| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Going concern Management has determined there is substantial
doubt about our ability to continue as a going concern as a result of our lack of significant revenues and recurring losses. If we are
unable to generate significant revenue or secure additional financing, we may be required to cease or curtail our operations. Our financial
statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s operations have been financed
primarily by proceeds from the sale of shares. The Company received $920,000 in April 2021 from the sale of shares. The Company sold an
additional 10 million shares of its common stock in November 2022 for a price of $880,000 USD, with the payments for the shares scheduled
to be paid before August 15, 2023. The Company will use these funds for working capital. The marketing personnel of the Company are developing
new customers and hope to build a stable base of customers. In this manner, Management hopes to generate sufficient operating cash inflow
to support its future operations and development of the Company in addition to capital raised from sales of shares and shareholders’
support based on need. Basis of presentation The accompanying condensed consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management,
all adjustments of a normal and recurring nature considered necessary for a fair presentation have been included in the accompanying condensed
consolidated financial statements. The results of operations for the interim period are not necessarily indicative of the results that
will be realized for the entire fiscal year. These condensed consolidated financial statements should be read in conjunction with Organic
Agricultural Company’s audited financial statements and accompanying notes thereto as of and for the year ended March 31, 2022 included
in Company’s current report on Form 10-K as filed with the SEC on July 14, 2022. The Company’s condensed consolidated financial
statements are expressed in U.S. Dollars and are presented in accordance with U.S. GAAP. Principles of consolidation The condensed consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated
in consolidation. The condensed consolidated financial statements include the assets, liabilities, and net income or loss of these subsidiaries. The Company’s subsidiaries as of December
31, 2022 are listed as follows:
Name Place of Attributable
Organic Agricultural (Samoa) Co., Ltd. Samoa 100
Organic Agricultural Company Limited (Hong Kong) Hong Kong 100
Heilongjiang Tianci Liangtian Agricultural Technology Development Company Limited China 100
Heilongjiang Yuxinqi Agricultural Technology Development Company Limited China 100 Use of estimates The preparation of condensed 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, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of
revenue and expenses during the reporting periods. Management makes these estimates using the best information available at the time the
estimates are made; however, actual results could differ from those estimates. Significant items subject to such estimates and assumptions
include the inventory valuation allowance. This estimate is often based on complex judgments and assumptions that management believes
to be reasonable but are inherently uncertain and unpredictable. Actual results could differ from these estimates. Cash Cash consists of cash on hand and bank deposits,
which are unrestricted as to withdrawal and use in the PRC and the USA. All highly liquid investments with original stated maturities
of three months or less are classified as cash. The Company’s cash consisted of cash on hand and cash in bank, as of December 31,
2022 and March 31, 2022. Revenue recognition The Company follows the Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606 — Revenue from Contracts with Customers.
Under ASC 606, the Company recognizes revenue from the commercial sales of products and contracts by applying the following steps: (1)
identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price;
(4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation
is satisfied. The Company recognizes revenue when the amount
of revenue can be reliably measured, it is probable that economic benefits will flow to the entity, and specific criteria have been met
for each of the Company’s activities as described below. The Company sells paddy and selenium-enriched
paddy products, rice and other agricultural products and provides software development services. All revenue is recognized when it is
both earned and realized. The Company’s policy is to recognize the sale when the products and services, ownership and risk of loss
have transferred to the purchasers, and collection of the sales proceeds, if not prepaid, is reasonably assured, all of which generally
occur when the customer receives the products and services. Accordingly, revenue is recognized at the point in time when delivery
is made and services are provided. Given the nature of this revenue generated by
the Company’s business and the applicable rules guiding revenue recognition, the Company’s revenue recognition practices do
not include estimates that materially affect results of operations nor does the Company have any policy for return of products. Fair value measurements The Company applies the provisions of FASB ASC
