SUBSEQUENT EVENTS | NOTE 13. SUBSEQUENT EVENTS The sale of shares During the period from April 1, 2020 to the date of filling this report, the Company received an advance of $137,900 for the sale of 91,000 shares to be issued and refunded $7,500 previously received for the sale of shares on April 3, 2020. Divestment of Lvxin On April 30, 2020 (the "Distribution Date"), the Company completed the divestment of its subsidiary Lvxin as its subsidiary, Heilongjiang Tianci Liangtian Agricultural Technology Development Co., Ltd, transfered its 51% equity interest in Lvxin to Lou Zhengui, the representative of the minority shareholders in Lvxin. Tianci Liangtian retained responsibility for the liabilities incurred by Lvxin prior to April 30, 2020, including debt of 257,731RMB (approx. US$36,380) owed by Lvxin to Yuxingqi, which is a subsidiary of Tianci Liangtian. Tianci Liangtian also waived a debt of 3,672,002RMB (approx. US$518,321) owed by Lvxin to Tianci Liangtian. In exchange for the 51% interest in Lvxin, Lou Zhengui assumed debt of 300,000RMB (approx. US$42,350) owed by Tianci Liangtian to Hao Shuping, a member of the Company's Board of Directors. The Company incurred $941,819 of investment loss from the divestment of Lvxin by Tianci Liangtian. After the Distribution Date, the Company does not beneficially own any shares of common stock of Lvxin and will no longer consolidate Lvxin with its financial results. Beginning in the first quarter of fiscal year 2021, Lvxin's historical financial results for periods prior to the Distribution Date will be reflected in the Company's consolidated financial statements as a discontinued operation (the "Lvxin Discontinued Operations"). The following unaudited Pro Forma Consolidated Statements of Income and cash flow of the Company for the years ended March 31, 2020 are presented as if the divestment had occurred as of April 1, 2019 in that they reflect the reclassification of Lvxin as a Discontinued Operation for all periods presented. The following unaudited Pro Forma Condensed Consolidated Balance Sheets of the Company as of March 31, 2020 is presented as if the divestment occurred on March 31, 2020. The unaudited Pro Forma Consolidated Financial Statements are presented based on information currently available including certain assumptions and estimates. They are intended for informational purposes only, and do not purport to represent what the Company's financial position and operating results would have been had the divestment and related events occurred on the dates indicated above, or to project the Company's financial position or results of operations for any future date or period. Furthermore, they do not reflect all actions that may be undertaken by the Company after the divestment and disposition of Lvxin. The unaudited Pro Forma Consolidated Financial Statements and the accompanying notes should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report for the fiscal year ended March 31, 2020. In the enclosed unaudited Pro Forma Consolidated Statements of Income, cash flow and Balance Sheets, the amounts reflected in the columns presented are described below: Historical Organic Agricultural This column reflects the Company's historical financial statements for the periods presented and does not reflect any adjustments related to the divestment and related events. The historical Organic Agricultural Consolidated Balance Sheet as of March 31, 2020 and the Consolidated Statement of Income and cash flow for the year ended March 31, 2020 were derived from the Company's audited Consolidated Financial Statements included in its Annual Report for the year ended March 31, 2020. Lvxin Discontinued Operations The unaudited pro forma financial information related to the Lvxin Discontinued Operations has been prepared in accordance with the discontinued operations guidance in Accounting Standards Codification 205, "Financial Statement Presentation" and therefore does not reflect what the Company's or Lvxin's results of operations would have been on a stand-alone basis and are not necessarily indicative of the Company's or Lvxin's future results of operations. Discontinued Operations