Land Administration Law”). Under the Land Administration Law, the national government implements a land registration and certification system. Lawfully registered land ownership and land use rights are protected by law and may not be infringed upon by any units or individuals.

Laws and Regulations Relating to Labor and Social Security

Employment Contracts

Pursuant to the Labor Law of the PRC, which was promulgated on July 5, 1994 and became effective on 1 January 1995, and the Labor Contract Law of the PRC, which became effective on 1 January 2008 and was amended on December 28, 2012, labor contracts shall be concluded in writing if labor relationships are to be or have been established between enterprises or entities on one hand and the laborers on the other hand.

Employee Funds

As required under the Regulation of Insurance for Labor Injury, implemented on January 1, 2004, the Provisional Measures for Maternity Insurance of Employees of Corporations, implemented on January 1, 1995, the Decisions on the Establishment of a Unified Program for Old-Aged Pension Insurance of the State Council, issued on July 16, 1997, the Decisions on the Establishment of the Medical Insurance Program for Urban Workers of the State Council, promulgated on December 14, 1998, the Unemployment Insurance Measures, promulgated on January 22, 1999, and the Social Insurance Law of the PRC, implemented on July 1, 2011, enterprises are obliged to provide their employees in the PRC with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, labor injury insurance and medical insurance. Enterprises must apply for social insurance registration with local social insurance agencies and pay premiums for their employees. If an enterprise fails to pay the required premiums on time or in full amount, the authorities in charge will demand the enterprise to settle the overdue amount within a stipulated time period and impose a 0.05% overdue fine. If the overdue amount is still not settled within the stipulated time period, an additional fine with an amount of three to five times of the overdue amount will be imposed.

According to the Regulation on Management of Housing Provident Fund, which was promulgated by the State Council on April 3, 1999, became effective on the same day and was amended on March 24, 2002, enterprises must register with the competent managing center for housing funds and, upon the examination by such managing center of housing fund, complete procedures for opening an account at the relevant bank for the deposit of employees’ housing funds. Employers are required to contribute, on behalf of their employees, to housing accumulation funds. The payment is required to be made to local administrative authorities. Any employer who fails to contribute may be fined and ordered to make good the deficit within a stipulated time limit.

Laws and Regulations Relating to Occupation Safety

The Production Safety Law of the PRC, (the “Production Safety Law”), which was promulgated by the Standing Committee on June 29, 2002, amended on August 27, 2009 and became effective on November 1, 2002, requires production entities to meet the relevant legal requirements, such as providing their staff with training and handbooks on production safety and providing safe working conditions in compliance with relevant laws, rules and regulations.

Regulations on Intellectual Property Rights

Patent. Patents in the PRC are principally protected under the Patent Law of the PRC. The duration of a patent right is either 10 years or 20 years from the date of application, depending on the type of patent right.

58

Copyright. Copyright in the PRC, including copyrighted software, is principally protected under the Copyright Law of the PRC and related rules and regulations. Under the Copyright Law, the term of protection for copyrighted software is 50 years.

Trademark. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. Registered trademarks are protected under the Trademark Law of the PRC and related rules and regulations. Trademarks are registered with the Trademark Office of the SAIC. Where registration is sought for a trademark that is identical or similar to another trademark which has already been registered or given preliminary examination and approval for use in the same or similar category of commodities or services, the application for registration of such trademark may be rejected. Trademark registrations are effective for a renewable ten-year period, unless otherwise revoked.

Domain Names. Domain name registrations are handled through domain name service agencies established under the relevant regulations, and applicants become domain name holders upon successful registration.

Regulations Relating to Dividend Withholding Tax

Pursuant to the Enterprise Income Tax Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in the PRC, or has set up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to a withholding tax on its PRC-sourced income at a rate of 10%. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, the withholding tax rate in respect to the payment of dividends by a PRC enterprise to a Hong Kong enterprise is reduced to 5% from a standard rate of 10% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the Notice of the State Administration of Taxation on the Issues concerning the Application of the Dividend Clauses of Tax Agreements, or Circular 81, a Hong Kong resident enterprise must meet the following conditions, among others, in order to enjoy the reduced withholding tax: (i) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (ii) it must have directly owned such percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. In August 2015, the State Administration of Taxation promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or Circular 60, which became effective on November 1, 2015. Circular 60 provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. Accordingly, Fortunes Capital HK and Keen Point, our Hong Kong subsidiaries, may be able to enjoy the 5% withholding tax rate for the dividends they receive from Xiangtai WFOE, our PRC subsidiary, if it satisfies the conditions prescribed under Circular 81 and other relevant tax rules and regulations. However, according to Circular 81 and Circular 60, if the relevant tax authorities consider the transactions or arrangements we have are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities may adjust the favorable withholding tax in the future.

Regulations Relating to Foreign Exchange

Regulations on Foreign Currency Exchange

The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently amended in August 2008. Under the PRC foreign exchange regulations, payments of current account items, such as profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital account items, such as direct investments, repayment of foreign currency-denominated loans, repatriation of investments and investments in securities outside of China.

59

In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds derived by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, SAFE promulgated another circular in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC must be conducted by way of registration and banks must process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches. On February 28, 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Notice 13. After SAFE Notice 13 became effective on June 1, 2015, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals may apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of SAFE, may directly review the applications and conduct the registration.

On March 30, 2015, SAFE promulgated Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises nationwide. Circular 19 came into force and replaced both previous Circular 142 and Circular 36 on June 1, 2015. On June 9, 2016, SAFE promulgated Circular 16 to further expand and strengthen such reform. Under Circular 19 and Circular 16, foreign-invested enterprises in the PRC are allowed to use their foreign exchange funds under capital accounts and RMB funds from exchange settlement for expenditure under current accounts within its business scope or expenditure under capital accounts permitted by laws and regulations, except that such funds shall not be used for (i) expenditure beyond the enterprise’s business scope or expenditure prohibited by laws and regulations; (ii) investments in securities or other investments than banks’ principal-secured products; (iii) granting of loans to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) construction or purchase of real estate for purposes other than self-use (except for real estate enterprises).

Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents

SAFE issued SAFE Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, that became effective in July 2014, replacing the previous SAFE Circular 75. SAFE Circular 37 regulates foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing or conduct round trip investment in China. Under SAFE Circular 37, a SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests, while “round trip investment” refers to direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. SAFE Circular 37 provides that, before making contribution into an SPV, PRC residents or entities are required to complete foreign exchange registration with SAFE or its local branch. SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015. This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

PRC residents or entities who had contributed legitimate onshore or offshore interests or assets to SPVs but had not obtained registration as required before the implementation of the SAFE Circular 37 must register their ownership interests or control in the SPVs with qualified banks. An amendment to the registration is required if there is a material change with respect to the SPV registered, such as any change of basic information (including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested enterprise, including payment of dividends and other distributions, such as proceeds from any reduction in capital,

60

share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations.

We are aware that our PRC resident beneficial owners subject to these registration requirements have registered with the Beijing SAFE branch and/or qualified banks to reflect the recent changes to our corporate structure.

Regulations on Dividend Distribution

Under our current corporate structure, China Xiangtai Food Co., Ltd. may rely on dividend payments from Xiangtai WFOE, which is a wholly foreign-owned enterprise incorporated in China, to fund any cash and financing requirements we may have. The principal regulations governing distribution of dividends of foreign-invested enterprises include the Foreign-Invested Enterprise Law, as amended in September 2016, and its implementation rules. Under these laws and regulations, wholly foreign-owned enterprises in China may pay dividends only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to allocate at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until these reserves have reached 50% of the registered capital of the enterprises. Wholly foreign-owned companies may, at their discretion, allocate a portion of their after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserves are not distributable as cash dividends.

Regulations Relating to Employment

The PRC Labor Law and the Labor Contract Law require that employers must execute written employment contracts with full-time employees. If an employer fails to enter into a written employment contract with an employee within one year from the date on which the employment relationship is established, the employer must rectify the situation by entering into a written employment contract with the employee and pay the employee twice the employee’s salary for the period from the day following the lapse of one month from the date of establishment of the employment relationship to the day prior to the execution of the written employment contract. All employers must compensate their employees with wages equal to at least the local minimum wage standards. Violations of the PRC Labor Law and the Labor Contract Law may result in the imposition of fines and other administrative sanctions, and serious violations may result in criminal liabilities.

Enterprises in China are required by PRC laws and regulations to participate in certain employee benefit plans, including social insurance funds, namely a pension plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan, and a housing provident fund, and contribute to the plans or funds in amounts equal to certain percentages of salaries, including bonuses and allowances, of the employees as specified by the local government from time to time at locations where they operate their businesses or where they are located. Failure to make adequate contributions to various employee benefit plans may be subject to fines and other administrative sanctions.

Currently, we are making contributions to the plans based on the minimum standards although the PRC laws required such contributions to be based on the actual employee salaries up to a maximum amount specified by the local government. Therefore, in our consolidated financial statements, we have made an estimate and accrued a provision in relation to the potential make-up of our contributions for these plans as well as to pay late contribution fees and fines. If we are subject to late contribution fees or fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected. See “Risk Factors — Risks Related to Doing Business in the People’s Republic of China — Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.”

4.C. Organizational structure

We are a holding company incorporated under the laws of the Cayman Islands with no business operations of our own. We conduct all of our operations through our operating entities established in the People’s Republic of China, including our indirect subsidiaries and consolidated variable interest entities, or VIEs, in China. We control and receive the economic benefits of the VIEs’ business operations through certain contractual arrangements. Neither we nor our

61

subsidiaries own any shares in these VIEs. Instead, we control and receive the economic benefits of the VIEs’ business operation through a series of contractual agreements, or the VIE Agreements. The VIE Agreements are designed to provide the Company’s indirect subsidiaries in China with the power, rights and obligations equivalent in all material respects to those it would possess as the principal equity holder of the VIEs, including absolute control rights and the rights to the assets, property and revenue of the VIEs. As a result of our indirect ownership in the subsidiaries in China and the VIE Agreements, we are regarded as the primary beneficiary of the VIEs. The VIE structure is used to replicate foreign investment in Chinese-based companies where Chinese law prohibits direct foreign investment in the operating companies. Because of our corporate structure, we are subject to risks due to the uncertainty of the interpretation and the application of PRC laws and regulations, including but not limited to limitation on foreign investment in certain industries in China, regulatory review of overseas listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the VIE Agreements. We are also subject to the risks of uncertainty about any future actions of the PRC government in this regard. The VIE Agreements may not be effective in providing control over the VIEs. The VIEs may also be subject to sanctions imposed by PRC regulatory agencies, including Chinese Securities Regulatory Commission, or CSRC, if we fail to comply with their rules and regulations. If the Chinse regulatory authorities disallow the VIE structure in the future, it will likely result in a material change in our financial performance and our results of operations and/or the value of our ordinary shares, which could cause the value of such securities to significantly decline or become worthless. For a description of our corporate structure and the VIE Agreements, see “Corporate History and Structure” See also “Risk Factors – Risks Related to Our Corporate Structure” and “Risk Factors – Risks Related to Doing Business in China” herein.

The following diagram illustrates our corporate structure:

Direct and indirect subsidiaries

Xiangtai BVI was incorporated on February 11, 2015. It is a wholly owned subsidiary of Xiangtai Cayman. Xiangtai BVI is currently not engaging in any active business and merely acting as a holding company.

Xiangtai HK was incorporated on March 4, 2015 under the law of Hong Kong Special Administrative Region. It is a wholly owned subsidiary of Xiangtai BVI. Xiangtai HK is currently not engaging in any active business and merely acting as a holding company.

Xiangtai WFOE is a PRC wholly foreign owned entity incorporated on September 1, 2017 in Chongqing under the laws of the People’s Republic of China. It is a wholly-owned subsidiary of Xiangtai HK and a wholly foreign-owned entity under the PRC laws. Xiangtai WFOE is currently not engaging in any active business and merely acting as a holding company.

62

GA Yongpeng was incorporated on May 10, 2008 in Chongqing under the laws of the People’s Republic of China. GA Yongpeng engages in the slaughtering, processing, packing and selling various processed meat products. It is a wholly owned subsidiary of Xiangtai WFOE.

CQ Pengmei was incorporated on July 27, 2017 in Chongqing under the laws of the People’s Republic of China. CQ Pengmei engaged in the operation of our supermarkets in Chongqing China, the operation of which has been discontinued since February 2020. It is a wholly owned subsidiary of Xiangtai WFOE.

China Silanchi was incorporated on December 12, 2019. It is a wholly owned subsidiary of Xiangtai Cayman. China Silanchi is currently not engaging in any active business and merely acting as a holding company.

Haochuangge HK was incorporated on January 6, 2020. It is a wholly owned subsidiary of China Silanchi. Haochuangge HK is currently not engaging in any active business and merely acting as a holding company.

Gangyixing WFOE is a PRC wholly foreign owned entity incorporated on June 28, 2020 in Beijing under the laws of the People’s Republic of China. It is a wholly-owned subsidiary of Haochuangge HK and a wholly foreign-owned entity under the PRC laws. Gangyixing WFOE is currently not engaging in any active business and is merely acting as a holding company.

Contractual Arrangements with CQ Penglin, JMC and Fu Tong Ge

CQ Penglin was incorporated on November 3, 2005 in Chongqing under the laws of the People’s Republic of China. Prior to April 2021, CQ Penglin primarily engaged in the wholesale and retail of pre-packaged food, live hog slaughtering, purchase of livestock and poultry, processing and sale of fresh livestock and poultry meat, process and retail of meat products (preserved meat products, sauce, meat products, smoked sausage, ham products, etc.). In April 2021, we discontinued the meat process business. CQ Penglin does not have significant operation as of the date of this annual report.

JMC was incorporated on March 14, 2012 in Chongqing under the laws of the People’s Republic of China. JMC is primarily engaged in the wholesale and distribution of soybean meal and soybean oil. JMC has established long-term strategic alliances with Sinograin, a state-owned grain and oil company in China, and has obtained general distributorship of “Fu Dou Lai” brand soybean meal in Chongqing, Sichuan, and neighboring area in China. JMC does not process the soybean meal and soybean oil procured from the suppliers.

Fu Tong Ge was incorporated on November 29, 2019 under the laws of the People’s Republic of China. Fu Tong Ge does not hold any assets nor have any operation at this moment.

CQ Penglin. JMC, and Fu Tong Ge have been deemed consolidated variable interest entities. We conduct our business through our variable interest entities, which we effectively control through a series of contractual arrangements. These contractual arrangements allow us to:

● exercise effective control over our variable interest entities;

● receive substantially all of the economic benefits of our variable interest entities; and

● have an exclusive option to purchase all or part of the equity interests in our variable interest entities when and to the extent permitted by PRC law.

As a result of these contractual arrangements, we have become the primary beneficiary of CQ Penglin. JMC, and Fu Tong Ge, and we treat CQ Penglin. JMC, and Fu Tong Ge as consolidated variable interest entities under U.S. GAAP. We have consolidated the financial results of CQ Penglin. JMC, and Fu Tong Ge in our consolidated financial statements in accordance with U.S. GAAP.

63

Contractual Arrangements between Xiangtai WFOE and CQ Penglin

The following is a summary of the currently effective contractual arrangements by and among Xiangtai WFOE, CQ Penglin, and the shareholders of CQ Penglin.

Equity Pledge Agreement

Pursuant to the equity pledge agreements, as amended, among the shareholders who collectively owned all of CQ Penglin, pledge all of the equity interests in CQ Penglin to Xiangtai WFOE as collateral to secure the obligations of CQ Penglin under the exclusive consulting services and operating agreement. These shareholders may not transfer or assign transfer or assign the pledged equity interests, or incur or allow any encumbrance that would jeopardize Xiangtai WFOE’s interests, without Xiangtai WFOE’s prior approval. In the event of default, Xiangtai WFOE as the pledgee will be entitled to certain rights and entitlements, including the priority in receiving payments by the evaluation or proceeds from the auction or sale of whole or part of the pledged equity interests of CQ Penglin. The agreement will terminate at the date these shareholders have transferred all of their pledged equity interests pursuant to the equity option agreement.

Voting Rights Proxy and Financial Supporting Agreement

Pursuant to the voting rights proxy and financial supporting agreements, as amended, the shareholders of CQ Penglin give Xiangtai WFOE an irrevocable proxy to act on their behalf on all matters pertaining to CQ Penglin and to exercise all of their rights as shareholders of CQ Penglin, including the right to attend shareholders meeting, to exercise voting rights and to transfer all or a part of their equity interests in CQ Penglin. In consideration of such granted rights, Xiangtai WFOE agrees to provide the necessary financial support to CQ Penglin whether or not CQ Penglin incurs loss, and agrees not to request repayment if CQ Penglin is unable to do so. The agreements shall remain in effect for 30 years until October 8, 2047.

Technical Consultation and Services Agreement

Pursuant to the technical consultation and services agreement between Xiangtai WFOE and CQ Penglin, as amended, Xiangtai WFOE is engaged as exclusive provider of management consulting services to CQ Penglin. For such services, CQ Penglin agree to pay service fees determined based on all of their net income to Xiangtai WFOE or Xiangtai WFOE has obligation to absorb all of the losses of CQ Penglin.

The technical consultation and services agreement, as amended, remains in effect for 30 years until October 8, 2047. The agreement can be extended only if Xiangtai WFOE gives its written consent of extension of the agreement before the expiration of the agreement and CQ Penglin then may extend without reservation.

Business Cooperation Agreement

Pursuant to the business cooperation agreement between Xiangtai WFOE and CQ Penglin, as amended, Xiangtai WFOE has the exclusive right to provide CQ Penglin with technical support, business support and related consulting services, including but not limited to technical services, business consultations, equipment or property leasing, marketing consultancy, system integration, product research and development, and system maintenance. In exchange, Xiangtai WFOE is entitled to a service fee that equals to all of the net income of CQ Penglin determined by U.S. GAAP. The service fees may be adjusted based on the services rendered by Xiangtai WFOE in that month and the operational needs of CQ Penglin.

The business cooperation agreement, as amended, remains in effect unless Xiangtai WFOE commits gross negligence, or a fraudulent act, against CQ Penglin. Nevertheless, Xiangtai WFOE shall have the right to terminate this agreement upon giving 30 days’ prior written notice to CQ Penglin at any time.

64

Equity Option Agreement

Pursuant to the equity option agreements, as amended, among Xiangtai WFOE, CQ Penglin and its shareholders. CQ Penglin’s shareholders jointly and severally grant Xiangtai WFOE an option to purchase their equity interests in CQ Penglin. The purchase price shall be the lowest price then permitted under applicable PRC laws. If the purchase price is greater than the registered capital of CQ Penglin, these shareholders of CQ Penglin are required to immediately return any amount in excess of the registered capital to Xiangtai WFOE or its designee of Xiangtai WFOE. Xiangtai WOFE may exercise such option at any time until it has acquired all equity interests of CQ Penglin, and may transfer the option to any third party. The agreements will terminate at the date on which all of these shareholders’ equity interests of CQ Penglin has been transferred to Xiangtai WFOE or its designee.

Contractual Arrangements between Xiangtai WFOE and JMC

The following is a summary of the currently effective contractual arrangements by and among Xiangtai WFOE, JMC, and the shareholders of JMC.

Equity Pledge Agreement

Under the equity pledge agreement among Xiangtai WFOE, JMC and the shareholders of JMC dated April 3, 2020, a shareholder who owned 51% equity interest of JMC pledged his 51% equity interests in JMC to Xiangtai WFOE to guarantee JMC’s performance of relevant obligations and indebtedness under the technical consultation and services agreement. In addition, the 51% shareholder of JMC completed the registration of the equity pledge under the agreement with the competent local authority. If JMC breaches its obligation under the technical consultation and services agreement, Xiangtai WFOE, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. This pledge will remain effective until all the guaranteed obligations are performed.

Voting Rights Proxy and Financial Support Agreement

Under the voting rights proxy and financial support agreement among Xiangtai WFOE, JMC and a shareholder who owned 51% equity interest of JMC dated April 3, 2020, the 51% JMC Shareholder irrevocably appointed Xiangtai WFOE as its attorney-in-fact to exercise on such shareholder’s behalf any and all rights that such shareholder has in respect of his 51% equity interests in JMC, including but not limited to the power to vote on its behalf on all matters of JMC requiring shareholder approval in accordance with the articles of association of JMC. The proxy agreement is for a term of 20 years and can be extended by Xiangtai WFOE unilaterally by prior written notice to the other parties.

Technical Consultation and Services Agreement

Pursuant to the technical consultation and services agreement between JMC and Xiangtai WFOE dated April 3, 2020, Xiangtai WFOE has the exclusive right to provide consultation services to JMC relating to JMC’s business, including but not limited to business consultation services, human resources development, and business development. Xiangtai WFOE exclusively owns any intellectual property rights arising from the performance of this agreement. For such services, JMC agrees to pay service fees determined based on 51% of their net income to Xiangtai WFOE or Xiangtai WFOE has the obligation to absorb 51% of the losses of JMC. This agreement will be effective for 20 years, and can be extended if Xiangtai WFOE gives its written consent of the extension of this agreement before the expiration of this agreement and JMC shall agree with this extension without reserve. Xiangtai WFOE may terminate this agreement at any time by giving a 30 days’ prior written notice to JMC.

Equity Option Agreement

Under the equity option agreement among Xiangtai WFOE, JMC and a shareholder owned 51% equity interest of JMC dated April 3, 2020, each of the shareholders of JMC irrevocably granted to Xiangtai WFOE or its designee an option to purchase at any time, to the extent permitted under PRC law, all or a portion of his 51% equity interests in JMC. Also, Xiangtai WFOE or its designee has the right to acquire any and all of its 51% assets of JMC. Without Xiangtai WFOE’s prior written consent, JMC’s shareholders cannot transfer their equity interests in JMC and JMC cannot transfer

65

its assets. The acquisition price for the shares or assets will be the minimum amount of consideration permitted under the PRC law at the time of the exercise of the option. This pledge will remain effective until all options have been exercised.

Contractual Arrangements between Gangyixing WFOE and Fu Tong Ge

The following is a summary of the currently effective contractual arrangements by and among Gangyixing WFOE, Fu Tong Ge, and the shareholders of Fu Tong Ge.

Equity Pledge Agreement

Pursuant to a certain equity pledge agreements dated June 28, 2020, among the shareholders who collectively owned all of Fu Tong Ge, pledges of all of the equity interests in Fu Tong Ge to Gangyixing WFOE were provided as collateral to secure the obligations of Fu Tong Ge under a Technical Consultation and Service Agreement and other control agreements (the “Control Agreements”). These shareholders may not transfer or assign the pledged equity interests, or incur or allow any encumbrance that would jeopardize Gangyixing WFOE’s interests, without Gangyixing WFOE’s prior approval. In the event of default, Gangyixing WFOE, as the pledgee, will be entitled to certain rights and entitlements, including the priority in receiving payments by the evaluation or proceeds from the auction or sale in whole or in part of the pledged equity interests of Fu Tong Ge. The agreement will terminate at the date these shareholders have transferred all of their pledged equity interests pursuant to the terms of the agreement

Voting Rights Proxy and Financial Support Agreement

Pursuant to certain voting rights proxy and financial supporting agreements dated June 28, 2020, the shareholders of Fu Tong Ge have given Gangyixing WFOE an irrevocable proxy to act on their behalf on all matters pertaining to Fu Tong Ge and to exercise all of their rights as shareholders of Fu Tong Ge, including the right to attend shareholders meetings, to exercise voting rights and to transfer all or a part of their equity interests in Fu Tong Ge. In consideration of such granted rights, Gangyixing WFOE has agreed to provide the necessary financial support to Fu Tong Ge, whether or not Fu Tong Ge incurs loss, and to not request repayment if Fu Tong Ge is unable to do so. The agreements shall remain in effect until June 28, 2040.

Technical Consultation and Services Agreement

Pursuant to certain technical consultation and services agreement between Gangyixing WFOE and Fu Tong Ge dated June 28, 2020, Gangyixing WFOE has been engaged as exclusive provider of management consulting services to Fu Tong Ge. For such services, Fu Tong Ge has agreed to pay service fees based on all of its net income to Gangyixing WFOE, or Gangyixing WFOE has the obligation to absorb all of the losses of Fu Tong Ge.

The technical consultation and services agreement, as amended, remains in effect until June 28, 2040. The agreement can be extended only if Gangyixing WFOE gives its written consent of extension of the agreement before its expiration.

Equity Option Agreement

Pursuant to certain equity option agreements dated June 28, 2020 among Gangyixing WFOE, Fu Tong Ge and its shareholders, Fu Tong Ge’s shareholders, jointly and severally, have granted Gangyixing WFOE an option to purchase their equity interests in Fu Tong Ge. The purchase price shall be the lowest price then permitted under applicable PRC laws. If the purchase price is greater than the registered capital of Fu Tong Ge, the Fu Tong Ge shareholders are required to immediately return any amount in excess of the registered capital to Gangyixing WFOE or its designee. Gangyixing WFOE may exercise such option at any time until it has acquired all equity interests of Fu Tong Ge, and may transfer the option to any third party. The agreements will terminate at the date on which all of these shareholders’ equity interests of Fu Tong Ge have been transferred to Gangyixing WFOE or its designee.

66

Entrustment Agreement and Call Option Agreement

China Meitai Food Co., Ltd. currently holds 8,710,000 of the issued and outstanding ordinary shares of the Company. Magic Pace Limited is currently the sole shareholder of China Meitai Food Co., Ltd. We do not foresee any conflict of interest between China Meitai Food Co., Ltd. and Xiangtai Cayman, because China Meitai Food Co., Ltd. is a holding company and do not have business operations.

Ms. Zeshu Dai entered into an entrustment agreement with Magic Pace Limited, according to which Magic Pace Limited entrusted its voting power, personnel appointment power and other power related to operating and managing of China Meitai Food Co., Ltd., and therefore effectively the control of our company, to Ms. Dai to the extent permitted by the laws of the British Virgin Islands.

Ms. Dai has also entered into a call option agreement with Magic Pace Limited. Pursuant to the call option agreement, Magic Pace Limited granted Ms. Dai an option exercisable from the closing date of the initial public offering of the Company. Ms. Dai can exercise the option to acquire 97.74% of the shares of China Meitai Food Co., Ltd for consideration. Mr. Dai also directly holds 290,000 ordinary shares of the Company. Upon excising the option shares in China Meitai Food Co., Ltd., Ms. Dai will own, directly or indirectly, a total of9,000,000% ordinary shares of the Company, representing 21.78% of our issued and outstanding ordinary shares.

If Ms. Dai elects not to exercise such option, Ms. Dai remains to have control of the company through the entrustment agreement with Magic Pace Limited and ordinary shares held by Magic Pace Limited.

4.D. Property, plants and equipment

As of June 30, 2021 and the date of this annual report, we leased two offices of 418 square meters and 375 square meters, respectively, both located in Chongqing.

We have a food processing facility located in Fulin, Chongqing. The facility has a processing area of 4,000 square meters, 7 large refrigeration houses of 2,200 square meters, offices and dormitories of 3,000 square meters, and boiler rooms of 200 square meters. This facility was sealed by the court in March 2021 and is subject to a lien pursuant to a court order in connection with a legal dispute between Chongqing Puluosi Small Mortgage Co., Ltd. and CQ Penglin. The court ordered the sale of this facility to enforce the court verdict against CQ Penglin. We suspended operation in this facility in March 2021. For additional information see the section “Legal Proceedings - Chongqing Puluosi Small Mortgage Co., Ltd. v. Chongqing Penglin Food Co., Ltd.”

We have a slaughtering plant in Linshui County, Sichuan Province. It covers an area of 27,000 square meters, with a construction area of 8,500 square meters, a slaughtering area of 3,000 square meters, 9 large refrigeration houses of 4,500 square meters, office and dormitory of 1,500 square meters, and a boiler room of 200 square meters. It was used for our pork slaughtering business prior to March 2021. The facility is subject to the same court lien pursuant to which the facility cannot be sold, transferred or otherwise disposed without approval of the court. Operations in this facility has been suspended since March 2021.

ITEM 4A.       UNRESOLVED STAFF COMMENTS

None.

ITEM 5.          OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear in this annual report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this annual report, particularly in “Risk Factors.” All amounts included in the fiscal years ended June 30, 2021, 2020 and

67

2019 (“Annual Financial Statements”) are derived from our audited consolidated financial statements included elsewhere in this annual report. These Annual Financial Statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP.

5A. Operating Results

Overview

We were a meat processing company engaged in slaughtering, processing, packing, and selling various processed meat products. We discontinued our grocery stores business in February 2020 and discontinued our farmers’ market and supermarket business in April 2021 as the businesses have been operating at losses. On April 3, 2020, we purchased 51% equity interest of Chongqing Ji Mao Cang Feed Co., Ltd. (“JMC”), which engages in raw feed material and formula solution wholesales business. We are committed to providing consumers with high-quality products through our portfolio of trusted and well-known brands and to driving consumption trends, while setting a high industry standard in product quality and food safety. We can efficiently match supply with demand and benefit from the strong industry trends in the People’s Republic of China (the “PRC” or “China”).

Our feed raw material revenues are driven from our raw feed material and formula solution wholesales business, which mainly includes two products: soybean meal and soybean oil. We purchased the two products based on current market needs from distributors and resell to small distributors. As one of the leading feed sales companies in southwest China, we have nearly 200 customers in farm industry and feed production industry.

Key Factors that Affect Operating Results

Feed Raw Material Industry

The rapid growth of the feed raw material industry has been driven largely by robust economic growth, continued urbanization and rising disposable income. China is the largest pork production and consumption market in the world, which increases the needs for feed raw materials. In the recent 10 years, feed raw material production volume has historically grown at a steady rate, a gap has consistently existed between the supply and demand of feed raw materials. During the years from 2018 to 2020, the feed raw materials consumption grew at a comparatively faster compound annual growth rate (“CAGR”) of 3.28%.

The key drivers of the feed raw material industry can be analyzed in terms of demand and supply. The growing demand for feed raw materials is attributable to the rise in disposable income and living standards, continuing urbanization, expansion of middle class, the important role of animal protein in food consumption, the importance of pork as a source of animal protein and increasing demand for high quality and safe products. As a result of changing consumer behavior and growing demand, producers are experiencing accelerated industry concentration and a trend toward vertical integration. If we are unable to sustain our higher quality of products and services and keep up with the changing demands, it may materially reduce the demand for our products and may have a materially adverse effect on our business.

PRC economy

Although the PRC economy has grown in recent years, the pace of growth has slowed, and even that rate of growth may not continue. According to the PRC National Bureau of Statistics, the annual rate of growth in the PRC declined from 6.7% in 2016, 6.5% in 2017, 6.6% in 2018, 6.1% in 2019, to 2.3% in 2020. A further slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments in the PRC may materially reduce the purchase power of the consumers of our products and lead to the decrease of demand for our products and may have a materially adverse effect on its business.

Key Factors

Our variable interest entity and our operating subsidiary are incorporated, and their operations and assets are located, in China. Accordingly, our results of operations, financial condition and prospects are affected by China’s

68

economic and regulation conditions in the following factors: (a) an economic downturn in China or any regional market in China; (b) economic policies and initiatives undertaken by the Chinese government; (c) changes in the Chinese or regional business or regulatory environment affecting the purchase power of consumers of our products; (d) changes in the Chinese government policy on feed raw material trading licenses; (e) changes in the Chinese government policy on food industry; (f) breakout of livestock and human diseases in the PRC, such as BSE, FMD and various strains of influenza and COVID-19. Unfavorable changes could affect demand for products that we sell and for products that we provide and could materially and adversely affect the results of operations.

We have contracted with a major governmental feed raw material supplier, which can help us avoid the risk of supply shortage and have relatively more stable purchase prices than our competitors. We have contracts with major distributors that are selling our products to individual customers or small distributors. Our sales efforts focus on those wholesale distributors which place large recurring orders and present less credit risk to us. During the year ended June 30, 2021, we cooperated with nearly 200 wholesale distributors. On the contrary, if our major supplier or any major distributors stop cooperation with us, it may have a materially adverse effect on our business.

Our operating results are materially impacted by market prices for feed raw materials, which are volatile and out of our control. Our feed raw material commodities are subject to volatile price changes due to weather, various supply and demand factors, transportation and storage costs, livestock diseases, speculators, and agricultural, energy and trade policies in China and internationally. To decrease the risk, we plan to build our own feed raw material plants to expand vertical integration of the industry supply chain and network.

69

5.A. Results of Operations

Comparison of Years Ended June 30, 2021 and 2020

Revenues

Our revenues are from raw feed materials revenues. Total revenues increased by approximately $56.2 million, or 232.0%, to approximately $80.5 million for the year ended June 30, 2021, compared to approximately $24.2 million for the year ended June 30, 2020. The overall increase was primarily attributable to the increase of our raw feed materials revenues as we purchased JMC on April 3, 2020.

Our revenues from our raw feed material revenues are summarized as follows:

	For the Year		For the Year
	ended		ended
	June 30, 2021		June 30, 2020		Change		Change (%)
Soybean meal	$	75,747,312	$	21,651,362	$	54,095,950	249.9	%
Soybean oil		4,751,123		2,597,403		2,153,720	82.9	%
Total raw feed material revenues	$	80,498,435	$	24,248,765	$	56,249,670	232.0	%

Our revenues from soybean meal in number of kilograms sold and its average selling price are summarized as follows:

	For the Year		For the Year
	ended		ended
	June 30, 2021		June 30, 2020		Change		Change (%)
Soybean meal (kg)		182,986,885		57,660,570		125,326,315	217.4	%
Average selling price (per kg)	$	0.41	$	0.38	$	0.03	10.2	%

The selling prices are not fixed, and they are floating based on the current local market prices. During the year ended June 30, 2021, we sold 182,986,885kg of soybean meal as compared to 57,660,570kg during the year ended June 30, 2020. The quantity sold increased 125,326,315kg or 217.4% during the year ended June 30, 2021 as compared to the same period in 2020 mainly due to we acquired the 51% equity interest in JMC on April 3, 2020.

The average selling price of soybean meal increased from $0.38/kg during the year ended June 30, 2020 to $0.41/kg during the year ended June 30, 2021, an increase of $0.03/kg or 10.2%. Because of the drought in South Africa, many countries started beans export restriction. In addition, China’s economics is recovering strongly and rapidly from the COVID-19, especially the poultry breeding industry, which had driven up the needs for soybean meals during the year ended June 30, 2021. The increase was also due to the appreciation of the RMB against U.S. dollar of 6.2%.