820, Fair Value Measurements Fair value is defined as the price that would
be received when selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. In determining the fair value for the assets and liabilities required or permitted to be recorded, the Company considers the principal
or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the
asset or liability. ASC 820 establishes a fair value hierarchy that
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC
820 establishes three levels of inputs that are to be used to measure fair value. The hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving
significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: Level 1: Unadjusted quoted prices in active markets
that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices, other than those in Level
1, in markets that are not active or for similar assets and liabilities, or inputs that are observable, either directly or indirectly,
for substantially the full term of the asset or liability; Level 3: Prices or valuation techniques that require
inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). Financial assets and liabilities of the Company
primarily consists of cash, accounts receivable, prepaid expenses, inventories, other receivables, accounts payable and accrued liabilities,
customer deposits, due to related parties, and other payables. As at December 31, 2022 and March 31, 2022, the carrying values of these
financial instruments approximated their fair values due to the short-term nature of these instruments. Functional currency and foreign currency
translation An entity’s functional currency is the currency
of the primary economic environment in which it operates. Normally that is the currency of the environment in which the entity primarily
generates and expends cash. Management’s judgment is essential to determine the functional currency by assessing various indicators,
such as cash flows, sales price and market, expenses, financing and inter-company transactions and arrangements. The functional currency
of the Company is the Chinese Renminbi (“RMB’), except the functional currency of Organic Agricultural HK is the Hong Kong
Dollar (“HKD”), and the functional currency of Organic Agricultural Samoa and Organic Agricultural is the United States dollar
(“US Dollars” “USD” or “$”). The reporting currency of these condensed consolidated financial statements
is in US Dollars. The financial statements of the Company, which
are prepared using the RMB and the HKD, are translated into the Company’s reporting currency, the US Dollar. Assets and liabilities
are translated using the exchange rate at each reporting period end date. Revenue and expenses are translated using average rates prevailing
during each reporting period, and shareholders’ equity is translated at historical exchange rates. Adjustments resulting from the
translation are recorded as a separate component of accumulated other comprehensive income or loss. Transactions denominated in currencies other than
the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions.
Foreign currency exchange gains and losses resulting from these transactions are included in operations. The exchange rates used for foreign currency translation
are as follows:
For the nine months ended March 31,
2022 2021 2022
(USD to (USD to (USD to
Assets and liabilities - period end exchange rate 6.8983/7.8088 6.3614/7.7974 6.3431/7.8306
Revenue and expenses - period average 6.8557/7.8390 6.3939/7.7896 N/A
For the three months ended
2022 2021
(USD to (USD to
Assets and liabilities - period end exchange rate 6.8983/7.8088 6.3614/7.7974
Revenue and expenses - period average 7.1111/7.8227 6.4413/7.7777 Income taxes The Company follows FASB ASC Topic 740, Income
Taxes ASC 740-10-30 requires income tax positions to
meet a more-likely-than-not recognition threshold to be recognized in the financial statements. Under ASC 740-10-40, previously recognized
tax positions that no longer meet the more-likely-than-not threshold should be derecognized in the first subsequent financial reporting
period in which that threshold is no longer met. The application of tax laws and regulations is
subject to legal and factual interpretations, judgments and uncertainties. Tax laws and regulations themselves are subject to change as
a result of changes in fiscal policies, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual
liability may be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially
reverse previously recorded tax liabilities or the net deferred tax asset valuation allowance. China According to the “PRC Income Tax Law”,
Tianci Liantian and Yuxinqi are subject to the 25% standard enterprise income tax rate in the PRC. United States The Company is subject to the U.S. corporation
tax rate of 21%. Samoa Organic Agricultural (Samoa) Co., Ltd was incorporated
in Samoa and, under the current laws of Samoa, it is not subject to income tax. Hong Kong Organic Agricultural Company Limited (Hong Kong)
was incorporated in Hong Kong and is subject to Hong Kong profits tax. Organic Agricultural Company Limited (Hong Kong) is subject to
Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. The applicable statutory
tax rate is 16.5%. Earnings (loss) per share The Company computes earnings (loss) per share