do not include any allocation of general corporate overhead expenses of the Company to Lvxin. The information in the Lvxin Discontinued Operations column in the unaudited Pro Forma Consolidated Statements of Income was prepared based on the Company's annual audited financial statements and only include costs that are directly attributable to the operating results of Lvxin. The Company believes that the adjustments included within the Lvxin Discontinued Operations column of the unaudited Pro Forma Consolidated Financial Statements are consistent with the guidance for discontinued operations in accordance with U.S. GAAP. The Company's current estimates on a discontinued operations basis are preliminary and could change as the Company finalizes the accounting for the discontinued operations to be reported in the Annual Report on Form 10-K for the year ending March 31, 2021. Pro Forma Adjustments The information in the "Pro Forma Adjustments" columns in the unaudited Pro Forma Consolidated Statements of Income and the unaudited Pro Forma Condensed Consolidated Balance Sheets reflect additional pro forma adjustments which are further described in the accompanying notes. The Pro Forma Adjustments are based on available information and assumptions that the Company's management believes are reasonable, that reflect the impact of events directly attributable to the divestment that are factually supportable, and for purposes of the Pro Forma Statements of Income, are expected to have a continuing impact on the Company. The Pro Forma Adjustments do not reflect future events that may occur after the divestment. Organic Agricultural Company Limited Pro Forma Consolidated Statements of Income (Unaudited) For the Year Ended March 31, 2020 (EXPRESSED IN U.S. DOLLARS) Historical Organic Agricultural Lvxin Pro Forma Pro Forma Organic Agricultural Revenue $ 1,011,708 $ (774,232 ) $ 19,523 (A) $ 256,999 Cost of sales 902,269 (717,155 ) 15,159 (A) 200,273 Gross profit 109,439 (57,077 ) 4,364 56,726 Operating costs and expenses: General and administrative expenses 508,382 (499 ) - 507,883 Selling and marketing expenses 49,611 - - 49,611 Total operating costs and expenses 557,993 (499 ) - 557,494 Operating (loss) (448,554 ) (56,578 ) 4,364 (500,768 ) Other income (loss) 1,952 (435 ) - 1,517 (Loss) before provision for income taxes (446,602 ) (57,013 ) 4,364 (499,251 ) Provision for income taxes - - - - Net loss (446,602 ) (57,013 ) 4,364 (499,251 ) Less: Net income attributable to non-controlling interests 27,936 (27,936 ) - - Net (loss) attributable to common shareholders $ (474,538 ) $ (29,077 ) $ 4,364 $ (499,251 ) Basic and diluted (loss) per share (0.04 ) - - (0.04 ) Weighted average number of shares outstanding- basic and diluted 11,414,862 - - 11,414,862 Organic Agricultural Company Limited Pro Forma Consolidated Balance Sheet (Unaudited) As of March 31, 2020 (EXPRESSED IN U.S. DOLLARS) Historical Organic Agricultural Lvxin Pro Forma Pro Forma Organic Agricultural Assets Cash and cash equivalents $ 242,174 $ (1,340 ) - $ 240,834 Accounts receivable 5,212 - - 5,212 Inventories 613,695 (649,172 ) 92,087 (B) 56,610 Other receivables 13,105 - - 13,105 Prepaid expenses 48,789 - - 48,789 Total current assets 922,975 (650,512 ) 92,087 364,550 Property, plant and equipment, net 4,498 - - 4,498 Operating lease right-of-use assets 2,007,274 (1,981,547 ) - 25,727 Total assets $ 2,934,747 $ (2,632,059 ) 92,087 $ 394,775 Liabilities and shareholders' equity Accounts payable and accrued expenses $ 69,437 $ - - $ 69,437 Customer deposits 88,131 - - 88,131 Due to related parties 121,434 (591,445 ) 554,299 (B) 84,288 Operating lease liabilities (current) 316,889 (298,259 ) - 18,630 Other payables 8,411 - - 8,411 Total current liabilities $ 604,302 $ (889,704 ) 554,299 $ 268,897 Operating lease liabilities (non-current) 1,424,600 (1,424,600 ) - - Total liabilities $ 2,028,902 $ (2,314,304 ) 554,299 $ 268,897 Shareholders' equity Common Stock 11,694 - - 11,694 Additional Paid-in Capital 2,612,954 (544,162 ) - 2,068,792 (Deficit) (1,752,671 ) 240,321 (462,212 )(A),(B) (1,974,562 ) Other comprehensive income (loss) 9,891 10,063 - 19,954 Total