Our revenues from soybean oil in number of kilograms sold and its average selling price are summarized as follows:

	For the Year		For the Year
	ended		ended
	June 30, 2021		June 30, 2020		Change		Change (%)
Soybean oil (ton)		5,686		3,335		2,351	70.5	%
Average selling price (per ton)	$	835.57	$	778.83	$	56.74	7.3	%

During the year ended June 30, 2021, we sold 5,686 tons of soybean oil as compared to 3,335 tons during the year ended June 30, 2020. The quantity sold increased 2,351 or 70.5% during the year ended June 30, 2021 as compared to the same period in 2020 mainly due to we acquired the 51% equity interest in JMC on April 3, 2020.

70

The average selling price of soybean oil increased from $778.83/ton during the year ended June 30, 2020 to $835.57/ton during the year ended June 30, 2021, an increase of $56.74/ton or 7.3% due to the same reasons of soybean meal sales as stated above.

Cost of Revenues

Our cost of revenues consists of cost of direct materials, labor and manufacturing overhead costs. Total cost of revenues increased by approximately $55.3 million, or 248.8%, to approximately $77.5 million for the year ended June 30, 2021, compared to approximately $22.2 million for the year ended June 30, 2020. Our total cost of revenues increased which was in line with the increase of total revenues.

Our cost of revenues from our raw feed material revenues are summarized as follows:

	For the Year		For the Year
	ended		ended
	June 30, 2021		June 30, 2020		Change		Change (%)
Soybean meal	$	72,867,046	$	19,665,423	$	53,201,623	270.5	%
Soybean oil		4,634,371		2,554,105		2,080,266	81.4	%
Total cost of raw feed material revenues	$	77,501,417	$	22,219,528	$	55,281,889	248.8	%

Our volume and unit cost of revenues from soybean meal are summarized as follows:

	For the Year		For the Year
	ended		ended
	June 30, 2021		June 30, 2020		Change		Change (%)
Soybean meal (kg)		182,986,885		57,660,570		125,326,315	217.4	%
Average unit cost (per kg)	$	0.40	$	0.34	$	0.06	16.8	%

During the year ended June 30, 2021, we purchased and resold 182,986,885kg of soybean meal as compared to 57,660,570kg during the year ended June 30, 2020. The quantity purchased and resold increased 125,326,315kg or 217.4% during the year ended June 30, 2021 as compared to the same period in 2020 mainly due to we acquired the 51% equity interest in JMC on April 3, 2020.

The average unit cost of soybean meal increased from $0.34/kg during the year ended June 30, 2020 to $0.40/kg during the year ended June 30, 2021, an increase of $0.06/kg or 16.8%. Because of the drought in South Africa, many countries started beans export restriction, which had decreased the supply of soybean meals. In addition, China’s economics is recovering strongly and rapidly from the COVID-19, especially the poultry breeding industry, which had driven up the needs and the purchase price of soybean meals during the year ended June 30, 2021. The increase was also due to the appreciation of the RMB against U.S. dollar of 6.2%.

Our volume and unit cost of revenues from soybean meal are summarized as follows:

	For the Year		For the Year
	ended		ended
	June 30, 2021		June 30, 2020		Change		Change (%)
Soybean oil (ton)		5,686		3,335		2,351	70.5	%
Average unit cost (per ton)	$	815.04	$	765.94	$	49.10	6.4	%

During the year ended June 30, 2021, we purchased and resold 5,686 tons of soybean oil as compared to 3,335 tons during the year ended June 30, 2020. The quantity purchased and resold increased 2,351 or 70.5% during the year ended June 30, 2021 as compared to the same period in 2020 mainly due to we acquired the 51% equity interest in JMC on April 3, 2020.

71

The average unit cost of soybean oil increased from $765.94/ton during the year ended June 30, 2020 to $815.04/ton during the year ended June 30, 2021, an increase of $49.10/ton or 6.4% due to the same reasons of soybean meal costs as stated above.

Gross Profit

Our gross profit from our major revenue categories are summarized as follows:

	For the Year			For the Year
	ended			ended
	June 30, 2021			June 30, 2020		Change			Change (%)
Raw feed material revenues
Gross profit	$	2,997,018		2,029,237		$	967,781		47.7	%
Gross margin		3.7	%	8.4	%		(4.7)	%

Our gross profit increased by approximately $1.0 million, or 47.7%, to approximately $3.0 million during the year ended June 30, 2021, from approximately $2.0 million during the year ended June 30, 2020. The increase in gross profit was primarily due to the increase of gross profit in soybean meal sales and soybean oil sales.

Our gross margin for raw feed material revenues was 3.7% for the year ended June 30, 2021 as compared to 8.4% for the year ended June 30, 2020, a decrease of 4.7%. The decrease in gross margin was due to the increase of selling prices at a lower rate than the increase of purchase prices because the soybean meal wholesales business suffered more pressure from suppliers and more risks of collecting outstanding balances from customers during the year ended June 30, 2021.

Selling Expenses

Selling expenses increased by approximately $0.2 million, or 273.6%, from approximately $64,000 for the year ended June 30, 2020 to approximately $0.2 million for the year ended June 30, 2021. The increase in selling expenses was primarily due to the increase of shipping fees of approximately $0.2 million.

General and Administrative Expenses

General and administrative expenses decreased by approximately $1.0 million, or 32.6%, from approximately $3.0 million for the year ended June 30, 2020 to approximately $2.0 million for the year ended June 30, 2021. The decrease in general and administrative expenses was primarily due to the decrease of the promissory note repayment extension penalty of $0.5 million, the decrease of business consulting fee of approximately $0.5 million and the decrease of approximately $0.2 million of legal expenses for Xiangtai Cayman. The decrease in general and administrative expenses was mainly offset by the increase of salary and insurance expenses of $0.1 million due to our purchase of the 51% equity interest in JMC on April 3, 2020. We expect our general and administrative expenses, including but not limited to, salaries and business consulting, to continue to increase in the foreseeable future, as our business further grows. We expect our legal expenses to decrease in the foreseeable future unless we will have additional potential acquisition or financing transactions that are required of legal services.

Provision for Doubtful Accounts

Provision for doubtful accounts increased by approximately $5.6 million, or 848.6% from approximately $0.7 million for the year ended June 30, 2020 to approximately $6.3 million for the year ended June 30, 2021. The change was due to the fact that we had more accounts receivables aged over 6 months as of June 30, 2021 as compared to June 30, 2020.

72

Stock Compensation Expenses

We incurred approximately $1.5 million stock compensation expense to pay for certain professional services during the year ended June 30, 2021. We expect this is a one-time expense and we do not expect such expenses will recur in the future period. In addition, we incurred approximately $0.4 million stock compensation expenses relating to amortization of deferred shares compensation and vested portion of the stock options issued to our independent directors.

We incurred approximately $0.9 million stock compensation expense to pay for certain professional services valued at $650,000 during the year ended June 30, 2020, in connection with the issuance of our ordinary shares in August 2019. We expect this is a one-time expense and we do not expect such expenses will recur in the future period. In addition, we incurred approximately $0.2 million stock compensation expenses relating to the vested portion of the stock options issued to our independent directors. Furthermore, we incurred approximately $67,000 in stock compensation expense relating to our ordinary shares issued to our business consulting firm for its services performed from March 2020 to June 2020.

Impairment of Goodwill

We recorded approximately $5.5 million impairment loss of goodwill assets during the year ended June 30, 2021. We impaired the goodwill of JMC due to the current and foreseeable future operations at loss.

Income (Loss) from Operations

The loss from operations for the year ended June 30, 2021 was approximately $13.0 million, an increase of approximately $10.4 million, or 398.0%, from approximately $2.6 million for the year ended June 30, 2020. The increase was mostly attributable to the increase of provision for doubtful accounts, stock compensation expenses, and the impairment of goodwill as the reasons that we mentioned above.

Other Income (Expense), Net

Our other expense, net, consists of interest income, interest expense, other finance expense, other income (expense), net, and gain on debt settlement. Our total other expense was approximately $0.3 million during the year ended June 30, 2021, a decrease of approximately $0.2 million, or 43.0%, as compared to our other expenses of approximately $0.5 million during the year ended June 30, 2020. The decrease was mainly due to the decrease of other finance expense of approximately $0.2 million and the gain on debt settlement of approximately $0.1 million. The decrease was offset by the increase of interest expense of approximately $0.1 million as we incurred more penalty interest charges for bank loans in default for the year ended June 30, 2021.

Benefit of (Provision for) Income Taxes

Benefit of income tax was approximately $1.0 million during the year ended June 30, 2021, an increase of approximately $1.2 million, or 549.1%, as compared to provision for income tax approximately $0.2 million for the year ended June 30, 2020. Under the Income Tax Laws of the PRC, companies are generally subject to income tax at a rate of 25%. The slight increase in provision for income taxes was mainly to JMC which had no taxable income but more provision for doubtful accounts during the year ended June 30, 2021.

Net Loss from Continuing Operations

Our net loss from continuing operations was approximately $12.3 million for the year ended June 30, 2021, increased by approximately $8.9 million, or 265.3%, from net loss from continuing operations of approximately $3.4 million for the year ended June 30, 2020. Such change was the result of the combination of the changes as discussed above.

73

Net Loss from Discontinued Operations

In February 2020, we discontinued our grocery stores business; in April 2021, we discontinued our farmers’ market and supermarket business as the businesses have been operating at losses. As a result, the results of operations for our farmers’ market and supermarket and grocery stores business are reported as discontinued operations under the guidance of Accounting Standards Codification 205. Our net loss from discontinued operations increased by approximately $33.8 million, or 3266.4%, to a net loss of approximately $34.8 million for the year ended June 30, 2021, from a net loss of approximately $1.0 million for the year ended June 30, 2020. The increase in loss from discontinued operations was predominantly due to the increase of provision for doubtful accounts of approximately $30.7 million and the impairment of long-lived assets of approximately $0.3 million. In addition, the gross profit also dropped approximately $4.6 million for the year ended June 30, 2021, as compared to the same period in 2020.

Net Loss

Our net loss was approximately $47.1 million for the year ended June 30, 2021, increased by approximately $42.7 million, or 970.2%, from a net loss of approximately $4.4 million for the year ended June 30, 2020. Such change was the result of the combination of the changes as discussed above.

The following tables reconcile our non-GAAP net income (loss) to the most directly comparable financial measures calculated in accordance with U.S. GAAP, which are net income (loss) attributable to our ordinary shareholders.

	For the Year ended June 30,
					Percentage
	2021		2020		Change		Change
Reconciliation of net loss to Non-GAAP net loss
Net loss	$	(47,082,967)	$	(4,399,533)		42,683,434	970.2	%
Stock compensation expense		1,889,173		930,223		958,950	103.1	%
Non-GAAP net loss	$	(45,193,794)	$	(3,469,310)	$	41,724,484	1,202.7	%

Our non-GAAP net loss increased by approximately $41.7 million, or 1,202.7%, to non-GAAP net loss of approximately $45.2 million for the year ended June 30, 2021, from non-GAAP net income of approximately $3.5 million for the year ended June 30, 2020. Such change was primarily attributable to the increase in provision for doubtful accounts and the increase of impairment of goodwill as discussed above.

Comparison of Fiscal Years Ended June 30, 2020 and 2019

Revenues

Our revenues are from raw feed materials revenues. Total revenues increased by approximately $24.3 million, or 100.0%, to approximately $24.3 million for the year ended June 30, 2020, compared to nil for the year ended June 30, 2019. The overall increase was primarily attributable to the increase of our raw feed materials revenues as we purchased JMC on April 3, 2020.

Raw feed material revenues was approximately $24.3 million for the year ended June 30, 2020 resulted from our purchase of the 51% equity interest in Chongqing JMC on April 3, 2020 and we began to engage in raw feed material and formula solution wholesales business.

74

Our revenues from our raw feed material revenues are summarized as follows

	For the Year		For the Year
	ended		ended
	June 30, 2020		June 30, 2019		Change		Change (%)
Soybean meal	$	21,651,362	$	—	$	21,651,362	100.0	%
Soybean oil		2,597,403		—		2,597,403	100.0	%
Total raw feed material revenues	$	24,248,765	$	—	$	24,248,765	100.0	%

Our revenues from soybean meal in number of kilograms sold and its average selling price are summarized as follows:

	For the Year		For the Year
	ended		ended
	June 30, 2020		June 30, 2019		Change		Change (%)
Soybean meal (kg)		57,660,570		—		57,660,570	100.0	%
Average selling price (per kg)	$	0.38	$	—	$	0.38	100.0	%

We began selling soybean meal at an average selling price of $0.38/kg after our acquisition of the 51% equity interest in JMC on April 3, 2020. The selling prices are not fixed, and they are floating based on the current local market prices.

Our revenues from soybean oil in number of kilograms sold and its average selling price are summarized as follows:

	For the Year		For the Year
	ended		ended
	June 30, 2020		June 30, 2019		Change		Change (%)
Soybean oil (ton)		3,335		—		3,335	100.0	%
Average selling price (per ton)	$	778.83	$	—	$	778.83	100.0	%

We began selling soybean oil at an average selling price of $778.83/kg after our acquisition of the 51% equity interest in JMC on April 3, 2020.

Cost of Revenues

Our cost of revenues consists of cost of direct materials, labor and manufacturing overhead costs. Total cost of revenues increased by approximately $22.2 million, or 100.0%, to approximately $22.2 million for the year ended June 30, 2020, compared to nil for the year ended June 30, 2019. Our total cost of revenues increased, which was in line with the increase of total revenues.

The cost of raw feed material revenues was approximately $22.2 million for the year ended June 30, 2020 resulted from our purchase of the 51% equity interest in JMC on April 3, 2020 and we began to engage in raw feed material and formula solution wholesales business.

Our cost of revenues from our raw feed material revenues are summarized as follows:

	For the Year		For the Year
	ended		ended
	June 30, 2020		June 30, 2019		Change		Change (%)
Soybean meal	$	19,665,423	$	—	$	19,665,423	100.0	%
Soybean oil		2,554,105		—		2,554,105	100.0	%
Total cost of raw feed material revenues	$	22,219,528	$	—	$	22,219,528	100.0	%

75

Our volume and unit cost of revenues from soybean meal are summarized as follows:

	For the Year		For the Year
	ended		ended
	June 30, 2020		June 30, 2019		Change		Change (%)
Soybean meal (kg)		57,660,570		—		57,660,570	100.0	%
Average selling price (per kg)	$	0.34	$	—	$	0.34	100.0	%

We purchased and resold 57,660,570 kg of soybean meal at an average purchase price of $0.34/kg resulted from our purchase of the 51% equity interest in JMC on April 3, 2020 and we began to engage in raw feed material and formula solution wholesales business.

Our volume and unit cost of revenues from soybean oil are summarized as follows:

	For the Year		For the Year
	ended		ended
	June 30, 2020		June 30, 2019		Change		Change (%)
Soybean oil (ton)		3,335		—		3,335	100.0	%
Average selling price (per ton)	$	765.94	$	—	$	765.94	100.0	%

We purchased and resold 3,335 tons of soybean oil at an average selling price of $765.94/kg resulted from our purchase of the 51% equity interest in JMC on April 3, 2020 and we began to engage in raw feed material and formula solution wholesales business.

Gross Profit

Our gross profit from our major revenue categories are summarized as follows:

	For the Year			For the Year
	ended			ended
	June 30, 2020			June 30, 2019		Change			Change (%)
Raw feed material revenues
Gross profit	$	2,029,237		—		$	2,029,237		100.0	%
Gross margin		8.4	%	—	%		8.4	%

Our gross profit increased by approximately $2.0 million, or 100.0%, to approximately $2.0 million during the year ended June 30, 2020, from nil for the year ended June 30, 2019. The increase in gross profit was primarily due to our increase of revenues in raw feed material sales.

Our gross margin for raw feed material revenues was 8.4% for the year ended June 30, 2020 resulted from our purchase of the 51% equity interest in JMC on April 3, 2020 and we began to engage in raw feed material and formula solution wholesales business.

Selling Expenses

Selling expenses increased by approximately $64,000, or 100.0%, from nil for the year ended June 30, 2019, to approximately $64,000 for the year ended June 30, 2020. The increase in selling expenses was primarily due to the increase of shipping fees of approximately $51,000.

General and Administrative Expenses

General and administrative expenses increased by approximately $2.5 million, or 482.6%, from approximately $0.5 million for the year ended June 30, 2019 as compared to approximately $3.0 million for the year ended June 30, 2020. The increase in general and administrative expenses was primarily due to the increase of salary and insurance expenses of $0.2 million. In addition, the increase also attributable to the increase of business consulting fee of approximately $1.0

76

million and the promissory note repayment extension penalty of $0.5 million. The increase also attributable to the increase of approximately $0.4 million of legal expense mainly related to our financing and acquisition of JMC activities.

Provision for Doubtful Accounts

Provision for doubtful accounts increased by approximately $0.7 million, or 100.0% from nil for the year ended June 30, 2019 to approximately $0.7 million for the year ended June 30, 2020. The change was due to the fact that we had slightly more accounts receivable aged over 6 months as of June 30, 2020 as compared to June 30, 2019.

Stock Compensation Expenses

We incurred approximately $0.9 million stock compensation expense to pay for certain professional services valued at $650,000 during the year ended June 30, 2020, in connection with the issuance of our ordinary shares in August 2019. We expect this is a one-time expense and we do not expect such expenses will recur in the future period. In addition, we incurred approximately $0.2 million stock compensation expenses relating to the vested portion of the stock options issued to our independent directors. Furthermore, we incurred approximately $67,000 in stock compensation expense relating to our ordinary shares issued to our business consulting firm for its services performed from March 2020 to June 2020.

Income (Loss) from Operations

The loss from operations for the year ended June 30, 2020 was approximately $2.6 million, an increase of approximately $2.1 million, or 410.5%, from approximately $0.5 million for the year ended June 30, 2019. The increase was primarily due to the increase of general and administrative expenses, provision for doubtful accounts and stock compensation expenses, as the reasons that we mentioned above.

Other Income (Expense), Net

Our other expense, net, consists of interest income, interest expense, other finance expense, and other income (expense), net. Our total other expense was approximately $0.5 million during the year ended June 30, 2020, an increase of approximately $0.5 million, or 63589.9%, as compared to our other expenses of approximately $800 during the year ended June 30, 2019. The increase was mainly due to the increase of interest expense of approximately $0.2 million as we incurred more penalty interest charges for bank loans in default for the year ended June 30, 2020. The increase was also due to the amortization costs of convertible debts of approximately $0.4 million for the year ended June 30, 2020.

Provision for Income Taxes

Provision for income tax was approximately $0.2 million during the year ended June 30, 2020, an increase of approximately $0.2 million, or 100.0%, as compared to $0 for the year ended June 30, 2019. Under the Income Tax Laws of the PRC, companies are generally subject to income tax at a rate of 25%. The slight increase in provision for income taxes was mainly to JMC which had taxable income during the year ended June 30, 2020.

Net (Loss) Income from Continuing Operations

Our net loss from continuing operations was approximately $3.4 million for the year ended June 30, 2020, increased by approximately $2.9 million, or 559.6%, from net loss from continuing operations of approximately $0.5 million for the year ended June 30, 2019. Such change was the result of the combination of the changes as discussed above.

Net (Loss) Income from Discontinued Operations

In February 2020, we discontinued our grocery stores business; in April 2021, we discontinued our farmers’ market and supermarket business as the businesses have been operating at losses. As a result, the results of operations for our farmers’ market and supermarket and grocery stores business are reported as discontinued operations under the guidance of Accounting Standards Codification 205. Our net income from discontinued operations decreased by

77

approximately $5.9 million, or 121.2%, to a net loss of approximately $1.0 million for the year ended June 30, 2020, from a net income of approximately $4.9 million for the year ended June 30, 2019. The increase in loss from discontinued operations was predominantly due to the loss on disposal of long-lived assets of approximately $0.3 million and the impairment of long-lived assets of approximately $0.7 million. In addition, due to COVID-19 in 2020, the gross profit also dropped approximately $3.7 million for the year ended June 30, 2020, as compared to the same period in 2019.

Net (Loss) Income

Our net loss was approximately $4.4 million for the year ended June 30, 2020, decreased by approximately $8.8 million, or 200.8%, from the net income of approximately $4.4 million for the year ended June 30, 2019. Such change was the result of the combination of the changes as discussed above.

5.B. Liquidity and Capital Resources

For the Fiscal Years ended June 30, 2021, 2020 and 2019

In assessing our liquidity, we monitor and analyze our cash on-hand and its operating expenditure commitments. Our liquidity needs are to meet its working capital requirements and operating expenses obligations. To date, we have financed our operations primarily through cash flows from operations and proceeds from financial institutions or third-party loans.

As of June 30, 2021, we had working deficit of approximately $6.2 million. We had accounts receivable of approximately $11.1 million, most of them are short-term in nature and can be collected back within our operating cycle to be used to support our working capital requirements. We believe the components of our current working capital is sufficient to support our operations for the next twelve months.

As of June 30, 2021, we had approximately $0.8 million of loans from financial institutions and $1.3 million of convertible notes. We obtained these loans and notes to fund our daily operations as our business requires significant amount of capital resource to fund our daily operations. For more details about these loans and notes, see Note 10 and Note 13 in our Notes to the consolidated financial statements included in this report.

Current foreign exchange and other regulations in the PRC may restrict our PRC entities, Xiangtai WFOE, Gangyixing WFOE, CQ Penglin, GA Yongpeng, CQ Pengmei, JMC and Fu Tong Ge, in their ability to transfer their net assets to the Company and its subsidiaries in Cayman Islands, British Virgin Islands, and Hong Kong. However, these restrictions have no impact on the ability of these PRC entities to transfer funds to the Company as we have no present plans to declare dividend which we plan to retain our retained earnings to continue to grow our business. In addition, these restrictions have no impact on the ability for us to meet our cash obligations as all of our current cash obligations are due within the PRC.

78

Cash Flows

The following summarizes the key components of our cash flows for the years ended June 30, 2021, 2020 and 2019.

	For the Years Ended June 30,
	2021		2020		2019
Net cash used in operating activities from continuing operations	$	(433,355)	$	(966,376)	$	(1,833,385)
Net cash used in operating activities from discontinued operations		(10,110,475)		(4,945,643)		(3,433,876)
Net cash provided by investing activities from continuing operations		—		859,461		—
Net cash (used in) provided by investing activities from discontinued operations		—		(700,399)		1,193,544
Net cash provided by (used in) financing activities from continuing operations		8,536,685		(70,849)		4,834,141
Net cash provided by financing activities from discontinued operations		117,482		4,147,857		1,816,385
Effect of exchange rate change on cash		459,834		(4,296)		320,103
Net change in cash and cash equivalents	$	(1,429,829)	$	(1,680,245)	$	2,896,912

As of June 30, 2021 and 2020, cash in the amount of approximately $0.1 million and $1.3 million, respectively, were all held by our subsidiaries and consolidated variable interest entities in the PRC.

Operating activities

Cash used in operating activities from continuing operations was approximately $0.4 million for the year ended June 30, 2021, which was mainly due to the net loss from continuing operations of approximately $12.3 million, gain on debt settlement of approximately $0.1 million, deferred tax benefit of approximately $1.6 million, the increase of accounts receivable of approximately $6.7 million, the increase of inventories of approximately $0.2 million, and the increase of prepayments of approximately $0.9 million. The net cash used in operating activities from continuing operations was mainly offset by the non-cash items of provision for doubtful accounts of approximately $6.3 million for accounts receivables as we had more account receivables aged over one year, the stock compensation expense of $1.9 million, the impairment of JMC goodwill of approximately $5.5 million, the increase in accounts payable of approximately $3.6 million, the increase in customer deposits of approximately $3.0 million, the increase in other payables and accrued liabilities of approximately $0.3 million, and the increase in taxes payable of approximately $0.6 million.

Cash used in operating activities from continuing operations was approximately $1.0 million for the year ended June 30, 2020, which was mainly due to the net loss from continuing operations of approximately $3.4 million, the increase of deferred tax benefit of approximately $0.2 million, the increase of accounts receivable of approximately $5.0 million, and the decrease of customer deposits of approximately $2.7 million. The net cash used in operating activities was mainly offset by non-cash items of provision for doubtful accounts of approximately $0.7 million as we had more account receivables aged over one year and we provided an allowance for a security deposit of a loan, stock compensation expense of approximately $0.9 million, late payment penalty expense for repayment of our promissory notes of $0.5 million, amortization of convertible debenture issuance cost and discount of approximately $0.4 million, the decrease of inventories of approximately $0.3 million as we try to minimize our inventory to reduce our storage cost, the decrease of prepayments of approximately $3.1 million, the decrease of security deposits of approximately $1.4 million, the increase of accounts payable of approximately $2.5 million, the increase of other payables and accrued liabilities of approximately $0.3 million, and the increase of tax payables of approximately $0.4 million.

Cash used in operating activities from continuing operations was approximately $1.8 million for the year ended June 30, 2019, which was mainly due to the net loss from continuing operations of approximately $0.5 million and the increase of security deposits of approximately $1.4 million. The net cash used in operating activities was offset by the increase of other payables and accrued liabilities of approximately $0.1 million.

79

Investing activities

The Company did not have any investing activities from continuing operations for the year ended June 30, 2021.

Cash provided in investing activities from continuing operations was approximately $0.9 million for the year ended June 30, 2020, which was due to approximately $0.9 million of cash held in connection with the acquisition of JMC.

The Company did not have any investing activities from continuing operations for the year ended June 30, 2019.

Financing activities

Cash provided by financing activities from continuing operations was approximately $8.5 million for the year ended June 30, 2021, which was mainly due to proceeds received from issuance of ordinary shares through private placements of approximately $9.0 million, proceeds from long-term bank loans of approximately $0.8 million, proceeds received from issuance of convertible debenture of $1.3 million. Cash provided by financing activities from continuing operations for the year ended June 30, 2021 was mainly offset by the repayments of other payables – related parties of approximately $1.3 million and repayments of short-term bank loans of approximately $1.3 million.

Cash used in financing activities from continuing operations was approximately $71,000 for the year ended June 30, 2020, which was mainly due to the repayments of other payables- related parties of approximately $5.8 million and the repayments of short-term bank loans of approximately $0.2 million. Cash used in financing activities from continuing operations was offset by proceeds from short-term bank loans of approximately $0.5 million and proceeds from convertible debentures of approximately $5.5 million, net of issuance cost of approximately $0.2 million.

Cash provided by financing activities from continuing operations was approximately $4.8 million for the year ended June 30, 2019, which was mainly due to proceeds from issuance of ordinary shares through private placements of $1.0 million, proceeds from issuance of ordinary shares with redemption rights of $0.2 million and proceeds from short-term bank loans of approximately $4.5 million. Cash provided by financing activities from continuing operations for the year ended June 30, 2019 was offset by the repayments of other payables – related parties of approximately $0.8 million.

5.C. Research and Development

We currently do not have any research and development expenses.

5.D. Trend Information

Other than as disclosed elsewhere in this prospectus and below, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

Guarantees

a) Related party

As of June 30, 2021, CQ Penglin, the Company’s CEO, her husband and her elder son, and an unrelated third party, Chongqing Education Guaranty Co., Ltd., jointly guaranteed approximately $1.2 million (RMB 8,000,000) loan that a related-party borrowed from the bank (see Note 9):

Name of the party being guaranteed	Guaranteed amount		Guarantee expiration date
CQ Mingwen (borrower)	$	1,238,927		December 22, 2021

80

The Company did not, however, accrue any liability in connection with such a guarantee because the borrowers have been current in its repayment obligation and the Company has not experienced any losses from providing such guarantee. As of the date of this report, the Company has evaluated the guarantee and has concluded that the likelihood of having to make any payments under the guarantee agreement is remote. If CQ Mingwen is unable to repay the loan upon maturity, assets of GA Yongpeng may be liquidated to pay back the loan.

b) CQ Mingwen, a related party, and three other unrelated third parties

As of June 30, 201, GA Yongpeng guaranteed approximately aggregated of unpaid loan balance of approximately $0.1 million (RMB 809,220) that that four entities, 1) CQ Mingwen, a related party, 2) Chongqing Gangxinyi Trading Co., Ltd., 3) Chongqing Liangxun Trading Co., Ltd., and 4) Chongqing Fu Yong Sheng Food Supermarket Co., Ltd., borrowed from Sichuan Toucu Financial Information Services Co., Ltd. These loan balances are GA Yongpeng’s property and CQ Pengmei’s 100% equity interest. As of June 30, 2021, these loans balance were repaid by the guarantees in full.

Contingencies

From time to time, we are a party to various legal actions arising in the ordinary course of business. The majority of these claims and proceedings related to or arise from, lease disputes, commercial disputes, worker compensation complaints, default on guaranteeing third party lease obligations, and default on loans. We first determine whether a loss from a claim is probable, and if it is reasonable to estimate the potential loss, the loss will be accrued. We disclose a range of possible losses, if a loss from a claim is probable but the amount of loss cannot be reasonably estimated.

As of June 30, 2021, the amount of potential losses we accrued for are summarized as follows:

Dispute matter	Claim amount
Leases	$	49,950

As of June 30, 2021, the amount of potential losses we did not accrue for are summarized as follows:

Dispute matter	Claim amount
Guarantees	$	270,403

We received three complaints related to an approximately $5.1 million (RMB 33,000,000) loan currently in default in default (See Note 10 – Chongqing Puluosi Small Mortgage Co., Ltd.).

Yong Li filed a lawsuit against Chongqing Fu Yong Sheng Food Supermarket Co., Ltd. (“FYS Supermarket”) and GA Yongpeng in connection with FYS Supermarket’s breach of a supermarket equipment purchase agreement signed on May 7, 2018 by failing to pay off the remaining balance of approximately $0.3 million (RMB 1.7 million). On June 11, 2020, Chongqing Nan’an District People’s Court made a judgement that FYS Supermarket should pay Yong the full remaining balance and the monthly interest rate at 1.5% for the transfer fee and the losses and Yong’s attorney fee approximately $3,100 (RMB 20,000). GA Yongpeng shall bear joint and several liability for the above repayment. FYS Supermarket and GA Yongpeng are also required to pay property guarantee fee approximately $800 (RMB 5,000) and court fee approximately $3,300 (RMB 21,045). As of the date of this report, we have evaluated the financial condition of FYS Supermarket and has concluded that the likelihood of having to make any payments is remote. Therefore, we did not accrue any contingent liability as of June 30, 2021.

On October 20, 2020, Chongqing Haobangshou Ecommerce Co., Ltd. (“Haobangshou”) filed a lawsuit against CQ Penglin in connection with the $1,548,659 (RMB 10,000,000) loan due on March 24, 2023 and a total of $487,828 (RMB 3,150,000) outstanding payments for goods purchased in July 2020. Haobangshou stated that Haobangshou and CQ Penglin made a verbal deal in July 2020 that CQ Penglin will return the whole balance of $2,036,486 (RMB 13,140,000) within three months, but CQ Penglin did not make repayments according to the deal. Therefore, Haobangshou asked CQ Penglin to pay off the full balance of $2,036,486 (RMB 13,140,000) and the interest of the whole balance at the annual interest rate of 12% from August 1, 2020 to the repayment date. On June 30, 2021, the court ruled in favor of the Haobangshou. CQ Penglin was ordered to repay RMB 13,140,000 and interest at 12% per annum. Zeshu Dai, Mingwen

81

Wang and Penglin Wang shall bear joint and several liability for the above repayment. As of June 30, 2021, CQ Penglin has not made any payment.

5.E. Off-balance Sheet Arrangements

Other than as disclosed elsewhere in this prospectus, we have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to its shares and classified as shareholder’s equity or that are not reflected in its consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.

5.F. Tabular Disclosure of Contractual Obligations

The following table summarizes our contractual obligations as of June 30, 2021:

	Payments due by period
Contractual obligations		Total		Less than 1 year		1 – 3 years		3 – 5 years		More than 5 years
Short term loan – bank	$	782,073	$	782,073	$	—	$	—	$	—

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements.

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for information pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).

Principles of consolidation

The consolidated financial statements include the accounts of the Company, its subsidiaries, and its VIE. All intercompany transactions and balances are eliminated upon consolidation.

Use of estimates and assumptions

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s consolidated financial statements include, but not limited to, revenue recognition, residual values, lease classification and liabilities, , inventory obsolescence, right-of-use assets, determinations of the useful lives and valuation of long-lived assets and goodwill,

82

estimates of allowances for doubtful accounts, estimates of impairment of long-lived assets and goodwill, valuation of deferred tax assets, estimated fair value used in business acquisitions, issuance of common stock and warrants exercised and other provisions and contingencies. Actual results could differ from these estimates.

Foreign currency translation and transaction

The reporting currency of the Company is the U.S. dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. The statement of income accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss). Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. These restrictions have not had a material impact on the Company because it has not engaged in any significant transactions that are subject to the restrictions.

Business combinations

The purchase of price of an acquired company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill. The results of operations of the acquired business are included in the Company’s operating results from the date of acquisition.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and time deposits placed with banks or other financial institutions and have original maturities of less than three months.

Accounts receivable

Accounts receivable include trade accounts due from customers. Accounts are considered overdue after 30 days. In establishing the required allowance for doubtful accounts, management considers historical experience, aging of the receivables, the economic environment, trends in the food industry and the credit history and relationships with the customers. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate, and adjusts the allowance when necessary. The Company provides an allowance for doubtful accounts provision of 25% for accounts receivable balances that are past due more than 180 days but less than 270 days, an allowance for doubtful accounts provision of 50% of for accounts receivable past due from 270 days but less than one year, an allowance for doubtful accounts provision of 100% for accounts receivable past due beyond one year, plus additional amounts as necessary when the Company’s collection department determines the collection of the full amount is remote and the Company’s management approves 100% of the allowance for doubtful accounts. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. The Company’s management has continued to evaluate the reasonableness of its valuation allowance policy and will update it if necessary.

Other receivables

Other receivables primarily include advances to employees, amounts due from unrelated entities, VAT tax refunds, and other deposits. Management regularly reviews the aging of receivables and changes in payment trends and records allowances when management believes the collection of amounts due are at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made.

83

Inventories

Inventories are comprised of finished goods and are stated at the lower of cost or net realizable value using the weighted average method. Management reviews inventories for obsolescence and cost in excess of net realizable value at least annually and records a reserve against the inventory when the carrying value exceeds net realizable value.

Prepayments

Prepayments are cash deposited or advanced to services providers for future inventory purchases or future services. This amount is refundable and bears no interest.

Security deposits

Security deposits include loan deposits to service providers who assisted the Company as a third party guarantor in the Company’s bank loans. These amounts are non-interest bearing and refundable upon the repayments of the loans or notes payable or fulfillment of sales contracts. Security deposits considered uncollectable are written off against allowances after exhaustive efforts at collection are made.