(“EPS”) in accordance with FASB ASC 260, Earnings Per Share Diluted EPS is similar to basic EPS but presents
the dilutive effect on a per share basis of contracts to issue ordinary common shares (e.g., convertible securities, options and warrants)
as if they had been converted at the beginning of the periods presented, or issuance date, if later. The computation of diluted EPS includes
the estimated impact of the exercise of contracts to purchase common stock using the treasury stock method and the potential common shares
associated with convertible debt using the if-converted method. Potential common shares that have an anti-dilutive effect (i.e., those
that increase earnings per share or decrease loss per share) are excluded from the calculation of diluted EPS. Share-based compensation The Company follows the provisions of FASB ASC
718 requiring equity awards to be accounted for under the fair value method. Accordingly, share-based compensation is measured at grant
date, based on the fair value of the award and recognized over its vesting period. During the nine months ended December 31, 2022, specifically
on July 1, 2022, the Company granted a total of 140,000 shares with a fair value on the grant date of $0.0899 per share to 11 individuals
for a sales bonus on promotion services, and on November 29, 2022, the Company granted a total of 50,000 shares with a fair value on the
grant date of $0.0880 per share for promotion services. A total of $16,986 in compensation expense was recognized under the provisions
of ASC 718. During the nine months ended December 31, 2021, specifically on April 12, 2021, the Company granted a total of 1,780,200 shares
with a fair value on the grant date of $0.43 per share to 25 individuals for sales promotion services during the period from April 12,
2021 through December 31, 2021. $759,000 in compensation expense was recognized under the provisions of ASC 718. These shares were fully
vested when issued. Segment information and geographic data The Company is operating in one segment in accordance
with the accounting guidance in FASB ASC Topic 280, Segment Reporting Concentration of credit and customer risks The Company maintains cash balances in two banks
in China. In China, the insurance coverage of each bank is RMB500,000 (approximately US$70,000). As of December 31, 2022, the Company
had no cash on deposit in excess of the insurance amounts. During the nine months ended December 31, 2022,
two customers, Jiufu Zhenyuan and Chuangyi Agriculture, generated 60% and 13% of our revenues, respectively. During the nine months ended
December 31, 2021, Jiufu Zhenyuan, generated 93% of our revenues. Risks and uncertainties The COVID-19 pandemic 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 which has increased the Company’s financial uncertainty. Our future business outlook and expectations are very
uncertain due to the impact of the COVID-19 pandemic 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 pandemic affects our business, financial results and financial condition include: the duration, spread and severity of the pandemic;
the actions taken to contain the virus, including “lockdowns” of infected areas or treat its impact, including government
actions to mitigate the economic impact of the pandemic; and how quickly and to what extent normal economic and operating conditions can
resume, including whether any future outbreak interrupts the economic recovery. Recently, since December 2022, many of the restrictive
measures previously adopted by the PRC governments at various levels to control the spread of the COVID-19 virus have been revoked or
replaced with more flexible measures since December 2022. The revocation or replacement of the restrictive measures to contain the COVID-19
pandemic could have a positive impact on the Company’s normal operations. However, there has recently been and may continue to be
an increase in COVID-19 cases in China, and as a result, we experienced temporary disruption to our operations where many employees were
infected with COVID-19 in December 2022. The extent to which the COVID-19 pandemic impacts the Company’s business, prospects and
results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited
to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and when and to what
extent normal economic and operating activities can resume. With the uncertainties surrounding the COVID-19 outbreak, the threat to the
Company’s business disruption and the related financial impact remains. Recently adopted accounting standards We do not believe any recently issued but not
yet effective accounting standards, if currently adopted, would have a material effect on the condensed consolidated financial position,
statements of operations and cash flows. Stock split On October 21, 2021,
the Company implemented a 5.16-for-1 forward split of its outstanding common stock. The Distribution Date was November 18, 2021,
at which time Organic Agricultural issued an additional 4.16 shares of common stock to the holders of each outstanding share of common
stock. The stock split increased the number of shares
outstanding by 67,347,638. The par value per share remained $0.001. The financial statements in this Report and all share and per share
amounts have been retroactively adjusted to give effect to this stock split. |