shareholders' equity of the Company 881,868 (293,778 ) (462,212 ) 125,878 Non-controlling interest 23,977 (23,977 ) - - Total equity 905,845 (317,755 ) (462,212 ) 125,878 Total liabilities and equity $ 2,934,747 $ (2,632,059 ) $ 92,087 $ 394,775 The following table summarizes the pro forma cash flows for the year ended March 31, 2020: For the Year Ended March 31, 2020 Historical Lvxin Discontinued Operations Pro Forma Adjustments Pro Forma Continuing Operations Net cash (used in) operating activities (524,933 ) (151 ) - (525,084 ) Net cash (used in) investing activities (1,318 ) - - (1,318 ) Net cash provided by financing activities 771,247 - - 771,247 Effect of exchange rate fluctuations on cash and cash equivalents (15,775 ) 69 - (15,706 ) Net increase (decrease) in cash and cash equivalents 229,221 (82 ) - 229,139 Cash and cash equivalents, beginning of year 12,953 (1,258 ) - 11,695 Cash and cash equivalents, end of year $ 242,174 $ (1,340 ) $ - $ 240,834 The unaudited Pro Forma Consolidated Statements of Income and cash flow for the year ended March 31, 2020 and the unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2020, include the following pro forma adjustments: (A) Reflects adjustments for intercompany transactions between the Company's historical segments, Passive Safety and Lvxin, which will no longer be eliminated in consolidation subsequent to the divestment. (B) Considering the following that occurred subsequent to March 31, 2020: (1) Tianci Liangtian retained responsibility for the liabilities incurred by Lvxin, including debt of 257,731 RMB (approx. US$36,380) owed by Lvxin to Yuxingqi, which is a subsidiary of Tianci Liangtian. Tianci Liangtian also waived a debt of 3,672,002 RMB (approx. US$518,321) owed by Lvxin to Tianci Liangtian. (2) In exchange for the 51% interest in Lvxin, Lou Zhengui assumed the obligation to satisfy a debt of 300,000 Renminbi (approx. US$42,350) owed by Tianci Liangtian to Hao Shuping, a member of the Company's Board of Directors. As a result of the foregoing transactions, the Organic Agricultural pro forma Inventories and Due to Related Parties balances are $56,610 and $84,288, respectively. The COVID-19 The COVID-19 outbreak has had a significant adverse impact and created many uncertainties related to our business, and we expect that it will continue to do so. The Company is experiencing challenges in sales and has suffered a significant decrease in revenues which has increased financial uncertainty. Our future business outlook and expectations are very uncertain due to the impact of the COVID-19 outbreak and are very difficult to quantify. It is difficult to assess or predict the impact of this unprecedented event on our business, financial results or financial condition. Factors that will impact the extent to which the COVID-19 outbreak affects our business, financial results and financial condition include: the duration, spread and severity of the outbreak; the actions taken to contain the virus or treat its impact, including government actions to mitigate the economic impact of the outbreak; and how quickly and to what extent normal economic and operating conditions can resume, including whether any future outbreaks interrupt economic recovery. The COVID-19 pandemic has led government and other authorities to impose measures intended to control its spread, including restrictions on freedom of movement, gatherings of large numbers of people, and temporary closure of company operations. The COVID-19 pandemic have led to significant disruptions in our retail, manufacturing and distribution operations and supply chains. In response to COVID-19, we have taken steps to reduce operating costs and improve efficiency, including furloughing of our employees. Such steps, and further changes we may make in the future to reduce our costs, may negatively impact our ability to attract and retain employees. In addition, the Company follow the government's epidemic prevention provisions to protect employee from COVID-19. The Management of the Company determined that there were no other reportable subsequent events to be adjusted for and/or disclosed as of the date of filing this report. |