Plant and equipment, net

Plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets with a 0% or 5% residual value. The estimated useful lives are as follows:

	Useful Life
Building	10-20 years
Electronic devices	5-10 years
Automobile	5-10 years
Office equipment	5 years
Leasehold improvements	Shorter of the lease term or useful life

The cost and related accumulated depreciation and amortization of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income and comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation and amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

Construction-in-progress represents contractor and labor costs, design fees and inspection fees in connection with the construction projects. No depreciation is provided for construction-in-progress until it is completed and placed into service.

Intangible assets, net

Intangible assets are stated at cost, less accumulated amortization. Amortization expense is recognized on the straight-line basis over the estimated useful lives of the assets. All land in the PRC is owned by the government; however, the government grants “land-use rights.” The Company has obtained rights to use various parcels of land for 50 years. The Company amortizes the cost of the land use rights over their useful life using the straight-line method.

Goodwill

Goodwill represents the excess of the consideration paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiaries at the date of acquisition. Goodwill is not amortized and is tested for impairment at least

84

annually, more often when circumstances indicate impairment may have occurred. Goodwill is carried at cost less accumulated impairment losses. If impairment exists, goodwill is immediately written off to its fair value and the loss is recognized in the consolidated statements of operations and comprehensive income (loss). Impairment losses on goodwill are not reversed.

The Company reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist annually or more frequently if events and circumstances indicate that it is more likely than not that an impairment has occurred. The Company has the opinion to access qualitative factors to determine whether it is necessary to perform the two-step in accordance with ASC 350-20. If the Company believes, as a result of the qualitative carrying amount, the two-step quantities impairment test described below is required.

The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required.

If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business acquisition with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. Estimating fair value is performed by utilizing various valuation techniques, with the primary technique being a discounted cash flow.

If impairment exists, goodwill is immediately written off to its fair value and the loss is recognized in the consolidated statements of operations and comprehensive income (loss). Impairment losses on goodwill are not reversed.

Impairment for long-lived assets

Long-lived assets, including plant and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values.

Financial Instruments

The Company analyzes all financial instruments with features of both liabilities and equity under FASB Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” and FASB ASC Topic 815 “Derivatives and Hedging”. The embedded conversion features of convertible debentures not separately accounted for as a derivative and contained considered to be derivative instruments provide for a rate of conversion that is below market value. Such feature is normally characterized as a “beneficial conversion feature” (“BCF”) required to separate the instruments into debt and equity. A BCF is a non-detachable conversion feature that is “in the money” at the commitment date, which requires recognition of interest expense for underlying debt instruments and a deemed dividend for underlying equity instruments. A conversion option is “in the money” if the effective conversion price is lower than the commitment date fair value of the share into which it is convertible. The relative fair values of the BCF were recorded as discounts from the face amount of the respective debt instrument. The Company amortized the discount using the straight-line method which approximates the effective interest method through maturity of such instruments.

Fair value measurement

The accounting standard regarding the fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company.

85

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest. Long-term bank loan on the balance sheets is at carrying value, which approximates fair value as the bank was lending the money to the Company at the market rate.

Related parties

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Revenue recognition

Prior to June 30, 2018, revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured.

Revenues are recognized at the date of goods delivered and title passed to customers or agents, when a formal arrangement exists, the price is fixed or determinable, the Company has no other significant obligations and collectability is reasonably assured. The Company’s revenues come from three channels: supermarkets, farmers’ markets and raw feed materials. The products sold in supermarkets together with raw feed materials are processed products are subject to a Chinese value-added tax (“VAT”) when sold in the PRC. The products sold at farmers’ markets are fresh-killed hog and hog’s byproducts. These products sold in the PRC are not subject to a Chinese VAT. VAT taxes are presented as a reduction of revenue.

On July 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of June 30, 2018. The core principle underlying the revenue recognition ASU is that the Company recognizes revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This requires the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or overtime, based on when control of goods and services transfers to a customer. The Company’s revenue streams are primarily recognized at a point in time.

86

The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.

Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and determined that there were no differences in the pattern of revenue recognition. Disaggregated revenue by the Company’s revenue streams, such as supermarket and grocery store revenue, famers’ market revenue and raw feed material revenue are required to be disclosed upon adoption, which has been reflected in the accompanying consolidated statements of income and comprehensive income.

Gross versus Net Revenue Reporting

The Company also engages in trading of chilled fresh pork. The determination of whether revenues should be reported on a gross or net basis is based on its assessment of whether it is the principal or an agent in the transaction in accordance with ASC 606-10-55 and depends on whether the promise to the customer is to provide the products or to facilitate a sale by a third party. The nature of the promise depends on whether the Company controls the products prior to transferring it. When the Company controls the product, the promise is to provide and deliver the products and revenue is presented gross. When the Company does not control the products, the promise is to facilitate the sale and revenue is presented net.

To distinguish a promise to provide products from a promise to facilitate the sale from a third party, the Company considers the guidance of control in ASC 606-10-55-37A and the indicators in 606-10-55-39. The Company considers this guidance in conjunction with the terms in the Company’s arrangements with both suppliers and customers.

In general, the Company does not control the products as it has no obligation to (i) fulfill the resale products delivery, and (ii) bear any inventory risk. In addition, when establishing the selling prices for delivery of the resale products, the Company has such discretion of establishing price to ensure it would generate profit for the services of the products delivery arrangements. The Company believes that all these factors indicate that the Company is acting as an agent in this transaction. As a result, revenue from the trading of chilled fresh pork is presented on a net basis.

Cost of revenues

Cost of revenues comprised of the cost of raw materials and the cost of processing and overhead expenses on sold products.

Shipping and handling

Shipping and handling costs are expensed as incurred and included in selling expenses.

Advertising costs

Advertising costs are expensed as incurred and included in selling expenses.

Leases

Effective July 1, 2019, the Company adopted FASB ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that does not require us to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. The Company also adopted the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. On July 1, 2019, the Company recognized

87

approximately $1.3 million right of use (“ROU”) assets and same amount of lease liabilities based on the present value of the future minimum rental payments of leases, using an incremental borrowing rate of 6.09% based on the duration of lease terms.

Operating lease ROU assets and lease liabilities are recognized at the adoption date of July 1, 2019 or the commencement date, whichever is earlier, based on the present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company use its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.

Lease terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception, therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Its leases generally do not provide a residual guarantee. The operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term.

The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested asset group and include the associated operating lease payments in the undiscounted future pre-tax cash flows.

Stock-based compensation

The Company records stock compensation expense for employees at fair value on the grant date and recognizes the expense over the employee’s requisite service period. The Company’s expected volatility assumption is based on the historical volatility of the Company’s stock. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination rate. The risk-free interest rate for the expected term of an option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is based on the Company’s current and expected dividend policy.

The Company records stock compensation expense for non-employees at fair value on the grant date and recognizes the expense over the service provider’s requisite service period.

Income taxes

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires us to use the assets and liability method of accounting for income taxes. Under the assets and liability method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forward. Under this accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.

ASC 740-10, Accounting for Uncertainty in Income Taxes, defines uncertainty in income taxes and the evaluation of a tax position as a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that

88

previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.

PRC tax returns filed in 2018 to 2020 are subject to examination by any applicable tax authorities.

Earnings per share (“EPS”)

Basic earnings per share are computed by dividing income available to ordinary shareholders by the weighted average ordinary shares outstanding during the period. Diluted earnings per share take into account the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised and converted into ordinary shares. Ordinary shares equivalents having an anti-dilutive effect on earnings per share are excluded from the calculation of diluted earnings per share. Dilution is computed by applying the treasury share method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase ordinary shares at the average market price during the period.

Employee benefit

The full-time employees of the Company are entitled to staff welfare benefits including medical care, housing fund, pension benefits, unemployment insurance and other welfare, which are government mandated defined contribution plans. The Company is required to accrue for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash contributions to the state-sponsored plans out of the amounts accrued.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820 “Fair Value Measurement”. ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning July 1, 2020. The adoption of this ASU on July 1, 2020 did not have a material effect on the Company’s consolidated financial statements.

In May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. In November 2019, the FASB issued ASU No. 2019-10, which to update the effective date of ASU No. 2016-02 for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit losses, leases, and hedging standard. The new effective date for these preparers is for fiscal years beginning after December 15, 2022.  The Company has not early adopted this update and it will become effective on July 1, 2023 assuming the Company will remain an emerging growth company, which

89

qualified as smaller reporting company, at that date. The Company is currently evaluating the impact of ASU 2019-05 will have on its consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01 to clarify the interaction of the accounting for equity securities under ASC 321 and investments accounted for under the equity method of accounting in ASC 323 and the accounting for certain forward contracts and purchased options accounted for under ASC 815. With respect to the interactions between ASC 321 and ASC 323, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting when applying the measurement alternative in ASC 321, immediately before applying or upon discontinuing the equity method of accounting. With respect to forward contracts or purchased options to purchase securities, the amendments clarify that when applying the guidance in ASC 815-10-15-141(a), an entity should not consider whether upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in ASC 323 or the fair value option in accordance with ASC 825. The ASU is effective for interim and prospecting periods beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. The Company does not expect the adoption of this standard will have a material impact on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. The amendment in this Update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, the Board decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this Update are effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements and related disclosures.

In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs”. The amendments in this Update represent changes to clarify the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. ASU 2020-08 is effective for the Company for annual and interim reporting periods beginning January 1, 2021. Early adoption was permitted, including adoption in an interim period. All entities should apply the amendments in this Update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not change the effective dates for Update 2017-08. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements to Subtopic 205-10, presentation of financial statements”. The amendments in this Update improve the codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the disclosure section of the codification. That reduce the likelihood that the disclosure requirement would be missed. The amendments also clarify guidance so that an entity can apply the guidance more consistently. ASU 2020-10 is effective for the Company for annual and interim reporting periods beginning January 1, 2022. Early application of the amendments is permitted for any annual or interim period for which financial statements are available to be issued. The amendments in this Update should be applied retrospectively. An entity should apply the amendments at the beginning of the period that

90

includes the adoption date. The Company is currently evaluating the impact of this new standard on Company’s consolidated financial statements and related disclosures

Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

Quantitative and Qualitative Disclosures about Market Risks

Interest Rate Risk

We are exposed to interest rate risk while we have short-term bank loans outstanding. Although interest rates for our short-term loans are typically fixed for the terms of the loans, the terms are typically twelve months and interest rates are subject to change upon renewal.

Credit Risk

Credit risk is controlled by the application of credit approvals, limits and monitoring procedures. We manage credit risk through in-house research and analysis of the Chinese economy and the underlying obligors and transaction structures. We identify credit risk collectively based on industry, geography and customer type. To minimize credit risk, we cooperate with local big distributors, which are more recognized in the feed raw materials and have better credibility history. This information is monitored regularly by management.

In measuring the credit risk of our sales to feed raw material distributors, we mainly reflect the “probability of default” by the customer on its contractual obligations and considers the current financial position of the customer and the exposures to the customer and its likely future development. For individual feed raw material customers, we use standard approval procedures to manage credit risk for receivables.

Liquidity Risk

We are also exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and liquidity to meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, we will turn to other financial institutions and third parties to obtain short-term funding to meet the liquidity shortage.

Inflation Risk

We are also exposed to inflation risk factors, such as increases in raw material and overhead costs, could impair our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of revenue if the selling prices of our products do not increase with such increased costs.

Foreign Currency Risk

A majority of our operating activities and a significant portion of our assets and liabilities are denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the Peoples’ Bank of China (“PBOC”) or other authorized financial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts. The value of RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.

91

ITEM 6.       DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

6.A. Directors and Management

The following table provides information regarding our executive officers and directors as of the date of this annual report.

Name	Age	Position(s)
Zeshu Dai	54	Chairwoman of the Board and Chief Executive Officer
Xiaohui Wu	44	President and Director
Xia Wang	34	Chief Financial Officer
Zhaorong Zhu	61	Independent Director, Chair of the Compensation Committee and Chair of the Nominating Committee
K. Bryce Toussaint	49	Independent Director and Chair of the Audit Committee
Yun Xia	65	Independent Director
Scott Silverman	52	Independent Director

The business address of each of the officers and directors is Xinganxian Plaza, Building B, Suite 21-1, Lianglukou, Yuzhong District, Chongqing City, PRC 400800.

Zeshu Dai. Ms. Dai has been our Chairwoman of the Board and CEO since our inception, January 23, 2018. Ms. Dai graduated from high school in 1982. She worked as a cashier at Qu County Xiandu Operation Cooperative from January 1983 to December 1985. She was the sales manager at Chongqing Liangping Meat Factory from January 1986 to December 2000. From January 2001 to May 2014, Ms Dai was the Vice general manager of Chongqing Mingwen Food Co., Ltd. She has been the director of CQ Penglin and GA Yongpeng since November 2005 and June 2008, respectively. She is familiar with the meat processing industry and has extensive managing experience.

Xiaohui Wu. Mr. Wu has been our President since January 23, 2018 and our director since May 8, 2018. He has been the Director and CEO of Geniusland International Capital Ltd. since 2007. Before that, Mr. Wu was the Senior Project Manager at Genesis Equity Partner LLC, where he helped Chinese companies to raise capital in the United States. Prior to that, Mr. Wu had extensive experience with Hong Kong economic affairs while he worked at Hong Kong and Macao Affairs Office of the Ministry of Foreign Affairs of PRC from 1996 to 2006. Mr. Wu acquired his bachelor’s degree in English from Jilin Universtiy in 1996 and his master’s degree in finance from Remin University of China, School of Finance. Mr. Wu is familiar with the capital market in the United States and is experienced in finance and management.

Xia Wang. Ms. Wang has been our Chief Financial Officer since January 23, 2018. However, Ms. Wang has been working at CQ Penglin in the accounting department since 2008 after she acquired her bachelor’s degree in environmental science major from Chongqing University of Arts and Science. Ms. Wang started as a clerk at CQ Penglin from 2008 to 2010. She then worked as assistant accountant from 2010 to 2011. She was promoted to accounting supervisor in 2011, and was appointed as CFO in 2014. She oversees our accounting department, which include duties such as reviewing all the accounting functions performed by our accounting staff, maintaining our accounting book and records, reporting to the Board of Directors, managing budget, reviewing cost, etc.

Zhaorong Zhu. Mr. Zhu has been our Independent Director since May 8, 2018. He has also been an assistant professor at Southwest University, School of Animal Science. Before that, from July 2005 to July 2017, Mr. Zhu worked at Southwest University. During which time, he has been the associate professor at Animal Medicine Department, the general secretary and department deputy director of the Fisheries Department, and the deputy director of Technology Industry Department. From September 2001 to July 2005, Mr. Zhu was the associate professor, deputy director at Technology Industry Department at Southwest Agricultural University. He had been an assistant professor, lecturer, and the associate professor at Department of Animal Medicine and deputy director of Department of Science and Technology at Sichuan Animal Husbandry and Veterinary College from 1983 to 2001. Mr. Zhu acquired his bachelor’s degree in Chinese Medicine from Chengdu College of Chinese Medicine in 1986 and associate degree in Animal Medicine from Sichuan Animal Husbandry and Veterinary College in 1983. Mr. Zhu is an expert in Animal Medicine and has received

92

the Chongqin Aquaculture Forensic Qualification Certificate, the Expert certificate of Chongqing Public Safety Technical Expert Committee, and the Ministry of Agriculture Practicing Veterinary Qualification Certificate.

K. Bryce Toussaint. Mr. Toussaint is a highly accomplished, result-driven entrepreneur with more than 20 years of business experience, including extensive work in providing merger and acquisition consulting, raising capital (equity and debt), project and corporate finance, private equity due diligence and accounting systems integration, with an emphasis in the energy (renewable, E&P, and midstream), manufacturing, nutraceutical and technology industries. Mr. Toussaint is well versed on SEC rules and regulations as well as Generally Accepted Accounting Principles (GAAP) promulgated by the Financial Accounting Stands Board. Mr. Toussaint currently serves as the Chairman and Interim CEO of Principal Solar, Inc. a position he has held since September of 2018. Mr. Toussaint formally served as Chief Executive Officer and Board member of Nasdaq listed Corporation MYOS RENS Technology Inc. from December 2015 until 2016. Mr. Toussaint built the foundation of his career at KPMG LLP, where he served both foreign and domestic registrants with reporting, mergers and acquisitions consulting and other capital market engagements from August 1996 to June 2000. In between, he also built a successful consulting practice assisting businesses of various sizes with process improvement and compliance initiatives, developing their management teams, accounting and reporting structure, providing strategic and operational expertise, and raising equity and debt financing, generally serving in an interim management capacity. Mr. Toussaint obtained both his Bachelor of Science in Accounting and his Master of Business Administration degrees from Louisiana State University in Baton Rouge, Louisiana. Mr. Toussaint is also certified as a CPA in the State of Texas. We believe Mr. Toussaint qualifies to be our director due to his financial expertise and public company experience.

Yun Xia. Ms. Xia has been our Independent Director since May 8, 2018. She has also been working at Chongqing International Freight Forwarders Association since June 2015, as secretary and deputy secretary. She was an independent director at Chongqing Foreign Economic & Trade (Group) Co. Ltd. from 2012 to 2014. She was the deputy general manager at Chongqing Bonded Port Development Management CO., Ltd. from 2009 to 2012. Before that, Ms. Xia worked as the chief of Chongqing Customs Supervision Department, Customs Clearance Department, and Review Department from 1998 to 2008, as chief personnel officer and deputy director of Personnel Education Department of Chongqing Customs from 1987 to 1998, as clerk at Personnel Education Division at Chongqing Municipal Bureau of Culture from 1985 to 1987, as clerk at Personnel Education Division at Chongqing Publishing Bureau, and as a nurse and assistant military medical officer at Railway Soldiers’ Sixth Division Hospital from 1970 to 1983. Ms. Xia acquired her bachelor’s degree in law (lawyer practice focused) from Southwest China University of Political Science and Law in 2004, an associate degree in Management from Central Party School in 1996, an associate degree in law from Southwest China University of Political Science and Law, an associate degree in Political Science from Chongqing Municipal Party University in 1985, and an associate degree in Anesthesia from Fourth Military Medical University in 1979. Ms. Xia is experienced in trade and is an expert in the legal framework of trade and business.

Scott Silverman. Mr. Silverman has over 25 years of business success on national and international levels, with a highly diverse knowledge of financial, legal and operations management; public company management, accounting and SEC regulations. Mr. Silverman specializes in establishing and streamlining back-office policies and procedures and implementing sound financial management and internal controls necessary for enterprise growth and scalability. Mr. Silverman is currently a director nominee of Muliang Viagoo Technology, Inc. Mr. Silverman is also a partner and CFO of VC Capital Holdings, a diversified PE firm with portfolio investments in hospitality, healthcare and construction and engineering. Additionally, Mr. Silverman serves as the CFO of Riverside Miami, a mixed use entertainment, food and beverage project in Miami, FL. He also serves as the CFO of Healthsnap, Inc. a healthcare SaaS platform on the cutting edge of remote patient monitoring and chronic care management. Mr. Silverman is one of the founders, and serves as President and CEO, of EverAsia Financial Group, which grew into a multi-national corporate financial management and advisory firm serving clients in the United States and Asia, and JJL Capital Management, a private equity firm specializing in investing in startup, early- and mid-stage companies. Prior, while serving as the VP of Finance of Itopia, Mr. Silverman was involved in the raise of over $5 million in Series A capital, reduced expenses by more than 40% and participated in a 100% increase in year-over-year top line revenues. Mr. Silverman has orchestrated investor exits for multiple companies, including direct participation in taking 7 companies public. He has also assisted in raising over $35 million for client companies, both public and private. He has a bachelor’s degree in finance from George Washington University and a Master’s degree in accounting from NOVA Southeastern University. We believe Mr. Silverman qualifies to be our director due to his finance expertise.

93

Family Relationships

None

6.B. Compensation

Director Compensation

All directors hold office until the next annual meeting of shareholders at which they are re-elected and until their successors have been duly elected and qualified. Officers are elected by and serve at the discretion of the board of directors. Employee directors are entitled receive compensation for their services. Non-employee directors are entitled to receive a set amount of cash fee for serving as directors. In addition, non-employee directors are entitled to receive compensation for their actual travel expenses for each board of directors meeting attended, and any out-of-pocket expenses incurred by them in connection with their services provided in such capacity. We have entered into agreements with all of our directors.

In addition, our employee directors Ms. Zeshu Dai receives compensation for her service as Chief Executive Officer of the Company and Mr. Xiaohui Wu receives compensation for his service as President of the Company. Mr. Dai and Mr. Wu have not received and will not receive compensation as directors of the Company.

We have agreed to pay our independent directors an annual cash retainer from $10,000 to $25,000, subject to terms of the definitive agreements. We will also reimburse all directors for any out-of-pocket expenses incurred by them in connection with their services provided in such capacity. In addition, we may provide incentive grants of stock, options or other securities convertible into or exchangeable for, our securities.

Executive Compensation

The Compensation Committee of the Board of Directors determined the compensation to be paid to our executive officers based on our financial and operating performance and prospects, and contributions made by the officers to our success. And our compensation committee approved our salary and benefit plans. Each of the named officers will be measured by a series of performance criteria by the board of directors, or the compensation committee on a yearly basis. Such criteria will be set forth based on certain objective parameters such as job characteristics, required professionalism, management skills, interpersonal skills, related experience, personal performance and overall corporate performance.

Summary Compensation Table

The following table presents summary information regarding the total compensation awarded to, earned by, or paid to each of the named executive officers for services rendered to us for the years ended June 30, 2021, 2020 and 2019.

					Stock	All Other
		Salary		Bonus	Awards	Compensation	Total
Name and Principal Position	Fiscal Year	($)(1)		($)	($)	($)	($)
Zeshu Dai	2021	$	120,000	—	—	—	$	120,000
Chief Executive Officer	2020	$	120,000	—	—	—	$	120,000
	2019	$	120,000	—	—	—	$	120,000
Xia Wang	2021	$	—	—	200,000	—	$	200,000
Chief Financial Officer	2020	$	80,000	—	—	—	$	80,000
	2019	$	80,000	—	—	—	$	80,000
Xiaohui Wu	2021	$	80,000	—	—	—	$	80,000
President	2020	$	80,000	—	—	—	$	80,000
	2019	$	80,000	—	—	—	$	80,000

(1) Amount reflecting salary paid or accrued to the individuals for services rendered, if any, to our PRC subsidiary and/or VIE.

94

Employment Agreements

Our employment agreements with our officers generally provide for employment for a specific term and pay annual salary, health insurance, pension insurance, and paid vacation and family leave time. The agreement may be terminated by either party as permitted by law. In the event of a breach or termination of the agreement by our company, we may be obligated to pay the employee twice the ordinary statutory rate. In the event of a breach or termination causing loss to our company by the employee, the employee may be required to indemnify us against loss. We have executed employment agreements with Zeshu Dai, Xiaohui Wu and Xia Wang.

Zeshu Dai

We entered into an employment agreement with Zeshu Dai for the position of Chief Executive Officer, effective on January 23, 2018. The employment is for three years and has been renewed on a year-to-year basis, with an annual compensation of $120,000.

Xiaohui Wu

We entered into an employment agreement with Xiaohui Wu for the position of President. The employment is for three years and has been renewed on a year-to-year basis, with an annual compensation of $80,000. In May 2021, the Company issued a total of 300,000 ordinary shares to Xiaohui Wu to settle the accrued but unpaid salary in the amount of $240,000 for his services from January 2018 to January 2021.

Xia Wang

During the fiscal year ended June 30, 2019 and 2018, we had an employment agreement with Xia Wang for the position of Chief Financial Officer with an annual compensation of $80,000. On July 31, 2020, the Company entered into an employment agreement to replace the previous offer letter. According to the employment agreement, the Company shall issue to Ms. Wang an annual compensation in the form of 200,000 ordinary shares of the Company, valued at $1.00 per share. In September 2020, the Company issued 200,000 ordinary shares pursuant to the employment agreement. The employment agreement has a term of three years.

6.C.   Board Practices

Board of Directors and Board Committees

Our board of directors currently consists of six (6) directors, four(4) of whom is independent as such term is defined by the Nasdaq Capital Market.

The directors will be re-elected at our annual general meeting of shareholders on an annual basis.

A director may vote in respect of any contract or transaction in which he is interested, provided, however that the nature of the interest of any director in any such contract or transaction shall be disclosed by him at or prior to its consideration and any vote on that matter. A general notice or disclosure to the directors or otherwise contained in the minutes of a meeting or a written resolution of the directors or any committee thereof of the nature of a director’s interest shall be sufficient disclosure and after such general notice it shall not be necessary to give special notice relating to any particular transaction. A director may be counted for a quorum upon a motion in respect of any contract or arrangement which he shall make with our company, or in which he is so interested and may vote on such motion.

Board Committees

We established three committees under the board of directors: an audit committee, a compensation committee and a nominating and corporate governance committee. We have adopted a charter for each of the three committees.

Each committee’s members and functions are described below.

95

Audit Committee. Our audit committee consisted of Ms. Yun Xia, Mr. Zhaorong Zhu, Mr. K. Bryce Toussaint and Mr. Scott Silverman. Mr. K. Bryce Toussaint is the chairman of our audit committee. We have determined that Mr. K. Bryce Toussaint, Ms. Yun Xia, Mr. Zhaorong Zhu and Mr. Scott Silverman satisfy the “independence” requirements of Nasdaq Rule 5605 and Rule 10A-3 under the Securities Exchange Act of 1934. Our board of directors has determined that Mr. Toussaint qualifies as an audit committee financial expert and has the accounting or financial management expertise as required under Item 407(d)(5)(ii) and (iii) of Regulation S-K. The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee will be responsible for, among other things:

● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;

● reviewing with the independent auditors any audit problems or difficulties and management’s response;

● discussing the annual audited financial statements with management and the independent auditors;

● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures;

● reviewing and approving all proposed related party transactions;

● meeting separately and periodically with management and the independent auditors; and

● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.

Compensation Committee.  Our compensation committee consists of Mr. Zhaorong Zhu, Ms. Yun Xia, Mr. K. Bryce Toussaint, and Mr. Scott Silverman. Mr. Zhaorong Zhu is the chairman of our compensation committee. The compensation committee will assist the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee will be responsible for, among other things:

● reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers;

● reviewing and recommending to the shareholders for determination with respect to the compensation of our directors;

● reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and

● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.

Nominating Committee.  Our nominating committee consists of Mr. Zhaorong Zhu, Ms. Yun Xia, Mr. K. Bryce Toussaint and Mr. Scott Silverman. Mr. Zhaorong Zhu is the chairperson of our nominating committee. The nominating committee will assist the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating committee will be responsible for, among other things:

● selecting and recommending to the board nominees for election by the shareholders or appointment by the board;

96

● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity;

● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and

● advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.

Copy of our committee charters are also available on our website at http://www.drespace.cn/PLIN/.

Duties of Directors

Under Cayman Islands law, our directors owe to us fiduciary duties, including a duty of loyalty, a duty to act honestly and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also have a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, as amended and restated from time to time. Our company may have the right to seek damages if a duty owed by our directors is breached.

Interested Transactions

A director may vote, attend a board meeting or sign a document on our behalf with respect to any contract or transaction in which he or she is interested. A director must promptly disclose the interest to all other directors after becoming aware of the fact that he or she is interested in a transaction we have entered into or are to enter into. A general notice or disclosure to the board or otherwise contained in the minutes of a meeting or a written resolution of the board or any committee of the board that a director is a shareholder, director, officer or trustee of any specified firm or company and is to be regarded as interested in any transaction with such firm or company will be sufficient disclosure, and, after such general notice, it will not be necessary to give special notice relating to any particular transaction.

Remuneration and Borrowing

All directors hold office until the next annual meeting of shareholders at which their respective class of directors is re-elected and until their successors have been duly elected and qualified. The directors may receive such remuneration as determined by a general meeting of the Company from time to time. Each director is entitled to be repaid or prepaid all traveling, hotel and incidental expenses properly incurred in going to attending and returning from meetings of our board of directors or committees of our board of directors or shareholder meetings or otherwise in connection with the business of the Company. The compensation committee will assist the directors in reviewing the compensation structure for the directors. Our board of directors may exercise all the powers of the company to borrow money and to mortgage or charge our undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party.

Terms of Directors and Officers

Our officers are elected by and serve at the discretion of the board. Each director is not subject to a term of office and holds office until such time as his successor takes office or until the earlier of his death, resignation or removal from office by ordinary resolution or the affirmative vote of a simple majority of the other directors present and voting at a board meeting. A director will be removed from office automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by our company to be of unsound mind; (iii) resigns by notice in writing to our company; (iv) is prohibited by law from being a director; or (v) is removed from office pursuant to any other provisions of the Memorandum and Articles of Association.

97

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor has any been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our discussion below in “Related Party Transactions,” our directors and officers have not been involved in any transactions with us or any of our affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

6.D.   Employees

We had 24 employees as of the date of this annual report. As of the date of this annual report, none of our full-time employees were located outside of China.

The following table sets forth a breakdown of our employees by function as of the date of this annual report:

	Number of
Department	Employees	% of Total
Management	7	29	%
Marketing and Sales	3	13	%
Administrative	14	58	%
Total	24	100	%

Our employees are not represented by a labor organization or covered by a collective bargaining agreement. We believe that we maintain a good working relationship with our employees and we have not experienced any significant labor disputes. We are required under PRC law to make contributions to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. As required by regulations in China and according to local government’s requirements, we participate in various employee social security plans that are organized by local governments. We pay social insurance for some of our employees, covering all five types of social insurance, including pension, medical insurance, work-related injury insurance, unemployment insurance, and maternity insurance.

6.E.   Share Ownership

The following table sets forth information with respect to beneficial ownership of our ordinary shares as of the date of this annual report by:

● Each person who is known by us to beneficially own more than 5% of our outstanding ordinary shares;

● Each of our director, director nominees and named executive officers; and

● All directors and named executive officers as a group.

Our company is authorized to issue 150,000,000 ordinary shares of $0.01 par value per share. The number and percentage of ordinary shares beneficially owned are based on 41,316,642 ordinary shares issued and outstanding as of the date of this prospectus. Information with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of more than 5% of our ordinary shares. Beneficial ownership is determined in accordance with the rules of the SEC and generally requires that such person has voting or investment power with respect to securities. In computing the number of ordinary shares beneficially owned by a person listed below and the percentage ownership of such person, ordinary shares underlying options, warrants or convertible securities held by each such person that are exercisable or convertible within 60 days of the date of this prospectus are deemed outstanding but are not deemed outstanding for computing the percentage ownership of any other person. Except as otherwise indicated in the footnotes

98

to this table, or as required by applicable community property laws, all persons listed have sole voting and investment power for all ordinary shares shown as beneficially owned by them.

	Amount of
	Beneficial	Percentage
Principal Shareholders	Ownership	Ownership
Directors and Named Executive Officers:
Zeshu Dai, Chairwoman of the Board and Chief Executive Officer (1)	9,000,000	21.78	%
Xia Wang, Chief Financial Officer	196,390	0.48	%
Xiaohui Wu, President and Director	—	—	%
Zhairong Zhu, Director	—	—	%
Yun Xia, Director	—	—	%
K. Bryce Toussaint, Director	—	—	%
Scott Silverman, Director	—	—	%
All directors and executive officers as a group (7 persons)	9,196,390	22.26	%
5% Beneficial Owners:
China Meitai Food Co., Ltd(1)	8,710,000	21.08	%

(1) Zeshu Dai directly own 290,000 ordinary shares of the Company. She also beneficially owns 8,710,000 ordinary shares through China Meitai Food Co., Ltd., a British Virgin Islands company. Zeshu Dai is entrusted with the voting and dispositive power of all 8,710,000 shares held by China Meitai Food Co., Ltd.

ITEM 7.       MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A.   Major Shareholders

Please refer to “Item 6. Directors, Senior Management and Employees — 6.E. Share Ownership.” The company’s major shareholders do have different voting rights than the other shareholders.

99

7.B.   Related Party Transactions

Related party transactions

a. Revenues – related party:

		For the Year		For the Year		For the Year
		Ended June 30,		Ended June 30,		Ended June 30,
Name of related party	Relationship	2021		2020		2019
Chongqing Puyuhong Commerce Co., Ltd. ("CQ Puyuhong")	Significantly influenced by JMC	$	4,008,969	$	—	$	—
Less: revenues - related party - discontinued operations			—		—
Total revenues - related party - continuing operations		$	4,008,969	$	—	$	—

Related party balances

a.     Customer deposits – related parties:

Name of related party	Relationship	June 30, 2021		June 30, 2020
CQ Mingwen	Significantly influenced by Penglin	$	29,990	$	27,395
CQ Puyuhong	Significantly influenced by JMC		5,958		—
Total			35,948		27,395
Less: customer deposit - related party - discontinued operations			(29,990)		(27,395)
Total customer deposit - related party - continuing operations			5,958		—

b.     Other payables – related parties:

Other payables – related parties are those nontrade payables arising from transactions between the Company and certain related parties, such as advances made by the related party on behalf of the Company, and related accrued interest payable on the advances. These advances are unsecured and non-interest bearing, except payables to Jiaping Zhou and Jun Zhou with an annual interest rate of 4.35%. Current payables are due on demand.

Name of related party	Name of related party	June 30, 2021		June 30, 2020
Xia Wang	Chief Financial Officer	$	209,275	$	153,659
Zeshu Dai	CEO		1,543,221		—
Penglin Wang	Son of the CEO		—		248
Zili Zhang	CEO of CQ Pengmei		—		12
Jiaping Zhou	Shareholder of JMC		—		231,268
Jun Zhou	Shareholder of JMC		1,483,634		1,879,639
Total			3,236,130		2,264,826
Less: other payables - related parties - discontinued operations			(6,182)		(260)
Total other payables - related parties - continuing operations		$	3,229,948	$	2,264,566

100

c.     Long-term loans – related parties:

Long-term loans – related parties are those long-term loans from advances made by certain related parties for the daily operations needs of the Company. These loans are unsecured and interest bearing.

					Weighted
					average		Collateral/
Long-term loans	Relationship		Maturities		interest rate		Guarantee	June 30, 2021		June 30, 2020
Xia Wang		CFO	$	44,576	9.6	%	None	$	111,503	$	101,904
Penglin Wang		Son of CEO	$	45,637	9.6	%	None		250,883		229,283
Yong Wang		Son of CEO	$	44,759	7.13	%	None		294,245		268,912
Zeshu Dai		CEO	$	44,628	7.13	%	None		123,893		113,226
Total								$	780,524	$	713,325
Less: long-term loans from related parties - discontinued operations									(780,524)		(713,325)
Total long-term loans from related parties - continuing operations									—		—

Interest expense incurred on the above mentioned related party loans for discontinued operations amounted to $62,635, $51,770 and $11,403 for the years ended June 30, 2021, 2020 and 2019, respectively.

d.     Guarantee provided to related party loan

On December 26, 2017, CQ Mingwen (the “borrower”) entered into a loan agreement with SPD Rural Bank (the lender) to borrow RMB 9 million (approximately $1.4 million) as working capital for one year. The loan was repaid RMB 1 million (approximately $0.1 million) and the remaining balance RMB 8 million (approximately $1.2 million) was extend to December 22, 2021. GA Yongpeng pledged its land-use right valued at RMB 10,198,100 (approximately $1.6 million) and building property valued at RMB 12,268,800 (approximately $1.9 million) as collateral.

Terms of Directors and Officers

See “Item 6. Directors, Senior Management and Employees—6.C. Board Practices—Terms of Directors and Officers.”

Contractual Arrangements with Our VIEs and Our VIEs’ Respective Shareholders

See “Item 4. Information on the Company—4.C. Organizational Structure — Contractual Arrangements with CQ Penglin, JMC and Fu Tong Ge.”

Employment Agreements and Indemnification Agreements

See “Item 6. Directors, Senior Management and Employees—6.B. Compensation—Employment Agreements.”

Other Related Party Transactions

During the year ended June 30, 2021, other than disclosed in elsewhere (including the financial statements for the fiscal years ended 2020 and accompanying footnotes), we did not have any other related party transactions.

ITEM 8.       FINANCIAL INFORMATION

8.A. Consolidated Statements and Other Financial Information

Please refer to Item 18.

101

Legal and Administrative Proceedings

Please refer to “Item 4. Information on the Company – Legal Proceedings.”

Dividend Policy

We have never declared or paid any cash dividends on our ordinary shares. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions and future prospects and other factors the Board of Directors may deem relevant.

Under our articles of association and the Cayman Islands Companies Law, we may only pay dividends (A) out of profits, (B) out of our share premium account, provided that we are able to pay our debts as they fall due in the ordinary course of business immediately after the dividend payment.

If we determine to pay dividends on any of our ordinary shares in the future, as a holding company, we will be dependent on receipt of funds from our operating subsidiaries. Dividend distributions from our PRC subsidiaries to us are subject to PRC taxes, such as withholding tax. In addition, regulations in the PRC currently permit payment of dividends of a PRC company only out of accumulated distributable after-tax profits as determined in accordance with its articles of association and the accounting standards and regulations in China. See “Risk Factors — Risks Related to Doing Business in the People’s Republic of China — We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.”

8.B. Significant Changes

We have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

ITEM 9.       THE OFFER AND LISTING

9.A. Offer and listing details

Our ordinary shares have been listed on the Nasdaq Capital Market since August 14, 2019 under the symbol “PLIN.”

9.B. Plan of distribution

Not applicable for annual reports on Form 20-F.

9.C. Markets

Our ordinary shares are listed on the Nasdaq Capital Market under the symbol “PLIN.”

On October 21, 2020, we received a letter from The Nasdaq Stock Exchange regarding our failure to comply with Nasdaq Continued Listing Rule (“Rule”) 5550(a)(2), which requires listed securities to maintain a minimum bid price of $1.00 per share. A failure to comply with Rule 5550(a)(2) exists when listed securities fail to maintain a closing bid price of at least $1.00 per share for 30 consecutive business days. Based on the closing bid price for the last 30 consecutive business days (including, in particular, the period September 2, 2020 through October 20, 2020), we failed to meet the aforesaid requirement. We were provided with 180 days, or until April 19, 2021, to regain compliance with the Rule. As a result of the Company’s ordinary shares closing with a bid price of at least $1.00 for at least 10 consecutive days, on February 19, 2021, Nasdaq notified the Company that it has regained compliance with Listing Rule 5550(a)(2) and the matter is now closed.

102

9.D. Selling shareholders

Not applicable for annual reports on Form 20-F.

9.E. Dilution

Not applicable for annual reports on Form 20-F.

9.F. Expenses of the issue

Not applicable for annual reports on Form 20-F.

ITEM 10.      ADDITIONAL INFORMATION

10.A. Share capital

Initial Public Offering

On May 10, 2019, we closed its initial public offering of an aggregate of 1,172,360 ordinary shares of the Company, at a public offering price of $5.00 per share, for gross proceeds of $5,861,800. We received net proceeds of approximately $5.1 million (after deducting underwriting discounts and commissions and other offering fees and expenses) from the offering. Proceeds from our initial public offering were used for equipment purchase and other general working capital purposes.

Private Placements – Convertible Debentures

Securities Purchase Agreement dated November 22, 2019

On November 22, 2019, we entered into a securities purchase agreement with an accredited investor, pursuant to which we issued convertible debentures in the total principal amount of $5,000,000 with a maturity date of twelve months after issuance thereof and an annual interest rate of 5%. The first convertible debenture in the amount of $2,000,000 was issued on November 22, 2019 and subsequently amended on December 18, 2019 and June 19, 2020. The second convertible debenture in the amount of $2,000,000 was issued on December 30, 2019 and was subsequently amended on June 19, 2020, September 15, 2020 and November 13, 2020. The third convertible debenture in the amount of $1,000,000 was issued on March 9, 2020 and was subsequently amended on November 13, 2020.

As amended, the convertible debentures grant the holder right to convert a convertible debenture in its sole discretion at any time on or prior to maturity at the lower of $5.06 or 93% of the average of the four lowest daily VWAPs during the 10 consecutive trading days immediately preceding the conversion date, provided that as long as we are not in default under the convertible debenture, the conversion price may never be less than the Floor Price (defined below). We may not convert any portion of a convertible debenture if such conversion would result in the holder beneficially owning more than 4.99% of our then issued and common stock, provided that such limitation may be waived by the holder with 65 days’ notice.

Any time after the issuance of a convertible debenture that the daily VWAP is less than the Floor Price for a period of 10 consecutive trading days (each such occurrence, a “Triggering Event”) and only for so long as such conditions exist after a Triggering Event, the Company shall make monthly payments beginning on the 60^th day after the date of the Triggering Event. Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the date of the Triggering Event divided by the number of such monthly payments until maturity, (ii) a redemption premium of 10% during the six month after the issuance of a convertible debenture of 20% thereafter in respect of such principal amount and (iii) accrued and unpaid interest hereunder as of each payment date. The Company may, no more than twice, obtain a thirty-day deferral of a monthly payment due as a result of a Triggering Event through the payment of a deferral fee in the amount equal to 10% of the total amount of such monthly payment. Each deferral payment may be paid at our option either in (i) cash or (ii) if the conversion price on the date of the payment is above the Floor Price and

103

such shares issued will be immediately freely tradable shares in the hands of the holder, by the issuance of such number of shares as is equal to the Floor Price.

As amended, the “Floor Price” of the convertible debenture issued on November 22, 2019 and December 30, 2019 shall be $1.00 per share; the “Floor Price” of the convertible debenture issued on March 9, 2020 shall be $0.80 per share for the first final $4200,000 of principal and accrued interest to be converted.; and the “Floor Price” for the remaining principal and accrued interest on the convertible debenture issued on March 9, 2020 shall be $3.00 per share.

As of June 30, 2021, the debenture holder has converted a total of $5,193,423.89 in principal and interest and we issued a total of 5,036,320 ordinary shares. The convertible debentures issued on November 22, 2019, December 30, 2019 and December 30, 2019 have retired.

The issuance of convertible debentures and the ordinary shares upon conversion are exempted from the registration requirements of the Securities Act under Rule 506(b) of Regulation D promulgated by the SEC under the Securities Act.

Securities Purchase Agreement dated June 19, 2020

On June 19, 2020, we entered into a securities agreement with the same accredited investor, pursuant to which we agreed to issue convertible debentures in the total principal amount of $2,000,000 with a maturity date of twelve months after issuance thereof and an annual interest rate of 5%. We issued the first convertible debenture in the amount of $700,000 on June 19, 2020, the second convertible debenture in the amount of $700,000 on July 17, 2020, the third convertible debenture in the amount of $300,000 on August 14, 2020 and the fourth convertible debenture in the amount of $300,000 on November 13, 2020.

The debenture holder may convert a convertible debenture in its sole discretion at any time on or prior to maturity at the lower of $3.00 or 93% of the average of the four lowest daily VWAPs during the 10 consecutive trading days immediately preceding the conversion date, provided that as long as we are not in default under the convertible debenture, the conversion price may never be less than $2.50. We may not convert any portion of a convertible debenture if such conversion would result in the debenture holder beneficially owning more than 4.99% of our then issued and common stock, provided that such limitation may be waived by the debenture holder with 65 days’ notice.

Any time after 180 days from the date of issuance that the daily VWAP is less than $2.50 for a period of 10 consecutive trading days (each such occurrence, a “Triggering Event”) and only for so long as such conditions exist after a Triggering Event, we shall make monthly payments beginning on the 30th day after the date of the Triggering Event. Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the date of the Triggering Event divided by the number of such monthly payments until maturity, (ii) a redemption premium of 10% during the six month after the signing of the Agreement or 20% thereafter in respect of such principal amount and (iii) accrued and unpaid interest hereunder as of each payment date. We may, no more than twice, obtain a thirty-day deferral of a monthly payment due as a result of a Triggering Event through the payment of a deferral fee in the amount equal to 10% of the total amount of such monthly payment. Each deferral payment may be paid either (i) in cash or (ii) if the conversion price on the date of the payment is above $2.50 and such shares issued will be immediately freely tradable shares in the hands of the debenture holder, by the issuance of such number of shares as is equal to the applicable deferral payment divided by a price per share equal to the conversion price.

As amended, the “Floor Price” of the convertible debenture issued on June 19, 2020 shall be $0.80 per share.

As of June 30, 2021, the debenture holder has converted a total of $730,027.40 in principal and interest and we issued a total of 912,532 ordinary shares. The convertible debenture issued on June 19, 2020 has retired. All of the principal and interest of the convertible debentures issued on July 17, 2020, August 14, 2020 and November 13, 2020 were outstanding as of June 30, 2021 and as of the date of the report.

104

Private Placements – Ordinary Shares

Securities Purchase Agreement dated July 27, 2020

On July 27, 2020, we entered into certain securities purchase agreement with certain “non-U.S. Persons” as defined in Regulation S of the Securities Act, pursuant to which the we sold 2,339,000 ordinary shares at a per share purchase price of $1.50. We received gross proceeds approximately $3.5 million from this offering. We used the proceeds for working capital and other general corporate purposes. The shares issued in the private placement are exempt from the registration requirements of the Securities Act pursuant to Regulation S promulgated thereunder.

Securities Purchase Agreement dated December 16, 2020

On December 16, 2020, we closed a private placement pursuant to certain securities purchase agreement with certain “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the agreement, we sold 704,762 ordinary shares at a per share purchase price of $1.50. We received $1,057,143 in gross proceeds from this offering. We used the proceeds for working capital and other general corporate purposes. The ordinary shares issued in the private placement are exempt from the registration requirements of the Securities Act pursuant to Regulation S promulgated thereunder.

Securities Purchase Agreement dated May 7, 2021

On May 7, 2021, we closed a private placement pursuant to certain securities purchase agreement with certain “non-U.S. Persons” as defined in Regulation S of the Securities Act. Pursuant to the agreement, we sold 5,580,000 ordinary shares at a per share purchase price of $0.80. We received $4,464,000 in gross proceeds from this offering. We plan to use the proceeds for working capital and other general corporate purposes. We used the proceeds to acquire certain business or assets that the Board of Directors may deem appropriate for the growth of the Company. The ordinary shares issued in the private placement are exempt from the registration requirements of the Securities Act pursuant to Regulation S promulgated thereunder.

10.B. Memorandum and articles of association

The following are summaries of the material provisions of our memorandum and articles of association and the Cayman Islands Companies Law, insofar as they relate to the material terms of our ordinary shares. Copies of our memorandum and articles of association are filed as exhibits to the registration statement of which this prospectus is a part. As a convenience to potential investors, we provide the below description of Cayman Islands law and our Articles of Association.

General

Each Ordinary Share in the Company confers upon the shareholder:

● the right to one vote at a meeting of the shareholders of the Company or on any resolution of shareholders;

● the right to an equal share in any dividend paid by the Company; and

● the right to an equal share in the distribution of the surplus assets of the Company on its liquidation.

All of our issued ordinary shares are fully paid and non-assessable. Certificates representing the ordinary shares are issued in registered form. Our shareholders may freely hold and vote their ordinary shares.

Listing

Our ordinary shares are listed on the Nasdaq Capital Market under the symbol “PLIN.”

105

Transfer Agent and Registrar

The transfer agent and registrar for the ordinary shares is Securities Transfer Corporation.

Distributions

The holders of our ordinary shares are entitled to such dividends or other distributions as may be recommended by the board and authorized by shareholders subject to the Cayman Islands Companies Law and our memorandum and articles of association.

Shareholders’ voting rights

Any action required or permitted to be taken by the shareholders must be taken at a duly called annual or special meeting of the shareholders entitled to vote on such action and may be effected by a resolution of shareholders consented to in writing. At each general meeting, each shareholder who is present in person or by proxy (or, in the case of a shareholder being a corporation, by its duly authorized representative) will have one vote for each Ordinary Share which such shareholder holds.

Election of directors

Delaware law permits cumulative voting for the election of directors only if expressly authorized in the certificate of incorporation. The laws of Cayman Islands, however, do not specifically prohibit or restrict the creation of cumulative voting rights for the election of our directors. Cumulative voting is not a concept that is accepted as a common practice in Cayman Islands, and we have made no provisions in our memorandum and articles of association to allow cumulative voting for elections of directors.

Our memorandum and articles of association do not permit a director to decide what compensation he or she will receive. All decisions about director compensation will be recommended by the compensation committee, and approved by the Board of Directors as a whole, both acting only when a quorum of members is present.

Meetings of shareholders

Any of our directors may convene a meeting of shareholders whenever they think fit. We must provide at least seven days’ written notice (exclusive of the day on which the notice is served or deemed to be served, but inclusive of the day for which the notice is given) of all meetings of shareholders, stating the time, place of the general meeting and, in the case of special business, the general nature of that business to shareholders whose names appear as shareholders in the register of members on the date of the notice and are entitled to vote at the meeting. Our board of directors must convene a general meeting upon the written request of one or more shareholders holding at least 10% of our shares.

No business may be transacted at any general meeting unless a quorum is present at the time the meeting proceeds to business. One or more shareholders holding in the aggregate not less than one-third of the total issue share capital of the Company present in person or by proxy and entitled to vote shall be a quorum. If, within half an hour from the time appointed for the meeting, a quorum is not present, the meeting, if convened upon the requisition of shareholders, shall be dissolved. In any other case, it shall stand adjourned to the same day in the next week, at the same time and place and if, at the adjourned meeting, a quorum is not present within half an hour from the time appointed for the meeting, the shareholders present shall be a quorum and may transact the business for which the meeting was called. If present, the chair of our board of directors shall be the chair presiding at any meeting of the shareholders.

A corporation that is a shareholder shall be deemed for the purpose of our articles of association to be present at a general meeting in person if represented by its duly authorized representative. This duly authorized representative shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were our individual shareholder.

106

Meeting of directors

The management of our company is entrusted to our board of directors, who will make decisions by voting on resolutions of directors. Our directors are free to meet at such times and in such manner and places within or outside Cayman Islands as the directors determine to be necessary or desirable. A director must be given not less than 5 days’ notice of a meeting of directors. At any meeting of directors, a quorum will be present if at least two directors are present. If there is a sole director, that director shall be a quorum. An action that may be taken by the directors at a meeting may also be taken by a resolution of directors consented to in writing by a majority of the directors.

Protection of minority shareholders

We would normally expect Cayman Islands courts to follow English case law precedents, which would permit a minority shareholder to commence a representative action, or derivative actions in our name, to challenge (1) an act which is ultra vires or illegal, (2) an act which constitutes a fraud against the minority by parties in control of us, (3) the act complained of constitutes an infringement of individual rights of minority shareholders (such as the right to vote and pre-emptive rights), and (4) an irregularity in the passing of a resolution which requires a special or extraordinary majority of the shareholders.

Pre-emptive rights

There are no pre-emptive rights applicable to the issue by us of new shares under either Cayman Islands law or our memorandum and articles of association.

Transfer of Ordinary Shares

Subject to the restrictions in our memorandum and articles of association and applicable securities laws, any of our shareholders may transfer all or any of his or her ordinary shares by written instrument of transfer signed by the transferor and containing the name of the transferee. Our board of directors may resolve by resolution to refuse or delay the registration of the transfer of any Ordinary Share without giving any reason.

Winding Up

If we are wound up and the assets available for distribution among our shareholders are more than sufficient to repay the whole of the paid up capital at the commencement of the winding up, the excess shall be distributable pari passu among those shareholders in proportion to the capital paid up at the commencement of the winding up on the shares held by them, respectively. If we are wound up and the assets available for distribution among the shareholders as such are insufficient to repay the whole of the paid up capital, those assets shall be distributed so that, to the greatest extent possible, the losses shall be borne by the shareholders in proportion to the capital paid up at the commencement of the winding up on the shares held by them, respectively. If we are wound up, the liquidator may with the sanction of a special resolution and any other sanction required by the Cayman Islands Companies Law, divide among our shareholders in specie or kind the whole or any part of our assets (whether they shall consist of property of the same kind or not), and may, for such purpose, set such value as the liquidator deems fair upon any property to be divided and may determine how such division shall be carried out as between the shareholders or different classes of shareholders.

The liquidator may also vest the whole or any part of these assets in trusts for the benefit of the shareholders as the liquidator shall think fit, but so that no shareholder will be compelled to accept any assets, shares or other securities upon which there is a liability.

Calls on Ordinary Shares and forfeiture of Ordinary Shares

Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 days prior to the specified time of payment. The ordinary shares that have been called upon and remain unpaid are subject to forfeiture.

107

Repurchase of Ordinary Shares

We are empowered by the Cayman Islands Companies Law to purchase our own shares, subject to certain restrictions and requirements. Our directors may only exercise this power on our behalf, subject to the Cayman Islands Companies Law, our memorandum and articles of association and to any applicable requirements imposed from time to time by the Nasdaq, the Securities and Exchange Commission, or by any other recognized stock exchange on which our securities are listed. Under the Cayman Islands Companies Law, the repurchase of any share may be paid out of our company’s profits or out of the proceeds of a fresh issue of shares made for the purpose of such repurchase, or out of capital (including share premium account and capital redemption reserve). If the repurchase proceeds are paid out of our company’s capital, our company must, immediately following such payment, be able to pay its debts as they fall due in the ordinary course of business. In addition, under the Cayman Islands Companies Law no such share may be repurchased (1) unless it is fully paid up, (2) if such repurchase would result in there being no shares outstanding, or (3) if the company is being wound up and: (a) the terms of the repurchase provided for it to take place after the commencement of the winding up; or (b) during the period beginning on the date when the repurchase was to have taken place and ending with the commencement of the shares were to have been repurchased. In addition, under the Cayman Islands Companies Law, our company may accept the surrender of any fully paid share for no consideration unless, as a result of the surrender, the surrender would result in there being no shares outstanding (other than shares held as treasury shares).

Modifications of rights

All or any of the special rights attached to any class of our shares may (unless otherwise provided by the terms of issue of the shares of that class) be varied with the consent in writing of the holders of three-fourths of the issued shares of that class or with the sanction of a resolution passed by not less than three-fourths of such shareholders of that class as may be present in person or by proxy at a separate general meeting of the holders of shares of that class.

Changes in the number of shares we are authorized to issue and those in issue

We may from time to time by resolution of shareholders in the requisite majorities:

● amend our memorandum of association to increase or decrease the maximum number of shares we are authorized to issue;

● Divide our authorized and issued shares into a larger number of shares; and

● combine our authorized and issued shares into a smaller number of shares.

Inspection of books and records

Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Where You Can Find Additional Information.”

Rights of non-resident or foreign shareholders

There are no limitations imposed by our memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.

Issuance of additional Ordinary Shares

Our memorandum and articles of association authorizes our board of directors to issue additional ordinary shares from authorized but unissued shares, to the extent available, from time to time as our board of directors shall determine.

108

10.C. Material contracts

We have not entered into any material contracts other than in the ordinary course of business and otherwise described elsewhere in this annual report.

10.D. Exchange controls

Regulations on Foreign Currency Exchange

The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently amended in August 2008. Under the PRC foreign exchange regulations, payments of current account items, such as profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. By contrast, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital account items, such as direct investments, repayment of foreign currency-denominated loans, repatriation of investments and investments in securities outside of China.

In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds derived by foreign investors in the PRC, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible previously. In addition, SAFE promulgated another circular in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in the PRC must be conducted by way of registration and banks must process foreign exchange business relating to the direct investment in the PRC based on the registration information provided by SAFE and its branches. On February 28, 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Notice 13. After SAFE Notice 13 became effective on June 1, 2015, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment from SAFE, entities and individuals may apply for such foreign exchange registrations from qualified banks. The qualified banks, under the supervision of SAFE, may directly review the applications and conduct the registration.

On March 30, 2015, SAFE promulgated Circular 19, which expands a pilot reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises nationwide. Circular 19 came into force and replaced both previous Circular 142 and Circular 36 on June 1, 2015. On June 9, 2016, SAFE promulgated Circular 16 to further expand and strengthen such reform. Under Circular 19 and Circular 16, foreign-invested enterprises in the PRC are allowed to use their foreign exchange funds under capital accounts and RMB funds from exchange settlement for expenditure under current accounts within its business scope or expenditure under capital accounts permitted by laws and regulations, except that such funds shall not be used for (i) expenditure beyond the enterprise’s business scope or expenditure prohibited by laws and regulations; (ii) investments in securities or other investments than banks’ principal-secured products; (iii) granting of loans to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) construction or purchase of real estate for purposes other than self-use (except for real estate enterprises).

In January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or SAFE Circular 3, which stipulates several capital control measures with respect to the outbound remittance of profit from domestic entities to offshore entities, including (i) under the principle of genuine transaction, banks shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits. Further, according to SAFE Circular 3, domestic entities shall make detailed explanations of the sources of capital and utilization arrangements, and provide board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment.

109

Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents

SAFE issued SAFE Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, that became effective in July 2014, replacing the previous SAFE Circular 75. SAFE Circular 37 regulates foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing or conduct round trip investment in China. Under SAFE Circular 37, a SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests, while “round trip investment” refers to direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. SAFE Circular 37 provides that, before making contribution into an SPV, PRC residents or entities are required to complete foreign exchange registration with SAFE or its local branch. SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment in February 2015, which took effect on June 1, 2015. This notice has amended SAFE Circular 37 requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

PRC residents or entities who had contributed legitimate onshore or offshore interests or assets to SPVs but had not obtained registration as required before the implementation of the SAFE Circular 37 must register their ownership interests or control in the SPVs with qualified banks. An amendment to the registration is required if there is a material change with respect to the SPV registered, such as any change of basic information (including change of the PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, and mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37 and the subsequent notice, or making misrepresentation on or failure to disclose controllers of the foreign-invested enterprise that is established through round-trip investment, may result in restrictions being imposed on the foreign exchange activities of the relevant foreign-invested enterprise, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations.

We are aware that our PRC resident beneficial owners subject to these registration requirements have registered with the Beijing SAFE branch and/or qualified banks to reflect the recent changes to our corporate structure.

10.E. Taxation

The following sets forth the material Cayman Islands, Chinese and U.S. federal income tax consequences related to an investment in our ordinary shares. It is directed to U.S. Holders (as defined below) of our ordinary shares and is based upon laws and relevant interpretations thereof in effect as of June 30, 2020, all of which are subject to change. This description does not deal with all possible tax consequences relating to an investment in our ordinary shares, such as the tax consequences under state, local and other tax laws.

The following brief description applies only to U.S. Holders (defined below) that hold ordinary shares as capital assets and that have the U.S. dollar as their functional currency. This brief description is based on the tax laws of the United States in effect as of June 30, 2020 and on U.S. Treasury regulations in effect or, in some cases, proposed, as of June 30, 2020, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.

The brief description below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are a beneficial owner of shares and you are, for U.S. federal income tax purposes,

● an individual who is a citizen or resident of the United States;

● a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia;

110

● an estate whose income is subject to U.S. federal income taxation regardless of its source; or

● a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

WE URGE POTENTIAL PURCHASERS OF OUR SHARES TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR SHARES.

Generally

China Xiangtai Food Co., Ltd. is an exempted company incorporated in Cayman Islands which is not currently subject to any Cayman Islands taxes. WVM, Inc. is a tax-exempt company incorporated in the British Virgin Islands. CVS Limited is subject to Hong Kong law. Xiangtai WFOE, CQ Penglin, GA Yongpeng, CQ Pengmei, JMC, Gangyixing WFOE and Fu Tong Ge are subject to PRC laws.

Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.

Payments of dividends and capital in respect of the shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of the shares, nor will gains derived from the disposal of the shares be subject to Cayman Islands income or corporation tax.

No stamp duty is payable in respect of the issue of the shares or on an instrument of transfer in respect of a share.

People’s Republic of China Taxation

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its global income. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control over and overall management of the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued a circular, known as Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.

The State Administration of Tax issued a Public Notice, or Public Notice 16, on March 18, 2015, to further regulate and strengthen the transfer pricing administration on outbound payments by a PRC enterprise to its overseas

111

related parties. In addition to emphasizing that outbound payments by a PRC enterprise to its overseas related parties must comply with arm’s-length principles, Public Notice 16 specifies certain circumstances whereby such payments are not deductible for the purpose of the enterprise income tax of the PRC enterprise, including payments to an overseas related party which does not undertake any function, bear any risk or has no substantial operation or activities, payments for services which do not enable the PRC enterprise to obtain direct or indirect economic benefits, or for services that are unrelated to the functions and risks borne by the PRC enterprise, or relate to the protection of the investment interests of the direct or indirect investor of the PRC enterprise, or for services that have already been purchased from a third party or undertaken by the PRC enterprise itself, and royalties paid to an overseas related party which only owns the legal rights of the intangible assets but has no contribution to the creation of such intangible assets. Although we believe all our related party transactions, including all payments by our PRC subsidiaries and consolidated affiliated entities to our non-PRC entities, are made on an arm’s-length basis and our estimates are reasonable, the ultimate decisions by the relevant tax authorities may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.

We believe that none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. We do not believe that China Xiangtai Food Co., Ltd. meets all of the conditions above. China Xiangtai Food Co., Ltd. is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. For the same reasons, we believe our other entities outside of China are not PRC resident enterprises either. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” There can be no assurance that the PRC government will ultimately take a view that is consistent with us.

However, if the PRC tax authorities determine that China Xiangtai Food Co., Ltd. is a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises. In addition, non-resident enterprise shareholders may be subject to a 10% PRC tax on gains realized on the sale or other disposition of ordinary shares, if such income is treated as sourced from within the PRC. It is unclear whether our non-PRC individual shareholders would be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders in the event we are determined to be a PRC resident enterprise. If any PRC tax were to apply to such dividends or gains, it would generally apply at a rate of 20% unless a reduced rate is available under an applicable tax treaty. However, it is also unclear whether non-PRC shareholders of China Xiangtai Food Co., Ltd. would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that China Xiangtai Food Co., Ltd. is treated as a PRC resident enterprise.

Provided that the Company is not deemed to be a PRC resident enterprise, holders of our ordinary shares who are not PRC residents will not be subject to PRC income tax on dividends distributed by us or gains realized from the sale or other disposition of our shares. However, under SAT Circular 698 and Circular 7, where a non-resident enterprise conducts an “indirect transfer” by transferring taxable assets, including, in particular, equity interests in a PRC resident enterprise, indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, or the transferee or the PRC entity which directly owned such taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. We and our non-PRC resident investors may be at risk of being required to file a return and being taxed under SAT Circular 698 and Circular 7, and we may be required to expend valuable resources to comply with SAT Circular 698 and Circular 7, or to establish that we should not be taxed under these circulars. See “Risk Factors — Risks Related to Doing Business in China — Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.”

112

United States Federal Income Tax Considerations

The following discussion is a summary of United States federal income tax considerations relating to the ownership and disposition of our ordinary shares by a U.S. holder (as defined below) that holds our ordinary shares as “capital assets” (generally, property held for investment) under the United States Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based upon existing United States federal income tax law, which is subject to differing interpretations and may be changed, possibly with retroactive effect. No ruling has been sought from the Internal Revenue Service (the “IRS”) with respect to any United States federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position. This discussion does not address all aspects of United States federal income taxation that may be important to particular investors in light of their individual circumstances, including investors subject to special tax rules (for example, banks or other financial institutions, insurance companies, broker-dealers, pension plans, cooperatives, traders in securities that have elected the mark-to-market method of accounting for their securities, partnerships and their partners, regulated investment companies, real estate investment trusts, and tax-exempt organizations (including private foundations)), holders who are not U.S. holders, holders who own (directly, indirectly, or constructively) 10% or more of our voting stock, holders who will hold their ordinary shares as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for United States federal income tax purposes, or investors that have a functional currency other than the United States dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this discussion does not discuss any non-United States, alternative minimum tax, state, or local tax considerations, or the Medicare tax on net investment income. Each U.S. holder is urged to consult its tax advisors regarding the United States federal, state, local, and non-United States income and other tax considerations with respect to the ownership and disposition of our ordinary shares.

General

For purposes of this discussion, a “U.S. holder” is a beneficial owner of our ordinary shares that is, for United States federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for United States federal income tax purposes) created in, or organized under the laws of, the United States or any state thereof or the District of Columbia, (iii) an estate the income of which is subject to United States federal income taxation regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (B) that has otherwise elected to be treated as a United States person under applicable United States Treasury regulations.

If a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding our ordinary shares and partners in such partnerships are urged to consult their tax advisors as to the particular United States federal income tax consequences of an investment in our ordinary shares.

Passive Foreign Investment Company Considerations

A non-United States corporation, such as our company, will be a “passive foreign investment company,” or “PFIC,” for United States federal income tax purposes, if, in any particular taxable year, either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the average quarterly value of its assets (as determined on the basis of fair market value) during such year produce or are held for the production of passive income. For this purpose, cash is categorized as a passive asset and the company’s unbooked intangibles associated with active business activities may generally be classified as active assets. Passive income generally includes, among other things, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock.

Although the law in this regard is unclear, we intend to treat CQ Penglin and JMC as being owned by us for United States federal income tax purposes, and we treat it that way, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a

113

result, we consolidate their results of operations in our consolidated financial statements. Assuming that we are the owner of CQ Penglin and JMC for United States federal income tax purposes, and based upon our income and assets and the value of our ordinary shares, we do not believe that we were a PFIC for the taxable years ended June 30, 2020, 2019 and 2018, and do not anticipate becoming a PFIC in the foreseeable future.

Assuming that we are the owner of CQ Penglin and JMC for United States federal income tax purposes, although we do not believe that we were a PFIC for the taxable year ended June 30, 2020, 2019 and 2018 and do not anticipate becoming a PFIC in the foreseeable future, the determination of whether we are or will become a PFIC will depend in part upon the value of our goodwill and other unbooked intangibles (which will depend upon the market value of our ordinary shares from time-to-time, which may be volatile). In estimating the value of our goodwill and other unbooked intangibles, we have taken into account our market capitalization. Among other matters, if our market capitalization is less than anticipated or subsequently declines, we may be or become a PFIC for the current or future taxable years. It is also possible that the IRS may challenge our classification or valuation of our goodwill and other unbooked intangibles, which may result in our company being or becoming a PFIC for the current or one or more future taxable years.

The determination of whether we will be or become a PFIC will also depend, in part, on the composition of our income and assets. If we determine not to deploy significant amounts of cash for active purposes or if we were treated as not owning CQ Penglin and JMC for United States federal income tax purposes, our risk of being classified as a PFIC may substantially increase. Because our PFIC status for any taxable year is a factual determination that can be made only after the close of a taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year. If we are a PFIC for any year during which a U.S. holder held our ordinary shares, we generally would continue to be treated as a PFIC for all succeeding years during which such U.S. holder held our ordinary shares.

The discussion below under “Dividends” and “Sale or Other Disposition of Ordinary Shares” is written on the basis that we will not be or become a PFIC for United States federal income tax purposes. The United States federal income tax rules that apply if we are a PFIC for the current taxable year or any subsequent taxable year are generally discussed below under “Passive Foreign Investment Company Rules.”

Dividends

Subject to the PFIC rules discussed below, any cash distributions (including the amount of any tax withheld) paid on our ordinary shares out of our current or accumulated earnings and profits, as determined under United States federal income tax principles, will generally be includible in the gross income of a U.S. holder as dividend income on the day actually or constructively received by the U.S. holder. Because we do not intend to determine our earnings and profits on the basis of United States federal income tax principles, any distribution paid will generally be reported as a “dividend” for United States federal income tax purposes. A non-corporate recipient of dividend income will generally be subject to tax on dividend income from a “qualified foreign corporation” at a reduced United States federal tax rate rather than the marginal tax rates generally applicable to ordinary income provided that certain holding period requirements are met.

A non-United States corporation (other than a corporation that is a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) will generally be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program, or (b) with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States. In the event we are deemed to be a resident enterprise under the PRC Enterprise Income Tax Law, we may be eligible for the benefits of the United States-PRC income tax treaty (which the U.S. Treasury Department has determined is satisfactory for this purpose) and in that case we would be treated as a qualified foreign corporation with respect to dividends paid on our ordinary shares. Each non-corporate U.S. holder is advised to consult its tax advisors regarding the availability of the reduced tax rate applicable to qualified dividend income for any dividends we pay with respect to our ordinary shares. Dividends received on the ordinary shares will not be eligible for the dividends received deduction allowed to corporations.

Dividends will generally be treated as income from foreign sources for United States foreign tax credit purposes and will generally constitute passive category income. In the event that we are deemed to be a PRC “resident enterprise”

114

under the Enterprise Income Tax Law, a U.S. holder may be subject to PRC withholding taxes on dividends paid on our ordinary shares. (See “—People’s Republic of China Taxation”) In that case, a U.S. holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any foreign withholding taxes imposed on dividends received on ordinary shares. A U.S. holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction, for United States federal income tax purposes, in respect of such withholdings, but only for a year in which such U.S. holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex. U.S. holders are advised to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Sale or Other Disposition of Ordinary Shares

Subject to the PFIC rules discussed below, a U.S. holder will generally recognize capital gain or loss upon the sale or other disposition of ordinary shares in an amount equal to the difference between the amount realized upon the disposition and the U.S. holder’s adjusted tax basis in such ordinary shares. Any capital gain or loss will be long-term if the ordinary shares have been held for more than one year and will generally be United States source gain or loss for United States foreign tax credit purposes. Long-term capital gain of non-corporate U.S. holders is generally eligible for a reduced rate of taxation. The deductibility of a capital loss may be subject to limitations. In the event that we are treated as a PRC “resident enterprise” under the Enterprise Income Tax Law and gain from the disposition of the ordinary shares is subject to tax in the PRC, a U.S. holder that is eligible for the benefits of the income tax treaty between the United States and the PRC may elect to treat the gain as PRC source income. U.S. holders are advised to consult its tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our ordinary shares, including the availability of the foreign tax credit under their particular circumstances and the election to treat any gain as PRC source.

Passive Foreign Investment Company Rules

If we are a PFIC for any taxable year during which a U.S. holder holds our ordinary shares, and unless the U.S. holder makes a mark-to-market election (as described below), the U.S. holder will generally be subject to special tax rules that have a penalizing effect, regardless of whether we remain a PFIC, for subsequent taxable years, on (i) any excess distribution that we make to the U.S. holder (which generally means any distribution paid during a taxable year to a U.S. holder that is greater than 125% of the average annual distributions paid in the three preceding taxable years or, if shorter, the U.S. holder’s holding period for the ordinary shares), and (ii) any gain realized on the sale or other disposition, including, under certain circumstances, a pledge, of ordinary shares. Under the PFIC rules:

● such excess distribution and/or gain will be allocated ratably over the U.S. holder’s holding period for the ordinary shares;

● such amount allocated to the current taxable year and any taxable years in the U.S. holder’s holding period prior to the first taxable year in which we are a PFIC, or pre-PFIC year, will be taxable as ordinary income;

● such amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect for that year; and

● an interest charge generally applicable to underpayments of tax will be imposed on the tax attributable to each prior taxable year, other than a pre-PFIC year.

If we are a PFIC for any taxable year during which a U.S. holder holds our ordinary shares and any of our non-United States subsidiaries is also a PFIC, such U.S. holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. U.S. holders are advised to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries.

As an alternative to the foregoing rules, a U.S. holder of “marketable stock” in a PFIC may make a mark-to-market election. Since our ordinary shares are listed on the Nasdaq, a U.S. holder holds ordinary shares will be eligible to make a mark-to-market election if we are or were to become a PFIC. If a mark-to-market election is made, the U.S. holder will generally (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market

115

value of ordinary shares held at the end of the taxable year over the adjusted tax basis of such ordinary shares and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the ordinary shares over the fair market value of such ordinary shares held at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. holder’s adjusted tax basis in the ordinary shares would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. holder makes an effective mark-to-market election, in each year that we are a PFIC any gain recognized upon the sale or other disposition of the ordinary shares will be treated as ordinary income and loss will be treated as ordinary loss, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If a U.S. holder makes a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ordinary shares are no longer regularly traded on a qualified exchange or the Internal Revenue Service consents to the revocation of the election.

If a U.S. holder makes a mark-to-market election in respect of a PFIC and such corporation ceases to be a PFIC, the U.S. holder will not be required to take into account the mark-to-market gain or loss described above during any period that such corporation is not a PFIC.

Because a mark-to-market election cannot be made for any lower-tier PFICs that a PFIC may own, a U.S. holder who makes a mark-to-market election with respect to our ordinary shares may continue to be subject to the general PFIC rules with respect to such U.S. holder’s indirect interest in any of our non-United States subsidiaries if any of them is a PFIC.

We do not intend to provide information necessary for U.S. holders to make qualified electing fund elections, which, if available, would result in tax treatment different from the general tax treatment for PFICs described above.

As discussed above under “Dividends,” dividends that we pay on our ordinary shares will not be eligible for the reduced tax rate that applies to qualified dividend income if we are a PFIC for the taxable year in which the dividend is paid or the preceding taxable year. In addition, if a U.S. holder owns our ordinary shares during any taxable year that we are a PFIC, such holder would generally be required to file an annual IRS Form 8621. Each U.S. holder is advised to consult its tax advisors regarding the potential tax consequences to such holder if we are or become a PFIC, including the possibility of making a mark-to-market election.

Information Reporting

Certain U.S. holders may be required to report information to the IRS relating to an interest in “specified foreign financial assets,” including shares issued by a non-United States corporation, for any year in which the aggregate value of all specified foreign financial assets exceeds US$50,000 (or a higher dollar amount prescribed by the IRS), subject to certain exceptions (including an exception for shares held in custodial accounts maintained with a United States financial institution). These rules also impose penalties if a U.S. holder is required to submit such information to the IRS and fails to do so.

In addition, U.S. holders may be subject to information reporting to the IRS with respect to dividends on and proceeds from the sale or other disposition of our ordinary shares. Each U.S. holder is advised to consult with its tax advisor regarding the application of the United States information reporting rules to their particular circumstances.

10.F. Dividends and paying agents

Not applicable for annual reports on Form 20-F.

10.G. Statement by experts

Not applicable for annual reports on Form 20-F.

116

10.H. Documents on display

We are subject to the information requirements of the Exchange Act. In accordance with these requirements, the Company files reports and other information with the SEC. You may read and copy any materials filed with the SEC at the Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at http://www.sec.gov that contains reports and other information regarding registrants that file electronically with the SEC.

10.I. Subsidiary Information

Not applicable.

ITEM 11.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Item 5. Operating and Financial Review and Prospects – Quantitative  and Qualitative Disclosures about Market Risk”

ITEM 12.      DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12.A.     Debt Securities

Not applicable.

12.B.     Warrants and Rights

Not applicable.

12.C.     Other Securities

Not applicable.

12.D.     American Depositary Shares

Not applicable.

117

PART II

ITEM 13.      DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

We do not have any material defaults in the payment of principal, interest, or any installments under a sinking or purchase fund.

ITEM 14.       MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF PROCEEDS

14.A. – 14.D.  Material Modifications to the Rights of Security Holders

There have been no material modifications to the rights of our security holders.

14.E. Use of Proceeds

Initial public offering

In May 2019, we completed our initial public offering of 1,172,360 of our ordinary shares, at an initial offering price of $5.00 per share. Boustead Securities, LLC acted as our underwriter.

We received gross proceeds approximately $5.1 million from our initial public offering. Except for our expenses relating to our IPO, we have used the proceeds for general working capital purpose.

None of the net proceeds from our initial public offering were directly or indirectly paid to the directors, officers, general partners of our company or their associates, persons owning 10% or more of our ordinary shares, or our affiliates.

Private Placements – Convertible Debentures

Securities Purchase Agreement dated November 22, 2019

On November 22, 2019, we entered into a securities purchase agreement with an accredited investor, pursuant to which we issued convertible debentures in the total principal amount of $5,000,000 with a maturity date of twelve months after issuance thereof and an annual interest rate of 5%. The first convertible debenture in the amount of $2,000,000 was issued on November 22, 2019 and subsequently amended on December 18, 2019 and June 19, 2020. The second convertible debenture in the amount of $2,000,000 was issued on December 30, 2019 and was subsequently amended on June 19, 2020, September 15, 2020 and November 13, 2020. The third convertible debenture in the amount of $1,000,000 was issued on March 9, 2020 and was subsequently amended on November 13, 2020. We used the proceeds from the convertible debentures for expansion of our business to hog raising, marketing and other general working capital purposes.

Securities Purchase Agreement dated June 19, 2020

On June 19, 2020, we entered into a securities agreement with the same accredited investor, pursuant to which we agreed to issue convertible debentures in the total principal amount of $2,000,000 with a maturity date of twelve months after issuance thereof and an annual interest rate of 5%. We issued the first convertible debenture in the amount of $700,000 on June 19, 2020, the second convertible debenture in the amount of $700,000 on July 17, 2020, the third convertible debenture in the amount of $300,000 on August 14, 2020, and the fourth convertible debenture in the amount of $300,000 on November 13, 2020. We used the proceeds from the convertible debentures for marketing and other general working capital purposes.

118

Private Placement – Ordinary Shares

Securities Purchase Agreement dated July 27, 2020

On July 272020, we entered into certain securities purchase agreement with certain “non-U.S. Persons” as defined in Regulation S of the Securities Act, pursuant to which we sold 2,339,000 ordinary shares at a per share purchase price of $1.50. We received gross proceeds approximately $3.5 million from this offering. We used the proceeds for general working capital purposes.

Securities Purchase Agreement dated December 16, 2020

On December 16, 2020, we closed a private placement pursuant to certain securities purchase agreement with certain “non-U.S. Persons” as defined in Regulation S of the Securities Act, pursuant to which we sold 704,762 ordinary shares at a per share purchase price of $1.50. We received $1,057,143 in gross proceeds from this offering. We used the proceeds for general working capital purposes.

Securities Purchase Agreement dated May 7, 2021

On May 7, 2021, we closed a private placement pursuant to certain securities purchase agreement with certain “non-U.S. Persons” as defined in Regulation S of the Securities Act, pursuant to which we sold 5,580,000 ordinary shares at a per share purchase price of $0.80. We received $4,464,000 in gross proceeds from this offering. We used the proceeds for general working capital purposes.

ITEM 15.      CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

As of June 30, 2020, the end of the fiscal year covered by this report, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2020, our disclosure controls and procedures were not effective.

(b) Management’s annual report on internal control over financial reporting.

The annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

(c) Attestation report of the registered public accounting firm.

Not applicable.

(d) Changes in internal control over financial reporting.

There were no changes in our internal controls over financial reporting occurred during the twelve months ended June 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16A.     AUDIT COMMITTEE FINANCIAL EXPERT

The Company’s board of directors has determined that K. Bryce Toussaint qualifies as an “audit committee financial expert” in accordance with applicable Nasdaq Capital Market standards. The Company’s board of directors has also determined that members of the Audit Committee are all “independent” in accordance with the applicable Nasdaq Capital Market standards.

119

ITEM 16B.     CODE OF ETHICS

The Company has adopted a Code of Business Conduct and Ethics that applies to the Company’s directors, officers, employees and advisors. The Code of Business Conduct and Ethics is attached as an exhibit to this annual report. Copy of the Code of Business Conduct and Ethics is also available on our website at http://www.drespace.cn/PLIN/.

ITEM 16C.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

Effective April 14, 2021, WWC, P.C. (“WWC”) was appointed by the Company to serve as its new independent registered public accounting firm to audit and review the Company’s financial statements. Prager Metis CPAs, LLC (“Prager Metis”) served as the Company’s independent registered public accounting firm the fiscal year ended June 30, 2020 and Friedman LLP (“Friedman”) served as the Company’s independent registered public accounting firm for the fiscal year ended June 30, 2019. Audit services provided by WWC, P.C. for fiscal year ended June 30, 2021 included the examination of the consolidated financial statements of the Company, and services related to periodic filings made with the SEC. Audit services provided by Prager Metis for fiscal year ended June 30, 2020 included the examination of the consolidated financial statements of the Company, and services related to periodic filings made with the SEC. Audit services provided by Friedman LLP for fiscal year ended June 30, 2019 included the examination of the consolidated financial statements of the Company, and services related to periodic filings made with the SEC.

Fees Paid To Independent Registered Public Accounting Firm

Audit Fees

WWC’s fee for the fiscal year ended June 30, 2021 was $240,000. Prager Metis’ fee for the fiscal year ended June 30, 2020 was $270,000. Friedman’s fee for the annual audit was $250,000 for our financial statements for the fiscal year ended June 30, 2019.

Audit-Related Fees

There was no audit-related service fees incurred from WWC, Prager Metis or Friedman for the fiscal years ended June 30, 2021, 2020 or 2019.

Tax Fees

There was no tax service fees incurred from WWC, Prager Metis or Friedman for the fiscal years ended June 30, 2021, 2020 or 2019.

All Other Fees

There was no other services fees incurred from WWC in fiscal year ended June 30, 20201. Friedman’s other services fees for the fiscal year ended June 30, 2020 was $45,000. There was no other services fees incurred from Prager Metis in fiscal year ended June 30, 2020. There was no other service fee from Friedman in the fiscal year ended June 30, 2019.

Audit Committee Pre-Approval Policies

WWC’s engagement by the Company to render audit or non-audit services was approved and ratified by the Company’s audit committee. All services rendered by WWC have been so approved and ratified.

ITEM 16D.     EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

120

ITEM 16E.     PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Neither the Company nor any affiliated purchaser has purchased any shares or other units of any class of the Company’s equity securities registered by the Company pursuant to Section 12 of the Securities Exchange Act during the fiscal year ended June 30, 2021.

ITEM 16F.     CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

On April 25, 2020, the Company dismissed its independent registered public accounting firm, Friedman LLP.

The report of Friedman LLP on the financial statements of the Company for the fiscal years ended June 30, 2019, and the related statements of operations and comprehensive income (loss), changes in stockholders’ equity (deficit), and cash flows for the fiscal years ended June 30, 2019 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

The decision to change the independent registered public accounting firm was recommended and approved by the Audit Committee and Board of Directors of the Company.

During the fiscal year ended June 30, 2019 and through April 25, 2020, the date of dismissal, (a) there were no disagreements with Friedman LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Friedman LLP, would have caused it to make reference thereto in its reports on the financial statements for such years and (b) there were no “reportable events” as described in Item 304(a)(1)(v) of Regulation S-K.

Effective May 4, 2020, the Audit Committee of the Company appointed Prager Metis as its independent registered public accounting firm to audit and review the Company’s financial statements. During the fiscal years ended June 30, 2019, 2018 and any subsequent interim periods through the date of the engagement of Prager Metis, neither the Company, nor someone on its behalf, has consulted Prager Metis regarding:

(i) either: the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and either a written report was provided to the Company or oral advice was provided that the new independent registered public accounting firm concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or

(ii) any matter that was either the subject of a disagreement as defined in paragraph 304(a)(1)(iv) of Regulation S-K or a reportable event as described in paragraph 304(a)(1)(v) of Regulation S-K.

On April 15, 2021, the Company dismissed its independent registered public accounting firm, Prager Metis.

The reports of Prager Metis on the financial statements of the Company for the fiscal years ended June 30, 2020 and the related statements of operations and comprehensive income (loss), changes in stockholders’ equity (deficit), and cash flows for the fiscal years ended June 30, 2020 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

The decision to change the independent registered public accounting firm was recommended and approved by the Audit Committee and Board of Directors of the Company.

During the fiscal year ended June 30, 2020 and through April 15, 2021, the date of dismissal, (a) there were no disagreements with Prager Metis on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Prager Metis, would have caused it to make reference thereto in its reports on the financial statements for such years and (b) there were no “reportable events” as described in Item 304(a)(1)(v) of Regulation S-K.

121

Effective April 14, 2021, the Audit Committee of the Company appointed WWC as its new independent registered public accounting firm to audit and review the Company’s financial statements. During the fiscal years ended June 30, 2020 and 2019 and any subsequent interim periods through the date of the engagement of Prager Metis, neither the Company, nor someone on its behalf, has consulted Prager Metis regarding:

(i) either: the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and either a written report was provided to the Company or oral advice was provided that the new independent registered public accounting firm concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or

(ii) any matter that was either the subject of a disagreement as defined in paragraph 304(a)(1)(iv) of Regulation S-K or a reportable event as described in paragraph 304(a)(1)(v) of Regulation S-K.

ITEM 16G.     CORPORATE GOVERNANCE

As a company listed on the Nasdaq Capital Market, we are subject to the Nasdaq corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards.

We currently follow and intend to continue to follow Cayman Islands corporate governance practices in lieu of the corporate governance requirements of the Nasdaq that listed companies must obtain its shareholders’ approval of all equity compensation plans and any material amendments to such plans. To the extent we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Ordinary Shares—As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.”

ITEM 16H.     MINE SAFETY DISCLOSURE

Not applicable.

122

PART III

ITEM 17.     FINANCIAL STATEMENTS

See Item 18.

ITEM 18.     FINANCIAL STATEMENTS

Our consolidated financial statements are included at the end of this annual report, beginning with page F-1.

ITEM 19.     EXHIBITS

Exhibit No.	Description of Exhibit
1.1*	Amended and Restated Memorandum and Articles of Association of China Xiangtai Food Co., Ltd.
2.1	Form of Convertible Debenture pursuant to a Securities Purchase Agreement dated November 22, 2019 (Incorporated by reference from the Form 6-K filed with the SEC on November 25, 2019)
2.2	Form of Convertible Debenture pursuant to a Securities Purchase Agreement dated June 19, 2020 (Incorporated by reference from the Form 6-K filed with the SEC on June 19, 2020)
4.1	English translation of executed business Cooperation Agreement between Chongqing Jinghuangtai Business Management Consulting Co., Ltd. and Chongqing Penglin Food Co., Ltd. dated October 9, 2017 (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
4.2	English translation of executed amendment to Business Cooperation Agreement between Chongqing Jinghuangtai Business Management Consulting Co., Ltd. and Chongqing Penglin Food Co., Ltd. dated February 25, 2018 (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
4.3	English translation of executed consultation and Services Agreement between Chongqing Jinghuangtai Business Management Consulting Co., Ltd. and Chongqing Penglin Food Co., Ltd. dated October 9, 2017 (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
4.4	English translation of executed amendment to Consultation and Services Agreement between Chongqing Jinghuangtai Business Management Consulting Co., Ltd. and Chongqing Penglin Food Co., Ltd. dated February 25, 2018 (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
4.5	English translation of form Voting Rights Proxy and Financial Supporting Agreement among Chongqing Jinghuangtai Business Management Consulting Co., Ltd., Chongqing Penglin Food Co., Ltd., and its shareholders (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
4.6	English translation of form Equity Option Agreement among Chongqing Jinghuangtai Business Management Consulting Co., Ltd., Chongqing Penglin Food Co., Ltd., and its shareholders (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
4.7	English translation of form Equity Pledge Agreement among Chongqing Jinghuangtai Business Management Consulting Co., Ltd., Chongqing Penglin Food Co., Ltd., and its shareholders (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
4.8	Executed employment agreement between China Xiangtai Food Co., Ltd. and Zeshu Dai (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
4.9	Executed employment agreement between China Xiangtai Food Co., Ltd. and Xia Wang (Incorporated by reference from the Form 6-K filed with the SEC on October 5, 2020)

123

4.10	Executed employment agreement between China Xiangtai Food Co., Ltd. and Xiaohui Wu (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
4.11	Executed director service agreement between China Xiangtai Food Co., Ltd. and Zeshu Dai (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
4.12	Director Offer Letter with K. Bryce Toussaint (Incorporated by reference from the Form 6-K filed with the SEC on August 6, 2020)
4.14	Director Offer Letter with Scott Silverman (Incorporated by reference from the Form 6-K filed with the SEC on August 6, 2020)
4.16	Director Offer Letter with Xiaohui Wu (Incorporated by reference from the Form 20-F filed with the SEC on November 06, 2019)
4.17	Director Offer Letter with Yun Xia (Incorporated by reference from the Form 20-F filed with the SEC on November 06, 2019)
4.18	Director Offer Letter with Zhaorong Zhu (Incorporated by reference from the Form 20-F filed with the SEC on November 06, 2019)
4.19	Call Option Agreement between Magic Pace Limited and Zeshu Dai dated May 23, 2018 (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
4.20	Entrustment Agreement between Magic Pace Limited and Zeshu Dai dated May 23, 2018 (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
4.21	Summary Translation of Loan Agreement -  Shanghai Pudong Development (SPD) Bank (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.22	Summary Translation of Loan Agreement -  Chongqing Rural Commercial Bank (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.23	Summary Translation of Loan Agreement -  Chongqing Puluosi Small Mortgage Co., Ltd. (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.24	Summary Translation of Loan Agreement -  Chongqing Puluosi Small Mortgage Co., Ltd. (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.25	Summary Translation of Loan Agreement - Sichuan Toucu Financial Information Services Co., Ltd and Chongqing Pengmei Supermarket Co. Ltd. (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.26	Summary Translation of Loan Agreement - Sichuan Toucu Financial Information Services Co., Ltd and Chongqing Penglin Food Co. Ltd. (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.27	Summary Translation of Loan Agreement - Sichuan Toucu Financial Information Services Co., Ltd and Guangan Yongpeng Food Co. Ltd. (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.28	Summary Translation of Loan Agreement – Chongqing Dadukou Village & Township Bank (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.29	Securities Purchase Agreement, date November 22, 2019 (Incorporated by reference from the Form 6-K filed with the SEC on November 25, 2019)
4.30	Registration Rights Agreement, dated November 22, 2019 (Incorporated by reference from the Form 6-K filed with the SEC on November 25, 2019)

124

4.31	Amendment Agreement to the Convertible Debenture issued on November 22, 2019, dated December 18, 2019 (Incorporated by reference from the Form 6-K filed with the SEC on December 19, 2019)
4.32	Share Purchase Agreement among China Xiangtai Food Co., Ltd., Chongqing Jinghuangtai Business Management Consulting Co., Ltd., Chongqing Ji Mao Cang Feed Co., Ltd. and its shareholders, dated April 3, 2020 (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.33	Technical Consultation and Service Agreement between Chongqing Jinghuangtai Business Management Consulting Co., Ltd. and Chongqing Ji Mao Cang Feed Co., Ltd., dated April 3, 2020 (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.34	Equity Pledge Agreement among Chongqing Jinghuangtai Business Management Consulting Co., Ltd., Chongqing Ji Mao Cang Feed Co., Ltd. and its shareholders, dated April 3, 2020 (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.35	Equity Option Agreement among Chongqing Jinghuangtai Business Management Consulting Co., Ltd., Chongqing Ji Mao Cang Feed Co., Ltd. and its shareholders, dated April 3, 2020 (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.36	Voting Rights and Proxy and Financial Support Agreement among Chongqing Jinghuangtai Business Management Consulting Co., Ltd., Chongqing Ji Mao Cang Feed Co., Ltd. and its shareholders, dated April 3, 2020 (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.37	Addendum to Securities Purchase Agreement among China Xiangtai Food Co., Ltd., Chongqing Jinghuangtai Business Management Consulting Co., Ltd., Chongqing Ji Mao Cang Feed Co., Ltd. and its shareholders, dated November 17, 2020 (Incorporated by reference from the Form 20-F filed with the SEC on November 17, 2020)
4.38	Conversion Agreement, dated May 22, 2020 (Incorporated by reference from the Form 6-K filed with the SEC on May 22, 2020)
4.39	Securities Purchase Agreement, date June 19, 2020 (Incorporated by reference from the Form 6-K filed with the SEC on June 19, 2020)
4.40	Amendment Agreement to the Convertible Debentures issued on November 22, 2019 and December 30 ,2019, dated June 19, 2020 (Incorporated by reference from the Form 6-K filed with the SEC on June 19, 2020)
4.41	Form of Private Placement Subscription Agreement (Incorporated by reference from the Form 6-K filed with the SEC on August 20, 2020)
4.42	Amendment Agreement to the Convertible Debenture issued on December 30, 2019, dated September 15, 2020 (Incorporated by reference from the Form 6-K filed with the SEC on September 17, 2020)
4.43	Amendment Agreement to the Convertible Debentures issued on December 30, 2019 and March 9, 2020, dated November 13, 2020 (Incorporated by reference from the Form 6-K filed with the SEC on November 13, 2020)
4.44	Form of Private Placement Subscription Agreement, dated December 16, 2020 (Incorporated by reference from the Form 6-K filed with the SEC on December 19, 2020)
4.45	Amendment Agreement to the Convertible Debentures issued on March 9, 2020, June 19, 2020, July 17, 2020, August 14, 2020 and November 13, 2020, dated January 22, 2021 (Incorporated by reference from the Form 6-K filed with the SEC on January 26, 2021)

125

4.46	Amendment Agreement to the Convertible Debentures issued on March 9, 2020, June 19, 2020, July 17, 2020, August 14, 2020 and November 13, 2020, dated March 9, 2021 (Incorporated by reference from the Form 6-K filed with the SEC on March 11, 2021)
4.47	Amendment Agreement to the Convertible Debentures issued on June 19, 2020, July 17, 2020, August 14, 2020 and November 13, 2020, dated April 14, 2021 (Incorporated by reference from the Form 6-K filed with the SEC on April 15, 2021)
4.45	Form of Private Placement Subscription Agreement, dated May 7, 2021 (Incorporated by reference from the Form 6-K filed with the SEC on May 10, 2021)
4.46	Debt Settlment and Mutual Release Agreement with Xiaohui Wu dated May 4, 2021 (Incorporated by reference from the Form 6-K filed with the SEC on May 19, 2021)
8.1*	List of Subsidiaries
11.1	Code of Business Conduct and Ethics (Incorporated by reference from the Form F-1/A filed with the SEC on September 17, 2018)
12.1*	Certification of Chief Executive Officer Required by Rule 13a-14(a)
12.2*	Certification of Chief Financial Officer Required by Rule 13a-14(a)
13.1**	Certification of Chief Executive Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code
13.2**	Certification of Chief Financial Officer Required by Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code
15.1*	Consent of Friedman LLP
15.2*	Consent of Prager Metis CPAs, LLC
15.3*	Consent of WWC, P.C.
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed with this annual report on Form 20-F

** Furnished with this annual report on Form 20-F

126

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

CHINA XIANGTAI FOOD CO., LTD.
By:	/s/ Zeshu Dai
	Name:	Zeshu Dai
	Title:	Chief Executive Officer and Chairwomen of the Board (Principal Executive Officer)

Date: November 15, 2021

127

CHINA XIANGTAI FOOD CO., LTD.

TABLE OF CONTENTS

Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firms	F-1 – F-3
Consolidated Balance Sheets as of June 30, 2021 and 2020	F-4
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended June 30, 2021, 2020 and 2019	F-5
Consolidated Statements of Changes in Stockholders’ (Deficit) Equity for the years ended June 30, 2021, 2020 and 2019	F-6
Consolidated Statements of Cash Flows for the years ended June 30, 2021, 2020 and 2019	F-7
Notes to Consolidated Financial Statements	F-8 – F-47

To:The Board of Directors and Shareholders of

China Xiangtai Food Co., Ltd.

Report of Independent Registered Public Accounting Firm

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of China Xiangtai Food Co., Ltd., its subsidiaries, and its variables interest entities (collectively the “Company”) as of June 30, 2021, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ (deficit) equity, and cash flows for the year ended June 30, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021, and the results of its operations and its cash flows for the year ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of Matter – Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company had incurred substantial losses during the year ended June 30, 2021, and had a working capital deficit, and a shareholders’ deficit which raises substantial doubt about its ability to continue as a going concern. Management’s plans to address this substantial doubt are set forth in Note 1. These financial statements do not include any adjustments that might result from the outcome of this uncertainly.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ WWC, P.C.

WWC, P.C.

Certified Public Accountants

San Mateo, California

November 15, 2021

We have served as the Company’s auditor since May 8, 2021.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

China Xiangtai Food Co., Ltd.

Opinion on the Financial Statements

We have audited the consolidated balance sheet of China Xiangtai Food Co., Ltd. (the “Company”) as of June 30, 2020 and the related consolidated statements of operations and comprehensive income (loss), changes in shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the financial statements), before the effects of the adjustments to retrospectively apply the change in accounting related to the discontinued operation of the Company’s subsidiaries, Chongqing Penglin Food Co., Ltd. (“CQ Penglin”), Guangan Yongpeng Food Co., Ltd. (“GA Yongpeng”) and Chongqing Pengmei Supermarket Co., Ltd. (“CQ Pengmei”), as described in Note 5 to the consolidated financial statements.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in accounting related to the discontinued operation of CQ Penglin, GA Yongpeng and CQ Pengmei as described in Note 5 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/ s/ Prager Metis CPAs, LLC

We have served as the Company’s auditor since 2020.

Hackensack, New Jersey

November 17, 2020

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Shareholders of China Xiangtai Food Co., Ltd.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of China Xiangtai Food Co., Ltd. and Subsidiaries (collectively, the “Company”) as of June 30, 2019 and 2018, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended June 30, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2019 and 2018, and the result of its operations and its cash flows for each of the years in the three-year period ended June 30, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/Friedman LLP

We have served as the Company’s auditor since 2017.

New York, New York

November 6, 2019

F-3

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

CONSOLIDATED BALANCE SHEETS

	June 30,		June 30,
	2021		2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	7,603	$	1,071,564
Accounts receivable, net		11,142,558		9,833,936
Other receivables, net		0		41,687
Inventories		229,392		0
Prepayments, net		2,051,547		1,057,423
Current assets of discontinued operations		19,090,614		38,271,324
Total current assets		32,521,714		50,275,934
OTHER ASSETS
Plant and equipment, net		4,395		10,121
Goodwill		0		5,185,866
Deferred tax assets		2,331,145		648,768
Other assets of discontinued operations		6,018,574		7,228,745
Total other assets		8,354,114		13,073,500
Total assets	$	40,875,828	$	63,349,434
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES
Short-term loans - banks	$	782,073	$	1,245,489
Loans from third parties		0		500,000
Convertible debenture, net		1,300,000		4,768,312
Accounts payable		9,966,193		5,727,718
Customer deposits		4,309,819		1,159,902
Customer deposits - related party		5,958		0
Other payables and accrued liabilities		242,410		409,725
Other payables - related parties		3,229,948		2,264,566
Taxes payable		1,034,421		399,276
Current liabilities of discontinued operations		17,826,470		16,260,602
Total current liabilities		38,697,292		32,735,590
OTHER LIABILITIES
Other liabilities of discontinued operations		3,798,524		3,787,008
Total other liabilities		3,798,524		3,787,008
Total liabilities		42,495,816		36,522,598
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIT) EQUITY
Ordinary shares, $0.01 par value, 50,000,000 shares authorized, 40,716,642 and 23,971,084 shares issued and outstanding as of June 30, 2021 and 2020, respectively		407,167		239,711
Additional paid-in capital		32,175,798		15,765,411
Deferred share compensation		(21,140)		(47,708)
Statutory reserves		1,670,367		1,670,367
(Accumulated deficit) retained earnings		(38,574,620)		7,034,899
Accumulated other comprehensive income (loss)		1,120,774		(856,218)
Total China Xiangtai Food Co., Ltd. shareholders' (deficit) equity		(3,221,654)		23,806,462
NONCONTROLLING INTERESTS		1,601,666		3,020,374
Total (deficit) equity		(1,619,988)		26,826,836
Total liabilities and shareholders' equity	$	40,875,828	$	63,349,434

The accompanying notes are an integral part of these consolidated financial statements.

F-4

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

	For the Years Ended June 30,
	2021		2020		2019
REVENUES
Feed raw material	$	76,489,466	$	24,248,765	$	—
Feed raw material - related party		4,008,969		—		—
Total revenues		80,498,435		24,248,765		—
COST OF REVENUES
Feed raw material		73,644,789		22,219,528		—
Feed raw material - related party		3,856,628		—		—
Total cost of revenues		77,501,417		22,219,528		—
GROSS PROFIT		2,997,018		2,029,237		—
OPERATING EXPENSES:
Selling		238,624		63,863		—
General and administrative		2,007,609		2,978,213		511,211
Provision for doubtful accounts		6,324,020		666,690		—
Stock compensation expense		1,889,173		930,223		—
Impairment of goodwill		5,533,507		—		—
Total operating expenses		15,992,933		4,638,989		511,211
LOSS FROM OPERATIONS		(12,995,915)		(2,609,752)		(511,211)
OTHER INCOME (EXPENSE)
Interest income		1,114		2,450		1,763
Interest expense		(294,139)		(167,097)		—
Other finance expenses		(136,456)		(362,413)		(927)
Other (expense) income, net		100		(6,255)		4
Gain on debt settlements		125,215		0		0
Total other (expense) income, net		(304,166)		(533,315)		840
LOSS BEFORE INCOME TAXES		(13,300,081)		(3,143,067)		(510,371)
(BENEFIT OF) PROVISION FOR INCOME TAXES		(1,002,346)		223,173		—
NET LOSS FROM CONTINUING OPERATIONS		(12,297,735)		(3,366,240)		(510,371)
NET (LOSS) INCOME FROM DISCONTINUED OPERATIONS		(34,785,232)		(1,033,293)		4,873,962
NET (LOSS) INCOME		(47,082,967)		(4,399,533)		4,363,591
Less: Net (loss) income attributable to non-controlling interest from continuing operations		(1,473,448)		477,409		—
NET (LOSS) INCOME ATTRIBUTABLE TO CHINA XIANGTAI FOOD CO., LTD.	$	(45,609,519)	$	(4,876,942)	$	4,363,591
NET (LOSS) INCOME	$	(47,082,967)	$	(4,399,533)	$	4,363,591
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment		2,031,732		(559,320)		(267,546)
TOTAL COMPREHENSIVE (LOSS) INCOME		(45,051,235)		(4,958,853)		4,096,045
Less: Comprehensive (loss) income attributable to non-controlling interests from continuing operations		(1,418,708)		465,736		—
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO CHINA XIANGTAI FOOD CO., LTD.	$	(43,632,527)	$	(5,424,589)	$	4,096,045
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES
Basic		33,194,383		22,417,524		20,319,723
Diluted		33,194,383		22,417,524		20,944,951
(LOSS) EARNINGS PER SHARE - BASIC
Continuing operations	$	(0.33)	$	(0.16)	$	(0.03)
Discontinued operations	$	(1.05)	$	(0.06)	$	0.24
(LOSS) EARNINGS PER SHARE - DILUTED
Continuing operations	$	(0.33)	$	(0.16)	$	(0.02)
Discontinued operations	$	(1.05)	$	(0.06)	$	0.23

The accompanying notes are an integral part of these consolidated financial statements.

F-5

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' (DEFICIT) EQUITY

												Accumulated
				Additional		Deferred		Retained earnings (accumulated deficit)				other
	Ordinary shares			paid-in		share		Statutory				comprehensive		Noncontrolling
	Shares	Par value		capital		compensation		reserves		Unrestricted		loss (income)		interests		Total
BALANCE, June 30, 2018	20,000,000	$	200,000	$	4,655,943	$	—	$	940,816	$	8,277,801	$	(41,025)	$	—	$	14,033,535
Issuance of ordinary shares through private placements	66,667		667		199,333				0		0		0		—		200,000
Issuance of ordinary shares in connection with redemption rights	725,000		7,250		1,792,750		—		0		0		0		—		1,800,000
Issuance of ordinary shares through initial public offering, net	1,172,360		11,723		4,383,911		—		0		0		0		—		4,395,634
Net income	—		0		0		—		0		4,363,591		0		—		4,363,591
Statutory reserves	—		0		0		—		555,826		(555,826)		0		—		0
Foreign currency translation	—		0		0		—		0		0		(267,546)		—		(267,546)
BALANCE, June 30, 2019	21,964,027		219,640		11,031,937		—		1,496,642		12,085,566		(308,571)		—		24,525,214
Issuance of ordinary shares for services	180,000		1,800		762,700		(114,500)		0		0		0		—		650,000
Amortization of deferred share compensation	—		0		0		66,792		0		0		0		—		66,792
Options issued to directors	—		0		213,431		—		0		0		0		—		213,431
Issuance of ordinary shares for acquisition	1,000,000		10,000		2,648,909		—		0		0		0		—		2,658,909
Fair value of noncontrolling interest acquired	—		0		0		—		0		0		0		2,554,638		2,554,638
Fair value of beneficial conversion feature of convertible debenture	—		0		259,540				0		0		0		—		259,540
Conversion convertible debenture into ordinary shares	827,057		8,271		848,894		—		0		0		0		—		857,165
Net (loss) income	—		0		0		—		0		(4,876,942)		0		477,409		(4,399,533)
Statutory reserves	—		0		0		—		173,725		(173,725)		0		—		0
Foreign currency translation	—		0		0		—		0		0		(547,647)		(11,673)		(559,320)
BALANCE, June 30, 2020	23,971,084		239,711		15,765,411		(47,708)		1,670,367		7,034,899		(856,218)		3,020,374		26,826,836
Issuance of ordinary shares for compensation	200,000		2,000		266,000		(268,000)		0		0		0		—		0
Amortization of deferred share compensation	—		0		0		315,708		0		0		0		—		315,708
Options issued to directors	—		0		30,490		—		0		0		0		—		30,490
Sales of ordinary shares	8,623,762		86,238		8,905,927		—		0		0		0		—		8,992,165
Conversion convertible debenture into ordinary shares	5,121,796		51,218		5,015,070		—		0		0		0		—		5,066,288
Issuance of ordinary shares for debt settlements	927,000		9,270		732,515		—		0		0		0		—		741,785
Issuance of ordinary shares for services	1,873,000		18,730		1,460,385		(21,140)		0		0		0		—		1,457,975
Net loss	—		0		0		—		0		(45,609,519)		0		(1,473,448)		(47,082,967)
Foreign currency translation	—		0		0				0		0		1,976,992		54,740		2,031,732
BALANCE, June 30, 2021	40,716,642	$	407,167	$	32,175,798	$	(21,140)	$	1,670,367	$	(38,574,620)	$	1,120,774	$	1,601,666	$	(1,619,988)

The accompanying notes are an integral part of these consolidated financial statements.

F-6

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Years Ended June 30,
	2021		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(47,082,967)	$	(4,399,533)	$	4,363,591
Net (loss) income from discontinued operations		(34,785,232)		(1,033,293)		4,873,962
Net loss from continuing operations		(12,297,735)		(3,366,240)		(510,371)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		6,514		1,579		0
Provision for doubtful accounts		6,324,385		666,690		0
Stock compensation expense		1,889,173		930,223		0
Late payment penalty expense		0		500,000		0
Impairment of goodwill		5,533,507		0		0
Amortization of convertible debenture issuance cost and discount		131,688		357,853		0
Gain on debt settlement		(125,215)		0		0
Deferred tax benefit		(1,581,005)		(166,673)		0
Change in operating assets and liabilities
Accounts receivable		(6,699,357)		(4,990,802)		0
Accounts receivable - related party		0		0		(55,255)
Other receivables		45,840		(32,368)		0
Inventories		(223,696)		318,478		0
Prepayments		(877,450)		3,062,453		0
Security deposits		0		1,388,179		(1,388,179)
Accounts payable		3,607,050		2,453,522		0
Customer deposits		2,965,151		(2,748,738)		0
Customer deposits - related party		5,811		0		0
Other payables and accrued liabilities		279,290		268,753		120,420
Taxes payable		582,694		390,715		0
Net cash provided by (used in) operating activities from continuing operations		(433,355)		(966,376)		(1,833,385)
Net cash used in operating activities from discontinued operations		(10,110,475)		(4,945,643)		(3,433,876)
Net cash used in operating activities		(10,543,830)		(5,912,019)		(5,267,261)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received from acquisition of JMC		0		859,461		0
Net cash provided by investing activities from continuing operations		0		859,461		0
Net cash (used in) provided by investing activities from discontinued operations		0		(700,399)		1,193,544
Net cash provided by investing activities		0		159,062		1,193,544
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments from other receivables - related parties, net		78,272		0		0
Repayments of other payables - related parties, net		(1,267,425)		(5,806,825)		(801,409)
Proceeds from issuance of ordinary shares through private placements		8,992,165		0		1,039,916
Proceeds from issuance of ordinary shares with redemption rights		0		0		200,000
Proceeds from short-term loans - banks		0		469,288		4,395,634
Repayments of short-term loans - banks		(1,328,981)		(213,312)		0
Proceeds from long-term loan - banks		762,654		0		0
Proceeds from convertible debentures, net of issuance costs		1,300,000		5,480,000		0
Net cash provided by (used in) financing activities from continuing operations		8,536,685		(70,849)		4,834,141
Net cash provided by financing activities from discontinued operations		117,482		4,147,857		1,816,385
Net cash provided by financing activities		8,654,167		4,077,008		6,650,526
EFFECT OF EXCHANGE RATE ON CASH		459,834		(4,296)		320,103
CHANGES IN CASH		(1,429,829)		(1,680,245)		2,896,912
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of year		1,535,760		3,216,005		319,093
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of year		105,931		1,535,760		3,216,005
LESS: CASH, CASH EQUIVALENTS AND RESTRICTED CASH FROM DISCONTINUED OPERATIONS		98,328		464,196		531,362
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS	$	7,603	$	1,071,564	$	2,684,643
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income tax	$	0	$	0	$	0
Cash paid for interest	$	644,319	$	488,360	$	823,551
NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES
Other receivable - related party offset with other payable - related party
upon execution of the tri-party offset agreement	$	0	$	1,195,585	$	439,479
Issuance of ordinary shares with redemption rights of mezzanine equity	$	0	$	0	$	1,800,000
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	11,568	$	3,240,920	$	0
Issuance of ordinary shares for acquisition	$	0	$	2,658,909	$	0
Conversion of convertible debenture into ordinary shares	$	5,066,288	$	857,165	$	0
Conversion of debts into ordinary shares	$	741,785	$	0	$	0

The accompanying notes are an integral part of these consolidated financial statements.

F-7

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Nature of business and organization

China Xiangtai Food Co., Ltd. (“Xiangtai Cayman” or the “Company”) is a holding company incorporated on January 23, 2018, under the laws of the Cayman Islands. The Company has no substantive operations other than holding all of the outstanding share capital of WVM Inc. (“Xiangtai BVI”). Xiangtai BVI is also a holding company holding all of the outstanding equity of CVS Limited, (“Xiangtai HK”). Xiangtai HK is also a holding company holding all of the outstanding equity of Chongqing Jinghuangtai Business Management Consulting Co., Ltd. (“Xiangtai WFOE”).

The Company, through its variable interest entity (“VIE”), Chongqin Penglin Food Co., Ltd. (“CQ Penglin”) and through its wholly-owned subsidiary, Guang’an Yongpeng Food Co., Ltd. (“GA Yongpeng”), engages in slaughtering, processing, packing and selling various processed meat products. On July 2, 2018, the Company acquired Chongqing Pengmei Supermarket Co. Ltd., (“CQ Pengmei”) that operated two grocery stores under common control of Ms. Zeshu Dai, its CEO, and her spouse in the city of Chongqing. The operations of these 2 grocery stores started in November 2017. The acquisition price was at the carrying value on CQ Pengmei books and records for a total of approximately $0.9 million (RMB 5,949,052). In February 2020, the Company discontinued its grocery stores business as the Company has been operating at losses in this business. As a result, the results of operations for the Company's grocery stores business are reported as discontinued operations under the guidance of Accounting Standards Codification 205.

On April 3, 2020, the Company entered into a Share Purchase Agreement ("SPA") with Xiangtai WFOE, Chongqing Ji Mao Cang Feed Co., Ltd. ("JMC"), which engages in raw feed material and formula solution wholesales business, and the shareholders of JMC ("JMC Shareholders"). Pursuant to the SPA, the Company shall issue to the shareholder who owns 51% of JMC's equity interest 2,000,000 duly authorized, fully paid and nonassessable ordinary shares of the Company, valued at a price of $1.77 per share, the closing price of the Company's ordinary share on April 3, 2020, for an aggregate discounted purchase price of $2,658,909 with probability of contingent considerations, subject to the milestones as specified in the SPA, in exchange for JMC Shareholders' agreement to cause JMC to enter into certain VIE agreements with Xiangtai WFOE, through which WFOE shall have the right to control, manage and operate JMC in return for a service fee equal to 51% of JMC's after-tax net income. (See Note 4).

The Company’s headquarter is located in the city of Chongqing, a direct-controlled municipality of the People’s Republic of China (the “PRC” or “China”). All of the Company’s business activities are carried out by CQ Penglin, GA Yongpeng, CQ Pengmei and JMC.

In May 2018, Xiangtai Cayman completed its reorganization of entities under the common control of one major shareholder, Zeshu Dai, who obtained 100% control of China Meitai Food Co., Ltd. (“China Meitai”), which has 64.17% ownership in Xiangtai Cayman, through an entrustment agreement with a third party prior to the reorganization, which the third party entrusted its voting power, personnel appointment power and other power-related to operating and managing of China Meitai, and therefore effectively the control of Xiangtai Cayman, to Ms. Dai to the extent permitted by the laws of the British Virgin Islands.

Ms. Dai entered into a call option agreement with a third party who is currently the sole shareholder of China Meitai. Pursuant to the call option agreement, the third party granted Ms. Dai an option that upon the closing of the initial public offering of the Company, Ms. Dai can exercise control of 97.74% of the shares of China Meitai. After excising the option shares in China Meitai, Ms. Dai indirectly owns 62.73% shares of the Company through China Meitai concurrently with the completion of the reorganization in May 2019.

Xiangtai Cayman, Xiangtai BVI and Xiangtai HK were established as the holding companies of Xiangtai WFOE. Xiangtai WFOE is the primary beneficiary of CQ Penglin and is the holding company of GA Yongpeng, and all of these entities included in Xiangtai Cayman are under common control of Ms. Dai and her immediate family members. As the 97.7% major shareholder in China Meitai, upon exercising the option shares, who collectively owns 100% of CQ Penglin and 100% of GA Yongpeng prior to the reorganization, causing the consolidation of CQ Penglin and GA Yongpeng which have been accounted for as a reorganization of entities under common control at carrying value. The consolidated financial

F-8

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

statements are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of Xiangtai Cayman.

On September 3, 2020, the Company entered into a share purchase agreement with Silanchi, a British Virgin Islands company, and China Gelingge Holding Limitied and China Yaxinge Holding Limited, the shareholders of Silanchi, who collectively hold 100% equity interest of Silanchi and to deliver a total consideration of US$100 in exchange for acquiring 98% equity interest of Silanchi. Silanchi was established on December 12, 2019. Silanchi is a holding company holding all of the outstanding equity of Haochuangge Limited (“Haochuangge”), which was incorporated in January 2020 under the laws of Hong Kong.

The accompanying consolidated financial statements reflect the activities of Xiangtai Cayman and each of the following entities:

Name	Background	Ownership
Xiangtai BVI	·       A British Virgin Islands company	100% owned by Xiangtai Cayman
Xiangtai HK	·       A Hong Kong company	100% owned by Xiangtai BVI
Xiangtai WFOE	·       A PRC limited liability company and deemed a wholly foreign-owned enterprise (“WFOE”)	100% owned by Xiangtai HK
CQ Penglin	·       A PRC limited liability company
	·       Slaughtering, processing, packing, and selling various processed meat products.	VIE of Xiangtai WFOE
GA Yongpeng	·       A PRC limited liability company
	·       Slaughtering, processing, packing and selling various processed meat products.	100% owned by Xiangtai WFOE
CQ Pengmei	·       A PRC limited liability company	100% owned by Xiangtai WFOE
	·       Grocery stores selling daily necessities
JMC	· A PRC limited liability company	51 % VIE of Xiangtai WFOE
	· Feed raw materials and formula solutions wholesales.
Silanchi	· A British Virgin Islands company	100% owned by Xiangtai Cayman
Haochuangge	· A Hong Kong company	100% owned by Silanchi

Contractual Arrangements

CQ Penglin

CQ Penglin’s PRC business license includes business activities of marketing survey service in the livestock industry and it is being included as a social survey category, which is within the business category in which foreign investment is restricted pursuant to the current PRC regulations. As such, CQ Penglin is controlled through contractual agreements in lieu of direct equity ownership by the Company or any of its subsidiaries. Such contractual arrangements consist of a series of five agreements (collectively the “Contractual Arrangements”). The significant terms of the Contractual Agreements are as follows:

Technical Consultation and Services Agreement

Pursuant to the technical consultation and services agreement between Xiangtai WFOE and CQ Penglin, as amended, Xiangtai WFOE is engaged as the exclusive provider of management consulting services to CQ Penglin. For such services, CQ Penglin agrees to pay service fees determined based on all of their net income to Xiangtai WFOE or Xiangtai WFOE has the obligation to absorb all of the losses of CQ Penglin.

The technical consultation and services agreement, as amended, remains in effect for 30 years until October 8, 2047. The agreement can be extended only if Xiangtai WFOE gives its written consent of extension of the agreement before the expiration of the agreement and CQ Penglin then may extend without reservation.

F-9

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Business Cooperation Agreement

Pursuant to the business cooperation agreement between Xiangtai WFOE and CQ Penglin, as amended, Xiangtai WFOE has the exclusive right to provide CQ Penglin with technical support, business support and related consulting services, including but not limited to technical services, business consultations, equipment or property leasing, marketing consultancy, system integration, product research and development, and system maintenance. In exchange, Xiangtai WFOE is entitled to a service fee that equals all of the net income of CQ Penglin determined by U.S. GAAP. The service fees may be adjusted based on the services rendered by Xiangtai WFOE in that month and the operational needs of CQ Penglin.

The business cooperation agreement, as amended, remains in effect unless Xiangtai WFOE commits gross negligence, or a fraudulent act, against CQ Penglin. Nevertheless, Xiangtai WFOE shall have the right to terminate this agreement upon giving 30 days’ prior written notice to CQ Penglin at any time.

Equity Option Agreements

Pursuant to the equity option agreements, as amended, among the shareholders who collectively owned all of CQ Penglin and Xiangtai WFOE, and CQ Penglin.  These shareholders jointly and severally grant Xiangtai WFOE an option to purchase their equity interests in CQ Penglin. The purchase price shall be the lowest price then permitted under applicable PRC laws. If the purchase price is greater than the registered capital of CQ Penglin, these shareholders of CQ Penglin are required to immediately return any amount in excess of the registered capital to Xiangtai WFOE or its designee of Xiangtai WFOE. Xiangtai WOFE may exercise such option at any time until it has acquired all equity interests of CQ Penglin, and may transfer the option to any third party. The agreements will terminate at the date on which all of these shareholders’ equity interests of CQ Penglin has been transferred to Xiangtai WFOE or its designee.

Equity Pledge Agreements

Pursuant to the equity pledge agreements, as amended, among the shareholders who collectively owned all of CQ Penglin, pledge all of the equity interests in CQ Penglin to Xiangtai WFOE as collateral to secure the obligations of CQ Penglin under the exclusive consulting services and operating agreement. These shareholders may not transfer or assign transfer or assign the pledged equity interests, or incur or allow any encumbrance that would jeopardize Xiangtai WFOE’s interests, without Xiangtai WFOE’s prior approval. In the event of default, Xiangtai WFOE as the pledgee will be entitled to certain rights and entitlements, including the priority in receiving payments by the evaluation or proceeds from the auction or sale of whole or part of the pledged equity interests of CQ Penglin. The agreement will terminate at the date these shareholders have transferred all of their pledged equity interests pursuant to the equity option agreement.

Voting Rights Proxy and Financial Supporting Agreements

Pursuant to the voting rights proxy and financial supporting agreements, as amended, the shareholders of CQ Penglin give Xiangtai WFOE an irrevocable proxy to act on their behalf on all matters pertaining to CQ Penglin and to exercise all of their rights as shareholders of CQ Penglin, including the right to attend shareholders meeting, to exercise voting rights and to transfer all or a part of their equity interests in CQ Penglin. In consideration of such granted rights, Xiangtai WFOE agrees to provide the necessary financial support to CQ Penglin whether or not CQ Penglin incurs a loss, and agrees not to request repayment if CQ Penglin is unable to do so. The agreements shall remain in effect for 30 years until October 8, 2047.

Based on the foregoing contractual arrangements, which grant Xiangtai WFOE effective control of CQ Penglin, obligate Xiangtai WFOE to absorb all of the risks of loss from their activities, and enable Xiangtai WFOE to receive all of their expected residual returns, the Company accounts for CQ Penglin as a VIE.

The Company consolidates the accounts of CQ Penglin for the periods presented herein, in accordance with Regulation S-X-3A-02 promulgated by the Securities Exchange Commission (“SEC”), and Accounting Standards Codification (“ASC”) 810-10, Consolidation.

F-10

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JMC

JMC is a private enterprise specializing in feed raw material sales and feed formula solutions.  JMC has entered strategic alliances with large grain and oil companies and has obtained general distributorship in Chongqing, Sichuan and other places in the PRC. To provide distribution service, JMC needs to conduct market research and to collect and analyze the relating market data, which is regarded as marketing service, which is within the business category in which foreign investment is restricted pursuant to the current PRC regulations. As such, JMC is controlled through contractual agreements in lieu of direct equity ownership by the Company or any of its subsidiaries. Such contractual arrangements consist of a series of 5 agreements (collectively the “Contractual Arrangements”). The significant terms of the Contractual Agreements are as follows:

Technical Consultation and Services Agreement

Pursuant to the technical consultation and services agreement, as amended, between Xiangtai WFOE and JMC, Xiangtai WFOE is engaged as the exclusive provider of management consulting services to JMC. For such services, JMC agrees to pay service fees determined based on 51% of their net income to Xiangtai WFOE or Xiangtai WFOE has the obligation to absorb 51% of the losses of JMC.

The technical consultation and services agreement, as amended, remains in effect for 20 years until April 2, 2040. The agreement can be extended only if Xiangtai WFOE gives its written consent of extension of the agreement before the expiration of the agreement and JMC then may extend without reservation.

Equity Option Agreement

Pursuant to the equity option agreement, a shareholder who owned 51% of JMC, Xiangtai WFOE, and JMC.   This shareholder severally grant Xiangtai WFOE an option to purchase her 51% equity interests in JMC. The purchase price shall be the lowest price then permitted under applicable PRC laws. If the purchase price is greater than the registered capital of JMC, this shareholder of JMC is required to immediately return any amount in excess of the registered capital to Xiangtai WFOE or its designee of Xiangtai WFOE. Xiangtai WOFE may exercise such option at any time until it has acquired the 51% equity interests of JMC, and may transfer the option to any third party. The agreements will terminate at the date on which all of this shareholder’s 51% equity interests of JMC has been transferred to Xiangtai WFOE or its designee.

Equity Pledge Agreement

Pursuant to the equity pledge agreement, a shareholder who owned 51% of JMC pledges all of her 51% equity interests in JMC to Xiangtai WFOE as collateral to secure the obligations of JMC under the exclusive consulting services and operating agreement. This shareholder may not transfer or assign transfer or assign the pledged equity interests, or incur or allow any encumbrance that would jeopardize Xiangtai WFOE’s interests, without Xiangtai WFOE’s prior approval. In the event of default, Xiangtai WFOE as the pledgee will be entitled to certain rights and entitlements, including the priority in receiving payments by the evaluation or proceeds from the auction or sale of whole or part of the pledged equity interests of JMC. The agreement will terminate at the date these shareholders have transferred all of their pledged equity interests pursuant to the equity option agreement.

Voting Rights Proxy and Financial Supporting Agreement

Pursuant to the voting rights proxy and financial supporting agreement, a 51% shareholder of JMC give Xiangtai WFOE an irrevocable proxy to act on their behalf on all matters pertaining to JMC and to exercise all of their rights as the 51% shareholder of JMC, including the right to attend shareholders meeting, to exercise voting rights and to transfer all 51% or a part of her equity interests in JMC. In consideration of such granted rights, Xiangtai WFOE agrees to provide the necessary 51% financial support to JMC whether or not JMC incurs a loss, and agrees not to request repayment if JMC is unable to do so. The agreements shall remain in effect for 20 years until April 2, 2040.

F-11

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Based on the foregoing contractual arrangements, which grant Xiangtai WFOE effective 51% control of JMC, obligate Xiangtai WFOE to absorb 51% of the risks of loss from their activities, and enable Xiangtai WFOE to receive 51% of their expected residual returns, the Company accounts for JMC as a VIE.

The Company consolidates the accounts of JMC beginning on April 3, 2020, in accordance with Regulation S-X-3A-02 promulgated by the Securities Exchange Commission (“SEC”), and Accounting Standards Codification (“ASC”) 810-10, Consolidation.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future. As of June 30, 2021, the Company had an accumulated deficit of $38,574,620, and net loss of $47,082,967 for the year ended June 30, 2021. The continuation of the Company as a going concern is dependent upon generating positive operating cash flows in its primary operations, or the procurement of additional external financing. Management believes that it will be able to undertake debt financing in the form of short-term bank loans, loans from related parties, and issuance of convertible notes that can be utilized by the Company as working capital and for capital expenditures. however, there is no assurance that the Company will be successful in securing sufficient funds to sustain or grow its operations.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of these uncertainties. Management believes that the actions presently being taken to obtain additional funding and implement its strategic plan provides the opportunity for the Company to continue as a going concern.

Note 2 – Summary of significant accounting policies

Basis of presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission, regarding financial reporting, and include all normal and recurring adjustments that management of the Company considers necessary for a fair presentation of its financial position and operation results.

Principles of consolidation

The consolidated financial statements include the accounts of the Company, its subsidiaries, and its variable interest entities. All intercompany transactions and balances are eliminated upon consolidation.

Use of estimates and assumptions

In presenting the consolidated financial statements in accordance with U.S. GAAP, management make estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgement and available information. Accordingly, actual results could differ from those estimates. On an ongoing basis, management reviews these estimates and assumptions using the currently available information. Changes in facts and circumstances may cause the Company to revise its estimates. The Company bases its estimates on past experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The inputs into our judgments and estimates consider the economic implications of COVID-19 on the Company’s critical and significant accounting estimates. Estimates are used when accounting for items and matters including, but not limited to revenue recognition, residual values, lease classification and liabilities, inventory obsolescence, right-of-use assets, determinations of the useful lives and valuation of long-lived assets and goodwill, estimates of allowances for doubtful accounts, estimates of impairment of long-lived assets and goodwill, valuation of

F-12

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

deferred tax assets, estimated fair value used in business acquisitions, issuance of common stock and warrants exercised and other provisions and contingencies.

Foreign currency translation and transaction

The reporting currency of the Company is the U.S. dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. The statement of income accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss). Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Translation adjustments included in accumulated other comprehensive income (loss) amounted to $1,120,774 and $(856,218) as of June 30, 2021 and 2020, respectively. The balance sheet amounts, with the exception of shareholders’ equity at June 30, 2021 and 2020 were translated at 6.46 RMB and 7.07 RMB to $1.00, respectively. The shareholders’ equity accounts were stated at their historical rate. The average translation rates applied to the statement of income accounts for the years ended June 30, 2021, 2020 and 2019 were 6.62 RMB, 7.03 RMB and 6.83 RMB to $1.00, respectively. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. These restrictions have not had a material impact on the Company because it has not engaged in any significant transactions that are subject to the restrictions.

Business combinations

The purchase of price of an acquired company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill. The results of operations of the acquired business are included in the Company's operating results from the date of acquisition.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and time deposits placed with banks or other financial institutions and have original maturities of less than three months.

Accounts receivable

Accounts receivable include trade accounts due from customers. Accounts are considered overdue after 30 days. In establishing the required allowance for doubtful accounts, management considers historical experience, aging of the receivables, the economic environment, trends in the food industry and the credit history and relationships with the customers. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate, and adjusts the allowance when necessary. The Company provides an allowance for doubtful accounts provision of 25% for accounts receivable balances that are past due more than 180 days but less than 270 days, an allowance for doubtful accounts provision of 50% of for accounts receivable past due from 270 days but less than one year,  an allowance for doubtful accounts provision of 100% for accounts receivable past due beyond one year, plus additional amounts as necessary when the Company’s collection department determines the collection of the full amount is remote and the Company’s management approves 100% of the allowance for doubtful accounts. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. The Company’s management has continued to evaluate the reasonableness of its valuation allowance policy and will update it if necessary.

F-13

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other receivables

Other receivables primarily include advances to employees, amounts due from unrelated entities, VAT tax refunds, and other deposits. Management regularly reviews the aging of receivables and changes in payment trends and records allowances when management believes the collection of amounts due are at risk. Accounts considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of June 30, 2021 and 2020, allowance for the doubtful accounts were $0 and $3,091 for continuing operations, respectively. As of June 30, 2021 and 2020, allowance for the doubtful accounts were $151,899 and $47,272 for discontinued operations, respectively.

Inventories

Inventories are comprised of finished goods and are stated at the lower of cost or net realizable value using the weighted average method. Management reviews inventories for obsolescence and cost in excess of net realizable value at least annually and records a reserve against the inventory when the carrying value exceeds net realizable value.

Prepayments

Prepayments are cash deposited or advanced to services providers for future inventory purchases or future services. This amount is refundable and bears no interest.

Security deposits

Security deposits include loan deposits to service providers who assisted the Company as a third party guarantor in the Company’s bank loans. These amounts are non-interest bearing and refundable upon the repayments of the loans or notes payable or fulfillment of sales contracts. Security deposits considered uncollectable are written off against allowances after exhaustive efforts at collection are made. As of June 30, 2021 and 2020, allowance for the doubtful accounts were $782,757 and $715,024 for discontinued operations, respectively. As of June 30, 2021 and 2020, 0 allowance for the doubtful accounts was recognized for continuing operations, respectively.

Plant and equipment, net

Plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets with a 0% or 5% residual value. The estimated useful lives are as follows:

	Useful Life
Building	10‑20 years
Electronic devices	5‑10 years
Automobile	5‑10 years
Office equipment	5 years
Leasehold improvements	Shorter of the lease term or useful life

The cost and related accumulated depreciation and amortization of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income and comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation and amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

Construction-in-progress represents contractor and labor costs, design fees and inspection fees in connection with the construction projects. No depreciation is provided for construction-in-progress until it is completed and placed into service.

F-14

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible assets, net

Intangible assets are stated at cost, less accumulated amortization. Amortization expense is recognized on the straight-line basis over the estimated useful lives of the assets. All land in the PRC is owned by the government; however, the government grants “land-use rights.” The Company has obtained rights to use various parcels of land for 50 years. The Company amortizes the cost of the land use rights over their useful life using the straight-line method.

If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. During the years ended June 30, 2021, 2020 and 2019, $151,398, $0 and $0 impairment of intangible assets was recognized for discontinued operations, respectively. During the years ended June 30, 2021, 2020 and 2019, 0 impairment of intangible assets was recognized for continuing operations.

Goodwill

Goodwill represents the excess of the consideration paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiaries at the date of acquisition. Goodwill is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred. Goodwill is carried at cost less accumulated impairment losses. If impairment exists, goodwill is immediately written off to its fair value and the loss is recognized in the consolidated statements of operations and comprehensive income (loss). Impairment losses on goodwill are not reversed.

The Company reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist annually or more frequently if events and circumstances indicate that it is more likely than not that an impairment has occurred. The Company has the opinion to access qualitative factors to determine whether it is necessary to perform the two-step in accordance with ASC 350-20. If the Company believes, as a result of the qualitative carrying amount, the two-step quantities impairment test described below is required.

The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required.

If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit's goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business acquisition with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. Estimating fair value is performed by utilizing various valuation techniques, with the primary technique being a discounted cash flow.

If impairment exists, goodwill is immediately written off to its fair value and the loss is recognized in the consolidated statements of operations and comprehensive income (loss). Impairment losses on goodwill are not reversed. For the years ended June 30, 2021, 2020 and 2019, $5,533,507, $0 and $0 impairment of goodwill was recorded for continuing operations. For the years ended June 30, 2021, 2020 and 2019, 0 impairment of goodwill was recorded for discontinued operations.

Impairment for long-lived assets

Long-lived assets, including plant and equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted

F-15

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

cash flows approach or, when available and appropriate, to comparable market values. During the years ended June 30, 2021, 2020 and 2019, $874,625, $724,987 and $0 impairment of long-lived assets was recognized for discontinued operations, respectively. During the years ended June 30, 2021, 2020 and 2019, 0 impairment of long-lived assets was recognized for continuing operations.

Financial Instruments

The Company analyzes all financial instruments with features of both liabilities and equity under FASB Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity” and FASB ASC Topic 815 “Derivatives and Hedging”.  The embedded conversion features of convertible debentures not separately accounted for as a derivative and contained considered to be derivative instruments provide for a rate of conversion that is below market value. Such feature is normally characterized as a “beneficial conversion feature” (“BCF”) required to separate the instruments into debt and equity. A BCF is a non-detachable conversion feature that is "in the money" at the commitment date, which requires recognition of interest expense for underlying debt instruments and a deemed dividend for underlying equity instruments. A conversion option is "in the money" if the effective conversion price is lower than the commitment date fair value of the share into which it is convertible. The relative fair values of the BCF were recorded as discounts from the face amount of the respective debt instrument. The Company amortized the discount using the straight-line method which approximates the effective interest method through maturity of such instruments.

Fair value measurement

The accounting standard regarding the fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company.

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest. Long-term bank loan on the balance sheets is at carrying value, which approximates fair value as the bank was lending the money to the Company at the market rate.

Related parties

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

F-16

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue recognition

Prior to June 30, 2018, revenue is recognized when all of the following have occurred: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price is fixed or determinable, and (iv) the ability to collect is reasonably assured.

Revenues are recognized at the date of goods delivered and title passed to customers or agents, when a formal arrangement exists, the price is fixed or determinable, the Company has no other significant obligations and collectability is reasonably assured. The Company’s revenues come from three channels: supermarkets, farmers’ markets and feed raw materials. The products sold in supermarkets together with feed raw materials are processed products are subject to a Chinese value-added tax (“VAT”) when sold in the PRC. The products sold at farmers’ markets are fresh-killed hog and hog’s byproducts. These products sold in the PRC are not subject to a Chinese VAT. VAT taxes are presented as a reduction of revenue.

On July 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of June 30, 2018. The core principle underlying the revenue recognition ASU is that the Company recognizes revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This requires the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or overtime, based on when control of goods and services transfers to a customer. The Company’s revenue streams are primarily recognized at a point in time.

The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.

Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and determined that there were no differences in the pattern of revenue recognition. Disaggregated revenue by the Company’s revenue streams, such as supermarket and grocery store revenue, famers’ market revenue and feed raw material revenue are required to be disclosed upon adoption, which has been reflected in the accompanying consolidated statements of income and comprehensive income.

Gross versus Net Revenue Reporting

The Company also engages in trading of chilled fresh pork. The determination of whether revenues should be reported on a gross or net basis is based on its assessment of whether it is the principal or an agent in the transaction in accordance with ASC 606-10-55 and depends on whether the promise to the customer is to provide the products or to facilitate a sale by a third party. The nature of the promise depends on whether the Company controls the products prior to transferring it. When the Company controls the product, the promise is to provide and deliver the products and revenue is presented gross. When the Company does not control the products, the promise is to facilitate the sale and revenue is presented net.

To distinguish a promise to provide products from a promise to facilitate the sale from a third party, the Company considers the guidance of control in ASC 606-10-55-37A and the indicators in 606-10-55-39. The Company considers this guidance in conjunction with the terms in the Company’s arrangements with both suppliers and customers.

In general, the Company does not control the products as it has no obligation to (i) fulfill the resale products delivery, and (ii) bear any inventory risk. In addition, when establishing the selling prices for delivery of the resale products, the Company has such discretion of establishing price to ensure it would generate profit for the services of the products delivery arrangements. The Company believes that all these factors indicate that the Company is acting as an agent in this transaction. As a result, revenue from the trading of chilled fresh pork is presented on a net basis.

F-17

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company engages in the distribution of animal feed. The Company is a principal in the feed distribution business, where it takes the risk and rewards of ownership of the feed products which are typically soybeans shell. The Company typically recognizes revenue for these products upon shipping, where the Company transfers ownership of the product to its customers, which is the primary performance obligation in the sales cycle, satisfaction of the obligation is typically evidenced by a form of customer acceptance. Sales contracts typically do not set forth terms for return of products or refund of payments.

Cost of revenues

Cost of revenues comprised of the cost of raw materials and the cost of processing and overhead expenses on sold products.

Shipping and handling

Shipping and handling costs are expensed as incurred and included in selling expenses.

Advertising costs

Advertising costs from discontinued operations amounted to $1,472, $16,913 and $14,876 for the years ended June 30, 2021, 2020 and 2019, respectively. Continuing operations did not incur any advertising costs for the years ended June 30, 2021, 2020 and 2019. Advertising costs are expensed as incurred and included in selling expenses.

Leases

Effective July 1, 2019, the Company adopted FASB ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that does not require us to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. The Company also adopted the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. On July 1, 2019, the Company recognized approximately $1.3 million right of use (“ROU”) assets and same amount of lease liabilities based on the present value of the future minimum rental payments of leases, using an incremental borrowing rate of 6.09% based on the duration of lease terms.

Operating lease ROU assets and lease liabilities are recognized at the adoption date of July 1, 2019 or the commencement date, whichever is earlier, based on the present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company use its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.

Lease terms used to calculate the present value of lease payments generally do not include any options to extend, renew, or terminate the lease, as the Company does not have reasonable certainty at lease inception that these options will be exercised. The Company generally considers the economic life of its operating lease ROU assets to be comparable to the useful life of similar owned assets. The Company has elected the short-term lease exception, therefore operating lease ROU assets and liabilities do not include leases with a lease term of twelve months or less. Its leases generally do not provide a residual guarantee. The operating lease ROU asset also excludes lease incentives. Lease expense is recognized on a straight-line basis over the lease term.

The Company reviews the impairment of its ROU assets consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liabilities in any tested asset group and include the associated operating lease payments in the undiscounted future pre-tax cash flows.

F-18

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation

The Company records stock compensation expense for employees at fair value on the grant date and recognizes the expense over the employee’s requisite service period. The Company’s expected volatility assumption is based on the historical volatility of the Company’s stock. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination rate. The risk-free interest rate for the expected term of an option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is based on the Company’s current and expected dividend policy.

The Company records stock compensation expense for non-employees at fair value on the grant date and recognizes the expense over the service provider’s requisite service period.

Income taxes

The Company accounts for income taxes in accordance with U.S. GAAP for income taxes. The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided in accordance with the laws of the relevant taxing authorities.

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. No penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. PRC tax returns filed in 2018 to 2020 are subject to examination by any applicable tax authorities.

Earnings per share (“EPS”)

Basic earnings per share are computed by dividing income available to ordinary shareholders by the weighted average ordinary shares outstanding during the period. Diluted earnings per share take into account the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised and converted into ordinary shares. Ordinary shares equivalents having an anti-dilutive effect on earnings per share are excluded from the calculation of diluted earnings per share. Dilution is computed by applying the treasury share method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase ordinary shares at the average market price during the period.

A total of 4,667 warrants with weighted average effect of 1,867 ordinary shares using treasury share method, a total of 90,000 vested stock options issued on August 1, 2019 with conversion effect of 90,000 ordinary shares, a total of $1.0 million principal value of convertible debts issued on March 9, 2020 with floor conversion price of $0.8 and conversion effect of 1,125,182 ordinary shares, a total of $0.7 million principal value of convertible debts issued on June 19, 2020 with floor conversion price of $0.8 and conversion effect of 912,532 ordinary shares, a total of $0.7 million principal value of convertible debts with floor conversion price of $2.5 issued on July 17, 2020 and estimated conversion effect of 280,000 ordinary shares, a total of $0.3 million principal value of convertible debts issued on August 14, 2020 with floor conversion price of $2.5 and estimated conversion effect of 120,000 ordinary shares, a total of $0.3 million principal value of

F-19

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

convertible debts issued on November 13, 2020 with floor conversion price of $2.5 and estimated conversion effect of 120,000 ordinary shares, and a total of 1,000,000 contingent shares to be issued to JMC Shareholders are excluded in the diluted EPS calculation for the year ended June 30, 2021 due to its anti-diluted effect.

A total of 67,500 vested stock options issued on August 1, 2019, a total of $1.2 million principal value of convertible debts with floor conversion price of $1.0 issued on November 22, 2019, a total of $1.8 million principal value of convertible debts issued on December 30, 2019 with floor conversion price of $1.0, a total of $1.0 million principal value of convertible debts issued on March 9, 2020 with floor conversion price of $3.0, a total of $0.7 million principal value of convertible debts issued on March 9, 2020 with floor conversion price of $3.0, and a total of 1,000,000 contingent shares to be issued to JMC Shareholders are excluded in the diluted EPS calculation for the year ended June 30, 2020 due to its anti-diluted effect.

Employee benefit

The full-time employees of the Company are entitled to staff welfare benefits including medical care, housing fund, pension benefits, unemployment insurance and other welfare, which are government mandated defined contribution plans. The Company is required to accrue for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash contributions to the state-sponsored plans out of the amounts accrued. Total expenses for the plans from continuing operations were $18,753, $2,938 and $0 for the years ended June 30, 2021, 2020 and 2019, respectively. Total expenses for the plans from discontinued operations were $27,635, $59,702 and $95,331 for the years ended June 30, 2021, 2020 and 2019, respectively.

Recently issued accounting pronouncements

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820 “Fair Value Measurement”. ASU 2018-13 eliminates certain disclosures related to transfers and the valuations process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning July 1, 2020. The adoption of this ASU on July 1, 2020 did not have a material effect on the Company’s consolidated financial statements.

In May 2019, the FASB issued ASU 2019-05, which is an update to ASU Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The amendments in this Update address those stakeholders’ concerns by providing an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets. Furthermore, the targeted transition relief also may reduce the costs for some entities to comply with the amendments in Update 2016-13 while still providing financial statement users with decision-useful information. In November 2019, the FASB issued ASU No. 2019-10, which to update the effective date of ASU No. 2016-02 for private companies, not-for-profit organizations and certain smaller reporting companies applying for credit losses, leases, and hedging standard. The new effective date for these preparers is for fiscal years beginning after December 15, 2022. The Company has not early adopted this update and it will become effective on July 1, 2023 assuming the Company will remain an emerging growth company, which qualified as smaller reporting company, at that date. The Company is currently evaluating the impact of ASU 2019-05 will have on its consolidated financial statements.

F-20

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In January 2020, the FASB issued ASU 2020-01 to clarify the interaction of the accounting for equity securities under ASC 321 and investments accounted for under the equity method of accounting in ASC 323 and the accounting for certain forward contracts and purchased options accounted for under ASC 815. With respect to the interactions between ASC 321 and ASC 323, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting when applying the measurement alternative in ASC 321, immediately before applying or upon discontinuing the equity method of accounting. With respect to forward contracts or purchased options to purchase securities, the amendments clarify that when applying the guidance in ASC 815-10-15-141(a), an entity should not consider whether upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under the equity method in ASC 323 or the fair value option in accordance with ASC 825. The ASU is effective for interim and annual reporting periods beginning after December 15, 2020. Early adoption is permitted, including adoption in any interim period. The Company does not expect the adoption of this standard will have a material impact on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. The amendment in this Update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, the Board decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this Update are effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements and related disclosures.

In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs”. The amendments in this Update represent changes to clarify the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. ASU 2020-08 is effective for the Company for annual and interim reporting periods beginning January 1, 2021. Early adoption was permitted, including adoption in an interim period. All entities should apply the amendments in this Update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. These amendments do not change the effective dates for Update 2017-08. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements to Subtopic 205-10, presentation of financial statements”. The amendments in this Update improve the codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the disclosure section of the codification. That reduce the likelihood that the disclosure requirement would be missed. The amendments also clarify guidance so that an entity can apply the guidance more consistently. ASU 2020-10 is effective for the Company for annual and interim reporting periods beginning January 1, 2022. Early application of the amendments is permitted for any annual or interim period for which financial statements are available to be issued. The amendments in this Update should be applied retrospectively. An entity should apply the amendments at the beginning of the period that includes the adoption date. The Company is currently evaluating the impact of this new standard on Company’s consolidated financial statements and related disclosures

F-21

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year of discontinued operations presentation. These reclassifications have no effect on the accompanying statements of operations and cash flows.

Note 3 – Variable interest entity (“VIE”)

A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Xiangtai WFOE is deemed to have a controlling financial interest and be the primary beneficiary of CQ Penglin and JMC because it has both of the following characteristics:

(1) The power to direct activities at CQ Penglin and JMC that most significantly impact such entity’s economic performance, and

(2) The obligation to absorb losses of, and the right to receive benefits from CQ Penglin and JMC that could potentially be significant to such entity.

Pursuant to the Contractual Arrangements, CQ Penglin pays service fees equal to all of its net income to Xiangtai WFOE and JMC pays service fees equal to 51% of its net income to Xiangtai WFOE. At the same time, Xiangtai WFOE is obligated to absorb all of CQ Penglin’s losses and to absorb 51% of JMC's losses. The Contractual Arrangements are designed so that CQ Penglin and JMC operate for the benefit of Xiangtai WFOE and ultimately, the Company. Accordingly, the accounts of CQ Penglin and JMC are consolidated in the accompanying consolidated financial statements. In addition, its financial positions and results of operations are included in the Company’s consolidated financial statements.

F-22

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The carrying amount of VIE’s consolidated assets and liabilities are as follows:

	June 30, 2021		June 30, 2020
Current assets	$	31,673,532	$	48,347,542
Property and equipment, net		4,395		10,121
Other noncurrent assets		7,017,153		4,951,796
Total assets		38,695,080		53,309,459
Total liabilities		(65,059,893)		(42,919,217)
Net assets	$	(26,364,813)	$	10,390,242

	June 30, 2021		June 30, 2020
Current liabilities:
Short-term loans - banks	$	782,073	$	1,245,489
Accounts payable		9,966,193		5,727,718
Other payables and accrued liabilities		21,768		17,007
Other payables - related parties		1,483,634		2,879,867
Customer deposits		4,309,819		1,159,902
Customer deposits - related party		5,958		0
Taxes payable		1,034,421		399,276
Current liabilities of discontinued operations		21,759,683		28,120,679
Total current liabilities		39,363,549		39,549,938
Other liabilities:
Other liabilities of discontinued operations		25,696,344		3,369,279
Total other liabilities		25,696,344		3,369,279
Total liabilities	$	65,059,893	$	42,919,217

The summarized operating results of the VIE’s are as follows:

	For the year ended		For the year ended		For the year ended
	June 30, 2021		June 30, 2020		June 30, 2019
Operating revenues	$	80,498,435	$	24,248,765	$	—
Gross profit	$	2,997,018	$	2,029,237	$	—
(Loss) income from operations	$	(3,872,881)	$	1,242,103	$	—
Net (loss) income from continuing operations	$	(3,007,036)	$	974,302	$	—
Net (loss) income from discontinued operations		(33,789,915)		—		5,333,912
Net (loss) income		(36,796,951)		974,302		5,333,912
Less: net (loss) income attributable to non-controlling interest		(1,473,448)		477,409		—
Net (loss) income attributable to Xiangtai Cayman	$	(35,323,503)	$	496,893	$	5,333,912

Note 4 – Business Combinations

Acquisition of JMC

On April 3, 2020, the Company entered into a Share Purchase Agreement (“SPA”) with WFOE, Chongqing Ji Mao Cang Feed Co., Ltd. (“JMC”) and the shareholders of JMC (“JMC Shareholders”). Pursuant to the SPA, the Company shall issue to the shareholder who owns 51% of JMC’s equity interest 2,000,000 duly authorized, fully paid and nonassessable ordinary shares of the Company, valued at a price of $1.77 per share, the closing price of the Company’s ordinary share on April 3, 2020, for an aggregate  discounted purchase price of $2,658,909 with probability of contingent considerations,

F-23

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

subject to the milestones as specified in the SPA, in exchange for JMC Shareholders’ agreement to cause JMC to enter into certain VIE agreements with WFOE, through which WFOE shall have the right to control, manage and operate JMC in return for a service fee equal to 51% of JMC’s after-tax net income.

The Company’s acquisition of JMC was accounted for as a business combination in accordance with ASC 805. The Company has allocated the purchase price of JMC based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. The Company estimated the fair values of the assets acquired and liabilities assumed at the acquisition date in accordance with the business combination standard issued by the FASB with the valuation methodologies using level 3 inputs, except for other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

The consideration was valued at $2,658,909, based upon the issuance of 1,000,000 shares determined using the closing price of $1.77 per share on April 3, 2020 and the present value of issuance of 1,000,000 shares payable at the end of year two and year three determined using the closing price of $1.77 per share on April 3, 2020 and discount rate of 4.75%. The considerations also include 70% probability of contingent considerations of 600,000 shares payment at the end of year two and 30% probability of contingent considerations of 400,000 shares payment at the end of year three. According to the milestones, 1,000,000 shares were issued to JMC shareholders before April 11, 2020; however, the audited total sales or net profit of JMC in fiscal year 2020 shall respectively exceed $70,000,000 (approximately RMB 500,000,000) or $1,500,000 (approximately RMB 10,000,000) in accordance with U.S. GAAP. According to the milestones, 600,000 shares shall be issued to JMC shareholders before August 7, 2021 and the audited total sales or net profit of JMC in fiscal year June 30, 2021 shall respectively increase by 10% compared with that of fiscal year 2020; 400,000 shares shall be issued to JMC shareholders before August 7, 2022 and the audited total sales or net profit of JMC in fiscal year June 30, 2022 shall respectively increase by 10% compared with that of fiscal year June 30, 2021. If the milestones cannot be met, the Company will not issue the corresponding shares to JMC shareholders.

The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date, which represents the net purchase price allocation on the date of the acquisition of JMC based on valuation performed by an independent valuation firm engaged by the Company and translated the fair value from RMB to USD using the exchange rate on April 3, 2020 at the rate of USD 1.00 to RMB 7.09.

	Fair value
Cash and cash equivalents	$	852,145
Other current assets		9,924,263
Plant and equipment		11,648
Goodwill		5,166,271
Other noncurrent assets		481,062
Total assets		16,435,389
Total liabilities		(11,221,842)
Net assets of JMC		5,213,547
Less: fair value of non-controlling interest		(2,554,638)
Total consideration paid	$	2,658,909

Note 5 – Discontinued Operations

In February 2020, the Company discontinued its grocery stores business and in April 2021, the Company discontinued its farmers’ market and supermarket business as the businesses have been operating at losses. As a result, the results of operations for the Company’s farmers' market and supermarket and grocery stores business are reported as discontinued operations under the guidance of ASC 205.

F-24

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reconciliation of the carrying amounts of major classes of assets and liabilities from discontinued operations in the consolidated balance sheets as of June 30, 2021 and 2020 is as follow:  

Carrying amounts of major classes of assets included as part of discontinued operations of CQ Penglin, GA Yongpeng and CQ Pengmei:

o
	June 30, 2021		June 30, 2020
CURRENT ASSETS:
Cash and cash equivalents	$	62,422	$	464,196
Restricted cash		35,906		—
Accounts receivables, net		18,898,267		30,738,821
Other receivables, net		45,597		164,602
Prepayments		48,422		6,663,029
Security deposits		—		240,676
Total current assets of discontinued operations		19,090,614		38,271,324
OTHER ASSETS:
Other receivables		85,139		88,056
Plant and equipment, net		2,410,975		3,471,624
Intangible assets, net		313,478		437,989
Operating lease right-of-use assets		3,208,982		3,231,076
Total other assets of discontinued operations		6,018,574		7,228,745
Total assets of discontinued operations	$	25,109,188	$	45,500,069
Carrying amounts of major classes of liabilities included as part of discontinued operations of CQ Penglin, GA Yongpeng and CQ Pengmei:
CURRENT LIABILITIES:
Short-term loan – banks	$	—	$	3,450,566
Loans from third parties		7,928,114		4,987,252
Current maturities of long-term loan - bank		850,808		777,558
Accounts payable		2,517,290		1,847,440
Customer deposits		82,212		112,690
Customer deposit - related party		29,990		27,395
Other payables and accrued liabilities		3,356,319		1,948,515
Other payables – related parties		6,182		260
Operating lease liabilities		77,127		166,075
Taxes payable		2,978,428		2,942,851
Total current liabilities of discontinued operations		17,826,470		16,260,602
OTHER LIABILITIES:
Loans from third parties		1,959,053		2,074,871
Long-term loans – related parties		780,524		713,325
Operating lease liabilities - noncurrent		1,058,947		998,812
Total other liabilities of discontinued operations		3,798,524		3,787,008
Total liabilities of discontinued operations	$	21,624,994	$	20,047,610

F-25

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reconciliation of the amounts of major classes of income and losses from discontinued operations in the consolidated statements of operations and comprehensive loss for the years ended June 30, 2021, 2020 and 2019.

	For the Year Ended		For the Year Ended		For the Year Ended
	June 30,		June 30,		June 30,
	2021		2020		2019
REVENUES:
Supermarket and grocery store	$	1,777,222	$	7,402,284	$	7,322,243
Farmers' market		47,325,339		80,475,418		95,222,909
Total revenues		49,102,561		87,877,702		102,545,152
COST OF REVENUES:
Supermarket and grocery store		1,885,056		6,397,149		6,371,345
Farmers' market		46,519,672		76,192,444		87,172,588
Total cost of revenues		48,404,728		82,589,593		93,543,933
Gross profit		697,833		5,288,109		9,001,219
OPERATING EXPENSES:
Selling		672,323		1,168,788		1,255,340
General and administrative		785,133		1,352,350		956,162
Provision for doubtful accounts		31,786,029		1,072,120		743,986
Loss on disposal		7,551		276,648		—
Impairment of long-lived assets		1,026,023		724,987		—
Total operating expenses		34,277,059		4,594,893		2,955,488
(Loss) income from operations		(33,579,226)		693,216		6,045,731
OTHER INCOME (EXPENSES)
Interest income		362		612		433
Interest expense		(1,518,593)		(1,621,319)		(841,130)
Other finance expense		(21,233)		(58,292)		(137,999)
Other income, net		333,458		(47,510)		20,576
Total other expenses, net		(1,206,006)		(1,726,509)		(958,120)
(Loss) income before income taxes		(34,785,232)		(1,033,293)		5,087,611
Income tax expense		—		—		213,649
Net (loss) income from discontinued operations	$	(34,785,232)	$	(1,033,293)	$	4,873,962

Note 6 – Accounts receivable, net

Accounts receivable, net consist of the following:

	June 30, 2021		June 30, 2020
Accounts receivable	$	73,308,380	$	44,505,100
Allowance for doubtful accounts		(43,267,555)		(3,932,343)
Total accounts receivable, net	$	30,040,825	$	40,572,757
Less: accounts receivable - discontinued operations		(18,898,267)		(30,738,821)
Accounts receivable, net - continuing operations	$	11,142,558	$	9,833,936

F-26

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Movements of allowance for doubtful accounts are as follows:

	June 30, 2021		June 30, 2020
Beginning balance	$	3,932,343	$	2,304,817
Balance inherited from JMC		—		930,657
Addition		38,100,340		769,764
Write off		0		0
Exchange rate effect		1,234,872		(72,895)
Ending balance	$	43,267,555	$	3,932,343
Less: discontinued operations		(8,227,240)		(2,342,585)
Ending balance - continuing operations	$	35,040,315	$	1,589,758

Note 7 – Plant and equipment, net

Plant and equipment consist of the following:

	June 30, 2021		June 30, 2020
Buildings	$	2,603,775	$	3,393,212
Automobile		181,231		165,628
Electronic devices		3,011,942		3,691,929
Office equipment		46,607		42,595
Construction-in-progress		—		495,634
Subtotal		5,843,555		7,788,998
Less: accumulated depreciation		(3,428,185)		(4,307,253)
Total	$	2,415,370	$	3,481,745
Less: plant and equipment, net - discontinued operations		(2,410,975)		(3,471,624)
Plant and equipment, net - continuing operations	$	4,395	$	10,121

Depreciation expense from continuing operations for the years ended June 30, 2021, 2020 and 2019 amounted to $6,514, $1,579 and $0, respectively. Depreciation expense from discontinued operations for the years ended June 30, 2021, 2020 and 2019 amounted to $478,610, $620,240 and $679,093, respectively. Loss on disposal and impairment of long-lived assets from discontinued operations for the years ended June 30, 2021, 2020 and 2019 was $882,176, $1,001,635 and $0, respectively.

As of June 30, 2021, property valued at RMB 12,268,800 (approximately $1.9 million) was pledged as collateral to secure a loan that a related party borrowed from a bank, and property valued at RMB 36,626,600 (approximately $5.7 million) was pledged as collateral to secure a short-term bank loan (see Note 10).

Note 8 – Intangible assets, net

Intangible assets consist of the following:

	June 30, 2021		June 30, 2020
Land use rights	$	409,775	$	586,795
Less: accumulated amortization		(96,297)		(148,806)
Net intangible assets	$	313,478	$	437,989
Less: intangible assets, net - discontinued operations		(313,478)		(437,989)
Intangible assets, net - continuing operations	$	—	$	—

Amortization expense from discontinued operations for the years ended June 30, 2021, 2020 and 2019 amounted to $10,257, $11,792 and $12,147, respectively. Loss on disposal and impairment of long-lived assets from discontinued

F-27

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

operations for the years ended June 30, 2021, 2020 and 2019 was $151,398, $0 and $0, respectively. As of June 30, 2021, GA Yongpeng’s land use right valued at RMB 10,198,100 (approximately $1.6 million) was pledged as collateral to secure a loan that a related party borrowed from a bank (see Note 9).

The estimated amortization is as follows:

	Estimated
Twelve months ending June 30,	amortization expense
2022	$	7,992
2023		7,992
2024		7,992
2025		7,992
2026		7,992
Thereafter		273,518
Total	$	313,478
Less: estimated amortization - discontinued operations		(313,478)
Estimated amortization - continuing operations		—

Note 9 – Related party transactions and balances

Related party transactions

a. Revenues – related party:

		For the Year		For the Year		For the Year
		Ended June 30,		Ended June 30,		Ended June 30,
Name of related party	Relationship	2021		2020		2019
Chongqing Puyuhong Commerce Co., Ltd. ("CQ Puyuhong")	Significantly influenced by JMC	$	4,008,969	$	—	$	—
Less: revenues - related party - discontinued operations			—		—		—
Total revenues - related party - continuing operations		$	4,008,969	$	—	$	—

Related party balances

b.    Customer deposits – related parties:

Name of related party	Relationship	June 30, 2021		June 30, 2020
CQ Mingwen	Significantly influenced by Penglin	$	29,990	$	27,395
CQ Puyuhong	Significantly influenced by JMC		5,958		—
Total			35,948		27,395
Less: customer deposit - related party - discontinued operations			(29,990)		(27,395)
Total customer deposit - related party - continuing operations			5,958		—

b.    Other payables – related parties:

Other payables – related parties are those nontrade payables arising from transactions between the Company and certain related parties, such as advances made by the related party on behalf of the Company, and related accrued interest payable

F-28

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

on the advances. These advances are unsecured and non-interest bearing, except payables to Jiaping Zhou and Jun Zhou with an annual interest rate of 4.35%. Current payables are due on demand.

Name of related party	Name of related party	June 30, 2021		June 30, 2020
Xia Wang	Chief Financial Officer	$	209,275	$	153,659
Zeshu Dai	CEO		1,543,221		0
Penglin Wang	Son of the CEO		0		248
Zili Zhang	CEO of CQ Pengmei		0		12
Jiaping Zhou	Shareholder of JMC		0		231,268
Jun Zhou	Shareholder of JMC		1,483,634		1,879,639
Total			3,236,130		2,264,826
Less: other payables - related parties - discontinued operations			(6,182)		(260)
Total other payables - related parties - continuing operations		$	3,229,948	$	2,264,566

c.    Long-term loans – related parties:

Long-term loans – related parties are those long-term loans from advances made by certain related parties for the daily operations needs of the Company. These loans are unsecured and interest bearing.

			Weighted
			average		Collateral/
Long-term loans	Relationship	Maturities	interest rate		Guarantee	June 30, 2021		June 30, 2020
Xia Wang	CFO	January 15, 2022	9.60	%	None	$	111,503	$	101,904
Penglin Wang	Son of CEO	December 11, 2024	9.60	%	None		250,883		229,283
Yong Wang	Son of CEO	July 17, 2022	7.13	%	None		294,245		268,912
Zeshu Dai	CEO	March 8, 2022	7.13	%	None		123,893		113,226
Total						$	780,524	$	713,325
Less: long-term loans from related parties - discontinued operations							(780,524)		(713,325)
Total long-term loans from related parties - continuing operations							—		0

Interest expense incurred on the above mentioned related party loans for discontinued operations amounted to $62,635, $51,770 and $11,403 for the years ended June 30, 2021, 2020 and 2019, respectively.

d.     Guarantee provided to related party loan

On December 26, 2017, CQ Mingwen (the “borrower”) entered into a loan agreement with SPD Rural Bank (the lender) to borrow RMB 9 million (approximately $1.4 million) as working capital for one year. The loan was repaid RMB 1 million (approximately $0.1 million) and the remaining balance RMB 8 million (approximately $1.2 million) was extend

F-29

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to December 22, 2021. GA Yongpeng pledged its land-use right valued at RMB 10,198,100 (approximately $1.6 million) and building property valued at RMB 12,268,800 (approximately $1.9 million) as collateral (see Note 8 and 9 and 15).

e.    Loans guaranteed by related parties

The Company has various short-term loans guaranteed by its related parties. See Note 10.

Note 10 – Credit Facilities

Short term loans – banks

Outstanding balances on short-term bank loans consisted of the following:

		Weighted
		average
Lenders	Maturities	interest rate		Collateral/Guarantee	June 30, 2021		June 30, 2020
Shanghai Pudong Development ("SPD") Bank Chongqing Nanbing Road Branch	Fully repaid by October 2020	6.09	%	A security deposit of $109,221 and guaranteed by the CEO and certain members of the family and affiliate	$	—	$	1,273,794
Chongqing Rural Commercial Bank	November 25, 2020	6.74	%	Guaranteed by the CEO and certain members of the family and affiliate and Chongqing Reassurance Co., Inc.		—		1,839,928
Chongqing Beibei Chouzhou Bank Co., Ltd. (Chouzhou Bank)	March 20, 2020	6.96	%	Guaranteed by GA Yongpeng's properties recorded at RMB 36,626,600 (approximately $5.2 million) and Zeshu Dai's 6.25% of stock right of GA Yongpeng recorded at RMB 1,250,000 (approximately $0.2 million)		—		336,845
The Agriculture Bank of China Chongqing Yubei Branch	June 27, 2021	3.85	%	Guaranteed by the properties of JMC's CEO and CFO recorded at RMB 5,517,400 (approximately $0.8 million)		—		467,058
China Zheshang Bank Chongqing Branch	May 5, 2021	5.35	%	Guaranteed by the properties of JMC's CEO and CFO recorded at RMB 12,090,000 (approximately $1.7 million)		—		778,430
Industrial and Commercial Bank of China Shiqiaopu Branch	March 11, 2022	3.85	%	Guaranteed by the properties of JMC's CEO and CFO recorded at RMB 7,495,600 (approximately $1.2 million)		782,073		0
Total					$	782,073	$	4,696,055
Less: short term loans - banks - discontinued operations						—		(3,450,566)
Short term loans - banks - continuing operations					$	782,073	$	1,245,489

F-30

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loans from third parties

Outstanding balances of third-party loans consisted of the following:

		Weighted
		average
Lenders	Maturities	interest rate		Collateral/Guarantee	June 30, 2021		June 30, 2020
Sichuan Toucu Financial Information Services Co., Ltd	—	9.0	%	None	$	0	$	63,554
Chongqing Puluosi Small Mortgage Co., Ltd.	Various amounts due between November 2018 and January 2019 – in default*	12.0	%	Guaranteed by the CEO and certain members of the family and affiliate		4,572,421		4,183,248
Gang Hu	September 4, 2022	7.13	%	None		131,636		120,303
Chongqing Reassurance Co., Ltd.	Due upon request	17.4	%	None		2,177,176		273,294
Mei Yang	—	24.0	%	None		0		7,077
Ping Wang	September 17, 2021 (Subsequently extended to September 17, 2022)	10.8	%	None		47,234		43,875
Yixuan Liu	September 11, 2022	12.0	%	None		92,920		84,920
Shuming Yang	September 20, 2022	12.0	%	None		185,839		169,839
Chunlan Zhuo	March 22, 2021 (Subsequently extended to March 22, 2022)	18.0	%	None		36,094		63,911
Qin Cao	June 30, 2021 (Subsequently extended to June 30, 2022)	24.0	%	None		5,380		30,005
Maohua Xia	June 30, 2021 (Subsequently extended to June 30, 2022)	24.0	%	None		5,749		33,561
Shiguo Zhang	March 3, 2022	18.0	%	None		340,705		0
Chongqing Shouqing Trading Co., Ltd.	September 7, 2021 (Subsequently extended to September 7, 2022)	12.0	%	None		418,138		382,139
Shengli Huang	April 23, 2022	24.0	%	None		0		99,073
Xiaofen Ai	June 17, 2021	24.0	%	None		0		28,307
Chongqing Haobangshou Ecommerce Co., Ltd.	March 24, 2023	6.0	%	None		1,548,659		1,415,328
Shiwen Zhang	September 2, 2021 (Subsequently extended to September 2, 2022)	24.0	%	None		108,406		0
Xiaomei Qin	September 7, 2021 (Subsequently extended to September 7, 2022)	18.0	%	None		30,973		0
Shengmeng Zhang	Various amounts due between October 2021 and December 2021 (Fully repaid in July 2021)	12.0	%	None		46,460		0
Qin Zhou	February 28, 2022	18.0	%	None		123,893		0
Mei Zhang	—	24.0	%	None		0		49,536
Feng Zhou	February 28, 2022	12.0	%	None		15,487		14,153
Xiaolin Cao	November 30, 2020 (Fully repaid by issuance of 500,000 ordinary shares in April 2021)	—	%	None		0		500,000
Total loans from third parties					$	9,887,170	$	7,562,123
Total non-current loans from third parties						(2,424,426)		(2,074,871)
Total current loans from third parties					$	7,462,744	$	5,487,252
Less: current loans from third parties - discontinued operations						(7,462,744)		(4,987,252)
Current loans from third parties - continuing operations					$	0	$	500,000

*The Company received 3 complaints related to an approximately $1.5 million (RMB 10,000,000) loan that was due on November 13, 2018, an approximately $0.5 million (RMB 3,000,000) loan due on December 21, 2018, and an approximately $3.1 million (RMB 20,000,000) loan due on January 2, 2019. The following amounts have been accrued in the accompanying consolidated financial statements under discontinued operations for the years ended June 30, 2021 and 2020: interest at a default interest rate of 18% totaling approximately $721,000 and $781,000, respectively. As of the date

F-31

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of this report, the Company has paid approximately $0.5 million (RMB 3,411,544) of the total repayment. On October 27, 2020, Chongqing Yubei District People’s Court froze CQ Penglin bank accounts with a total balance of approximately $20,000 (RMB 130,295). As of the date of this report, the accounts are still frozen.

Long term and short-term loans – related parties

See Note 9.

Long-term loan - bank

The outstanding balance of long term bank loan consisted of the following:

		Weighted
		average
Lender	Maturity	interest rate		Collateral/Guarantee	June 30, 2021		June 30, 2020
Chongqing Dadukou Rongxing Village & Township Bank	September 20, 2020 (Subsequently in default*)	12.0	%	Guaranteed by CQ Penglin, CQ Pengmei, GA Yongpeng, CQ Mingwen, the CEO and certain members of the family	$	850,808	$	777,558
Less: long term loan - bank - discontinued operations						(850,808)		(777,558)
Long term loan - bank - continuing operations					$	—	$	—

*On August 12, 2020, Chongqing Dadukou Rongxing Village & Township Bank (“Dadukou Rongxing”) sued CQ Penglin to repay the loan of Dadukou Rongxing approximately $1.0 million (RMB 6,629,447), which consists of principal of approximately $0.8 million (RMB 5,493,839) and approximately $0.2 million (RMB 1,135,608), in the Chongqing Dadukou District People’s Court.   CQ Penglin, CQ Pengmei, GA Yongpeng, CQ Mingwen, the CEO and certain members of the family guaranteed the loan shall bear joint and several lability for the repayment.  As of the date of this report, the Chongqing Dadukou District People’s Court has not held a trial.

Interest expense for continuing operations pertaining to the above loans for the years ended June 30, 2021, 2020 and 2019 amounted to $291,541, $167,097 and $0, respectively. Interest expense for discontinued operations pertaining to the above loans for the years ended June 30, 2021, 2020 and 2019 amounted to $1,518,593 ($62,635 was for interest expense of loans – related parties), $1,609,544 ($11,403 was for interest expense of loans – related parties) and $823,551, respectively.

Note 11 – Taxes

Income tax

Cayman Islands

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, 0 Cayman Islands withholding tax will be imposed.

F-32

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

British Virgin Islands

Xiangtai BVI and Silanchi are incorporated in the British Virgin Islands and are not subject to tax on income or capital gains under the current British Virgin Islands law. In addition, upon payments of dividends by these entities to their shareholders, 0 British Virgin Islands withholding tax will be imposed.

Hong Kong

Xiangtai HK and Haochuangge are incorporated in Hong Kong and are subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax law, Xiangtai HK and Haochuangge are exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.

PRC

Xiangtai WFOE, CQ Penglin, GA Yongpeng, CQ Pengmei and JMC are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), Chinese enterprises are subject to income tax at a rate of 25% after appropriate tax adjustments.

Income tax exemption status granted

On August 20, 2018, the Lingshui County Tax Bureau enacted a tax exemption for Lingshui Guang’an Yongpeng Food Co., Ltd. (wholly owned subsidiary) which expires on December 31, 2020. In addition, the benefit can also be retroactively applied to prior periods from January 1, 2014 to June 30, 2017. The tax savings of discontinued operations for the years ended June 30, 2021, 2020 and 2019 was $0, $334,794 and $1,389,566, respectively. The Company’s basic and diluted earnings per shares of discontinued operations would have been lower by $0, $0.01 and $0.07 per share for the years ended June 30, 2021, 2020 and 2019 without the preferential tax rate reduction.

Significant components of the (benefit of) provision for income taxes are as follows:

	For the year		For the year		For the year
	ended		ended		ended
	June 30, 2021		June 30, 2020		June 30, 2019
Current	$	0	$	389,845	$	213,649
Deferred tax expense		(1,002,346)		(166,672)		—
Total (benefit of) provision for income taxes	$	(1,002,346)	$	223,173	$	213,649
Less: provision for income taxes - discontinued operations		0		—		(213,649)
Total (benefit of) provision for income taxes - continuing operations	$	(1,002,346)	$	223,173	$	—

F-33

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles China statutory rates to the Company’s effective tax rate:

	June 30, 2021		June 30, 2020		June 30, 2019
China income tax rate	25.0	%	25.0	%	25.0	%
Change in valuation allowance	0	%	0	%	1.0	%
Income tax exemption status granted	0	%	(10.2)	%	(21.9)	%
Others*	(17.5)	%	(24.2)	%	0	%
Effective tax rate	7.5	%	(9.4)	%	4.1	%

* This represents the expenses incurred by the Company that are not deductible for PRC income tax purposes during the years.

Deferred tax assets – China

Deferred tax assets are comprised of allowance for doubtful accounts at June 30, 2021 and 2020 totaling $2,331,145 and $648,768, respectively.

NOL carried forward

According to Chinese tax regulations, net operating losses can be carried forward to offset taxable income for the next five years. On August 20, 2018, GA Yongpeng obtained the tax-free benefit and the Company utilized the tax planning strategy to allocate intercompany profit into GA Yongpeng. As a result, for the years ended June 30, 2021, 2020 and 2019, there was 0 tax effect in relation to the NOL that the Company has previously reserved.

Bad debt allowance

Bad debt allowance must be approved by the Chinese tax authority prior to being deducted as an expense item on the tax return.

Uncertain tax positions

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure the unrecognized benefits associated with the tax positions. As of June 30, 2021 and 2020, the Company did not have any significant unrecognized uncertain tax positions.

Value-added tax

All of the Company’s service revenues that are earned and received in the PRC are subject to a Chinese VAT at a rate of 6% of the gross proceed or at a rate approved by the Chinese local government.

All of the Company’s products that are sold in the PRC are subject to a Chinese value-added tax at a rate of 0%, 11%, 13% or 17% of the gross sales price depending on how much processing was added by the Company to each kind of products or at a rate approved by the Chinese local government. This VAT may be offset by the VAT paid by the Company on raw materials and other materials included in the cost of producing the finished product.

F-34

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Taxes payable consisted of the following:

	June 30, 2021		June 30, 2020
Income taxes	$	4,001,634	$	3,114,811
Other taxes		11,215		227,316
Total	$	4,012,849	$	3,342,127
Less: taxes payable - discontinued operations		(2,978,428)		(2,942,851)
Taxes payable - continuing operations	$	1,034,421	$	399,276

Note 12 – Concentration of risk

Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. In China, the insurance coverage of each bank is RMB 500,000 (approximately$77,000). As of June 30, 2021 and 2020, cash balance of $102,184 and $1,366,796, respectively, were deposited with financial institutions located in China, of which $0 and $968,840, respectively, were subject to credit risk. The Hong Kong Deposit Protection Board pays compensation up to a limit of HKD 500,000 (approximately $64,000) if the bank with which an individual/a company hold its eligible deposit fails. As of June 30, 2021 and 2020, cash balance of $189 and $5,254, respectively, were maintained at financial institutions in Hong Kong, and were not subject to credit risk. In the US, the insurance coverage of each bank is $250,000. As of June 30, 2021 and 2020, cash balance of $2,957 and $163,640, respectively, were deposited with financial institutions located in US and were not subject to credit risk. While management believes that these financial institutions and third-party fund holders are of high credit quality, it also continually monitors their creditworthiness.

The Company is also exposed to risk from its accounts receivable, other receivables and prepayments. These assets are subjected to credit evaluations. An allowance has been made for estimated unrecoverable amounts which have been determined by reference to past default experience and the current economic environment.

As of June 30, 2021, the Company had working deficit of approximately $6.2 million. The Company had accounts receivable of approximately $11.1 million, most of them are short-term in nature and can be collected back within the Company's operating cycle to be used to support its working capital requirements. The Company believes the components of its current working capital is sufficient to support its operations for the next twelve months from the date of this report. If the Company is unable to realize its current assets within the normal operating cycle of a twelve-month period, the Company may have to consider supplementing its available sources of funds through obtaining additional loans.

Customer concentration risk

For the year ended June 30, 2021, 0 customer accounted for more than 10% of the Company’s total revenues. For the year ended June 30, 2020, 1 customer accounted for 18.7% of the Company’s total revenues. For the year ended June 30, 2019, the Company did not start the feed raw material business.

As of June 30, 2021, 0 customer accounted for more than 10% of the total balance of accounts receivable. As of June 30, 2020, 1 customer accounted for 10.0% of the total balance of accounts receivable.

Vendor concentration risk

For the year ended June 30, 2021, 1 vendor accounted for 72.7% of the Company’s total purchases. For the year ended June 30, 2020, 2 vendors accounted for 75.6% and 11.5% of the Company's total purchases. For the year ended June 30, 2019, the Company did not start the feed raw material business.

As of June 30, 2021, 3 vendors accounted for 39.8%, 30.1% and 11.5% of the total balance of accounts payable. As of June 30, 2020, 4 vendors accounted for 39.6%, 26.5%, 17.8% and 13.7% of the total balance of accounts payable.

F-35

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13 – Convertible Debentures

Convertible Debenture issued on November 22, 2019, December 30, 2019 and March 9, 2020

On November 22, 2019, the Company entered into a securities purchase agreement with an accredited investor to place convertible debentures (“Debenture”) with a maturity date of twelve months after the issuance thereof in the aggregate principal amount of $5,000,000. The First Convertible Debenture was issued on November 22, 2019 in the amount of $2,000,000; the Second Convertible Debenture was issued on December 30, 2019 in the amount of $2,000,000; and the Third Convertible Debenture was issued on March 9, 2020 in the amount of $1,000,000. The three 2019 Convertible Debentures bear interest at the rate of 5% per annum.

The Debenture holder may convert a Debenture in its sole discretion at any time on or prior to maturity at the lower of $5.06 or 93% of the average of the four lowest daily VWAPs during the 10 consecutive trading days immediately preceding the conversion date, provided that as long as we are not in default under the Debenture, the conversion price may never be less than $3.00.  Any time after the issuance of a Debenture that the daily VWAP is less than $3.00 for a period of 10 consecutive trading days (each such occurrence, a “Triggering Event”) and only for so long as such conditions exist after a Triggering Event, the Company shall make monthly payments beginning on the 30^th day after the date of the Triggering Event. Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the date of the Triggering Event divided by the number of such monthly payments until maturity, (ii) a redemption premium of 10% during the six month after the issuance of a Debenture of 20% thereafter in respect of such principal amount and (iii) accrued and unpaid interest hereunder as of each payment date. The Company may, no more than twice, obtain a thirty-day deferral of a monthly payment due as a result of a Triggering Event through the payment of a deferral fee in the amount equal to 10% of the total amount of such monthly payment. Each deferral payment may be paid by the issuance of such number of shares as is equal to (i) if such shares issued will be immediately freely tradable shares in the hands of the holder, 100% of the average of the daily VWAPs during the 10 consecutive trading days immediately preceding the due date in respect of such deferred monthly payment, and (ii) if such shares issued will be restricted securities, 93% of the average of the 4 lowest daily VWAPS during the 10 consecutive Trading Days immediately preceding the due date.

On June 19, 2020, the Company entered in an amendment agreement with the Debenture holder to amend the “Floor Price” of the First Convertible Debenture issued on November 22, 2019 to $1.00 per share and the “Floor Price” of the convertible debenture issued on December 30, 2019 to $1.00 per share for the first $200,000 of principal and accrued interest to be converted. The “Floor Price” for the remaining principal and accrued interest on that debenture shall remained unchanged at $3.00 per share.  On September 15, 2020, the Company entered in an amendment agreement with the Debenture holder to amend the “Floor Price” of the Second Convertible Debenture to $1.00 per share for the first $1,400,000 of principal and accrued interest to be converted. The “Floor Price” for the remaining principal and accrued interest on the Second Convertible Debenture and the Third Convertible Debenture shall remain unchanged at $3.00 per share. On November 13, 2020, the Company entered in an amendment agreement with the Debenture Holder to amend the “Floor Price” of the remaining $600,000 of principal and accrued interest to be converted in the Second Convertible Debenture to $1.00 per share and to amend the “Floor Price” of the Third Convertible Debenture to $1.00 per share for the first $200,000 of principal plus accrued interest to be converted. The “Floor Price” for the remaining principal and accrued interest on the Third Convertible Debenture shall remain unchanged at $3.00 per share. On January 22, 2021, the Company entered in an amendment agreement with the Debenture Holder to amend the “Floor Price” of the Third Convertible Debenture to $0.80 per share for the next $400,000 of principal plus accrued interest to be converted. The “Floor Price” for the remaining principal and accrued interest on the Third Convertible Debenture shall remain unchanged at $3.00 per share.

The Company determined that conversion option embedded in the Debenture is considered indexed to the Company’s own stock and did not required to be separately accounted for as a derivative under the guidance in ASC 815.   However, the Debenture are convertible into shares of the common stock, at conversion price equal to 93% of the average of four lowest trading price during the 10 trading day period prior to the date of any notice of conversion, which is lower than the price of the Company’s common stock on the date of issue for the first two batches of the principal amount of $4,000,000 of the Debenture on November 22, 2019 and December 30, 2019. Therefore, the conversion feature embedded in the convertible note meet the definition of beneficial conversion feature (“BCF”). The Company evaluated the intrinsic value of the BCF at the issue date to be at $259,540. The relative fair values of the BCF were recorded into additional paid in capital as well

F-36

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

as were recognized as a discount to the Debenture. The discount to the Debenture is being amortized to interest expense over the life of the Debenture using effective interest method.

The price of the Company’s common stock on the date of issue on March 9, 2020 was $2.33 for the remaining principal amount of $1,000,000 of the Debenture, which is lower than the conversion floor price of $3.00 and it does not contain a BCF on the issuance date.  As a result, the $1,000,000 conversion option embedded in the Debenture are entirety accounted for a liability with the Debenture.

During the period from May 21, 2020 to August 13, 2020, the Company issued a total of 1,847,167 ordinary shares to the holder of the First Convertible Debenture upon the conversion of a total of $2,062,191 in principal due and accrued and unpaid interest under the Convertible Debenture. During the period from August 17, 2020 to December 31, 2020, the Company issued a total of 2,063,971 ordinary shares to the holder of the Second Convertible Debenture upon the conversion of a total of $2,084,904 in principal due and accrued and unpaid interest under the Convertible Debenture. During the period from January 11, 2021 to March 11, 2021, the Company issued a total of 1,125,182 ordinary shares to the holder of the Third Convertible Debenture upon the conversion of a total of $1,046,328 in principal due and accrued and unpaid interest under the Convertible Debenture. As a result, the First, Second and Third Convertible Debentures have retired.

Convertible Debenture issued on June 19, 2020, July 17, 2020, August 14, 2020, and November 13, 2020

On June 19, 2020, the Company entered into another securities purchase agreement with the same accredited investor to place convertible debentures with a maturity date of twelve months after the issuance thereof in the aggregate principal amount of $2,000,000. The Fourth Convertible Debenture in the amount of $700,000 was issued on June 19, 2020; the Fifth Convertible Debenture in the amount of $700,000 was issued on July 17, 2020; the Six Convertible Debenture in an amount of $300,000 was issued on August 14, 2020; and the Seventh Convertible Debenture in an amount of $300,000 was issued on November 13, 2020. The four 2020 Convertible Debentures bear interest at the rate of 5% per annum.

The Debenture holder may convert a Debenture in its sole discretion at any time on or prior to maturity at the lower of $3.00 or 93% of the average of the 4 lowest daily VWAPs during the 10 consecutive trading days immediately preceding the conversion date, provided that as long as we are not in default under the Debenture, the conversion price may never be less than $2.50.  The Company may not convert any portion of a Debenture if such conversion would result in the Debenture holder beneficially owning more than 4.99% of our then issued and common stock, provided that such limitation may be waived by the Debenture holder with 65 days’ notice.  Any time after 180 days from the date of issuance that the daily VWAP is less than $2.50 for a period of 10 consecutive trading days (each such occurrence, a “Triggering Event”) and only for so long as such conditions exist after a Triggering Event, we shall make monthly payments beginning on the 30^th day after the date of the Triggering Event. Each monthly payment shall be in an amount equal to the sum of (i) the principal amount outstanding as of the date of the Triggering Event divided by the number of such monthly payments until maturity, (ii) a redemption premium of 10% during the six month after the signing of the Agreement or 20% thereafter in respect of such principal amount and (iii) accrued and unpaid interest hereunder as of each payment date. The Company may, no more than twice, obtain a thirty-day deferral of a monthly payment due as a result of a Triggering Event through the payment of a deferral fee in the amount equal to 10% of the total amount of such monthly payment. Each deferral payment may be paid either (i) in cash or (ii) if the conversion price on the date of the payment is above $2.50 and such shares issued will be immediately freely tradable shares in the hands of the Debenture holder, by the issuance of such number of shares as is equal to the applicable deferral payment divided by a price per share equal to the conversion price.

On April 14, 2021, the Company entered in an amendment agreement with the Debenture Holder to amend the “Floor Price” of the Fourth Convertible Debenture to $0.80 per share. During the period from April 26, 2021 to April 28, 2021, the Company issued a total of 912,532 ordinary shares to the holder of the Fourth Convertible Debenture upon the conversion of a total of $730,027 in principal due and accrued and unpaid interest under the Convertible Debenture. As a result, the Fourth Convertible Debenture has retired.

The price of the Company’s common stock on the date of issue on June 19, 2020 was $1.70 for the principal amount of $700,000 of the first Debenture, which is lower than the conversion floor price of $2.50 and it does not contain a BCF on

F-37

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the issuance date.  As a result, the $700,000 conversion option embedded in the Debenture are entirety accounted for a liability with the Debenture.

	June 30, 2021		June 30, 2020
Principal balance	$	1,300,000	$	4,900,000
Less: Debentures discount and debts insurance cost		—		(131,688)
Total	$	1,300,000	$	4,768,312

The Company incurred issuance cost of $230,000 and had a BCF value of $259,540 in connection with the issuance of the Debentures.  The Company recognized the issuance cost and the BCF value as a discount to the Debentures at the inception date.  For the years ended June 30, 2021 and 2020, amortization of the issuance cost and Debentures discount of $131,688 and $357,853, respectively. These issuance costs and Debenture discount are being amortized and recorded to interest expense in the accompanying consolidated statements of income and comprehensive income (loss) over the life of the Debentures using effective interest method.

Note 14 – Equity

Restricted net assets

The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiary. Relevant PRC statutory laws and regulations permit payments of dividends by Xiangtai WFOE, CQ Penglin, GA Yongpeng, CQ Pengmei and JMC only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.

Xiangtai WFOE, CQ Penglin, GA Yongpeng, CQ Pengmei and JMC are required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, Xiangtai WFOE may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at its discretion. CQ Penglin, GA Yongpeng, CQ Pengmei and JMC may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. The remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by the State Administration of Foreign Exchange.

As of June 30, 2021 and 2020, Xiangtai WFOE, CQ Penglin, GA Yongpeng, CQ Pengmei and JMC collectively attributed $1,670,367 and $1,670,367 of retained earnings for their statutory reserves, respectively.

As a result of the foregoing restrictions, Xiangtai WFOE, CQ Penglin, GA Yongpeng, CQ Pengmei and JMC are restricted in their ability to transfer their net assets to the Company. Foreign exchange and other regulation in the PRC may further restrict Xiangtai WFOE, CQ Penglin, GA Yongpeng, CQ Pengmei and JMC from transferring funds to the Company in the form of dividends, loans and advances. As of June 30, 2021 and 2020, amounts restricted are the net assets of Xiangtai WFOE, CQ Penglin, GA Yongpeng, CQ Pengmei and JMC, which amounted to $(19,082,218) and $17,978,793, respectively.

Private placements

On July 27, 2020, the Company entered into certain securities purchase agreement (the “SPA”) with certain “non-U.S. Persons” as defined in Regulation S of the Securities Act of 1933, as amended pursuant to which the Company agreed to sell 2,339,000 ordinary shares at a per share purchase price of $1.50. The gross proceeds to the Company from this offering will be approximately $3.5 million. The Company plans to use the proceeds for working capital. The offering was closed on August 20, 2020.

On December 17, 2020, the Company entered into certain securities purchase agreement (the “SPA”) with certain “non-U.S. Persons” as defined in Regulation S of the Securities Act of 1933, as amended pursuant to which the Company agreed to sell 5,580,000 ordinary shares at a per share purchase price of $0.80. The Company received $4,464,000 in gross

F-38

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

proceeds from this offering. The Company plans to use the proceeds for working capital and other general corporate purposes. The Company may also use the proceeds to acquire certain business or assets that the Board of Directors may deem appropriate for the growth of the Company. The offering was closed on May 7, 2021.

Issuance of ordinary shares for compensation

On July 1, 2020, the Company entered into a three-year employment agreement (the “Employment Agreement”) with Ms. Xia Wang, the CFO of the Company, pursuant to which the Company agreed to issue 200,000 ordinary shares of the Company per annum as Ms. Wang’s compensation during her employment with the Company. The compensation arrangement was subsequently approved by the Compensation Committee of the Company. On September 24, 2020, pursuant to the Employment Agreement, the Company issued the 200,000 ordinary shares to Ms. Wang for her services as CFO for the fiscal year ended June 30, 2021. The shares were valued at $1.35 per share using the closing price on July 1, 2020 with total consideration of $270,000.

On May 4, 2021, the Company entered into a debt settlement and mutual release agreement with Mr. Xiaohui Wu, the President of the Company. As of the date of the Agreement, the Company was indebted to Mr. Wu accrued but unpaid salary in the amount of $240,000 (the “Debt”). In order to settle the Debt, the Company agreed to issue, and Mr. Wu agreed to accept 300,000 ordinary shares (the “Shares”) of the Company, valued at $0.80 per share. On May 18, 2021, pursuant to the Agreement, the Company issued the Shares to Mr. Wu.

Conversion of debenture and debts

As of June 30, 2020, the Debenture holder converted principal and interest value of $800,000 and $57,165, respectively, into a total of 827,057 of the Company’s ordinary shares at weighted average conversion price of $1.04.

During the year ended June 30, 2021, the Debenture holder converted principal and interest value of $4,900,000 and $166,288, respectively, into a total of 5,121,795 of the Company’s ordinary shares at weighted average conversion price of $0.99.

During the year ended June 30, 2021, the $500,000 short-term third-party loan due to Xiaolin Cao was settled and converted into 500,000 shares of the Company’s ordinary shares at a conversion price of $0.83, resulting in $80,000 gain on debt settlement. During the year ended June 30, 2021, the $127,000 outstanding legal fees due to Ortoli Rosenstadt LLP was settled and converted into 127,000 shares of the Company’s ordinary shares at a conversion price of $0.76, resulting in $31,115 gain on debt settlement. During the year ended June 30, 2021, the $240,000 accrued expenses due to Xiaohui Wu was settled and converted into 300,000 shares of the Company’s ordinary shares at a conversion price of $0.74, resulting in $14,100 gain on debt settlement.

Stock options

In August 2019, the Company issued a total of 95,000 options to 2 directors of the Company and vested in 4 equal installment on a quarterly basis with an exercise price of $5.00 for three years from date of issuance after the Company’s listing on the Nasdaq Stock Market on August 15, 2019. The Company used the Black Scholes model to value the options at the time they were issued, based on the stated exercise prices of $5.0, market price of $4.6, volatility of 118%, risk-free rate of 1.44% and dividend yield of 0%. Because the Company does not have a history of employee stock options, the estimated life is based on one half of the sum of the vesting period and the contractual life of the option. This is the same as assuming that the options are exercised at the mid-point between the vesting date and expiration date.  The Company’s ordinary share did not have a history of trading history to determine its own volatility. As a result, the Company used the volatility of a comparable company with similar size and similar industry as the assumption of its estimated volatility.  Total fair value of these options were estimated to be $243,922 and the compensation expenses are to be recognized on a straight-line basis over the total service period of one year. Total compensation expenses for the years ended June 30, 2021 and 2020 was $30,490 and $213,431, respectively.

F-39

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The summary of stock option activity is as follows:

			Weighted		Average
			Average		Remaining	Aggregate
	Options	Exercisable	Exercise		Contractual	Intrinsic
	Outstanding	Option	Price		Life	Value
June 30, 2019	—	—	$	—	—	—
Granted/Acquired	95,000	71,250	$	5.00	3.00	—
Forfeited	—	—	$	—	—	—
Exercised	—	—	$	—	—	—
June 30, 2020	95,000	71,250	$	5.00	2.12	—
Granted/Acquired	—	—	$	—	—	—
Forfeited	—	—	$	—	—	—
Exercised	—	—	$	—	—	—
June 30, 2021	95,000	71,250	$	5.00	1.12	—

Warrants

The summary of warrant activity is as follows:

			Weighted		Average
			Average		Remaining
	Warrants	Exercisable	Exercise		Contractual
	Outstanding	Shares	Price		Life
June 30, 2018	0	0	$	0	—
Granted/Acquired	86,732	86,732	$	4.89	5.00
Forfeited	0	0	$	0	—
Exercised	0	0	$	0	—
June 30, 2019	86,732	86,732	$	4.89	4.89
Granted/Acquired	0	0	$	0	—
Forfeited	0	0	$	0	—
Exercised	0	0	$	0	—
June 30, 2020	86,732	86,732	$	4.89	3.88
Forfeited	0	0	$	0	—
Exercised	0	0	$	0	—
June 30, 2021	86,732	86,732	$	4.89	2.86

Note 15 – Commitments and contingencies

Lease commitments

The Company determines if a contract contains a lease at inception. US GAAP requires that the Company’s leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option which result in an economic penalty. All of the Company’s real estate leases are classified as operating leases.

The Company has entered into 7 non-cancellable operating lease agreements for two office spaces, two dormitories, one storage and three market spaces for the grocery stores expiring through February 2030. Upon adoption of FASB ASU 2016-02, the Company recognized approximately $1.3 million right of use (“ROU”) assets and same amount of lease liabilities based on the present value of the future minimum rental payments of leases, using incremental borrowing rate

F-40

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of 6.09% based on duration of lease terms. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The leases generally do not contain options to extend at the time of expiration.

Operating lease expenses are allocated between the cost of revenue and selling, general, and administrative expenses. Rent expense (including amounts in cost of goods sold) for discontinued operations for the years ended June 30, 2021, 2020 and 2019 was $415,673, $221,844 and $348,408, respectively. Continuing operations did not incur any operating lease expenses for the years ended June 30, 2021, 2020 and 2019.

The five-year maturity of the Company’s lease obligations is presented below:

Twelve Months Ending June 30,	Operating  Lease Amount
2022	$	281,504
2023		265,505
2024		273,750
2025		164,238
2026		79,534
Thereafter		280,185
Total lease payments		1,344,716
Less: Interest		(208,642)
Present value of lease liabilities	$	1,136,074
Less: present value of lease liabilities - discontinued operations		(1,136,074)
Present value of lease liabilities - continuing operations		—

(1) Current lease commitment table excludes an existing lease entered by CQ Pengmei in August 2017 due to fire safety requirement not being met by the landlord for which the Company has temporarily stopped operation in August 2018. Per the Company’s PRC counsel, it is more than probable that the Company does not require to fulfill the remaining term of such lease contract.

The Company also leased a pig farm from an unrelated third party and subleased the pig farm to an unrelated third party for the same amount of approximately $18,000 (RMB 120,000) annually from May 8, 2020 to May 7, 2025. The Company did not recognized these transactions as there are no income statements effect with the offset of the lease expenses and sublease income and the result of the recognition of ROU and lease liabilities are immaterial to the Company's financial statements.

Guarantees

a) Related party

As of June 30, 2021, CQ Penglin, the Company’s CEO, her husband and her elder son, and an unrelated third party Chongqing Education Guaranty Co., Ltd. jointly guaranteed approximately $1.2 million (RMB 8,000,000) loan that a related-party borrowed from the bank (see Note 9):

Name of the party being guaranteed	Guaranteed amount		Guarantee expiration date
CQ Mingwen (borrower)	$	1,238,927	December 22, 2021

The Company did not, however, accrue any liability in connection with such a guarantee because the borrowers have been current in its repayment obligation and the Company has not experienced any losses from providing such guarantee. As of the date of this report, the Company has evaluated the guarantee and has concluded that the likelihood of having to make any payments under the guarantee agreement is remote. If CQ Mingwen is unable to repay the loan upon maturity, assets of GA Yongpeng may be liquidated to pay back the loan.

F-41

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

b) CQ Mingwen, a related party, and three other unrelated third parties

As of June 30, 2021, GA Yongpeng guaranteed approximately aggregated of unpaid loan balance of approximately $0.1 million (RMB 809,220) that four entities, 1) CQ Mingwen, a related party, 2) Chongqing Gangxinyi Trading Co., Ltd., 3) Chongqing Liangxun Trading Co., Ltd., and 4) Chongqing Fu Yong Sheng Food Supermarket Co., Ltd., borrowed from Sichuan Toucu Financial Information Services Co., Ltd. These loan balances are GA Yongpeng’s property and CQ Pengmei’s 100% equity interest. As of June 30, 2021, these loans balance were repaid by the guarantees in full.

Contingencies

From time to time, the Company is a party to various legal actions arising in the ordinary course of business. The majority of these claims and proceedings related to or arise from, lease disputes, commercial disputes, default on guaranteeing third party lease obligations, and default on loans. The Company first determines whether a loss from a claim is probable, and if it is reasonable to estimate the potential loss, the loss will be accrued. The Company discloses a range of possible losses, if a loss from a claim is probable but the amount of loss cannot be reasonably estimated.

As of June 30, 2021, the amount of potential losses the Company accrued for are summarized as follows:

Dispute matter	Claim amount
Leases	$	49,950

As of June 30, 2021, the amount of potential losses the Company did not accrue for are summarized as follows:

Dispute matter	Claim amount
Guarantees	$	270,403

The Company received three complaints related to an approximately $5.1 million (RMB 33,000,000) loan currently in default (See Note 10 – Chongqing Puluosi Small Mortgage Co., Ltd.).

Yong Li filed a lawsuit against Chongqing Fu Yong Sheng Food Supermarket Co., Ltd. (“FYS Supermarket”) and GA Yongpeng in connection with FYS Supermarket’s breach of a supermarket equipment purchase agreement signed on May 7, 2018 by failing to pay off the remaining balance of approximately $0.3 million (RMB 1.7 million). On June 11, 2020, Chongqing Nan’an District People’s Court made a judgement that FYS Supermarket should pay Yong the full remaining balance and the monthly interest rate at 1.5% for the transfer fee and the losses and Yong’s attorney fee approximately $3,100 (RMB 20,000). GA Yongpeng shall bear joint and several liability for the above repayment. FYS Supermarket and GA Yongpeng are also required to pay property guarantee fee approximately $800 (RMB 5,000) and court fee approximately $3,300 (RMB 21,045). As of the date of this report, the Company has evaluated the financial condition of FYS Supermarket and has concluded that the likelihood of having to make any payments is remote. Therefore, the Company did not accrue any contingent liability as of June 30, 2021.

On October 20, 2020, Chongqing Haobangshou Ecommerce Co., Ltd. (“Haobangshou”) filed a lawsuit against CQ Penglin in connection with the $1,548,659 (RMB 10,000,000) loan due on March 24, 2023 and a total of $487,828 (RMB 3,150,000) outstanding payments for goods purchased in July 2020. Haobangshou stated that Haobangshou and CQ Penglin made a verbal deal in July 2020 that CQ Penglin will return the whole balance of $2,036,486 (RMB 13,150,000) within three months but CQ Penglin did not make repayments according to the deal. Therefore, Haobangshou asked CQ Penglin to pay off the full balance of $2,036,486 (RMB 13,150,000) and the interest of the whole balance at the annual interest rate of 12% from August 1, 2020 to the repayment date. Currently, the case is still under review and no verdict was issued as the date of the report.

Variable interest entity structure

In the opinion of management, (i) the corporate structure of the Company is in compliance with existing PRC laws and regulations; (ii) the Contractual Arrangements are valid and binding, and do not result in any violation of PRC laws or

F-42

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

regulations currently in effect; and (iii) the business operations of Xiangtai WFOE and the VIE are in compliance with existing PRC laws and regulations in all material respects.

However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to the foregoing opinion of its management. If the current corporate structure of the Company or the Contractual Arrangements is found to be in violation of any existing or future PRC laws and regulations, the Company may be required to restructure its corporate structure and operations in the PRC to comply with changing and new PRC laws and regulations. In the opinion of management, the likelihood of loss in respect of the Company’s current corporate structure or the Contractual Arrangements is remote based on current facts and circumstances.

Note 16 – Segments

ASC 280, “Segment Reporting”, establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for detailing the Company’s business segments.

The Company’s chief operating decision maker is the Chief Executive Officer, who reviews the financial information of the separate operating segments when making decisions about allocating resources and assessing the performance of the group.  Effective on April 3, 2020, after the acquisition of JMC, the Company has determined that it has 3 operating segments for purposes of allocating resources and evaluating financial performance, which consists of: (1) fresh meat business (discontinued), (2) feed raw materials business, and (3) grocery stores (discontinued). Prior period numbers are broken down for comparative purpose.

The following tables present summary information by segment for the years ended June 30, 2021, 2020 and 2019:

	Feed raw		Fresh		Grocery
	materials		meat		stores		Total
	(continuing		(discontinued		(discontinued		(discontinued
For the year ended June 30, 2021	operations)		operations)		operations)		operations)
Revenues	$	80,498,435	$	49,102,561	$	—	$	49,102,561
Cost of revenues		77,501,417		48,404,728		—		48,404,728
Gross profit		2,997,018		697,833		—		697,833
Depreciation and amortization		6,514		485,559		3,308		488,867
Total capital expenditures	$	0	$	0	$	0	$	0

	Feed raw		Fresh		Grocery
	materials		meat		stores		Total
	(continuing		(discontinued		(discontinued		(discontinued
For the year ended June 30, 2020	operations)		operations)		operations)		operations)
Revenues	$	24,248,765	$	86,302,737	$	1,574,965	$	87,877,702
Cost of revenues		22,219,528		81,153,996		1,435,597		82,589,593
Gross profit		2,029,237		5,148,741		139,368		5,288,109
Depreciation and amortization		1,579		506,775		125,257		632,032
Total capital expenditures	$	0	$	700,399	$	0	$	700,399

	Feed raw		Fresh		Grocery
	materials		meat		stores		Total
	(continuing		(discontinued		(discontinued		(discontinued
For the year ended June 30, 2019	operations)		operations)		operations)		operations)
Revenues	$	—	$	99,079,267	$	3,465,885	$	102,545,152
Cost of revenues		—		90,429,027		3,114,906		93,543,933
Gross profit		—		8,650,240		350,979		9,001,219
Depreciation and amortization		—		521,925		167,609		689,534
Total capital expenditures	$	—	$	20,635	$	0	$	20,635

F-43

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total assets as of:

	June 30,		June 30,
	2021		2020
Fresh meat business - discontinued	$	24,580,812	$	44,857,432
Feed raw materials business - continuing		15,633,213		17,633,125
Grocery stores - discontinued		528,376		642,637
Holding companies		133,427		216,240
Total Assets	$	40,875,828	$	63,349,434

Note 17 – Condensed financial information of the parent company

The Company performed a test on the restricted net assets of the consolidated subsidiary in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08 (e) (3), “General Notes to Financial Statements” and concluded that it was applicable for the Company to disclose the financial statements for the parent company.

The subsidiary did not pay any dividend to the Company for the periods presented. For the purpose of presenting parent-only financial information, the Company records its investment in its subsidiary under the equity method of accounting. Such investment is presented on the separate condensed balance sheets of the Company as “Investment in subsidiary” and the income of the subsidiary is presented as “share of income of subsidiary”. Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted.

The Company did not have significant capital and other commitments, long-term obligations, or guarantees as of June 30, 2021 and 2020.

F-44

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARENT COMPANY BALANCE SHEETS

	June 30, 2021		June 30, 2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,943	$	163,640
Prepayments		130,088		18,406
Other receivables		0		28,940
Intercompany receivables		19,163,736		9,963,384
Total current assets		19,295,767		10,174,370
OTHER ASSETS
Investment in subsidiary		0		19,713,942
Total assets	$	19,295,767	$	29,888,312
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Loan from third party	$	0	$	500,000
Convertible debenture, net		1,300,000		4,768,312
Other payable and accrued expenses		218,045		390,122
Other payable - related parties		720,809		423,416
Total current liabilities		2,238,854		6,081,850
OTHER LIABILITIES
Loss in excess of investment in subsidiaries		20,278,567		0
Total liabilities		22,517,421		6,081,850
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Ordinary shares, $0.01 par value, 50,000,000 shares authorized, 40,716,642 and 23,971,084 share issued and outstanding as of June 30, 2021 and 2020, respectively		407,167		239,711
Additional paid-in capital		32,175,798		15,765,411
Deferred share compensation		(21,140)		(47,708)
Statutory reserves		1,670,367		1,670,367
(Accumulated deficit) retained earnings		(38,574,620)		7,034,899
Accumulated other comprehensive income (loss)		1,120,774		(856,218)
Total shareholders' equity		(3,221,654)		23,806,462
Total liabilities and shareholders' equity	$	19,295,767	$	29,888,312

F-45

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARENT COMPANY STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

	For the Years Ended June 30,
	2021		2020		2019
OPERATING EXPENSES
General and administrative	$	(1,585,052)	$	(2,512,271)	$	(309,466)
Stock compensation expense		(1,889,173)		(930,223)		0
Total operating expenses		(3,474,225)		(3,442,494)		(309,466)
LOSS FROM OPERATIONS		(3,474,225)		(3,442,494)		(309,466)
OTHER INCOME (EXPENSE)
Interest expense		(156,048)		(123,212)		0
Other finance expenses		(134,960)		(359,187)		0
Gain on debt settlement		125,215		0		0
Equity (loss) income of subsidiaries		(41,969,501)		(952,049)		4,673,057
Total other (expenses) income, net		(42,135,294)		(1,434,448)		4,673,057
NET (LOSS) INCOME		(45,609,519)		(4,876,942)		4,363,591
FOREIGN CURRENCY TRANSLATION ADJUSTMENT		1,976,992		(547,647)		(267,546)
COMPREHENSIVE (LOSS) INCOME	$	(43,632,527)	$	(5,424,589)	$	4,096,045

F-46

CHINA XIANGTAI FOOD CO., LTD., ITS SUBSIDIARIES, AND ITS VARIABLE INTEREST ENTITIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PARENT COMPANY STATEMENTS OF CASH FLOWS

	For the Years Ended June 30,
	2021		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(45,609,519)	$	(4,876,942)	$	4,363,591
Adjustments to reconcile net income to cash (used in) provided by operating activities:
Equity loss (income) of subsidiary		41,969,501		952,049		(4,673,057)
Stock compensation expense		1,889,173		930,223		0
Late payment penalty expense		0		500,000		0
Amortization of convertible debenture issuance cost and discount		131,688		357,853		0
Gain on debt settlement		(125,215)		0		0
Change in operating assets and liabilities
Other receivables		28,940		(28,940)		0
Prepayments		(111,682)		(18,406)		0
Accrued expenses		276,210		269,521		126,213
Intercompany		(9,200,351)		(3,567,750)		0
Net cash used in operating activities		(10,751,255)		(5,482,392)		(183,253)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from other payables - related parties, net		297,393		166,032		183,253
Proceeds from issuance of ordinary shares through private placements		8,992,165		0		0
Proceeds from convertible debentures, net of issuance costs		1,300,000		5,480,000		0
Net cash provided by financing activities		10,589,558		5,646,032		183,253
CHANGES IN CASH AND CASH EQUIVALENTS		(161,697)		163,640		0
CASH AND CASH EQUIVALENTS, beginning of year		163,640		0		0
CASH AND CASH EQUIVALENTS, end of year	$	1,943	$	163,640	$	0
NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES
Issuance of ordinary shares with redemption rights of mezzanine equity	$	0	$	0	$	1,800,000
Issuance of ordinary shares for acquisition	$	0	$	2,658,909	$	0
Conversion of debts into ordinary shares	$	741,785		0		0
Conversion of convertible debenture into ordinary shares	$	5,066,288	$	857,165	$	0

18. SUBSEQUENT EVENT

The Company has assessed all events from June 30, 2021, up through November 15, 2021, which is the date that these consolidated financial statements are available to be issued, unless as disclosed herein, there are not any material subsequent events that require disclosure in these consolidated financial statements.

F-47